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Cyprob solution would boost TRNC economy

20 April 2015

As well as directly providing about 30% of the TRNC’s budget, Ankara finances major infrastructure projects in the territory, from roads to hospitals. At the same time, it encourages Turkish businesses to invest.

But for the TRNC’s some 300,000 inhabitants, it’s the economic consequences of the country’s unrecognised status that has the greatest impact.

“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.

“This is a reality and this is a problem. We have this problem because the economy of North Cyprus is not able to have access to international markets,” he said.

At Ercan airport, the only planes taking off and landing are from Turkey. The North’s main port, at Famagusta, suffers the same restrictions.

Head of the Turkish Cypriot Chamber of Commerce, Fikri Toros said the embargoes have very real economic consequences.

“Take a container coming from China,” he said. “Bringing it to Limassol is going to cost you around $2,200. If you want to bring it to Famagusta, it costs $3,600.”

Cyprus joined the European Union in 2004 but the TRNC does not enjoy the same privileges, so suffers from the restrictions and taxes imposed on countries outside the union on its goods.

This is demonstrated by the country’s enormous trade deficit with exports of about $130 million per year, against imports of $1.4 billion, Toros says. Only Turkey’s substantial support, he said, keeps the economy going.

Tourism is one of the only developing industries in the North as 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 about 80% of budget spent employees’ salaries, he said.

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 UN-backed plan to resolve the dispute appeared to be making headway, the TRNC’s economy blossomed even though no solution was reached.

“Because everyone believed that there was going to be a solution… we had an economy that grew 15-17% for 3-4 years. We had a boom here because everyone was very positive about a solution,” Besim said.

Edited article published by Agence France-Presse

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