EUROPEAN COMMISSION

Brussels, 8.7.2021

COM(2021) 398 final

2021/0216(NLE)

Proposal for a

COUNCIL IMPLEMENTING DECISION

on the approval of the assessment of the recovery and resilience plan for Cyprus

{SWD(2021) 196 final}

2021/0216 (NLE)

Proposal for a

COUNCIL IMPLEMENTING DECISION

on the approval of the assessment of the recovery and resilience plan for Cyprus

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the Functioning of the European Union,

Having regard to Regulation (EU) 2021/241 of the European Parliament and of the Council of 12 February 2021 establishing the Recovery and Resilience Facility 1 and in particular Article 20 thereof,

Having regard to the proposal from the European Commission,

Whereas:

(1)The COVID-19 outbreak has had a disruptive impact on the economy of Cyprus, exacerbating the challenges that existed before the pandemic. In 2019, the gross domestic product per capita (GDP per capita) of Cyprus was 81% of the Union average. According to the Commission’s Spring 2021 forecast, the real GDP of Cyprus declined by 5,1% in 2020 and is expected to decline by 2,1% cumulatively in 2020 and 2021. Longer-standing aspects with an impact on medium-term economic performance include a growth model relying on relatively few sources of growth and a high level of stocks of private, public and external debt with vulnerabilities in the financial sector.

(2)On 9 July 2019 and on 20 July 2020, the Council addressed recommendations to Cyprus in the context of the European Semester. In particular, the Council recommended to effectively address the pandemic, sustain the economy and support the ensuing recovery. When economic conditions allow, the Council recommended to Cyprus to pursue fiscal policies aimed at achieving prudent medium-term fiscal positions and ensuring debt sustainability, while enhancing investment. In addition, the Council recommended to strengthen the resilience and capacity of the health system to ensure quality and affordable services, including by improving health workers’ working conditions, and to ensure that the National Health System becomes operational in 2020, as planned, while preserving its long-term sustainability. The Council also recommended Cyprus to provide adequate income replacement and access to social protection for all, to strengthen public employment services, reinforce outreach and activation support for young people, promote flexible working arrangements, improve labour market relevance of education and training, deliver on the reform of the education and training system, including teacher evaluation, and increase employers’ engagement and learners’ participation in vocational education and training, and access to affordable early childhood education and care. The Council also recommended Cyprus to secure adequate access to finance and liquidity, especially for small and medium-sized enterprises, adopt legislation to simplify the procedures for strategic investors to obtain necessary permits and licences, resume the implementation of privatisation projects and to front-load mature public investment projects and promote private investment to foster the economic recovery and focus investment on the green and digital transition, in particular on clean and efficient production and use of energy, waste and water management, sustainable transport, digitalisation and research and innovation. Moreover, Cyprus was invited to step up action to address features of the tax system that facilitate aggressive tax planning by individuals and multinationals, in particular by means of outbound payments. Cyprus was also advised to improve the efficiency and quality, including digitalisation, of (i) the judicial system, including the functioning of administrative justice and revising civil procedures and increasing the specialisation of courts, and (ii) the public sector, including the functioning of the public administration and local governments and the governance of state-owned entities and take measures to strengthen the legal enforcement of claims and ensure reliable, secure and swift systems for the issuance and transfer of title deeds and immovable property rights. Cyprus was also invited to facilitate the reduction of non-performing loans including by setting up an effective governance structure of the State-owned asset management company, taking steps to improve payment discipline and strengthening the supervision of the credit acquiring companies and in the non-bank financial sector, including by fully integrating the insurance and pension funds supervisors. Moreover, Cyprus was invited to accelerate anti-corruption reforms, safeguard the independence of the prosecution and strengthen the capacity of the law enforcement. Having assessed progress in the implementation of those country-specific recommendations at the time of submission of the recovery and resilience plan, the Commission finds that the recommendation on taking all necessary measures to effectively address the pandemic, sustain the economy and support the ensuing recovery has been fully implemented.

(3)On 2 June 2021, the Commission published an in-depth review under Article 5 of Regulation (EU) No 1176/2011 of the European Parliament and of the Council 2 for Cyprus. The Commission’s analysis concluded that Cyprus is experiencing excessive macroeconomic imbalances, in particular related to high stocks of external, government and private debt, and still high non-performing loans, alongside a substantial current account deficit.

(4)[The Council recommendation on the economic policy of the euro area recommended to euro area Member States to take action, including through their recovery and resilience plans, to, inter alia, ensure a policy stance which supports the recovery and to further improve convergence, resilience and sustainable and inclusive growth. The Council recommendation also recommended to strengthen national institutional frameworks, to ensure macro-financial stability, to complete the Economic and Monetary Union and to strengthen the international role of the euro.] [If the Council recommendation is not adopted by the time of the CID adoption, please remove the recital.]

(5)On 17 May 2021, Cyprus submitted its national recovery and resilience plan to the Commission, in accordance with Article 18(1) of Regulation (EU) 2021/241. That submission followed a consultation process, conducted in accordance with the national legal framework, of local authorities, social partners, civil society organisations, youth organisations and other relevant stakeholders. The national ownership of the recovery and resilience plans is underpinning their successful implementation and lasting impact at national level and credibility at European level. Pursuant to Article 19 of that Regulation, the Commission has assessed the relevance, effectiveness, efficiency and coherence of the recovery and resilience plan, in accordance with the assessment guidelines of Annex V to that Regulation.

(6)The recovery and resilience plans should pursue the general objectives of the Recovery and Resilience Facility established by Regulation (EU) 2021/241 and of the EU Recovery Instrument set up by Council Regulation (EU) 2020/2094 3 in order to support the recovery in the aftermath of the COVID-19 crisis. They should promote the Union’s economic, social and territorial cohesion by contributing to the six pillars referred to in Article 3 of Regulation (EU) 2021/241.

(7)The implementation of the Member States’ recovery and resilience plans will constitute a coordinated effort of investment and reforms across the Union. Through the coordinated and simultaneous implementation of these reforms and investments and the implementation of cross-border projects, these reforms and investments will mutually reinforce each other and generate positive spillovers across the whole Union. Therefore, about one third of the impact of the Facility on Member States’ growth and job creation should come from spillovers from other Member States.

Balanced response contributing to the six pillars

(8)In accordance with Article 19(3), point (a) and section 2.1 of Annex V to Regulation (EU) 2021/241, the recovery and resilience plan represents to a large extent (Rating A) a comprehensive and adequately balanced response to the economic and social situation, thereby contributing appropriately to all six pillars referred to in Article 3 of Regulation (EU) 2021/241, taking the specific challenges and the financial allocation of the Member State concerned into account.

(9)The recovery and resilience plan consists of a wide and balanced set of reforms and investments that supports addressing the main policy challenges of the Cypriot society and economy, while at the same time responding adequately to the impacts of the COVID-19 pandemic. The plan is designed around the overarching objective of strengthening the economy’s resilience and the country’s potential for economically, socially and environmentally sustainable long-term growth and welfare. The plan focuses on five priority policy axes: health and civil protection; transition to a green economy; resilience and competitiveness of the economy; digital transformation; and labour market, social protection, education and human capital. The plan clearly explains how each policy axis contributes to the six pillars referred to in Article 3 of Regulation (EU) 2021/241. This contributes to ensuring that each pillar is comprehensively addressed in a coherent manner.

(10)The plan aims to contribute to addressing key challenges related to the green transition, including high greenhouse gas emissions, gaps in water and waste management, the need to safeguard biodiversity and wildlife. Measures in this context include the introduction of green taxation, a reform of the electricity market accompanied by facilitation of deployment of renewable energy, renovations of the building stock with a view to improving energy efficiency, greening of the vehicles stock, forest fire protection, protection of the marine ecosystem and smart water management. The plan also includes measures with the aim to contribute to the digital transformation, with emphasis on connectivity and e-government solutions, and integrating digitalisation concerns into measures in other areas, such as in the reform of the justice, health and education and training systems. Digitalisation of companies, in particular small and medium-sized enterprises, is supported through direct measures aimed at increasing their productivity and competitiveness. Smart, sustainable and inclusive growth is expected to be fostered by measures improving access to finance of companies, targeted research and innovation reforms and investments, an education reform contributing to addressing both the quality of educational outcomes and the need to reduce socio-economic divides, and support to a cleaner energy mix and lower carbon footprint of the economy in a fair and inclusive manner. In parallel, a component dedicated to financial and fiscal stability aims to strengthen the soundness of the banking sector, improve the functioning of the insolvency framework and prevent high private debt, along with a more effective and fair tax system, thus improving the resilience of the economy. The plan also contributes to addressing challenges of the Cypriot economy with regards to competiveness, productivity and the need to diversify the growth model, through reforms and investments in the agro-food sector, light manufacturing, sustainable tourism and circular economy.

(11)The plan contributes to enhancing the economic, social and territorial cohesion and convergence of Cyprus with the Union through measures improving the accessibility, resilience and quality of the health and long-term care systems, renovating social infrastructure, combatting energy poverty, making access to digital infrastructures more equal, and strengthening employment and social support to more vulnerable groups. Some of those measures should also benefit health and economic, social and institutional resilience and should act in synergy with other targeted reforms and investments, such as closing gaps in the social protection system, reducing skills mismatches on the labour market through upskilling and reskilling initiatives as well as guidance, and modernising and digitalising public administration and services, including schools and health institutions. Policies for the next generation, children and the youth are also prominent in the plan, covering the modernisation and enhancement of the education and training system at all levels, more accessible early childhood education and care, better outreach to young people not in employment, education or training, and support at all levels for the development of skills relevant for the digital and green transitions.

Addressing all or a significant subset of challenges identified in Country Specific Recommendations

(12)In accordance with Article 19(3), point (b) and section 2.2 of Annex V to Regulation (EU) 2021/241, the recovery and resilience plan is expected to contribute to effectively addressing all or a significant subset of challenges (Rating A) identified in the relevant country-specific recommendations, including fiscal aspects thereof and recommendations made pursuant to Article 6 of Regulation (EU) No 1176/2011, addressed to Cyprus or challenges identified in other relevant documents officially adopted by the Commission in the context of the European Semester.

(13)The plan includes an extensive set of mutually reinforcing reforms and investments that contribute to effectively addressing all or a significant subset of the economic and social challenges outlined in the country-specific recommendations addressed to Cyprus by the Council in the European Semester in 2019 and in 2020. By addressing the aforementioned challenges, the recovery and resilience plan is expected to also contribute to correcting the excessive macroeconomic imbalances 4 that Cyprus is experiencing, notably with respect to high stocks of external, government and private debt, and still high non-performing loans, alongside a substantial current account deficit.

(14)The expansion of very high capacity networks in underserved areas and building cabling to be “Gigabit-ready” is expected to improve internet connectivity in Cyprus and promote its take-up. Digitalising government services and introducing e-justice, e-health and smart cities are expected to help the digital transition. Furthermore, the plan is expected to improve the efficiency of public administration by strengthening the strategic role of the personnel department and the capacity of the line ministries’ administrations to better implement public administration policies and human resource functions, introducing a new framework for filling public service vacancies and for the evaluation of employee performance. The introduction of a new legal framework for local governments is expected to improve their functioning. Moreover, the establishment of an anti-corruption authority is expected to help fight corruption more effectively, which should also contribute to preventing, detecting and correcting irregularities in the use of public funds. The plan includes measures which are expected to address features of Cyprus’ tax system that facilitate aggressive tax planning, in particular by multinationals, including the introduction of withholding taxes to outbound payments of dividends, royalty payments and interest.

(15)The establishment of a national graduate tracking system and the update of secondary schools’ educational curricula to improve digital literacy, soft skills and entrepreneurship skills, along with several training schemes to enhance digital, green, blue and entrepreneurship skills across different population groups, are expected to improve the quality and labour market relevance of education and training. Furthermore, the digitalisation of the hiring incentive schemes system and the development of a performance management system for the public employment services are expected to improve the efficiency of operations and the quality of the services. Provision of counselling and guidance as well as a hiring incentives scheme for young people not in employment, education or training are expected to reinforce outreach and activation support for young people. The education and training system is expected to be improved by a new teacher and school evaluation system, by the implementation of a national action plan addressing skills mismatches, by the extension of free compulsory pre-primary education from the age of four and by the construction of two model technical schools further strengthening vocational education and training. Furthermore, investments in early childhood education and care and the adoption of a national strategy and action plan are expected to improve quality and affordability of early childhood education and care. The plan also provides for a law to regulate flexible working arrangements in the form of telework and extension of social protection to self-employed and workers in new forms of employment in line with the relevant country specific recommendations. The implementation of the plan is expected to strengthen the capacity, quality and resilience of the health and civil protection systems through measures aiming at upgrading equipment and setting up dedicated information systems, next to promoting investments in communication systems and e-Health. Extension and construction of additional specialised care units are also envisaged.

(16)The establishment of a National Promotional Agency and the introduction of funding programmes and schemes are expected to improve access to finance and liquidity, especially for small and medium-sized enterprises. Grant schemes for research and innovation as well as the establishment of a central knowledge transfer office are expected to increase investments in research and innovation.

(17)The recovery and resilience plan contains measures that are expected to contribute to the green transition. The plan promotes clean and efficient production and use of energy through various measures, which include green taxation, opening of the electricity market, green investments support and energy renovation projects of the building stock and other infrastructure. The plan also includes measures aiming at strengthening forest fire protection and the protection of the marine ecosystem. Waste and water management related measures aim at reducing water losses, upgrading existing infrastructure and water management. Moreover, investments in zero- or low-emission vehicles as well as in the digitalisation of the transport sector are foreseen to promote sustainable transport.

(18)The plan aims to reduce risks in the banking sector related to legacy non-performing loans through a dedicated action plan as well as through measures to improve the working environment for credit acquirers and credit servicers. Regarding high private debt and payment discipline, the plan puts forward improved monitoring of debts, enhancements to the functioning of the insolvency framework, and a strategy for combating financial illiteracy. Improved supervision of the insurance and pension funds sectors is expected to be achieved through an increase in available human resources and an improvement of available supervisory tools.

(19)The recommendations related to the immediate fiscal policy response to the pandemic can be considered as falling outside the scope of Cyprus’ recovery and resilience plan, notwithstanding the fact that Cyprus has generally responded adequately and sufficiently to the immediate need to support the economy through fiscal means in 2020 and 2021, in line with the provisions of the General Escape Clause.

Contribution to growth potential, job creation and economic, social and institutional resilience

(20)In accordance with Article 19(3), point (c) and section 2.3 of Annex V to Regulation (EU) 2021/241, the recovery and resilience plan is expected to have a high impact (Rating A) on strengthening the growth potential, job creation, and economic, social and institutional resilience of the Member State, contributing to the implementation of the European Pillar of Social Rights, including through the promotion of policies for children and youth, and on mitigating the economic and social impact of the COVID‑19 crisis, thereby enhancing the economic, social and territorial cohesion and convergence within the Union.

(21)Simulations by the Commission services show that the plan has the potential to increase the GDP of Cyprus by between 1,1% and 1,8% until 2026 5 . The plan includes a wide set of investments in physical and human capital and reforms that are expected to contribute to economic growth and increasing employment. The plan aims to accelerate the economic recovery in Cyprus and to lay the basis for a sustainable growth model in the long-term. By improving the growth potential, creating jobs and increasing economic, social and institutional resilience, the measures included in the plan are expected to reduce the country’s vulnerability to shocks. The plan is also expected to contribute to the implementation of the European Pillar of Social Rights, including through the promotion of policies creating equal opportunities for all children and increasing youth employment, and help Cyprus in being an inclusive society with good access to health care and a productive and sustainable economy.

(22)The Cypriot plan addresses employment, education and skills and social challenges relevant for the implementation of the European Pillar of Social Rights. To foster equal opportunities and access to the labour market, the plan proposes reforms to enhance digital and green skills, modernise the evaluation system of teachers and schools and address overall skills mismatches. Investments to upgrade vocational education and training and provide activation support for young people are also envisaged, complementing actions of the European Social Fund Plus. To improve labour market dynamics and working conditions, Cyprus has proposed a number of measures, including legislative ones, to make flexible working arrangements available more widely. The plan takes an integrated approach to labour market services and policies such as public employment services and active labour market policies, in line with the Commission Recommendation on Effective Active Support to Employment 6 . The main target group is the youth, with the plan including a targeted hiring incentive associated with training. To improve social protection and inclusion, the plan proposes measures supporting deinstitutionalisation and long-term care services.

(23)The plan presents a comprehensive set of measures to address labour market challenges and to improve social cohesion. Those measures include reforms and investments in education and skills, activation policies and social services, fighting inequalities, modernising the labour market, and increasing social inclusion. The plan provides a detailed mapping of selected interventions to address the vulnerabilities identified by the Social Scoreboard underpinning the European Pillar of Social Rights.

(24)The plan contains reforms of the public administration aiming to advance the digitalisation of government, to reduce the administrative burden on citizens and firms and to further speed up the planning and approval of public investment projects. Those measures are expected to make the business climate more investment-friendly in the long run and the economy more competitive, by ensuring efficient digital government services and enabling long-lasting productivity enhancing effects.

Do no significant harm

(25)In accordance with Article 19(3), point (d) and section 2.4 of Annex V to Regulation (EU) 2021/241, the recovery and resilience plan is expected to ensure that no measure (Rating A) for the implementation of reforms and investments projects included in the recovery and resilience plan does significant harm to environmental objectives within the meaning of Article 17 of Regulation (EU) 2020/852 of the European Parliament and of the Council 7 (the principle of ‘do no significant harm’).

(26)For each of the measures, Cyprus’ recovery and resilience plan is expected to ensure that no significant harm is done to any of the six environmental objectives within the meaning of Article 17 of Regulation (EU) 2020/852, namely climate change mitigation, climate change adaptation, sustainable use and protection of water and marine resources, circular economy, pollution prevention and control, and protection and restoration of biodiversity and ecosystems. Cyprus provided justifications in accordance with the ‘do no significant harm’ technical guidance of the European Commission (2021/C 58/01).

(27)For some measures where calls for proposals or calls for expressions of interest should be necessary to select specific projects in the future, the principle of ‘do no significant harm’ should be complied with by ensuring, through appropriate milestones associated with those measures, that the terms of reference of the calls for proposals or calls for expressions of interest contain exclusion criteria to prevent activities that may do significant harm to environmental objectives from being selected.

Contribution to the green transition including biodiversity

(28)In accordance with Article 19(3), point (e) and section 2.5 of Annex V to Regulation (EU) 2021/241, the recovery and resilience plan contains measures that contribute to a large extent (Rating A) to the green transition, including biodiversity, or to addressing the challenges resulting therefrom. The measures supporting climate objectives account for an amount which represents 41% of the plan’s total allocation calculated in accordance with the methodology of Annex VI to Regulation (EU) 2021/241. In accordance with Article 17 of Regulation (EU) 2021/241, the recovery and resilience plan is consistent with the information included in the National Energy and Climate Plan 2021-2030.

(29)In terms of contribution to the achievement of the Union 2030 climate and energy-related targets, the implementation of the plan is expected to contribute to addressing some of the key policy challenges identified in the Commission’s recommendations to the Cypriot National Energy and Climate Plan. The plan includes reforms relating to the introduction of green taxation, the liberalisation of the electricity market, facilitating energy renovations in buildings and accelerating electric mobility. The plan further includes a broad range of energy efficiency and renewable energy investments targeting households, enterprises, municipalities and the wider public sector and non-governmental organisations. The plan includes investments relating to the mass roll-out of smart meters as well as the EuroAsia Interconnector project, which should aid electricity generation from cleaner sources, in particular renewables. The plan also promotes the replacement of conventional vehicles with zero- and low-emission vehicles, the use of alternative, cleaner fuels and means of transport as well as the use of public transport.

(30)The implementation of the plan is also expected to contribute to the achievement of the Union’s objectives on environmental policy with a strong focus on water management and the circular economy. The plan includes a water management reform as well as a set of interrelated and reinforcing investments aimed at modernising water resource management and making it more sustainable. The plan also includes measures that aim at the enhancement of the circular economy in the sector of tourism and in the industrial sector as well as at increasing sustainable waste management practices, including recycling. The plan further addresses the challenges of climate change adaptation through a number of protective and preventive measures in the areas of forest fire protection and anti-flood management. Biodiversity preservation is addressed with one measure focusing on the protection of the marine ecosystem from hazards.

Contribution to the digital transition

(31)In accordance with Article 19(3), point (f) and section 2.6 of Annex V to Regulation (EU) 2021/241, the recovery and resilience plan contains measures that contribute to a large extent (Rating A) to the digital transition or to addressing the challenges resulting from it. The measures supporting digital objectives account for an amount which represents 23% of the plan’s total allocation calculated in accordance with the methodology of Annex VII to Regulation (EU) 2021/241.

(32)With a significant share of the overall budget and a prominence of digital aspects across the majority of its components, the recovery and resilience plan proposed by Cyprus puts a strong emphasis on the digital transition and addressing the challenges resulting from it across all sectors.

(33)Almost each component includes measures directly supporting the digital transition or addressing related challenges. The most important contributions come from components dedicated to connectivity infrastructure and the digitalisation of the public sector, followed by the three components addressing e-justice, fiscal and financial stability and the support of digital skills. Therefore, measures related to digital transition, or to addressing the challenges resulting from it, are spread out throughout the plan. They are expected to contribute to the digital transformation of several economic and social sectors, such as the education or health sector, and to addressing the country specific challenges resulting from the digital transition.

Lasting impact

(34)In accordance with Article 19(3), point (g) and section 2.7 of Annex V to Regulation (EU) 2021/241, the recovery and resilience plan is expected to have a lasting impact on Cyprus to a large extent (Rating A).

(35)The plan presents a series of measures with the aim to contribute to the digital transition and to addressing the low level of digital public services. The measures included are expected to ensure coverage with very high-capacity broadband, fixed and wireless, including mobile, that is to say 5G, for 100% of the population living in organised communities, including deployment of 5G along the main terrestrial corridors, and enabling universal and affordable access to Gigabit connectivity in all urban and rural areas, including 5G connectivity. The plan aims also at promoting e-government with a set of reforms and investments. Digital projects, such as the digital transformation of courts, smart cities and digitalising the law making process in combination with projects for improving the management system, evaluation and recruitment of the staff in the public administration and an overhaul of the local authorities are expected to make a structural and lasting change in the functioning of the public administration and justice system, which should ultimately improve the business environment. The establishment of an independent authority to coordinate and oversee measures to fight corruption is a key element of the plan concerning structural change in institutions.

(36)The implementation of reforms and investments envisaged in the Cypriot plan is expected to bring lasting changes in the education and training system and the labour market. The plan includes major reforms in the education system, such as introducing a new system for teacher and school evaluation, extending free compulsory preschool education and adapting the curricula of higher and secondary education according to the needs of the labour market. The plan also contains the provision of trainings to foster the digital skills of students, employed persons and the unemployed. Furthermore, the plan includes the development of a comprehensive national strategy to address skills mismatches as well as the preparation of a national strategy for early childhood education and care. These measures are expected to improve the quality of education and training for all ages and students’ performance and make better connections between the education system and the labour market.

(37)Lasting impact of the plan can also be enhanced through synergies between the plan and other programmes financed by the cohesion policy funds, notably by addressing in a substantive manner territorial challenges and promoting a balanced development.

Monitoring and implementation

(38)In accordance with Article 19(3), point (h) and section 2.8 of Annex V to Regulation (EU) 2021/241, the arrangements proposed in the recovery and resilience plan are adequate (Rating A) to ensure effective monitoring and implementation of the recovery and resilience plan, including the envisaged timetable, milestones and targets, and the related indicators.

(39)The Monitoring Committee, chaired by the Director General of the Directorate General for European Programmes, Coordination and Development (‘DG EPCD’) and attended by the Directors-General of Ministries and Deputy Ministries involved in the plan, is responsible for centrally monitoring progress in implementation. The overall responsibility for the monitoring and implementation of the recovery and resilience plan is assigned to the Directorate for Recovery and Resilience of DG EPCD, which is the Coordinating Authority. Its role consists in coordinating the implementation of the measures, certifying the achievement of the milestones and targets, drafting progress reports, and liaising with the Commission, including submitting payment requests under Regulation (EU) 2021/241. In that role it is assisted by two specialised monitoring bodies that would certify the achievement of the milestones and targets for the measures in the plan that require specialised input. The implementation of the various investments and reforms in the plan is the responsibility of the implementing bodies. 

(40)The milestones and targets of the Cypriot plan constitute an appropriate system for monitoring the plan’s implementation. They are sufficiently clear, realistic and comprehensive to ensure that their completion can be traced and verified and the proposed indicators for those milestones and targets are relevant, acceptable and robust. Milestones and targets are also relevant for measures already completed which are eligible according to Article 17(2) of Regulation (EU) 2021/241. The satisfactory fulfilment of those milestones and targets over time is required to justify a disbursement request. The verification mechanisms, data collection and responsibilities described by the Cypriot authorities appear sufficiently robust to justify in an adequate manner the disbursement requests once the milestones and targets are assessed as completed.

(41)Member States should ensure that financial support under the Facility is communicated and acknowledged in line with Article 34 of Regulation (EU) 2021/241. Technical support may be requested under the Technical Support Instrument to assist Member States in the implementation of their plan.

Costing

(42)In accordance with Article 19(3), point (i) and section 2.9 of Annex V to Regulation (EU) 2021/241, the justification provided in the plan on the amount of the estimated total costs of the recovery and resilience plan is to a medium extent (Rating B) reasonable and plausible, is in line with the principle of cost efficiency and is commensurate to the expected national economic and social impact.

(43)For the majority of the measures, the costing information provided is rather detailed, the methodology is well explained with calculations that are easy to follow and supported by evidence. The information provided suggests that costs would be in line with the nature and type of the envisaged reforms and investments, thus supporting their plausibility. However, a small amount of the costs were assessed as reasonable and plausible only up to a medium extent. Finally, the estimated total cost of the recovery and resilience plan is in line with the principle of cost-efficiency and is commensurate to the expected national economic and social impact.

Protection of financial interests

(44)In accordance with Article 19(3), point (j) and section 2.10 of Annex V to Regulation (EU) 2021/241, the arrangements proposed in the recovery and resilience plan and the additional measures contained in this Decision are adequate (Rating A) to prevent, detect and correct corruption, fraud and conflicts of interests when using the funds provided under that Regulation, and the arrangements are expected to effectively avoid double funding under that Regulation and other Union programmes. This is without prejudice to the application of other instruments and tools to promote and enforce compliance with Union law, including for preventing, detecting and correcting corruption, fraud and conflicts of interests, and for protecting the Union finances in line with Regulation (EU, Euratom) 2020/2092 of the European Parliament and of the Council 8 .

(45)The control and audit system developed by Cyprus is coherently designed to meet the requirements of Regulation (EU) 2021/241. In particular, pending development of a dedicated Monitoring Information System for management and monitoring of the plan in line with Article 22(2), point (d) of Regulation (EU) 2021/241, an adequate transitory repository system should be set up. A transitory repository system or the dedicated Monitoring Information System should record and store the relevant data related to the implementation of the recovery and resilience plan, in particular on the achievement of milestones and targets, data on final recipients, contractors, subcontractors and beneficial owners in line with Article 22(2) point (d) of Regulation (EU) 2021/241. In accordance with Article 20(5), point (e) of Regulation (EU) 2021/241, Cyprus should implement the transitory repository system or the dedicated Monitoring Information System with the required functionalities in order to comply with Article 22 of that Regulation, by confirming the completion of its implementation with the submission of the first payment request. A dedicated audit of the system should attest that it has the required functionalities in line with Article 22(2), point (d) of Regulation (EU) 2021/241.

(46)The internal control system is based on robust processes and structures. Roles and responsibilities of the actors for controls and audits are clear, relevant control functions are appropriately segregated and the independence of actors performing audits is ensured. The actors responsible for controls have the legal empowerment and administrative capacity to exercise their planned roles and tasks. The procedures described in the plan for controls and audits have entered into force and responsibilities of the bodies involved have been defined by means of the decision of the Council of Ministers approving the plan. The designated audit bodies are the Audit Office of the Republic of Cyprus and the Internal Audit Service of the Republic of Cyprus. They are mandated to conduct ex-post audits to check whether implementing bodies carry out procedures to prevent, detect and correct fraud, corruption and conflicts of interest, when using the funds provided under Regulation (EU) 2021/241. Moreover, there are control arrangements at several levels aimed at avoiding double funding from other Union programmes as well as compliance with applicable rules.

Coherence of the plan

(47)In accordance with Article 19(3), point (k) and section 2.11 of Annex V to Regulation (EU) 2021/241, the plan includes to a high extent (Rating A) measures for the implementation of reforms and public investment projects that represent coherent actions.

(48)Reforms and investments presented in the Cypriot recovery and resilience plan are complementary to each other. They are based on a comprehensive growth plan, which ensures its coherence towards contributing to smart, inclusive and sustainable economic development in the future. The five main policy axes of the Plan, “Resilient and Effective Health System, Enhanced Civil Protection”, “Climate neutrality, energy efficiency and renewable energy penetration”, “Strengthening the resilience and competitiveness of the economy”, “Towards a digital era”, and “Labour market, social protection, education and human capital” are interlinked and mutually reinforcing. They contain measures related to the digital transformation, which are key enablers for the green and circular transition of the Cypriot economy. The plan also contains reforms that reinforce planned investments, such as in the water management sector and a tax reform to incentivise emission reductions and green investments. The policy axis “Strengthening the resilience and competitiveness of the economy” involves public investment to boost competitiveness, support productivity and long-run growth and to create new jobs, supported by reforms to improve the institutional framework and hence the business environment. The policy axis “Labour market, social protection, education and human capital” contributes to enabling the green and digital transitions by improving the education and skills development system at all levels, thus equipping the Cypriot society with the necessary skills, ensuring that digital and green transitions should be fair by prioritising sustainable job creation, in particular for young people, as well as investments in social care services, while the policy axis “Resilient and Effective Health System, Enhanced Civil Protection” aims at universal access to high quality and effective health services, including digital. In order to promote wider coherence across instruments, notably with the European cohesion policy funds, a balanced territorial allocation of resources is encouraged.

Equality

(49)The plan contains a series of measures across several components that are expected to contribute to addressing the challenges in the area of gender equality and equal opportunities for all. Particularly relevant measures include those that aim at improving the access to affordable quality early childhood education and care and long-term care as well as to promote flexible working arrangements facilitating labour market activation for people with caring responsibilities, particularly women, social inclusion and the reduction of socio-economic disadvantages. Challenges regarding female entrepreneurship or financial illiteracy of older women are also addressed. Support for young people not in employment, education or training is expected to benefit young people from vulnerable backgrounds, including with migration backgrounds. Throughout the plan, needs of persons with disabilities are taken into account and a quantitive target for the improvement of energy performance in households with persons with disabilities is included.

Security self-assessment

(50)The plan includes a security-self assessment for investments in digital capacities and connectivity. As regards investments in connectivity, the plan identifies the relevant security issues and associated risks and identifies mitigating measures to be enacted for each of them based on the common objective criteria included in the EU toolbox for Cybersecurity of 5G networks.

Cross-border and multi-country projects

(51)Cyprus has included two cross-border projects in its plan for an electricity interconnector and submarine cables for data connectivity. Both projects have a cross-border element with Greece. First, the construction of the EuroAsia interconnector aims to ensure security of supply and more competitive wholesale electricity prices and to enable the increased use of electricity from cleaner sources, in particular renewables, by connecting the electricity network of Cyprus to the Union continental system through the Greek network in Crete. This is part of a broader investment building a cross-border interconnector with a total length of 1 208 km between Crete, Cyprus and Israel. Second, for the submarine cables, the project aims at creating high-capacity resilient backbone internet connectivity for Cyprus through a new submarine link for data connectivity between Cyprus and Greece. The deployment of a new separate backbone route between Cyprus and Greece is expected to support connectivity in Cyprus. It is also expected to have a positive impact on the available capacity and the commercial offers of backbone connectivity needed to provide very-high-speed services to end-users. Finally, it is expected to offer higher performance compared to existing dated cables.

Consultation process

(52)Based on the summary of the consultation process included in the plan, all relevant stakeholders such as social partners, civil society organisations and youth organisations have been consulted in the preparation phase of the plan in accordance with the national legal framework. Within the scope of their responsibilities, the different Ministries, governmental services and local authorities have been involved at an early stage and in numerous steps in the elaboration of the plan. The Parliament has been regularly informed about the content of the plan. Furthermore, the Cyprus Economy and Competitiveness Council, equivalent to a national productivity board, has been consulted. Following the consultation of all relevant stakeholders, part of the initially planned reforms and investments have been adapted or removed from the plan.

(53)A coordination process with all relevant stakeholders, including social partners and civil society, is expected to take place also for the implementation phase of the plan. To ensure ownership by the relevant actors, it is crucial to involve all local authorities and stakeholders concerned, including social partners, throughout the implementation of the investments and reforms included in the plan.

Positive assessment

(54)Following the positive assessment of the Commission concerning the Cypriot recovery and resilience plan with the finding that the plan satisfactorily complies with the criteria for assessment set out in Regulation (EU) 2021/241, in accordance with Article 20(2) of that Regulation, this Decision should set out the reforms and investment projects necessary for the implementation of the plan, the relevant milestones, targets and indicators, and the amount made available from the Union for the implementation of the plan in the form of non-repayable financial and loan support.

Financial contribution

(55)The estimated total cost of the recovery and resilience plan of Cyprus is EUR 1 206 400 000. As the recovery and resilience plan satisfactorily complies with the criteria for assessment set out in Regulation (EU) 2021/241 and, furthermore, as the amount of the estimated total costs of the recovery and resilience plan is higher than the maximum financial contribution available for Cyprus, the financial contribution allocated for the Cypriot recovery and resilience plan should be equal to the total amount of the financial contribution available to Cyprus.

(56)In accordance with Article 11(2) of Regulation (EU) 2021/241, the calculation of the maximum financial contribution for Cyprus is to be updated by 30 June 2022. As such, in accordance with Article 23(1) of that Regulation, an amount for Cyprus should be made available now for a legal commitment by 31 December 2022. Where necessary following the updated maximum financial contribution, the Council, on a proposal from the Commission, should amend this Decision to include the updated maximum financial contribution without undue delay.

(57)Furthermore, in order to support additional reforms and investments, Cyprus has requested loan support. The maximum volume of the loan requested by Cyprus is less than 6,8% of its 2019 Gross National Income in current prices. The amount of the estimated total costs of the recovery and resilience plan is higher to the combined financial contribution available for Cyprus and requested loan support.

(58)The support to be provided is to be financed from the borrowing by the Commission on behalf of the Union on the basis of Article 5 of Council Decision (EU, Euratom) 2020/2053 9 . The support should be paid in instalments once Cyprus has satisfactorily fulfilled the relevant milestones and targets identified in relation to the implementation of the recovery and resilience plan.

(59)Cyprus has requested pre-financing of 13% of the financial contribution and of 13% of the loan. That amount should be made available to Cyprus subject to the entry into force and in accordance with the Financing Agreement provided for in Article 23(1) of Regulation (EU) 2021/241 and the Loan Agreement provided for in Article 15(2) of that Regulation.

(60)This Decision should be without prejudice to the outcome of any procedures relating to the award of Union funds under any other Union programme than Regulation (EU) 2021/241 or to procedures relating to distortions of the operation of the internal market that may be undertaken, in particular under Articles 107 and 108 of the Treaty. It does not override the requirement for Member States to notify instances of potential State aid to the Commission under Article 108 of the Treaty,

HAS ADOPTED THIS DECISION:

Article 1
Approval of the assessment of the recovery and resilience plan

The assessment of the recovery and resilience plan of Cyprus on the basis of the criteria provided for by Article 19(3) of Regulation (EU) 2021/241 is approved. The reforms and investment projects under the recovery and resilience plan, the arrangements and timetable for monitoring and implementation of the recovery and resilience plan, including the relevant milestones and targets and the additional milestones and targets related to the payment of the loan, the relevant indicators relating to the fulfilment of the envisaged milestones and targets, and the arrangements for providing full access by the Commission to the underlying relevant data are set out in the Annex to this Decision.

Article 2
Financial contribution

1.The Union shall make available to Cyprus a financial contribution in the form of non-repayable support amounting to EUR 1 005 946 047. 10 An amount of EUR 818 213 837 shall be available to be legally committed by 31 December 2022. Subject to the update provided for in Article 11(2) of Regulation (EU) 2021/241 calculating an amount for Cyprus equal to or more than this amount, a further amount of EUR 187 732 210 shall be available to be legally committed from 1 January 2023 until 31 December 2023.

2.The Union financial contribution shall be made available by the Commission to Cyprus in instalments in accordance with the Annex. An amount of EUR 130 772 986 shall be made available as a pre-financing payment, equal to 13% of the financial contribution. The pre-financing and instalments may be disbursed by the Commission in one or several tranches. The size of the tranches shall be subject to the availability of funding.

3.The pre-financing shall be released subject to the entry into force and in accordance with the Financing Agreement provided for in Article 23(1) of Regulation (EU) 2021/241. Pre-financing shall be cleared by being proportionally deducted against the payment of the instalments.

4.The release of instalments in accordance with the Financing Agreement shall be conditional on available funding and a decision by the Commission, taken in accordance with Article 24 of Regulation (EU) 2021/241, that Cyprus has satisfactorily fulfilled the relevant milestones and targets identified in relation to the implementation of the recovery and resilience plan. Subject to the entry into force of the legal commitments referred to in paragraph 1, to be eligible for payment, milestones and targets shall be completed no later than 31 August 2026.

Article 3
Loan support

1.The Union shall make available to Cyprus a loan amounting to a maximum of EUR 200 320 000.

2.The loan support shall be made available by the Commission to Cyprus in instalments in accordance with the Annex. An amount of EUR 26 041 600 shall be made available as a pre-financing payment, equal to 13% of the loan. The pre-financing and instalments may be disbursed by the Commission in one or several tranches. The size of the tranches shall be subject to the availability of funding.

3.The pre-financing shall be released subject to the entry into force and in accordance with the Loan Agreement provided for in Article 15(2) of Regulation (EU) 2021/241. Pre-financing shall be cleared by being proportionally deducted against the payment of the instalments.

4.The release of instalments in accordance with the Loan Agreement shall be conditional on available funding and a decision by the Commission, taken in accordance with Article 24 of Regulation (EU) 2021/241, that Cyprus has satisfactorily fulfilled the additional milestones and targets covered by the loan and identified in relation to the implementation of the recovery and resilience plan. To be eligible for payment, the additional milestones and targets covered by the loan shall be completed no later than 31 August 2026.

Article 4
Addressee

This Decision is addressed to the Republic of Cyprus.

Done at Brussels,

(1)    OJ L 57, 18.2.2021, p. 17.

(2)    Regulation (EU) No 1176/2011 of the European Parliament and of the Council of 16 November 2011 on the prevention and correction of macroeconomic imbalances (OJ L 306, 23.11.2011, p. 25).

(3)    Council Regulation (EU) 2020/2094 of 14 December 2020 establishing a European Union Recovery Instrument to support the recovery in the aftermath of the COVID-19 crisis (OJ L 433I , 22.12.2020, p. 23).

(4)    These macroeconomic imbalances refer to the recommendations made pursuant to Article 6 of Regulation (EU) No 1176/2011 in 2019 and 2020.

(5)    Such simulations reflect the overall impact of NGEU, which also includes funding for ReactEU, and increased funding for Horizon Europe, InvestEU, JTF, Rural Development and RescEU. Such simulation does not include the possible positive impact of structural reforms, which can be substantial.

(6)    Commission Recommendation (EU) 2021/402 of 4 March 2021 on an effective active support to employment following the COVID-19 crisis (EASE) (OJ L 80, 8.3.2021).

(7)    Regulation (EU) 2020/852 of the European Parliament and of the Council of 18 June 2020 on the establishment of a framework to facilitate sustainable investment, and amending Regulation (EU) 2019/2088 (OJ L 198, 22.6.2020, p. 13).

(8)    Regulation (EU, Euratom) 2020/2092 of the European Parliament and of the Council of 16 December 2020 on a general regime of conditionality for the protection of the Union budget (OJ L 433I, 22.12.2020, p. 1.)

(9)    Council Decision (EU, Euratom) 2020/2053 of 14 December 2020 on the system of own resources of the European Union and repealing Decision 2014/335/EU, Euratom (OJ L 424, 15.12.2020, p. 1).

(10)    This amount corresponds to the financial allocation after deduction of the Cyprus’ proportional share of the expenses of Article 6(2) of Regulation (EU) 2021/241, calculated in accordance with the methodology of Article 11 of that Regulation.

EUROPEAN COMMISSION

Brussels, 8.7.2021

COM(2021) 398 final

ANNEX

to the

Proposal for a Council Implementing Decision

on the approval of the assessment of the recovery and resilience plan for Cyprus

{SWD(2021) 196 final}

ANNEX

SECTION 1: REFORMS AND INVESTMENTS UNDER THE RECOVERY AND RESILIENCE PLAN

1.Description of Reforms and Investments

A. COMPONENT 1.1: Resilient and effective health system, enhanced civil protection

This component of the Cypriot Recovery and Resilience plan addresses the challenge of universal access to high-quality healthcare in Cyprus as well as civil protection’s overall emergency preparedness and response. The objective of this component is to strengthen the effectiveness, accessibility and overall resilience of the healthcare sector supporting the recently introduced National Health System through various interventions. These include the (i) modernisation and digitalisation of health care infrastructure and equipment, (ii) stepping-up of e-health services, (iii) accreditation of provided health care services and introduction of evidence-based clinical protocols and quality monitoring systems, as well as (iv) upskilling opportunities for health workers. It further aims at enhancing Cyprus’ civil protection system by establishing a modern Public Warning System.

The component addresses the country-specific recommendations on health (country-specific recommendation 1 of 2020 and country-specific recommendation 3 of 2019).

It is expected that no measure in this component does significant harm to environmental objectives within the meaning of Article 17 of Regulation (EU) 2020/852, taking into account the description of the measures and the mitigating steps set out in the recovery and resilience plan in accordance with the DNSH Technical Guidance (2021/C58/01).

A.1.    Description of the reforms and investments for non-repayable financial support

Reform 1 (C1.1R1): National Centre for Clinical Evidence and Quality Improvement

The objective of the reform is to enhance the quality and sustainability of the healthcare system.

For this purpose, a National Centre for Clinical Evidence and Quality Improvement shall be established developing evidence-based medicine (EBM) clinical guidelines, protocols and pathways for all levels of care (primary, secondary and tertiary healthcare) in close cooperation with healthcare professionals and patients as well as monitoring and evaluation processes such as clinical audits, peer reviews and inspections. Furthermore, an IT system enabling implementation and monitoring of the clinical standards and protocols and including an e-learning platform shall be developed. The reform shall include the training of healthcare professionals in the respective newly established protocols and processes.

The implementation of the reform shall be completed by 31 December 2025.

Reform 2 (C1.1R2): Design of an Electronic platform for the surveillance of Nosocomial Antibiotic Consumption and Healthcare – Associated Infections

The aim of the reform is to support the digital transition of the healthcare sector and strengthen the health system’s effectiveness and resilience.

It shall consist of the development of an electronic platform to process data from hospital pharmacies (nosocomial antibiotic consumption), microbiology laboratories (antimicrobial resistance), and hospitals (healthcare-associated infections (HAIs)).

The implementation of the reform shall be completed by 31 December 2025.

Investment 1 (C1.1I1): New facilities for the Cyprus Blood Establishment and procurement of the latest technology attendant equipment

The objective of the investment is to enhance central Blood Establishment operations in Cyprus.

This measure shall entail the construction of new facilities for the Cyprus Blood Establishment and the procurement of the latest technology attendant equipment. About 80 000 blood products (such as red blood cells, platelets and fresh frozen plasma) shall be able to be distributed for clinical use across the whole country.The new facilities shall have a primary energy demand that is at least 20% lower than defined in the nearly zero-energy building (NZEB) requirement.

The implementation of the investment shall be completed by 30 June 2025.

Investment 2 (C1.1I2): Cyprus Innovative Public Health information and communications technology (ICT) System

The aim of the measure is to establish the Influenza Sentinel Surveillance module of the Cyprus Innovative Public Health information and communications technology (ICT) System to support public health sector bodies in making evidence-based decisions.

It shall include both the development of the necessary digital tools (such as software and ICT infrastructure) as well as the upskilling of health workers and Ministry of Health personnel to use the system for data collection and information extraction. Following the European Centre for Disease Prevention and Control (ECDC) and World Health Organisation (WHO) guidelines, the Influenza Sentinel Surveillance (ISS) module of the Cyprus Innovative Public Health ICT System shall record epidemiological data informing the Ministry of Health of potential epidemiological outbursts. The Ministry of Health shall assign 150 doctors as sentinels who shall enter data in the Influenza Sentinel Surveillance (ISS) module of the Cyprus Innovative Public Health ICT System. 

The implementation of the investment shall be completed by 31 December 2025.

Investment 3 (C1.1I3): Purchase/replacement of medical equipment in hospitals

The investment aims at enabling private hospitals to invest within a short timeframe in the modernisation of their medical equipment increasing the quality of health services provided.

The measure shall comprise a support scheme for private hospitals supporting the upgrade or replacement of medical equipment. Applications for funding shall be assessed based on transparent selection criteria by a special Assessment Committee, which shall be appointed by the Minister of Health.

The implementation of the investment shall be completed by 31 December 2025.

Investment 4 (C1.1I4): Accreditation of public and private hospitals

The objective of this investment is to support the accreditation of hospitals, enabling their registration within the National Health System (NHS) and enhancing the quality assurance of health care services provided.

It shall consist in a sponsorship scheme facilitating the accreditation of hospitals by covering part of (i) the costs incurred by private and public hospitals related to accreditation advisory services from external experts (on how to make the necessary preparations for the accreditation) and (ii) accreditation fees charged by internationally recognised bodies.

The implementation of the investment shall be completed by 31 December 2025.

Investment 6 (C1.1I6): Deployment of generic cross border e-health services in Cyprus

The measure aims at extending e-health services to allow cross-border exchange of patient health information (in particular patient summaries and e-prescriptions), to become part of a secure peer-to-peer e-health network within the EU.

It shall consist in putting in operation a cross-border data exchange between Cyprus and Union Member States with operational National Contact Points for eHealth (NCPeH), such as e-prescriptions, e-dispensations, patient summaries, and additional data sets (amongst others discharge forms, laboratory results and imaging) as agreed with the eHealth Digital Service Infrastructure (eHDSI).

The implementation of the investment shall be completed by 30 June 2025.

Investment 7 (C1.1I7): Public warning system for supporting emergency operations through SMS

The objective of the investment is to enhance Cyprus’ civil protection system by establishing a modern public warning system targeting the whole population through a mobile application to increase public safety, preparedness and resilience.

The measure shall consist in putting in operation a public warning system reaching the whole population through a mobile application or SMS for alerting on imminent or developing emergencies.

The implementation of the investment shall be completed by 31 December 2025.

A.2.    Milestones, targets, indicators, and timetable for monitoring and implementation for non-repayable financial support

A.3.    Description of the reforms and investments for the loan

Reform 3 (C1.1R3): Gradually shifting of the healthcare provision and reimbursement framework towards value-based models

The aim of the reform is to introduce and gradually move to value-based healthcare models to complement current volume-based healthcare models, to improve health outcomes and limit costs.

It shall consist in the development of appropriate value-based models and initiatives, with relevant monitoring mechanisms to measure and track the success of the reform, and the introduction of value-based models in the Reimbursement Decision for primary and in-patient care as per the General Health System Legislation.

The implementation of the reform shall be completed by 31 March 2023.

Investment 5 (C1.1I5): Enhancement, modernisation and upgrade of Cyprus State Hospitals

The objective of this investment is to enhance, modernise and/or upgrade the Cyprus State Hospitals to enable them to compete on an equal basis with the private sector whilst at the same time improving the quality of healthcare services as well as working conditions for health workers in public hospitals.

This measure shall consist in the enhancement, modernisation and/or upgrade of the following nine State Hospitals: (1) enhancement of the Makarios Hospital for Children to offer a complete treatment of cases to children; (2) construction and/or extension of Haemodyalisis Unit at Paphos and Limassol Hospitals; (3) construction of a Mental Health Hospital; (4) enhancement of the Limassol General Hospital; (5) enhancement of the Accident and Emergency Units across all State Cyprus Hospitals; (6) enhancement of the Paphos General Hospital; (7) extension of Invasive Radiology Unit including medical equipment (such as Angiography Unit); (8) construction of a COVID-19 Unit at the Famagusta Hospital; and (9) creation of a Communicable Diseases Unit at the Limassol General Hospital. Building renovations shall aim at achieving on average at least a 30% primary energy demand reduction. The Haemodyalisis unit at Paphos Hospital shall have a primary energy demand that is at least 20% lower than defined by the nearly zero-energy building (NZEB) requirement.

The implementation of the investment shall be completed by 30 June 2026.

A.4.    Milestones, targets, indicators, and timetable for monitoring and implementation for the loan

B. COMPONENT 2.1: Climate neutrality, Energy efficiency and Renewable Energy

This component of the Cypriot Recovery and Resilience Plan aims to address the challenge of climate change mitigation by contributing to the country’s transition to climate neutrality.

The objectives of the component are to improve the environment policy through measures relating to green taxation, the opening up of the electricity market and the facilitation of licensing of renewable energy and renovation projects. The component aims to improve the energy efficiency of the building stock and other infrastructure and to support green investments for SMEs, households, the wider public sector and NGOs. The component also targets the alleviation of energy poverty and aims to address Cyprus’ energy isolation.

The component supports addressing the Country Specific Recommendations for the years 2019 and 2020 that recommend focusing investment and investment-related policies on energy efficiency and renewable energy (Country-Specific Recommendation 4 of 2019 and Country-Specific Recommendation 3 of 2020).

It is expected that no measure in this component does significant harm to environmental objectives within the meaning of Article 17 of Regulation (EU) 2020/852, taking into account the description of the measures and the mitigating steps set out in the recovery and resilience plan in accordance with the DNSH Technical Guidance (2021/C58/01).

B.1.    Description of the reforms and investments for non-repayable financial support

Reform 1 (C2.1R1): Green Taxation

The objectives of the measure are to promote a shift towards a more efficient use of environmental resources, reduce greenhouse gas emissions and to increase the penetration of renewable energy.

The reform shall consist in legislative changes introducing a carbon tax for fuels used in the sectors of the economy that do not fall under the EU greenhouse gas Emissions Trading System. The reform shall also entail the gradual introduction of a levy on water, as well as the introduction of a charge on household/landfill waste. The reform shall aim at making a tangible contribution to reaching the 2030 climate and energy targets to reduce greenhouse gas emissions and increase the share of renewable energy. The legislative changes shall be based on the findings of an independent study to be undertaken.

The implementation of the reform shall be completed by 30 June 2026.

Reform 2 (C2.1R2): Independence of Cyprus Transmission System Operator (TSOC) from the incumbent Electricity Authority of Cyprus

The objective of the measure is to enhance competition in the electricity market by creating conditions for new investors to participate in the generation, storage, aggregation, demand response and supply of electricity.

The reform shall consist in ensuring the independence of the Cyprus Transmission System Operator (TSOC) from the incumbent Electricity Authority of Cyprus (EAC) in terms of governance, financial and personnel management. The measure shall also facilitate supplier switching, which is expected to reduce the cost of electricity for domestic and commercial/industrial customers.

The implementation of the reform shall be completed by 31 December 2021.

Reform 3 (C2.1R3): Digital One-Stop Shops to streamline RES projects permitting and to facilitate Energy Renovation in Buildings

The objective of the measure is to promote the implementation of RES projects by streamlining the RES projects permitting process. The reform shall also aim at accelerating the energy renovation of buildings.

The reform shall consist in digitalising the licensing permitting process for RES projects and establishing a single point of contact for technical and financial support for the purposes of energy renovation of buildings.

The implementation of the reform shall be completed by 31 December 2022.

Reform 4 (C2.1R4): Energy Storage Regulatory Framework

The objective of the measure is to establish a regulatory framework for promoting the participation of storage facilities in the electricity market.

The reform shall consist in amending the Transmission and Distribution Rules (TDRs) and the Trading and Settlement Rules (TSRs) to allow storage facilities to participate in the wholesale electricity market. This is expected to promote the generation of electricity from renewable energy systems and to contribute to the efficiency and economic viability of the electricity market as a whole.

The implementation of the reform shall be completed by 31 December 2021.

Investment 1 (C2.1I1): Promoting energy efficiency investments in SMEs, municipalities, communities and the wider public sector

The objective of the measure is to reduce the primary and final energy consumption and the CO2 emissions in buildings and/or facilities owned or operated by SMEs, local authorities (Municipalities and Communities) and organisations of the wider public sector.

The investment shall consist in providing support to at least 275 entities for building renovation and for making production processes more efficient. The grant scheme shall also promote the execution of energy audits, as well as the adoption of digital technologies and the integration of renewables. The investment shall aim at achieving on average at least a 30% primary energy demand reduction.

It is expected that this measure does not do significant harm to environmental objectives within the meaning of Article 17 of Regulation (EU) 2020/852, taking into account the description of the measure and the mitigating steps set out in the recovery and resilience plan in accordance with the DNSH Technical Guidance (2021/C58/01). In particular, the call for proposals for this measure shall reflect that the purchasing of biomass boilers shall comply with the provisions of the Directive 2008/50/EC on ambient air quality and cleaner air for Europe, the Renewable Energy Directive 2018/2001/EU and relevant national legislation on air pollutant emissions.

The implementation of the investment shall be completed by 31 December 2025.

Investment 2 (C2.1I2): Promoting renewables and individual energy efficiency measures in dwellings and tackling energy poverty in households with people with disabilities

The objective of the measure is to encourage the use of renewable energy sources and energy savings by the large stock of old dwellings, as well as to subsidise the implementation of small-scale energy renovations in energy poor households as well as in households with people with disabilities.

The investment is composed of two sub-measures: (i) a support scheme for promoting renewables and individual energy efficiency measures in dwellings and (ii) a support scheme for addressing energy poverty in households with people with disabilities.

Sub-measure 1: promoting renewables and energy efficiency measures in dwellings

The investment shall consist in providing grants to at least 16 200 dwellings (including households of vulnerable electricity consumers) for thermal insulation of roofs and/or for the installation of a photovoltaic system and/or for the installation or replacement of Solar Water Heating (SWH) Systems of an existing dwelling.

Sub-measure 2: addressing energy poverty in households with people with disabilities

The investment shall consist in providing support for the implementation of small-scale energy renovations, such as thermal insulation and energy efficient equipment, in at least 270 energy poor households as well as households with people with disabilities.

The implementation of the investment shall be completed by 30 June 2026.

Investment 3 (C2.1I3): Encouraging the use of renewables and energy savings by local/wider public authorities as well as NGOs and facilitating the transition of local communities towards climate mitigation & adaptation

The objective of the measure is to promote the use of RES and energy savings by the large stock of old infrastructure used by local authorities, as well as to build a pipeline of sustainable energy and climate adaptation investment projects across rural communities in Cyprus.

The investment is composed of two sub-measures: (i) encouraging the use of renewables and energy savings by local/wider public authorities as well as NGOs; and (ii) facilitating the transition of local communities towards climate mitigation and adaptation. The investment shall aim at achieving on average at least a 30% primary energy demand reduction.

Sub-measure 1: Encouraging the use of renewables and energy savings by local/wider public authorities as well as NGOs

The sub-measure shall consist in setting up a grant scheme for providing support for large-scale energy efficiency and RES measures in buildings, infrastructure, and social housing targeting local public authorities and NGOs.

Sub-measure 2: Facilitating the transition of local communities towards climate mitigation and adaptation

The sub-measure shall consist in providing technical support to rural Community Councils in developing Sustainable Energy and Climate Plans and implementing energy and climate investments, as well as in setting up a grant scheme to support sustainable energy and climate adaptation investments.

The two sub-measures together shall lead to at least 580 investments for improving energy performance and resilience to climate change to be undertaken by local authorities or NGOs.

The implementation of the investment shall be completed by 30 June 2026.

Investment 4 (C2.1I4): Reduction of CO2 emissions in industries, businesses and organisations

The objective of the measure is to encourage industries, businesses and organisations to engage in transformations targeting decarbonisation and to implement action plans to reduce greenhouse gas emissions in their operations and/ or supply chains.

The investment consists in setting up a support scheme providing financing, equivalent to the cost for the purchase of greenhouse gas emission allowances to be avoided due to the reduction in emissions resulting from the beneficiaries’ actions. At least 354 566 tons of CO2eq shall be reduced as a result of the support provided.

In order to ensure that the measure complies with the ‘Do no significant harm’ Technical Guidance (2021/C58/01), the eligibility criteria contained in terms of reference for upcoming calls for projects shall exclude the following list of activities: (i) activities related to fossil fuels, including downstream use 1 ; (ii) activities under the EU Emission Trading System (ETS) achieving projected greenhouse gas emissions that are not lower than the relevant benchmarks 2 ; (iii) activities related to waste landfills, incinerators 3 and mechanical biological treatment plants 4 ; and (iv) activities where the long-term disposal of waste may cause harm to the environment. The terms of reference shall additionally require that only activities that comply with relevant EU and national environmental legislation may be selected.

The implementation of the investment shall be completed by 30 June 2026.

Investment 5 (C2.1I5): Energy Efficiency Upgrading of public buildings

The objective of the measure is to facilitate the energy upgrading and increased energy efficiency of selected public buildings, i.e. fire service properties, schools, the Nicosia General Hospital, water treatment plants and water pumping stations.

The investment is composed of three sub-measures: (i) Fire Service Properties and Schools; (ii) Nicosia General Hospital; and (iii) Installation of Grid connected Photovoltaic Energy Systems in Water Treatment Plants and water pumping stations.

Sub-measure 1: Fire Service Properties and Schools

The sub-measure consists in the implementation of energy upgrades in the 16 Urban Fire Stations in Cyprus, the Fire Brigade Headquarters, and two rural Fire Stations. The sub-measure shall also cover the installation of thermal insulation and photovoltaic systems in at least 405 schools.

The investment shall aim at achieving on average at least a 30% primary energy demand reduction.

Sub-measure 2: Nicosia General Hospital

The sub-measure shall consist in the setting up and installation of photovoltaics system at the Nicosia General Hospital of a total capacity of 943 KW.

Sub-measure 3: Water Treatment Plants and water pumping stations

The sub-measure shall consist in the installation of grid connected photovoltaic energy systems of total power of 2 MWp in water treatment plants and water pumping stations.

The implementation of the investment shall be completed by 31 December 2025.

Investment 6 (C2.1I6): Upgrading renewable energy and smart grids testing infrastructure at the University of Cyprus

The objective of the measure is to upgrade the renewable energy and smart grids testing infrastructure at the University of Cyprus and to integrate this infrastructure in the future smart grid.

The investment shall consist in delivery, installation, testing, calibration, commissioning and acceptance of smart grids equipment, followed by final infrastructure integration. The measure shall also include personnel orientation and training.

The implementation of the investment shall be completed by 30 June 2024.

Investment 7 (C2.1I7): Mass installation and operation by the Distribution System Operator (DSO) of Smart Metering Infrastructure (Advanced Metering Infrastructure)

The objective of the measure is to facilitate the mass roll-out of smart meters in Cyprus.

The investment shall consist in the delivery and installation of 400 000 smart meters to final electricity customers, including natural and legal persons.

The implementation of the investment shall be completed by 30 June 2026.

Investment 8 (C2.1I8): Monitoring and reduction of GHG emissions in agriculture

The objective of the measure is to enhance the monitoring for greenhouse gas emissions from agriculture in Cyprus and contribute to their reduction.

The investment shall consist in the establishment of a GHG monitoring system for agriculture, which shall provide data for the implementation of more efficient mitigation practices and contribute to achieving a 10% reduction of GHG emissions from agriculture by end 2025.

The implementation of the investment shall be completed by 31 December 2025.

Investment 9 (C2.1I9): Forests fire protection

The objective of the measure is to upgrade the capabilities of relevant authorities in Cyprus to cope with fire hazards and to strengthen the protection against the risks faced by citizens, infrastructure and forests.

The investment shall consist in the purchasing of firefighting aircraft, vehicles, equipment and related training and servicing for the period of implementation of the measure. This shall include the supply of the following vehicles, machinery and equipment: 75 transport vehicles for patrol purposes for forest protection and transfer of staff in fire incidents; 12 large fire trucks; 25 emergency firefighting vehicles; four bulldozers for the construction of fire protection works with the possibility of transport by truck for rapid transport to fires; four ground bulldozers for the construction of fire protection works; six agricultural tractors equipped with the necessary tools for the implementation of fire prevention measures; four-wheel excavators / loaders; six branch shredders; four loaders (trucks) and six 20-tonne tankers for fire protection purposes; one firefighting aircraft.

The implementation of the investment shall be completed by 31 December 2025.

Investment 10 (C2.1I10): Market Management System to facilitate the opening of the electricity market to competition

The objective of the measure is to introduce a Market Management System by the Cyprus Transmission System Operator as a tool for facilitating the opening of the electricity market to competition.

The investment shall consist in the installation and roll-out of the Market Management System for the Cyprus Electricity Market and related training of 100% of the personnel of the Transmission System Operator.

The implementation of the investment shall be completed by 31 March 2023.

B.2.    Milestones, targets, indicators, and timetable for monitoring and implementation for non-repayable financial support

B.3.    Description of the reforms and investments for the loan

Investment 11 (C2.1I11) Ending energy isolation – Project of Common Interest "EuroAsia Interconnector"

The objective of the measure is to ensure security of supply and more competitive wholesale electricity prices, and to enable the increased use of electricity from cleaner sources, in particular renewables, by connecting the electricity network of Cyprus to the EU continental system.

The investment shall consist in the completion and commissioning of the PCI 3.10.2 Interconnection between Cyprus and Greece, which shall include a DC 1 000 MW converter station in Cyprus and related infrastructure in Cyprus and Crete, connected through 898 km of HVDC submarine cables with 1 000 MW capacity. This is expected to be part of a broader investment building a cross-border interconnector with a total length of 1 208 km between Crete, Cyprus and Israel. Different parts of the project are expected to receive funding from different sources, namely the Recovery and Resilience Facility, the Connecting Europe Facility, a loan from the European Investment Bank, commercial loans and equity.

It is expected that this measure does not do significant harm to environmental objectives within the meaning of Article 17 of Regulation (EU) 2020/852, taking into account the description of the measure and the mitigating steps set out in the recovery and resilience plan in accordance with the DNSH Technical Guidance (2021/C58/01). In particular, the mitigating measures targeting the conservation of the marine environment shall be duly respected during the implementation of the project as set out in the Environmental Impact Assessment and the building permit. Any measures identified in the framework of the EIA and the assessment under Directive 2000/60/EC as necessary to ensure compliance with the DNSH Technical Guidance (2021/C58/01) shall be integrated into the project and complied with at the stages of construction, operation and decommissioning of the infrastructure.

The implementation of the investment shall be completed by 31 December 2025.

B.4.    Milestones, targets, indicators, and timetable for monitoring and implementation for the loan

C. COMPONENT 2.2: Sustainable Transport

This component of the Cyprus recovery and resilience plan aims at promoting cleaner, smarter, safer and fairer urban mobility by encouraging a modal shift from private cars to more sustainable modes of transport such as public transport, cycling, walking, and to promote the use of zero or low-emission vehicles (LEVs) as well as the use of digital systems in the transport sector.

The component addresses the country-specific recommendations on investment in sustainable transport (Country-Specific Recommendation 4 of 2019 and Country-Specific Recommendation 3 of 2020).

It is expected that no measure in this component does significant harm to environmental objectives within the meaning of Article 17 of Regulation (EU) 2020/852, taking into account the description of the measures and the mitigating steps set out in the recovery and resilience plan in accordance with the DNSH Technical Guidance (2021/C58/01).

C.1.    Description of the reforms and investments for non-repayable financial support

Reform 1 (C2.2R1): Establishment of an Intelligent Transport System using Digital Twin technologies

The objective of the measure is to enhance technological infrastructure, to enable better and more efficient monitoring of the infrastructure and to introduce smart features to it.

The reform consists in developing and implementing an Intelligent Transport System in order to improve the mobility management in urban areas and the Cyprus TEN-T network, also by improving the cooperation between various stakeholders. The reform shall include the delivery, installation and connection to the National Access Point of 300 sensors. This equipment is expected to constitute the basis for the digitalisation of the physical mobility networks in a geographical information system (GIS) database and the integration of mobility services.

The implementation of the reform shall be completed by 31 December 2025.

Reform 2 (C2.2R2): Provide the regulatory framework for an interoperable and effective electric vehicle (EV) recharging infrastructure and an efficient EV recharging market

The objective of the measure is to facilitate the creation of an efficient electro-mobility infrastructure for recharging EVs.

The reform consists in the entry into force of legislation on recharging infrastructure for EV. The reform aims at creating a mechanism for (i) implementation and monitoring of the recharging market for EV and (ii) coordinating data analysis allowing for the effective network monitoring as well as for ensuring compliance with national and EU law.

The implementation of the reform shall be completed by 31 December 2024.

Reform 3 (C2.2R3): Progressively phase out the most polluting vehicles, especially in polluted urban areas

The objective of the reform is to provide the regulatory framework to create impetus for replacing old and polluting rolling stock, and to provide incentives for using sustainable commuting and mobility solutions.

This reform shall set up the legal framework allowing the implementation of measures aiming at the exclusion of polluting vehicles from key areas, such as no-emission zones, levies for the circulation of vehicles in certain areas, and compulsory use of EV in certain transport operations. The reform is supported by Investment 3 (Promote widespread use of EV, LEVs and alternative means of transport).

The implementation of the reform shall be completed by 31 December 2025.

Investment 1 (C2.2I1): Implementation of Sustainable Urban Mobility Projects (SUMP) and accessibility-enhancing measures

The objectives of the measures are to create the necessary infrastructure to enhance urban mobility with more environmentally friendly options, improve the city environment and road safety in Limassol and Larnaca. The investment shall also include measures to enhance the accessibility and safe movement of pedestrians, cyclists and persons with disabilities in all urban centres.

More specifically, the investment consists in the introduction of cycle ways, bus lanes and the relevant ITS equipment (i.e. smart traffic light system with bus priority system), as well as the introduction of cycle stands, bus shelters and improvement of road safety conditions at selected junctions. It also includes the creation of Park & Ride stations and the relevant ITS equipment as well as upgrades on existing road network in the urban centres (such as walkways, crossings for pedestrians, cyclists and/or people with disabilities, warning systems for the visually impaired, bicycle parking hubs, walkway ramps).

The implementation of the investment shall be completed by 31 March 2026.

Investment 2 (C2.2I2): Creation of electro-mobility infrastructure

The objectives of the measures are to create the necessary infrastructure to facilitate the transition to electro-mobility and to contribute to the deployment of charging points.

The investment is composed of three sub-measures: (i) the installation of publicly accessible EV fast charging stations; (ii) a grant scheme for the installation of publicly accessible charging points on the premises of businesses and local authorities; and (iii) a grant scheme for charging EV from Renewable Energy Sources (RES).

Sub-measure 1: the installation of publicly accessible fast charging stations for EV

The investment consists in the installation of 10 fast charging stations as a demonstration project for the promotion of electro-mobility. It shall provide access to fast recharging infrastructure for EVs and therefore it is expected to contribute to removing consumer inhibitions concerning EV autonomy. The 10 fast charging stations shall be placed in publicly accessible areas such as hospitals, large publicly accessible parking places or outside public services buildings (such as Ministries or Courts).

Sub-measure 2: a grant scheme for the installation of publicly accessible charging points in the premises of businesses and local authorities

The scheme shall promote the installation of charging points in publicly accessible areas owned by businesses or local authorities.

Sub-measure 3: a grant scheme for charging EVs from RES

The scheme shall provide financial incentives to promote the development of the necessary infrastructure for electro-mobility especially through the charging of EVs from RES. The grant scheme shall include the installation of photovoltaic systems and charging equipment in dwellings for the charging of electric private vehicles and the financing of local/public authorities for the construction of public charging points for EVs. The electricity for the public charging points is expected to be generated in large part from RES.

The implementation of the investment shall be completed by 31 December 2025.

Investment 3 (C2.2I3): Promote widespread use of Electric Vehicles (EVs)

The objective of the measure is to promote the purchase of EVs, LEVs (i.e. a car emitting less than 50 g/km of CO2), electric bicycles and public or non-motorised modes of transport (such as bus, bicycle), while simultaneously gradually removing older polluting vehicles from circulation. The investment is expected to complement Reform 3 (Progressively phase out the most polluting vehicles, especially in polluted areas).

The investment is composed of three sub-measures: (i) kick-start the transition to electro-mobility in the government sector; (ii) a support scheme for the purchase of EV; and (iii) a scrapping scheme for the most polluting vehicles combined with incentives for non/low emission mobility options.

Sub-measure 1: kick-start the transition to electro-mobility in the government sector

The investment includes measures aiming to kick-start the gradual replacement of government conventional vehicle fleet with electric vehicles and promote the transition to electro-mobility. It shall include the purchase of 100 electric vehicles for the needs of the general government and the installation of the relevant charging points on government premises. In addition, the Department of Postal Services shall replace its whole motorcycle fleet with electric motorcycles.

This is expected to serve as a demonstration project for the promotion of electro-mobility to the wider public.

Sub-measure 2: a support scheme for the purchase of EVs

The scheme shall provide incentives, by means of grant, for the purchase and registration of EVs and the purchase of electric bicycles. It is directly linked to Reform 3, “Progressively phase out the most polluting vehicles, especially in polluted urban areas”, as a parallel, supportive and complementary measure.

Sub-measure 3: a scrapping scheme for the most polluting vehicles combined with incentives for non/low emission mobility options

The scheme shall incentivise motorists to give up older and more pollutant vehicles in exchange for alternative mobility options, such as the purchase of a LEV or of an electric bicycle and/or free annual bus tickets. The removal of older vehicles is expected to contribute to the reduction of greenhouse gas (GHG) emission from transport, as well as to the mitigation of its impact on air, water, soil and noise pollution. The scrapped vehicles shall be recycled, by licensed recyclers. Priority shall be given to the oldest vehicles to be scrapped.

The implementation of the investment shall be completed by 31 December 2025.

C.2.    Milestones, targets, indicators, and timetable for monitoring and implementation for non-repayable financial support

D. COMPONENT 2.3: Smart and Sustainable Water Management

This component of the Cypriot recovery and resilience plan addresses inefficiencies in water management. The objectives of this component are to ensure adequate and uninterrupted supply of good quality drinking water, maximising the infrastructure for sewerage collection systems, sewerage treatment and reuse of treated effluent in agriculture; reducing water loss, non-revenue water and groundwater abstraction, improving anti-flood infrastructure, improving operational efficiency of the services being provided to the consumers through technological advances and establishing transparency in financial transactions.

The component addresses the Country Specific Recommendation on water management (Country-Specific Recommendation 3 of 2020 and Country-Specific Recommendation 4 of 2019).

It is expected that no measure in this component does significant harm to environmental objectives within the meaning of Article 17 of Regulation (EU) 2020/852, taking into account the description of the measures and the mitigating steps set out in the recovery and resilience plan in accordance with the DNSH Technical Guidance (2021/C58/01).

D.1.    Description of the reforms and investments for non-repayable financial support

Reform 1 (C2.3R1): Water Resource Management Reform

The objective of the measure is to define actions addressing structural weaknesses in the water resource management in Cyprus and improving its efficiency and sustainability.

The reform consists of the establishment of a high-level Working Party (the “Working Party”) led by the Ministry of Agriculture, Rural Development and Environment with participants from the Ministry of Interior, Ministry of Finance, Directorate General for European Programmes, Coordination and Development and all Water and Sewerage Boards as well as Local Administration coordinative bodies to represent all stakeholders in national water management. The Working Party shall serve as the body for cooperation between the various water management authorities and as a coordination and monitoring body for the implementation of the investments and actions to be proposed. The Working Party shall propose an action plan with the necessary regulatory and adaptation measures to be implemented within the next 10 to 15 years. The objectives of the suggested action plan shall be (i) to increase operational efficiency through mergers of District Water & Sewerage Boards, (ii) to reduce non-revenue water, (iii) to improve water use, and (iv) to enhance the safety and sustainable operation of the infrastructures of the Water Development Department. The Working Party shall coordinate and monitor the implementation of the action plan and shall provide the necessary technical assistance to the relevant water management authorities for carrying out the reform measures as well as the investments included in the component.

The implementation of the reform shall be completed by 30 June 2025.

Investment 1 (C2.3I1): Choirokitia‑Famagusta Conveyor Replacement

The objectives of the measure are to enhance water supply security through an improved conveyor infrastructure with increased capacity of the duct between key water sources (such as water treatment plants) and consumption areas. The investment shall also contribute to minimising water losses and the occurrence of failures, improving water quality by mixing desalinated and refined water before it reaches the final consumers, and achieving energy savings through reduced water pumping.

The measure consists of the construction of a replacement of the existing water conveyor. The project shall include conducting topographical studies and environmental impact assessments. Following the aforementioned preliminary steps and the issuance of the necessary permits, the Water Development Department shall assign the construction works to a contractor who shall be selected via public procurement procedures to carry out the works.

The implementation of the investment shall be completed by 30 June 2026.

Investment 2 (C2.3I2): Water Treatment Plants: upgrade for water quality improvement

The objectives of the measure are to improve water quality, reduce energy consumption and the cost of drinking water production by limiting the need for water desalination, as well as decrease disruptions to the supply and distribution of water.

The measure consists of refurbishing the Water Treatment Plants of Limassol, Asprokremmos, Tersefanou, Kornos and Kannaviou. This shall include replacing the existing chlorination infrastructure for these five Water Treatment Plants, installing activated carbon polishing units for Limassol, Asprokremmos and Tersefanou Water Treatment Plants, extending the capacity of Asprokremmos Water Treatment Plant by 10 000 m3/day and upgrading the monitoring and control system as well as its automation system.

The implementation of the investment shall be completed by 31 December 2025.

Investment 3 (C2.3I3): Integrated Monitoring and Control Management System for the Water Development Department’s infrastructure

The objective of the measure is to improve the water resource management efficiency and increase the operational capacity of the competent authorities. The measure aims to reduce the risk of business disruption by securing the various systems against cyber- and physical attacks, to reduce energy consumption and GHG emissions by increasing efficiency, to reduce non-revenue water in irrigation by improving infrastructure and monitoring capacity and to reduce the high-impact risk of contamination events and the impact of prolonged drought events by closely managing water resources and forecasting.

The measure consists of creating an integrated platform that shall be composed of a number of subsystems where each of them shall address key challenges, including water quality, flood management, water demand management and water allocation for irrigation purposes, energy efficiency as well as cyber- and physical security. The implementation of the measures shall include: (i) the installation of 500 hydraulic and quality sensors in all the lakes, reservoirs, rivers, as well as in the water transport network, up to the level of the communities; (ii) the installation of energy meters to monitor the energy consumption of pumping stations that shall be transmitted and stored in a database; (iii) a software platform linked with intelligent analytics and methods to help the decision-making process in relation to the production of water from different sources (desalination and treatment of water from reservoirs) taking into account security of water supply, cost of water production across different systems and drought forecasts. In addition, the measure shall address cyber- and physical security challenges through tools for enhancing the protection of ICT systems. The project shall be implemented by the following sequence of actions: detailed requirement analysis with the help of specialised consultants; procurement and installation of equipment; and implementation, assessment and commissioning of the IT sub-systems.

The implementation of the investment shall be completed by 30 June 2026.

Investment 4 (C2.3I4): Smart Water and Sewerage Networks Management

The objective of the measure is to enhance operational and energy efficiency through the digitalisation of Larnaca Sewerage and Drainage Board, Larnaca Water Board and Water Board of Limassol, notably the upgrading of the organisations’ operation and services and integrating the IT systems currently used into a unified system to operate under cloud services.

The measure consists of a series of smart and digital upgrades in each of the three organisations: (i) The Larnaca Sewerage and Drainage Board shall conduct a techno-economic study to map its energy footprint and identify potential for reductions in energy consumption, such as through solar and biogas solutions. It shall also install smart meters, sensors and systems for recording the hydrological balance to enable the timely detection of damaged pipelines and the monitoring of pathogens. (ii) The Larnaca Water Board shall install water quality and pressure sensors in its distribution networks and is thus expected to replace at least 50% of its conventional consumer meters with smart meters. Moreover, it shall develop a Digital Twin decision support tool and a data bank. These systems shall draw information from the installed sensors, smart water meters and existing systems to be combined to accurately estimate water flow, pressure and quality of water for the timely detection of events. (iii) The Water Board of Limassol shall replace conventional consumer meters with automated smart meters and install pressure and quality sensors for infrastructure monitoring and development of innovative customer services, such as early warning in the case of a leakage. Furthermore, it is expected to design a customised software integrating all its operations and to support data-driven decision making.

The implementation of the investment shall be completed by 30 June 2026.

Investment 5 (C2.3I5): Anti-flood and water collection measures

The objective of the measure is to mitigate the negative effects on human health, the environment, cultural sites and income from flooding events through managing flood risk. A specific objective resulting from the actions to be implemented is the reduction of erosion from extreme runoffs, both in agricultural and urban areas.

The measure consists of a series of anti-flood and water collection measures. The works shall concentrate in three areas, namely Livadia, Kladeri and the centre of Nicosia, as follows: (i) In Livadia, the Municipality of Larnaca shall upgrade and embellish flood channels, through improvements to the riverbed and riverbanks. (ii) In Kladeri area, the Municipality of Ypsonas shall construct a complete rainwater collection network of 4 600 meters in length to cover the area ending in 35 absorption pits. (iii) In Nicosia, the Municipality of Nicosia has already selected eight areas where a complete sewer system shall be constructed. The works shall include the reconstruction of streets and pavements and the expansion of the rainwater network.

The implementation of the investment shall be completed by 31 December 2025.

Investment 6 (C2.3I6): Enhance water security for Nicosia and Larnaca regions

The objective of the measure is to increase the water adequacy for the needs of Nicosia and Larnaca Water Boards.

The measure foresees the construction of three new generation Glass Lined Steel (GLS) water reservoirs of 26 000 m3 in total in Nicosia Region and the construction of a 10 000 m3 water reservoir in a specific designated area at Klavdia, Larnaca.

The implementation of the investment shall be completed by 30 June 2025.

Investment 7 (C2.3I7): Eastern Nicosia infrastructure for the re-use of treated wastewater

The objective of the measure is to increase the storage capacity of a Wastewater Treatment Plant in the area Vathia Gonia to enable the utilisation of the whole treated wastewater amount. This shall be achieved through the construction of the necessary infrastructure to utilise the water immediately, avoiding any discharge and satisfying the existing irrigation needs of farmers connected to the irrigation network.

The projects shall be implemented by the Water Development Department and involves also the pumping, conveyance, distributing and storage of treated effluent from the Vathia Gonia Wastewater Treatment Plant located in eastern Nicosia. The treated water shall eventually be used for irrigation purposes in specific agricultural regions situated in the broader eastern Nicosia area under the control of the Republic of Cyprus, thus avoiding any discharge.

The implementation of the investment shall be completed by 30 June 2026.

Investment 8 (C2.3I8) Protection of the marine ecosystem from hazards through oil spills

The objective of the measure is to protect marine ecosystems through an upgrade of the operational capacity of the Department of Fisheries and Marine Research to respond promptly, adequately and effectively to incidents from oil pollution to marine pollution.

The measure consists of the purchase of three detergent vessels with the possibility of autonomous oil recovery companies, two of which shall operate close to the shoreline and the larger one on the high seas, as well as the purchase of two autonomous oil dispersant air spraying units.

The implementation of the investment shall be completed by 31 December 2025.

D.2.    Milestones, targets, indicators, and timetable for monitoring and implementation for non-repayable financial support

E. COMPONENT 3.1: New growth model and diversification of the economy

The component addresses the challenges of the Cypriot economy with regards to competitiveness, productivity and investment, as well as overreliance on certain economic sectors, such as tourism.

The objective of the component is to help the economy to transit to a new economic growth model (Sustainable Business and Trade Centre of Europe) by addressing sectoral challenges as follows:

Primary Sector: the objective is to develop a competitive agriculture sector primarily through agri-tech and strong collaboration with business, higher-education institutions and research centres to excel.

Secondary Sector: the objective is to develop a competitive light manufacturing sector that includes a focus on areas such as green-tech and agri-tech.

Sustainable Tourism: the objective is to develop a strong agri-tourism and sustainable hospitality infrastructure and attracting health & wellness tourists through competitive and reputable healthcare.

Circular economy (with emphasis on waste management): the objective is to help move towards a circular economy by making better use of raw materials, reducing waste, raising awareness for sustainable development and switching to renewable energy in order to mitigate the climate crisis, protect social well-being and build a resilient economy. The component contributes to addressing the country specific recommendation related to “focus investment on the green and digital transition” and “on waste and water management” (Country-Specific Recommendation 3 of 2020), “focus investment-related economic policy on sustainable transport, environment” and “on environment, in particular waste and water management” (Country-Specific Recommendation 4 of 2019)

It is expected that no measure in this component does significant harm to environmental objectives within the meaning of Article 17 of Regulation (EU) 2020/852, taking into account the description of the measures and the mitigating steps set out in the recovery and resilience plan in accordance with the DNSH Technical Guidance (2021/C58/01).

E.1.    Description of the reforms and investments for non-repayable financial support

Sub-Component 3.1.1 Resilient and competitive primary sector

Reform 1 (C3.1R1): Move agricultural practices from the 20th century to the 21st century by investing in a national centre for excellence in agri-tech

The objective of the reform is to address challenges in the primary sector, including low productivity and lack of technological knowledge, by establishing a centralised operating model through strong collaboration between the Agricultural Research Institute and public universities.

The reform shall consist in establishing Cyprus’s Agricultural Research Institute as the country’s centre of excellence in agriculture, animal husbandry and environmental protection and to strengthen the cooperation between the Agricultural Research Institute and universities to develop new curricula.

The implementation of the reform shall be completed by 30 June 2023.

Reform 2 (C3.1R2): On-line, cloud-based platform for improving the trade and information symmetry in the fresh produce supply chain

The objectives of the reform are to address long-standing drawbacks of the fresh produce supply chain, especially regarding traceability, market price distortions and the information asymmetry, which weakens producers’ position in the market.

The reform shall consist of a new law on unfair practices in transactions in the local fresh produce market and the operation of a platform for recording transactions in the local fresh produce market.

The implementation of the reform shall be completed by 30 June 2026.

Reform 3 (C3.1R3): Genetic improvement of the Cyprus sheep and goat population

The objective of the reform is to enhance the productivity and sustainability of the primary sector through the promotion of agro-technology, advanced reproduction and genomic improvement of sheep and goats to optimise the production of dairy products.

The reform shall consist of support to the sheep and goat farmers to upgrade their record keeping on farm, their production processes, product quality evaluation efforts and participation in the nationally funded AGRICYGEN project, which shall provide them with advanced knowledge and guidance on the genetic merit of their animals. This shall allow farmers to make informed decisions on animal reproduction to improve productivity, primarily in terms of milk production.

The implementation of the reform shall be completed by 30 June 2026.

Investment 1 (C3.1I1): Construction of a collaborative marine aquaculture infrastructure (port and land facilities) in the Pentakomo coastal area

The objective of the measure is to cover the gap of not having sufficient port and land infrastructure for the daily needs of this activity, by covering existing as well as future needs of more than 70% of the marine aquaculture units operating in Cyprus, aiming at the smooth operation of this sector. The measure aims at maintaining the aquaculture’s viability, improve its competitiveness and provide for its future further sustainable development and expansion, strengthening the resilience, competitiveness and contribution of the primary sector to sustainable development of the Cypriot economy.

The investment shall consist in the construction of a collaborative infrastructure for marine aquaculture in the Pentakomo area, which shall be specifically designed to accommodate the needs of marine offshore aquaculture activities (safe service vessels docking, maintenance areas of equipment, storage areas, loading and unloading areas and fuelling station). It shall cover the construction of a small port with the required and appropriate land facilities that shall have the capacity to serve seven aquaculture units with about 40 service vessels of various sizes.

The implementation of the investment shall be completed by 31 March 2026.

Investment 2 (C3.1I2): Enhancing the existing isotopic databases of Cypriot local traditional food/drinks, by developing a Block Chain platform, to ensure their identity

The objective of the measure is to develop a mechanism and a fit for purpose verification methodology for the authentication of Cypriot products as well as of European food in general, by using stable isotopic databases, thus utilising research and technology. In particular, the measure shall develop a verification methodology for at least three areas of authenticity (dairy products, honey and spirits) that are significantly affected by adulteration and fraud.

The investment shall consist in the establishment of a network of expertise that shall inform regulatory and production stakeholders about food authenticity issues and problems, existing datasets, available methodology and secure sharing of data and information. Also, it shall develop fit for purpose verification methodology for at least three areas of authenticity (dairy products, honey and spirits) that are significantly affected by adulteration and fraud. Moreover, it shall promote knowledge transfer of “IsoDataBase” outputs to the food industry, regulatory, enforcement, research and consumer stakeholders and shall build a configurable web and mobile Enterprise Resource Planning that may convert any paper-based supply chain to digital.

The implementation of the investment shall be completed by 31 March 2025.

Investment 3 (C3.1I3): Upskill the existing farming community and professionalise future labour force by investing in human capital

The objective of the measure is the upskilling of the farming community, through knowledge transfer and the promotion of innovation. In this way, it aims at fostering a more competitive agricultural sector with higher potential, through capacity building and knowledge transfer.

The investment shall consist in the granting of ten scholarships in the agricultural sector, of EUR 10 000 each, for supporting the development of the future labour force in the sector. It shall also support transfer of knowledge and innovation within the existing labour force, through the use of the Agricultural Knowledge and Innovation System with links to academia, bridging the gap between practical application on the one hand and knowledge, science, experience and research on the other.

The implementation of the investment shall be completed by 31 December 2022.

Sub-Component 3.1.2 Innovative and competitive secondary sector

Investment 4 (C3.1I4): Initiating the setup of the first Eco-Industrial Science Park

The objective of the measure is to set the framework to encourage the growth of greenfield direct investment and host a cluster of light manufacturing entities that focus on renewables (emphasis on solar), agri-tech solutions, and ICT.

The investment shall consist in the approval of an action plan by the Council of Ministers, based on an underlying study, for the establishment of the Eco-Industrial Science Park. The park shall be a cluster of businesses specialising in manufacturing tech equipment focusing on renewable energy (in particular solar), agri-tech solutions and ICT.

The implementation of the investment shall be completed by 30 September 2023.

Investment 5 (C3.1I5): Creation of a National Commercial Identity and promotion of the traditional product “halloumi”

The objective of the measure is to establish a brand name for the Cypriot products in order to promote their export.

The investment shall consist in the development of action plans based on two studies: (a) one on the creation of a National Commercial Identity “Made in Cyprus” (branding) focusing on the quality and structural characteristics of Cypriot products and services combined with elements of the tradition and history of the island, and (b) a study for implementing a strategy for halloumi cheese in order to increase its distinctiveness as an authentic Cyprus product and designing a promotional and awareness campaign.

The implementation of the investment shall be completed by 31 March 2022.

Investment 6 (C3.1I6): Scheme for modernisation and digitalisation of enterprises engaged in manufacturing and trading of agricultural products

The objective of the measure is to strengthen the resilience of the agricultural sector, promote diversification of economic activity and ultimately accelerate sustainable economic growth. The measure aims to incentivise investments in new businesses or in the technological advancement of existing businesses, thus helping them bring to the market improved products, increase productivity and strengthen their growth prospects, create local jobs and provide the base for sustained growth of the overall economy.

The investment shall consist in the use of a grant scheme that shall provide aid to existing and newly established enterprises, especially SMEs, engaged in the processing, marketing and development of agricultural products covered by Annex I of the Treaty on the Functioning of the European Union, except wine, wine vinegar and activities related to fisheries and aquaculture. The scheme shall assist enterprises to finance investments in tangible or intangible assets to modernise and improve their production facilities, expand and increase their productive capacity, introduce new technologies and procedures and develop new or higher-quality agricultural products. The funding shall also help businesses to improve their digital capabilities, thus helping them improve their processes.

The implementation of the investment shall be completed by 31 March 2026.

Investment 7 (C3.1I7): Scheme for the enhancement of large enterprises competitiveness in the manufacturing sector

The objective of the measure is to help large enterprises with capital expenditures for modernisation efforts that are expected to enable these enterprises to grow, become more competitive, create employment and thus contribute to economic development of the country.

The investment shall consist in the grant scheme of up to EUR 7 000 000, to develop and promote existing and new large enterprises in the manufacturing sector. Each enterprise shall receive a maximum of EUR 750 000. The grant scheme shall provide incentives to the enterprises to maintain their activities and employment.

In order to ensure that the measure complies with the ‘Do no significant harm’ Technical Guidance (2021/C58/01), the eligibility criteria contained in terms of reference for upcoming calls for projects shall exclude the following list of activities 5 : (i) activities related to fossil fuels, including downstream use; (ii) activities under the EU Emission Trading System (ETS) achieving projected greenhouse gas emissions that are not lower than the relevant benchmarks; (iii) activities related to waste landfills, incinerators and mechanical biological treatment plants; and (iv) activities where the long-term disposal of waste may cause harm to the environment. The terms of reference shall additionally require that only activities that comply with relevant EU and national environmental legislation may be selected.

The implementation of the investment shall be completed by 30 June 2026.

Sub-component 3.1.3 Sustainable, high value-added tourism sector

Investment 8 (C3.1I8): Enhancing the added value of the tourism sector with emphasis on the countryside, mountainous and remote areas

The objectives of the investment are to enrich the tourism product, attract new markets, while reducing seasonality and improving the built environment in the countryside, mountainous and remote areas.

The investment shall consist of grant support to three categories of businesses: (1) SMEs in the accommodation industry, such as hotels, in the countryside, mountainous and remote areas for renovation projects, (2) traditional restaurants or businesses selling traditional products, which shall be included in the label “Taste of Cyprus”, for renovation works, and (3) SMEs in the accommodation industry, such as hotels, to include medical and assisted living facilities.

The implementation of the investment shall be completed by 30 June 2026.

Investment 9 (C3.1I9): Promotion of circular economy in hotel establishments

The objectives of the investment are to facilitate the transition of hotels’ business model to circular, or to develop circular products or services.

The investment consists of diagnostics, recommendations, training and coaching, and monitoring of the implementation of recommendations leading to certification.

The implementation of the investment shall be completed by 31 March 2026.

Investment 10 (C3.1I10): Enrichment of the tourism product in rural, mountainous and remote areas 

The objective of the investment is to support the economy in rural, mountainous and remote areas, by developing the offer of activities to visitors, such as workshops, live demonstrations and traditional souvenirs. It aims at enhancing the diversification of the tourism sector, creating jobs, reducing out-migration.

The investment consists of (i) a creation of an "Authentic Experience Route" of 300 kilometres, which shall pass through mountainous, rural and remote parts of the country, and (ii) grant support to enterprises and local community boards for limited-scale restoration of private and public buildings and mostly repurposing them in order to host micro and small businesses in the creative and manufacturing sectors, such as artists, handcrafts and traditional products.

The implementation of the investment shall be completed by 31 December 2025.

Sub-component 3.1.4 Circular economy

Reform 4 (C3.1R4): Enhancement of circular economy in the Industry

The objective of the measure is to enhance the circular economy model in the country through the implementation of a concrete Action Plan. The Action Plan shall include a grant scheme to enhance business investment in the circular economy, as well as actions such as (i) raising awareness among the consumers and the business community regarding the benefits of circular products towards the environment and about the strengths and business opportunities that the circular economy offers, (ii) providing consulting services regarding business diagnostics, business coaching, training of employees and preparation of a roadmap for transitioning to circularity, and (iv) sharing a marketplace platform for the circular economy to connect supply and demand of materials, scrub and waste.

The grant scheme shall be open to SMEs aiming to move into a circular operating model. Grants may go up to EUR 317 500 for each beneficiary, covering up to 60% of the investment cost incurred by each SME. This grant scheme shall be implemented.

In order to ensure that the measure complies with the ‘Do no significant harm’ Technical Guidance (2021/C58/01), the eligibility criteria contained in terms of reference for upcoming calls for projects shall exclude the following list of activities 6 : (i) activities related to fossil fuels, including downstream use; (ii) activities under the EU Emission Trading System (ETS) achieving projected greenhouse gas emissions that are not lower than the relevant benchmarks; (iii) activities related to waste landfills, incinerators and mechanical biological treatment plants; and (iv) activities where the long-term disposal of waste may cause harm to the environment. The terms of reference shall additionally require that only activities that comply with relevant EU and national environmental legislation may be selected.

The implementation of the reform shall be completed by 30 June 2026.

Reform 5 (C3.1R5): Establishment of a Coordinating Body between central and local government

The objective of the measure is to upscale waste management towards prevention of waste and separate collection, thus contributing to compliance with the EU waste management directives as well as promoting the circular economy. The reform shall provide a mechanism to support local authorities both technically and financially, help them to liaise with the central government, create expertise and exploit funding opportunities in the field of waste management.

The reform consists in the establishment of a Coordinating Body between central and local government that shall promote activities within the waste management hierarchy and the waste management plan and support local authorities in this perspective. It shall also participate in research programmes, support pilot programmes and conduct education and information campaigns that aim at waste prevention and separation of waste, as well as maintain the database of programmes and projects in the field of waste management.

The implementation of the reform shall be completed by 30 June 2025.

Investment 11 (C3.1I12): Waste management towards circular economy

The objective of the measure is to contribute effectively to upscaling efforts towards reuse as well as recycling of bio waste and dry recyclables. The investment aims to assist the achievement of bio waste reduction targets, increase waste prevention as the most important way to improve resource efficiency and reduce the environmental impact of waste.

The investment consists of three constituents: (i) distribution of 50 small and medium size composters and 2 000 home composters in rural and semi-rural communities for facilitating the separate collection and proper treatment of bio waste, (ii) development, set-up, installation and operation of 50 green kiosks for dry recyclables to help municipalities in remote areas to improve their waste management schemes, and (iii) construction and operation of two Reuse and Repair Centres in strategic locations in Cyprus that can serve all 5 regions together with an associated network of reuse shops to improve resource efficiency and create a local green job potential.

The implementation of the investment shall be completed by 31 December 2025.

E.2.    Milestones, targets, indicators, and timetable for monitoring and implementation for non-repayable financial support

E.3.    Description of the reforms and investments for the loan

Investment 11 (C3.1I11): Improvement and extension of the Cyprus Green Points Network and creation of a network of Collection Points and Recycling Corners

The objectives of the measure are the improvement of the management of solid waste, the protection of the environment and public health. It aims at mitigating uncontrolled and illegal dumping of waste in public areas, increasing the rate of recovery and recycling materials, and raising users’ awareness of sustainable development and circular economy.

The investment foresees the construction of fourteen Green Points covering an area of at least 50 500 m² to serve citizens and local authorities to deposit specific household and municipal waste streams. In addition to the creation of new Green Points, the investments foresees the construction of Recycling Corners Network and Collection Points Network to give access to citizens of rural communities to dispose of their waste.

The implementation of the investment shall be completed by 30 June 2026.

Investment 13(C3.1I13): Establishment of the Orounda Livestock Waste and Animal-By-Product Management Facilities

The objective of the measure is to develop regional Livestock Waste Management Facilities to serve farms of the wider Orounda Complex area to provide an integrated solution for the effective management of the organic waste produced mainly from piggeries, poultry, sheep, goat and cattle farms. For those communities, the investment aims to achieve a close-loop operation, minimisation of externalities and recovery of nutrients for soil improvement as well as reduction of the social and environmental impact.

The investment foresees the construction of facilities for wastewater treatment, co-composting and anaerobic digestion to allow the treatment of the big quantities of livestock waste produced in the area, produce electricity from biogas, combat desertification at the local level, reduce odour annoyance of local communities to less than 10% of the duration of the day, reduce greenhouse gas emissions and produce water for irrigation.

The implementation of the investment shall be completed by 30 June 2026.

It is expected that this measure does not do significant harm to environmental objectives within the meaning of Article 17 of Regulation (EU) 2020/852, taking into account the description of the measure and the mitigating steps set out in the recovery and resilience plan in accordance with the DNSH Technical Guidance (2021/C58/01). In particular, the measure shall be subject to an Environmental Impact Assessment in the first year of implementation and the requirement for adherence to the DNSH principle shall be included in all procurement procedures.

E.4.    Milestones, targets, indicators, and timetable for monitoring and implementation for the loan

Sequential Number	Related Measure (Reform or Investment)	Milestone / Target	Name	Qualitative indicators (for milestones)	Quantitative indicators (for targets)			Indicative timeline for completion		Description of each milestone and target
					Unit of measure	Baseline	Goal	Q	Y
116	C3.1I11Improvement and extension of the Cyprus Green Points Network and creation of a network of Collection Points and Recycling Corners	Target	Completion of construction, expansion and start of operation of four Green Points	-	Number	0	4	Q4	2023	Completion of construction, expansion and start of operation of four Green Points at Avgorou, Troulloi, Eptagonia and Alambra in accordance with the National Strategic Plan for the Development of a National Green Point Network
117	C3.1I11Improvement and extension of the Cyprus Green Points Network and creation of a network of Collection Points and Recycling Corners	Target	Completion of construction, expansion and operation of 14 Green Points	-	Number	4	14	Q2	2026	Completion of construction, expansion and start of operation of fourteen Green Points at Avgorou, Troulloi, Eptagonia, Alambra, Aglantzia, Latsia, Derynia, Sotera, Pelentri, Egkomi, Lakatamia, Pano Platres, Kalo Horio Limassol, Souni Zanatzia in accordance with the National Strategic Plan for the Development of a National Green Point Network
118	C3.1I13Establishment of the Orounda Livestock Waste and Animal-By-Product Management Facilities	Milestone	Construction of facilities for wastewater treatment and co-composting	Licences for the construction obtained and proof of completed land acquisition	-	-	-	Q1	2024	All licences for the construction of facilities for wastewater treatment and co-composting (environmental, construction and operating permits and licenses) from all relevant authorities such as Department of Environment, Department of Town Planning and Housing and Department of Land and Surveys have been obtained and relevant land acquisition has been completed.
119	C3.1.I13Establishment of the Orounda Livestock Waste and Animal-By-Product Management Facilities	Milestone	Completion and start of operation of the Anaerobic Digestion facilities	Taking over certificate issued by the Project Engineer and approved by the Technical Steering Committee	-	-	-	Q2	2026	Completion and start of operation of the Anaerobic Digestion facilities, producing biogas (methane) to be used for electricity production of 3,5 MWh (for 20 hours of daily operation) at full capacity, 365 days a year. The electricity produced shall be supplied to the grid.

F. COMPONENT 3.2: Enhanced Research and Innovation

The component of the Cypriot recovery and resilience plan addresses the challenges that Cyprus faces as regards the Research and Development ecosystem that plays a relatively limited role in economic growth. This is mainly due to a low share of Science, Technology, Engineering and Math (STEM) graduates, limited interaction of the public research system with the business sector and limited access and availability of risk funding.

The objectives of the component are to strengthen links between research organisations and enterprises, commercialise research results, increase intensity in research & development (R&D) activity and investments by both public and private organisations, as well as to make all publicly funded research infrastructure accessible to the entire ecosystem. Furthermore, it aims to enhance financial support to start-ups, scale-ups, SMEs, internationalise the local research and innovation (R&I) ecosystem, develop local talent and attract talent from abroad to work in R&I with emphasis on specific thematic areas.

The component addresses the Country-Specific Recommendations on increasing the focus on investment-related economic policy on research and innovation (Country-Specific Recommendations 3 of 2020 and 4 of 2019).

It is expected that no measure in this component does significant harm to environmental objectives within the meaning of Article 17 of Regulation (EU) 2020/852, taking into account the description of the measures and the mitigating steps set out in the recovery and resilience plan in accordance with the DNSH Technical Guidance (2021/C58/01).

F.1.    Description of the reforms and investments for non-repayable financial support

Reform 1 (C3.2R1): Comprehensive national Research and Innovation Policy supported by data-driven policy tools to support the R&I Ecosystem and to enhance links between policy making and implementation

The objective of the measure is to promote the efficient coordination of the R&I governance system, to foster awareness raising and nurture innovation culture, to mobilise stakeholders and to develop and augment the fundamental building blocks of the national R&I ecosystem (of three levels: policy making, strategy and implementation, stakeholders and users/citizens).

The reform shall consist in the implementation of the Action Plan for the National Strategy for Research and Innovation. This shall follow the political endorsement of the Action Plan, together with the adoption of a National Strategy for R&I and the revised Smart Specialisation Strategy for Cyprus. It shall also consist in establishment of a mechanism for impact driven monitoring and support of the six Centres of Excellence and in the development of a digital tool for the dynamic mapping of the R&I ecosystem (stakeholders, policy measures and tools, R&I performance, registry of innovative companies and sector analytics).

The implementation of the reform shall be completed by 31 December 2024.

Reform 2 (C3.2R2): Incentives to encourage and attract investments and human capital in Research and Innovation

The objective of the measure is to attract investment in innovative companies and entrepreneurial and scientific talents from abroad.

The reform shall consist in the extension of the application of the tax scheme for investing in innovative companies to legal entities (from physical persons currently). Eligible investments of up to EUR 150 000 per investor, under this incentive, include equity, loans, guarantees and factoring. In addition, it shall consist in the review, promotion and, where appropriate, amendment of current incentive schemes aimed at attracting talents from third countries, including the Scientific VISA scheme for researchers and their families and the Start-up VISA scheme for founders of innovative enterprises and their families.

The implementation of the reform shall be completed by 30 September 2022.

Reform 3 (C3.2R3): Introduce policies and incentives to facilitate and foster access to publicly funded research infrastructure and laboratories

The objective of the measure is to optimise utilisation of publicly funded research infrastructure and laboratories by the business community.

The reform shall consist in (i) an approval of an action plan focusing on the optimal utilisation of research infrastructure and adopting actions aimed at promoting and enhancing the collaboration among research organisations, academia and the private sector; (ii) the development and launch of a dynamic digital tool accessible to all stakeholders of the R&I ecosystem, providing information circulation, tools and services for the facilitation of a collaborative partnership arrangement between different R&I organisations and teams (public and private) in respect to publicly funded research infrastructures and laboratories; (iii) review of the legal and operational framework of the publicly funded research institutions and promote actions aiming to facilitate and support the optimal use of research infrastructure through opening up access to other research institutions and the business sector; (iv) introduction of measures and incentives (such as including in Research and Innovation Foundation grant agreement a clause for opening up funded infrastructure) in order to enhance the collaboration of Research Performing Organisations with business and spin-offs.

The implementation of the reform shall be completed by 31 December 2024.

Investment 1 (C3.2I1): Set up and operate a central knowledge transfer office

The objective of the measure is to improve technology transfer in Cyprus, through improved academia-business collaboration and commercialisation of research.

The investment shall consist in the creation and putting in operation of a Knowledge Transfer Office (KTO) by the Research and Innovation Foundation, to provide a cost-efficient solution for the support of technology transfer, built on the principles of acquiring a critical mass of research output and economies of scale. The KTO shall provide knowledge transfer services, facilitating commercialisation of research, to universities, other research organisations and enterprises. Indicative list of services: (a) evaluation of commercialisation prospects, (b) intellectual property rights advice, (c) patents filed and intellectual property rights maintenance cases, (d) development of commercialisation strategy, (e) technology marketing, (f) support in setting up spin-off companies, and (g) provision of funding to support translational research. The reform shall also consist in a review of the existing institutional framework on knowledge transfer in Cyprus, including relevant legislation, as well as national and institutional policies relating to the commercial exploitation of intellectual property, knowledge transfer and the establishment of spin-off companies.

The KTO shall become self-financed starting from 1 January 2026, by retaining 20% of revenue from KTO managed agreements for operational costs, to be specified in the contractual arrangements between the Research and Innovation Foundation and the beneficiary.

The implementation of the investment shall be completed by 31 December 2025.

Investment 2 (C3.2I2): Innovation funding programmes & funding schemes for the enhancement of growth & competitiveness of start-ups, innovative companies and SMEs

The objective of the measure is to provide grant support through innovation programmes (such as Fast-Track Innovation, Pre-Seed, Seed, Innovate) as a means to improve access to funds for innovative SMEs and start-ups.

The investment shall consist in a grant support through innovation programmes (for instance, Fast-Track Innovation, Pre-Seed, Seed, Innovate) for businesses to develop innovative products and services with international orientation from concept to ready-for-market. The funding programmes shall (i) promote collaboration of businesses with research organisations; (ii) facilitate commercialisation of research results in targeting delivery of closer-to-market outputs and outcomes, thus allowing for shorter-term economic effects; (iii) lead to the creation of employment; (iv) promote business clustering, and (v) target accelerated transition to a green economy and towards a digital era of efficiency and productivity. These programmes shall require businesses to leverage private/own funds in conjunction with public funding (provided by the Research and Innovation Foundation), therefore contributing to the overall increase of R&D investment.

In order to ensure that the measure complies with the ‘Do no significant harm’ Technical Guidance (2021/C58/01), the eligibility criteria contained in terms of reference for upcoming calls for projects shall exclude the following list of activities 7 : (i) activities related to fossil fuels, including downstream use; (ii) activities under the EU Emission Trading System achieving projected greenhouse gas emissions that are not lower than the relevant benchmarks; (iii) activities related to waste landfills, incinerators and mechanical biological treatment plants; and (iv) activities where the long-term disposal of waste may cause harm to the environment. The terms of reference shall additionally require that only activities that comply with relevant EU and national environmental legislation may be selected.

The implementation of the investment shall be completed by 30 June 2026.

Investment 3 (C3.2I3): Thematic research and innovation funding program on green transition

The objective of the measure is to provide grant support through thematic R&I programmes of relatively high technology readiness levels focusing on green transition.

The investment shall consist in grant support of projects that shall be using the latest digital technologies to provide cost-effective solutions for green transition, thereby upgrading the country’s research capacity. The supported projects shall focus on renewable energy, energy efficiency and sustainable transport, entail collaboration with Centres of Excellence for R&I, and facilitate the commercialisation of research results.

In order to ensure that the measure complies with the ‘Do no significant harm’ Technical Guidance (2021/C58/01), the eligibility criteria contained in terms of reference for upcoming calls for projects shall exclude the following list of activities 8 : (i) activities related to fossil fuels, including downstream use; (ii) activities under the EU Emission Trading System achieving projected greenhouse gas emissions that are not lower than the relevant benchmarks; (iii) activities related to waste landfills, incinerators and mechanical biological treatment plants; and (iv) activities where the long-term disposal of waste may cause harm to the environment. The terms of reference shall additionally require that only activities that comply with relevant EU and national environmental legislation may be selected.

The implementation of the investment shall be completed by 30 June 2026.

Investment 4 (C3.2I4): Funding schemes to support organisations performing R&D activities on dual technologies, including the creation of new or upgrade of existing laboratories and the development of classified laboratories

The objective of the measure is to promote dual-use research and to use technologies, which would otherwise only serve government/military purposes, for civilian, commercial and societal interests.

The investment shall consist in a grant support that would enable research organisations and companies to engage in R&D on dual-use technologies. The funding schemes shall enable the upgrade of the R&I capabilities and capacity of Research Centres of Excellence, academic institutions, research organisations as well as companies engaged in R&D on dual use technologies. In particular, they shall enable these organisations to acquire security classification certificates in order to be able to participate in consortia for European funding (such as Horizon Europe, European Defence Fund) as well as to enhance their R&I capabilities and competitiveness in the field of dual use technologies.

The funding shall focus on civil business only and research outcomes and infrastructure shall benefit civil applications only. The measure shall comply with the Council Regulation (EC) No 428/2009 of 5 May 2009 on setting up a Community regime for the control of exports, transfer, brokering and transit of dual-use items, regarding dual use technologies during the implementation of the funding scheme, and shall be designed in line with ‘EU Funding for Dual Use – A practical guide to accessing EU funds for European Regional Authorities and SMEs’.

In order to ensure that the measure complies with the ‘Do no significant harm’ Technical Guidance (2021/C58/01), the eligibility criteria contained in terms of reference for upcoming calls for projects shall exclude the following list of activities 9 : (i) activities related to fossil fuels, including downstream use; (ii) activities under the EU Emission Trading System achieving projected greenhouse gas emissions that are not lower than the relevant benchmarks; (iii) activities related to waste landfills, incinerators and mechanical biological treatment plants; and (iv) activities where the long-term disposal of waste may cause harm to the environment. The terms of reference shall additionally require that only activities that comply with relevant EU and national environmental legislation may be selected.

The implementation of the investment shall be completed by 30 June 2026.

F.2.    Milestones, targets, indicators, and timetable for monitoring and implementation for non-repayable financial support

Sequential Number	Related Measure (Reform or Investment)	Milestone / Target	Name	Qualitative indicators (for milestones)	Quantitative indicators (for targets)			Indicative timeline for completion		Description of each milestone and target
					Unit of measure	Baseline	Goal	Quarter	Year
120	C3.2R1 National R&I Policy and policy tools	Milestone	Adoption of the national R&I Strategy and of the Action Plan to implement it	Publication of the Council of Ministers’ decision	-	-	-	Q4	2022	Develop an integrated R&I Strategy, providing a long-term perspective framework, ensuring a focused effort and commitment for implementation, over time, on behalf of the State and stakeholders involved in the national R&I system, and a digital tool for the dynamic mapping of the R&I ecosystem.
121	C3.2R1 National R&I Policy and policy tools	Milestone	Completion of the Action Plan for the R&I Strategy	Publication of the Council of Ministers’ approval of the progress report, attesting the completion of the action plan	-	-	-	Q4	2024	Implementation of the measures in the Action Plan of the National Research and Innovation Strategy, as evidenced by a progress report.
122	C3.2R2 Incentives for investments and human capital in R&I	Milestone	Tax exemption of legal entities for investing in innovative companies	Provision in the law indicating the entry into force of the legislation	-	-	-	Q1	2022	Entry into force a law establishing the tax exemption of corporate investors (legal entities) for investing in innovative companies.
123	C3.2R3 Policies to foster access to publicly funded research infrastructure and laboratories	Milestone	Digital registry to record and publish research infrastructure	Link to the digital registry published in the Deputy Ministry for Research, Innovation and Digital Policy website	-	-	-	Q4	2022	Development and start of operation of a digital registry to record and publish research infrastructure that shall facilitate the request of access of interested parties to such infrastructure. It shall include the mapping of all publicly funded research institutions (under Horizon 2020, national schemes). It shall also improve visibility of the Research Institutions and support collaboration with the private sector.
124	C3.2R3 Policies to foster access to publicly funded research infrastructure and laboratories	Milestone	Collaboration of Research Performing Organisations with business and spin-offs	Publication of measures and incentives adopted on the Research and Innovation Foundation website	-	-	-	Q4	2024	Adoption of measures and incentives to enhance the collaboration of Research Performing Organisations with business and spin-offs, such as including in Research and Innovation Foundation grant agreement a clause for opening up funded infrastructure.
125	C3.2I1 Set up and operate a central Knowledge Transfer Office (KTO)	Milestone	Launch of KTO	Opening of KTO’s first case	-	-	-	Q2	2022	The Research and Innovation Foundation, responsible for putting in operation the KTO, has hired or contracted highly trained staff and/or experts to provide expert knowledge transfer services. Systems and tools shall be in place to support KTO operation. The KTO shall start the provision of services to universities, other research organisations or enterprises.
126	C3.2I1 Set up and operate a central Knowledge Transfer Office (KTO)	Target	Case files closed attesting provision of relevant knowledge transfer services	-	Number	0	30	Q4	2025	At least 30 completed cases of knowledge transfer services provided by the central KTO to universities, other research organisations or enterprises.
127	C3.2I2 Innovation funding programmes for start-ups, innovative companies and SMEs	Milestone	Signature of grant agreements for 50% of budget	Grant agreements signed	-	-	-	Q4	2022	Signing of grant agreements which commit at least 50% of total budget (contracts of a total value of at least EUR 26 000 000 total budget) for innovation funding programmes for start-ups, innovative companies and SMEs, with terms of reference including eligibility criteria that ensure that the selected projects comply with the ‘Do no significant harm’ Technical Guidance (2021/C58/01) through the use of an exclusion list and the requirement of compliance with the relevant EU and national environmental legislation.
128	C3.2I2 Innovation funding programmes for start-ups, innovative companies and SMEs	Target	Organisations supported to carry out R&I related activities	-	Number	0	70	Q3	2023	Funding support to at least 70 organisations to carry out R&I related activities such as industrial research, experimental research innovation activities, start-up activities, knowledge transfer activities, including (but not limited to) activities for the management and protection of intellectual property, for establishing links between research organisations and companies, for building knowledge transfer capacity and for commercialising research results, in compliance with the ’Do no significant harm’ Technical Guidance (2021/C58/01) through the use of an exclusion list and the requirement of compliance with the relevant EU and national environmental legislation.
129	C3.2I2 Innovation funding programmes for start-ups, innovative companies and SMEs	Target	Organisations supported to carry out R&I related activities	-	Number	70	200	Q2	2026	Funding support to at least 200 organisations to carry out R&I related activities, in compliance with the ’Do no significant harm’ Technical Guidance (2021/C58/01) through the use of an exclusion list and the requirement of compliance with the relevant EU and national environmental legislation.
130	C3.2I3 R&I funding program on green transition	Milestone	Signature of grant agreements for the whole budget	Grant agreements signed by the Director of the Research and Innovation Foundation	-	-	-	Q4	2022	Signing of grant agreements for R&I funding program on green transition, with terms of reference including eligibility criteria that ensure that the selected projects comply with the ‘Do no significant harm’ Technical Guidance (2021/C58/01) through the use of an exclusion list and the requirement of compliance with the relevant EU and national environmental legislation.
131	C3.2I3 R&I funding program on green transition	Target	Organisations supported by grants on green transition R&I activities	-	Number	0	10	Q2	2026	At least 10 enterprises supported by grants on green transition R&I activities, in compliance with the ’Do no significant harm’ Technical Guidance (2021/C58/01) through the use of an exclusion list and the requirement of compliance with the relevant EU and national environmental legislation.
132	C3.2I4 Funding to organisations performing R&D activities on dual technologies	Milestone	Signing of grant agreements which commit 80% of total budget for funding to organisations performing R&D activities on dual technologies	Grant agreements signed	-	-	-	Q2	2023	Signing of grant agreements which commit 80% of total budget (contracts of at least a total value of 2 400 000 euro total budget) for funding to organisations performing R&D activities on dual technologies, with terms of reference including eligibility criteria that ensure that the selected projects comply with the ‘Do no significant harm’ Technical Guidance (2021/C58/01) through the use of an exclusion list and the requirement of compliance with the relevant EU and national environmental legislation.
133	C3.2I4 Funding organisations performing R&D activities on dual technologies	Target	Funding for the development of classified Laboratories	-	Number	0	16	Q2	2026	At least 16 enterprises are receiving funding for the development of classified laboratories. An enterprise may be counted more than once if it participates in more than one project, in compliance with the ’Do no significant harm’ Technical Guidance (2021/C58/01) through the use of an exclusion list and the requirement of compliance with the relevant EU and national environmental legislation.

G. COMPONENT 3.3: Business support for Competitiveness

This component of the Cypriot Recovery and Resilience addresses the challenges of low productivity and competitiveness of the economy, driven by the enterprises’ small size on average, the complex licensing process requested for an investment and difficulties of access to funding to business. The objectives of this component are to support entrepreneurs and enterprises and improve their competitiveness and contribution to the growth of the economy by improving the regulatory framework regarding investment and entrepreneurial activity and to enhance SMEs productivity, mainly through digitalisation. It consists of six reforms and six investments, to be completed by Q2 2026.

The component addresses the Country-Specific Recommendation 3 of 2020 and Country-Specific Recommendation 4 of 2019.

It is expected that no measure in this component does significant harm to environmental objectives within the meaning of Article 17 of Regulation (EU) 2020/852, taking into account the description of the measures and the mitigating steps set out in the recovery and resilience plan in accordance with the DNSH Technical Guidance (2021/C58/01).

G.1.    Description of the reforms and investments for non-repayable financial support

Reform 1 (C3.3R1): Facilitation of Strategic investments

The objective of the measure is to develop a new system supporting strategic investments, aiming at stimulating investment activity in the country through streamlined rules and mechanisms, simplifying the licencing and permit procedures, reducing the administrative burden and making the strategic investment environment more efficient. The definition of strategic investment refers to investments in strategic sectors (including Health and Social Care, Education, Culture, Sport, Environment, Industry, Tourism, Energy, Research, Development and Innovation) that significantly contribute to the development of the economy.

The reform shall consist in the entry into force of a legislation for the facilitation of strategic investments, in regards to the efficiency of obtaining investment licenses and building permits. A dedicated governmental sector shall be assigned for the processing of strategic investments. It shall consist in the preparation of the operational guidelines, process flows, and other ISO 9001:2015 requirements for mainstreaming the process. It shall develop Memorandum of Understandings with other Departments relevant to parts of the process in order to ensure the fast-track mechanism’s feasibility. Moreover, it shall include training of employees in the procedures to be introduced. In addition, the reform shall benefit from the set-up of a digital platform that shall enable applying, studying and issuing Planning and Building Permits digitally, through an application management tool and a GIS system (project under Component 3.4: “enhancing e-system for issuing building permits”).

The implementation of the reform shall be completed by 30 June 2023.

Reform 2 (C3.3R2): Enhancing Fast-Track Business Activation Mechanism

The objectives of the measure are the simplification of the procedures, the digitalisation of the governmental services and the operation of a Business Support Centre that shall provide all necessary and supportive information and services

The reform shall consist in the establishment of an interactive digital platform, enhancing the Fast-track Business activation Mechanism that is already in operation. Through the platform the investor shall be able to track his/her application but also the competent authorities will be able to interact, exchange documents and process the application.

The implementation of the reform shall be completed by 31 December 2025.

Reform 3 (C3.3R3): Modernisation of the Companies Law

The objective of the measure is to support the improvement of the business environment by the review of the Companies Act, making it clearer in interpreting and applying the law in practice.

The reform shall consist in modernising the Cyprus Companies Law by using best practices from other common law jurisdictions to provide a foundation of knowledge and clarity in the form of case law and literature, to assist in interpreting and applying the law in practice. The accompanying Companies Rules shall also be reviewed. Moreover, Cyprus shall assign a team of legal experts to undertake the project for advisory and drafting services of the new Companies Law and Regulations. Moreover, the law review shall include the insolvency proceedings under the Companies Law, which are Liquidations, Receivership and Examinership. Also, the reform shall include the undertaking of an SME test during the preparing of the bill.

The implementation of the reform shall be completed by 31 December 2025.

Reform 4 (C3.3R4): Design and establish a National Promotional Agency

The objective of the reform is to improve access to finance for Small Medium Enterprises (SMEs) by facilitating access to loans, guarantees and equity financing and enhance the absorption capacity of EU financing through EU tools.

The reform shall consist in an ex-ante assessment analysis covering SMEs’ access to finance in all sectors of the economy with a focus on green and circular economy, digital enablement and alternative financing. The report shall define the scope of intervention of the proposed NPA. The legal and organisational set-up of the National Promotional Agency shall be defined after the final selection of its scope of activity. The proposed structure shall allow a high transparency of NPA's operations and autonomy. The Agency shall not operate with a banking license and therefore will not need to be capitalised a priori. A steering committee, with the participation of representatives of the Ministry of Finance and the Ministry of Energy, Commerce and Industry shall monitor the implementation.

The implementation of the reform shall be completed by 30 September 2025.

Reform 5 (C3.3R5): Strategic Investor of the Cyprus Stock Exchange

The objective of the reform is the privatisation of the Cyprus Stock Exchange.

The reform shall consist in a tender process, which is currently underway whereby the Cyprus Stock Exchange seeks to appoint a reputable independent advisor or consortium thereof, with extensive relevant expertise to find the most suitable strategic investor for the Cyprus Stock Exchange. The privatisation phase of the contract shall be concluded upon final approval by the House of Representatives of the Republic of Cyprus, after all other conditions have been met.

The implementation of the reform shall be completed by 31 December 2024.

Reform 6 (C3.3R6): Incentives to promote mergers & acquisitions

The objective of the measure is to incentivise the increase of SMEs’ size.

The reform shall consist in targeted incentives to promote the mergers or acquisitions of enterprises in order to scale-up and become more competitive. In particular, the reform shall consist in the approval of a report and an accompanying action plan by the Council of Ministers, following the evaluation of similar regimes within the EU and consultation with stakeholders for specific incentives for promoting mergers and acquisitions.

The implementation of the reform shall be completed by 31 December 2022.

Investment 2 (C3.3I2): Creation of a Regulatory Sandbox to enable FinTech

The objective of the measure is to enable FinTech, start-ups, and other innovative companies to expand their offering in new products or services, by regulators establishing a "testing ground" that would allow them to conduct live experiments in a controlled environment under their supervision.

The investment shall consist in facilitating the development of a suitable and attractive regulatory regime on FinTech and innovative technologies and strike a balance between the seamless deployment of innovative products or services and ensuring investors’ protection.

The implementation of the investment shall be completed by 30 September 2024.

Investment 3 (C3.3I3): Consulting services for Small and Medium Enterprises (SMEs)

The objective of the measure is to promote the development of SMEs in Cyprus and increase in their competitiveness, through tailor-made advisory services and other non-financial support tools.

The investment shall consist in providing to SMEs expert assistance, business advice, targeted training and business matching activities.

The implementation of the investment shall be completed by 31 December 2025.

Investment 4 (C3.3I4): Scheme for the digital upgrade of enterprises

The objective of the investment is to enhance the integration of digital technology in existing and future SMEs established in Cyprus. More specifically, the measure aims to enhance the digital identity of the businesses, increasing the share of Small and Medium Enterprises that use information and communication technologies, including the e-commerce sector, and to promote digital entrepreneurship.

The investment shall consist in the provision of financial grants of about EUR 30 000 to each beneficiary, as a share of what they shall have invested in eligible investment for the digital upgrade of their enterprises.

The implementation of the investment shall be completed by 30 June 2026.

Investment 5 (C3.3I5): Support extroversion and openness of Cyprus firms to international trade

The objective of the investment is to strengthen the extroversion of new and existing enterprises active in the fields of manufacturing and processing and marketing of agricultural and industrial products as well as service providers.

The investment shall consist in a grant scheme of a total of EUR 8 000 000 to at least 140 Cypriot firms through funding actions to strengthen their extroversion for enterprises active in the fields of manufacturing/processing and marketing of agricultural and industrial products and service providers. Selectable funding expenditures might include consultancy and other eligible, under the state-aid regulations, expenses.

In order to ensure that the measure complies with the ‘Do no significant harm’ Technical Guidance (2021/C58/01), the eligibility criteria contained in terms of reference for upcoming calls for projects shall exclude the following list of activities 10 : (i) activities related to fossil fuels, including downstream use; (ii) activities under the EU Emission Trading System (ETS) achieving projected greenhouse gas emissions that are not lower than the relevant benchmarks; (iii) activities related to waste landfills, incinerators and mechanical biological treatment plants; and (iv) activities where the long-term disposal of waste may cause harm to the environment. The terms of reference shall additionally require that only activities that comply with relevant EU and national environmental legislation may be selected.

The implementation of the investment shall be completed by 30 June 2026.

Investment 6 (C3.3I6): State funded equity fund

The objective of the measure is the establishment of a Fund to support the efforts of the Government to enhance access to alternative sources of finance aiming to (i) foster economic development and growth and enhance the competitiveness of small-medium enterprises in Cyprus; (ii) increase the availability of alternative financing sources, particularly for innovative companies and start-ups; and (iii) contribute to the enhancement of the ecosystem for equity and venture capital investments.

The investment shall consist in a tender procedure to select and appoint an external fund manager for an investment period that is foreseen to be five years.

In order to ensure that the measure complies with the ‘Do no significant harm’ Technical Guidance (2021/C58/01), the legal agreement between Cyprus and the Fund in charge of the financial instrument and the subsequent investment policy of the financial instrument shall

I.require the application of the Commission’s technical guidance on sustainability proofing for the InvestEU Fund; and

II.exclude the following list of activities and assets from eligibility: (i) activities and assets related to fossil fuels, including downstream use 11 ; (ii) activities and assets under the EU Emission Trading System (ETS) achieving projected greenhouse gas emissions that are not lower than the relevant benchmarks 12 ; (iii) activities and assets related to waste landfills, incinerators 13 and mechanical biological treatment plants 14 ; and (iv) activities and assets where the long-term disposal of waste may cause harm to the environment; and

III.require the verification of legal compliance with the relevant EU and national environmental legislation of the projects by Fund for all transactions, including those exempted from sustainability proofing.

The implementation of the investment shall be completed by 30 June 2026.

G.2.    Milestones, targets, indicators, and timetable for monitoring and implementation for non-repayable financial support

G.3.    Description of the reforms and investments for the loan

Investment 1 (C3.3I1): Integrated Information system for the Registrar of Companies and Official Receiver.

The objectives of the measure are the design, development, implementation, maintenance and operation of an Integrated Registry Platform solution supporting the processes and services of the Companies Section and Intellectual and Industrial Property Section of the Registrar of Companies and Official Receiver, in such a way to drive the digital transformation of the two aforementioned sections to become established as frontrunners in digital presence, online capabilities and outstanding customer service delivered by efficient internal processes and supported by flexible IT systems.

The investment shall consist in the installation of the hardware and software of the system, completing the network infrastructure, and the training of the personnel for the new system.

The implementation of the investment shall be completed by 31 December 2025.

G.4.    Milestones, targets, indicators, and timetable for monitoring and implementation for the loan

H. COMPONENT 3.4: Modernising public and local authorities, making justice more efficient and fighting corruption

This component of the Cypriot recovery and resilience plan addresses long-standing challenges in the functioning of public administration, at both the central and the local levels, the justice system and the anti-corruption framework. The objectives of the component are: (i) to increase the effectiveness, efficiency and relevance of government processes, considering current challenges, needs, and expectations of citizens and businesses, (ii) to strengthen the administrative capacity and cooperation of the Ministry of Interior and local governments to ensure the effective implementation of the new local administration model, (iii) to improve the effectiveness, including quality and efficiency, of the justice system, through accelerating the administration of justice and reducing the backlog of cases, and (iv) to achieve greater coherence to the government’s efforts to fight corruption.

The reforms and investments included in the component contribute to addressing the Country-Specific Recommendations on improving efficiency in the public sector, in particular as regards the functioning of the public administration and of local governments (Country-Specific Recommendations 1 of 2019 and 4 of 2020), on promoting flexible working arrangements (Country-Specific Recommendation 2 of 2020), on improving the efficiency and digitalisation of the judicial system (Country-Specific Recommendation 5 of 2019 and Country-Specific Recommendation 4 of 2020) and on anti-corruption reforms (Country-Specific Recommendation 5 of 2019).

It is expected that no measure in this component does significant harm to environmental objectives within the meaning of Article 17 of Regulation (EU) 2020/852, taking into account the description of the measures and the mitigating steps set out in the recovery and resilience plan in accordance with the DNSH Technical Guidance (2021/C58/01).

H.1.    Description of the reforms and investments for non-repayable financial support

Subcomponent 3.4.1: Modernising the Public Sector

Reform 1 (C3.4R1): Enhance the administrative capacity and improve the functioning of public administration for better policy making and implementation

The objective of the reform is to improve the functioning of general public administration by improving its human resource management framework and to restructure and enhance the administrative capacity of the Cyprus Police.

The reform shall consist of two elements:

I)Development and implementation of an action plan to strengthen the administrative capacity and the strategic role in human resource management of the Public Administration and Personnel Department relating to the formulation and monitoring of implementation of public administration and human resource management policies in the public sector, such as policy setting, formulation of guidelines and basic principles on human resource management matters, review of existing policies, legislation and practices, and industrial relations. In parallel, the reform shall enhance line Ministries’ capacity to implement public administration policies and human resource functions, while ensuring adequate accountability and responsiveness;

II)reorganisation and modernisation of the Cyprus Police by designing and implementing a new model of policing and operations, a new management framework for learning and development, and a new human resources management framework.

The implementation of the reform shall be completed by 31 December 2025.

Reform 2 (C3.4R2): Regulate flexible working arrangements in the public sector

The objective of the reform is to increase productivity and effectiveness of the public service through the use of flexible working arrangements, such as working remotely, partly remotely, and part-time.

The reform shall consist in implementing flexible working arrangements in the public sector on the basis of an assessment by the Public Administration and Personnel Department of the recommendations of an external study of best practices and possible limitations noted by other national public administrations. The study shall review the terms and conditions for flexible working arrangements in the public service as applied in other jurisdictions.

The implementation of the reform shall be completed by 31 December 2024.

Reform 3 (C3.4R3): Introduce new framework for evaluation and selection process for filling public service vacancies and new regulations for the evaluation of employees’ performance

The objective of the reform is to improve the functioning of the public service through a review of the recruitment and promotion framework and of the performance appraisal system.

The reform shall consist of: (i) introducing a new framework in the public service for the evaluation and selection of candidates for promotion posts, including managerial posts, based on merit; (ii) introducing a new performance appraisal system to be used for development and promotion purposes in order to make appraisal and promotion more transparent, fair, skill-based and effective; and (iii) improving the recruitment procedures through training, update of the Schemes of Service (the set of requirements and duties for jobs in the public administration) and changes in the two relevant laws for recruitment.

The implementation of the reform shall be completed by 31 March 2025.

Reform 4 (C3.4R4): Strengthen administrative capacity and transparency through the professionalisation of public procurement and further digitalisation of its process

The objective of the reform is to increase the efficiency and effectiveness of public procurement by introducing new procurement processes using digital tools and increasing knowledge and expertise of personnel.

The reform shall consist in introducing an integrated fully digitalised e-procurement system using modern technologies, thus reducing administrative burden for participants while safeguarding accountability and transparency. It shall be accompanied by measures aimed at the professionalisation of public procurement, such as revising the organisational structure of the central professional public procurement function and training and certification of procurement professionals.

The implementation of the reform shall be completed by 31 December 2025.

Reform 5 (C3.4R5): Enhancement of the capacity of the Law Office

The objective of the reform is to implement a digital transformation of the Law Office, aiming to increase its efficiency and effectiveness, as well as the productivity, quality of work and working conditions of the employees.

The reform shall consist in digitalising all the processes and procedures of the Law Office by introducing an IT system (eLaw System), which shall be delivered as a complete Software-as-a-Service solution. It shall include the supply, development and customisation of an existing web-based management system to provide features such as the creation of electronic case files and folders, case management and monitoring, internal communication and workflows, tracking of cases, financial management and payments. During the implementation of the project, a business analysis shall assess needs for process re-engineering. All existing paper files shall be migrated into the core eLaw System.

The implementation of the reform shall be completed by 31 December 2023.

Investment 1 (C3.4I1): Rationalisation of the shift system through the implementation of a Roster Planning System

The objective of the investment is to optimise shift patterns and deliver productivity and efficiency gains in public sector organisations that provide services in different time shifts.

The investment shall consist in implementing a roster planning system that features day-to-day administration and tactical planning tools, automation of shift plans/rotations, and timely automated communication with the employees and managers. The systemshould be interfaced with the human resource management module of the enterprise resource planning system being implemented in the public sector (outside of the recovery and resilience plan). The measure shall include training of administrator users of the roster planning system.

The implementation of the investment shall be completed by 30 June 2026.

Investment 2 (C3.4I2): Digitalisation of the law-making process

The objective of the investment is to improve the quality of regulation and increase legal certainty and transparency by modernising the legislative drafting process and publication of applicable legislation.

The investment shall consist in establishing a legislation preparation platform enabling easier drafting, consolidation, management and storing of laws and regulations. The system shall also become the official government single point of digital access for the public to all legislation texts in an interoperable format. The investment shall cover the upload of all existing laws and regulations into the new platform.

The implementation of the investment shall be completed by 31 December 2025.

Investment 3 (C3.4I3): Economic Policy Modelling Hub

The objective of the investment is to improve policymaking and implementation by increasing the use of quantitative modelling techniques for regulatory impact assessment.

The investment shall consist in developing modelling tools and expertise among public personnel to allow for better policy impact assessment. This shall be achieved by (i) establishing an Economic Policy Modelling Hub disposing of the tools and data for policy analysis and evaluation; (ii) transferring the policy analysis and evaluation knowledge to the employees of the Ministry of Finance; and (iii) developing tools for big data and data analytics.

The implementation of the investment shall be completed by 31 December 2025.

Subcomponent 3.4.2: Local Administration and Spatial reform

Reform 6 (C3.4R6): New legal framework for Local Authorities and relevant support measures

The objective of the measure is to reform the local government system in Cyprus to improve its decision-making power and administrative autonomy, to increase efficiency of governance and to align resources and responsibilities to ensure financial sustainability.

The reform shall consist in adopting new legislation that shall: reduce the number of municipalities and create community clusters for the centralised provision of services in order to improve administrative capacity; introduce a new model of administration and a new staff structure for municipalities; transfer competences and resources from the central government to the municipalities, in particular in the areas of issuing permits, social policy, local infrastructure maintenance, schools and the provision of local services to the citizens; reform the financing of municipalities; and ensure adequate legal supervision, transparency and democratic accountability. The reform shall also include capacity building through training.

The implementation of the reform shall be completed by 31 December 2024.

Reform 7 (C3.4R7): Urban land consolidation

The objective of the reform is to reduce the pressure for municipalities’ expansion and increasing soil seal by facilitating the utilisation of available land for construction purposes.

The reform shall consist in setting up a legislative framework for urban land consolidation and promoting implementation of urban land consolidation master plans in selected areas or in areas of strategic significance for the island. The reform shall also include the preparation of an expert study, a digital platform for enabling urban land consolidation, and the preparation of urban land consolidation pilot master plans.

The implementation of the reform shall be completed by 31 December 2025.

Investment 4 (C3.4I4): Enhancing e-system for issuing building permits

The objective of the investment is to increase the efficiency of building permit procedures.

The investment shall consist of (i) expanding the e-application environment of the existing Hippodamos IT system for planning and permitting, to enable all planning authorities and building authorities (municipalities) to submit applications for planning and building permits from a common platform; (ii) upgrading the Hippodamos system to enable applying, studying and issuing planning and building permits digitally; and (iii) upgrading or expanding other Hippodamos modules, such as construction contract management and administration.

The implementation of the investment shall be completed by 31 December 2024.

Investment 5 (C3.4I5): Smart cities

The objective of the investment is to coordinate on-going smart cities initiatives into a nationwide implementation plan.

The investment shall consist in putting forward a Smart City National Master Plan, focussing on three priority smart solutions for municipalities: smart parking, smart lighting and smart waste collection management. The investment shall entail the design and implementation of the smart city infrastructure (central platform) as well as the design and implementation of the three priority smart solutions, including the installation of sensors. The investment is expected to include 30 municipalities. The central platform shall have the necessary flexibility for future additions of new smart cities solutions.

The implementation of the investment shall be completed by 30 June 2026.

Investment 6 (C3.4I6): Regeneration and Revitalisation of Nicosia Inner City

The objective of the investment is to revitalise the Nicosia inner city by attracting young residents, new investments and fostering economic activity.

The investment shall consist of (i) the renovation of the Faneromeni School to be used as a department of the University of Cyprus; (ii) the purchase and renovation of buildings in the inner city to be transformed into student accommodation; and (iii) the introduction of private sector incentives to provide student accommodation in the area.