Isolated north Cyprus counts on Turkey for economic survival

Isolated north Cyprus counts on Turkey for economic survival

Nicosia (AFP) - Recognised 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 unrecognised 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.

"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.

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.

A UN-monitored ceasefire line runs across the island, limiting movement and trade, and the capital Nicosia is split in two.

At the TRNC's Ercan airport, some 40 kilometres (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.

- 'There is no economy' -

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 $2,200. If you want to bring it to Famagusta, it costs $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 $130 million per year, against imports of $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 -- from roads to hospitals -- 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 -

Shaheen said he would be voting on Sunday, but didn't expect any change.

"Politicians don't care, they don't want to change things," he said. Whoever is elected "won't be able to open the country because of Turkey".

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 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. We had a boom here because everyone was very positive about a solution," Besim said.

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