Iso­lated north Cyprus counts on Turkey for its eco­nomic sur­vival

The China Post - - WORLD BUSINESS - BY CAMILLE BOUIS­SOU

Rec­og­nized only by Ankara, the tiny Turk­ish Repub­lic of North­ern Cyprus heads to the polls on Sun­day with its econ­omy suf­fer­ing from in­ter­na­tional iso­la­tion and sur­viv­ing mainly thanks to Turkey’s largesse.

The cam­paign for the pres­i­den­tial vote, which will see in­cum­bent Dervis Eroglu face three main chal­lengers, has fo­cused on stalled ef­forts to re­solve the 40-year-old con­flict that has left the TRNC a break­away en­clave on the Mediter­ranean is­land’s north­ern third.

But for the TRNC’s some 300,000 in­hab­i­tants, it’s the eco­nomic con­se­quences of the ter­ri­tory’s un­rec­og­nized sta­tus that hit home the most.

“The Turk­ish Cypriot econ­omy has a very big struc­tural prob­lem, and we are very much aware of that. First is that the econ­omy is an aid-de­pen­dent econ­omy, and we do have lots of funds com­ing from Turkey,” said Mustafa Besim, a pro­fes­sor at Fa­m­a­gusta’s Eastern Mediter­ranean Uni­ver­sity.

“We have this prob­lem be­cause the econ­omy of north Cyprus is not able to have ac­cess to in­ter­na­tional mar­kets,” he said.

Since Turkey’s in­va­sion of the north­ern part of Cyprus in 1974 in re­sponse to an Athens-en­gi­neered coup seek­ing union with Greece, the ter­ri­tory has been al­most com­pletely cut off from the out­side world.

At the TRNC’s Er­can air­port, some 40 kilo­me­ters (25 miles) out­side Ni­cosia, the only planes tak­ing off and land­ing are from Turkey. The north’s main port, at Fa­m­a­gusta, suf­fers the same re­stric­tions.

Fikri Toros, the head of the Turk­ish Cypriot cham­ber of com­merce, said the lim­its have very real eco­nomic con­se­quences. “Take a con­tainer com­ing from China,” he said. “Bring­ing it to Li­mas­sol (the port in south­ern Cyprus) is go­ing to cost you around US$2,200. If you want to bring it to Fa­m­a­gusta, it costs US$3,600.”

Cyprus joined the Euro­pean Union in 2004 but goods from the TRNC do not have priv­i­leged ac­cess to the bloc so suf­fer from the re­stric­tions and taxes im­posed on out­side coun­tries. It shows in the coun­try’s enor­mous trade deficit — ex­ports of only about US$130 mil­lion per year, against im­ports of US$1.4 bil­lion, ac­cord­ing to Toros.

Only Turkey’s sub­stan­tial sup­port, he said, keeps the econ­omy go­ing. As well as di­rectly pro­vid­ing about 30 per­cent of the TRNC’s bud­get, Ankara fi­nances ma­jor in­fra­struc­ture projects in the ter­ri­tory and en­cour­ages Turk­ish busi­nesses to in­vest.

With tourism one of the few bright spots in the lo­cal econ­omy, Turk­ish in­vest­ment has nearly dou­bled ho­tel ca­pac­ity in the past 10 years, Toros said. Ankara’s sub­si­dies also al­low the Turk­ish Cypriot gov­ern­ment to fi­nance its bloated public sec­tor, with some 80 per­cent of bud­get spend­ing on public em­ploy­ees, Toros said.

For many Turk­ish Cypri­ots, even the idea of a “na­tional” econ­omy is an illusion. “There is no econ­omy in our coun­try,” said Ahmed Sha­heen, a 29-year-old sit­ting in the sun­shine out­side a Ni­cosia cafe.

Di­vi­sion Hurts Growth

Eco­nomic ex­perts and some lo­cal busi­ness­men say what’s needed is a po­lit­i­cal so­lu­tion that would in­te­grate the TRNC into the global econ­omy.

The Cypriot branch of the Peace Re­search In­sti­tute Oslo (PRIO), a think-tank that pro­motes rec­on­cil­i­a­tion, said in a re­port that re­uni­fi­ca­tion of the is­land would give a sig­nif­i­cant boost to the econ­omy, on both sides of the Greek-Turk­ish divide.

If a so­lu­tion were found by the start of 2016, the TRNC’s econ­omy would grow from 2.6 bil­lion eu­ros in 2012 to 11.2 bil­lion in 2035, the re­port said. With­out a so­lu­tion, it would grow to only 4.7 bil­lion eu­ros.

Pre­vi­ous hopes for a po­lit­i­cal so­lu­tion in Cyprus have al­ready shown the po­ten­tial for an eco­nomic surge. In the early 2000s, when a U.N.-backed plan to re­solve the dis­pute ap­peared to be mak­ing head­way, the TRNC’s econ­omy roared ahead even with­out a fi­nal agree­ment. “Be­cause ev­ery­one be­lieved that there was go­ing to be a so­lu­tion ... we had an econ­omy that grew 15-17 per­cent for 3-4 years.” Besim said.

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