Güven Sak, PhD - [Archive]

Oil should not hinder change in Cyprus 12/10/2012 - Viewed 1933 times

Did you know that Northern Cyprus’s is not performing as strongly as Muğla in terms of tourism?

When it comes to the economy of Cyprus, I instantly think of an anecdote I heard two years ago, one that’s like a joke, but summarizes the state of affairs in the Northern Cyprus. The owner of a pizza shop located on a university campus in Northern Cyprus rushes into the office of a university administrator. “I have a complaint," he says. "I serve hot pizzas on campus, but students are ordering pizza from a village half an hour away. This is unacceptable!” The administrator asks, “what do you want me to do?” and the owner responds, “put a ban on ordering pizza from off campus.” This is the automatic option shop owners in Northern Cyprus think of. Prices are controlled by the state and it is never a shame to ask for official fixed prices. No pizza place owner in Cyprus questions whether he or she is doing something wrong when customers order cold pizza from another pizza place half an hour away. He or she asks for state support and protection instead.

The reason for this evident distortion in the economy of Northern Cyprus economy is Turkey's unilateral and shallow policy design tradition. The security-based approach to Cyprus has not yet acknowledged the key importance of establishing a functional economic structure on the island. Reportedly, Northern Cyprus is a tourism destination, but figures tell that it is not even as successful as Turkey’s Muğla in this regard. Currently, Southern Cyprus, recognized as the Republic of Cyprus, has the European Union presidency. The Turkish Republic of Northern Cyprus (TRNC), meanwhile, is not recognized. Per capita income is $30,000 in the south and half of that in the north. TRNC citizens work in the south while carrying TRNC passports. In the absence of a plan, the North automatically integrates into the South, which has a strong economy. At least this is what I see. And Turkey appears to have completely dismissed the Cyprus issue. So, as the Cyprus issue is off the agenda, let me tell what I think Turkey has done wrong in that regard.

The sense of follow-up is weak in Turkey. One day everyone dives on an issue and you expect a solution to come out, but it doesn’t. Time passes and the issue falls off the agenda, without any solution. The issue remains an issue in all its glory. A while ago, we were supposedly solving the Cyprus issue. We were to be one step ahead of others. But nothing happened! Turkey has never considered the Cyprus issue as an issue per se, but remembers Cyprus only when it meant something else for Turkey. Yesterday, when it was seeking entry to the European Union, Turkey remembered Cyprus sort of as a commutation ticket. Now, we have completely forgotten about the island once again. Turkey’s biggest mistake in Cyprus was that it did not enable or consider the establishment of a self-sufficient economic structure on the northern part of the island. The so-called smart plan Turkey came up with instead was putting Cypriots on the payroll provided that they continued living on Cyprus. This is just wrong! Turkey introduced price liberalization in 1980. In Cyprus, on the other hand, everything is under state control. GSM operators are extremely cheap in the south and expensive in the north. The system in Northern Cyprus survives thanks to price controls.

Thus, Northern Cyprus lacks a functional economic structure. Take tourism, for instance. Did you know that Northern Cyprus is not performing as strongly as Muğla? The bed capacity of Northern Cyprus is around 17,000 compared to Muğla’s 90,000. From this perspective, Muğla is similar to Southern Cyprus, which has a bed capacity of around 90,000, with 2.2 million annual tourists. An average of 2.7 million tourists visit Muğla each year, compared to barely a million for Northern Cyprus. In 2011, project finance from Ankara was 350 million liras to Muğla and 850 million liras to Northern Cyprus. I believe that the major impediment here has to do with the mentality rather than travel restrictions. Northern Cyprus held free elections; the old elite was replaced by the new. Yet, the new elite has not brought about a structural economic transformation that will help Cypriots stand on their feet, but has continued with old practices, setting fixed prices and distributing resources from Nicosia. Meanwhile, Ankara has continued providing the resources. Why? Because, on this matter, Turkey thinks it is important that Cypriots stay on the island. In short, nothing has changed.

There still is no political movement on the island to help Northern Cypriots decide their own fate. The structural problems are still waiting for structural solutions. The price of any good on the island is still higher than that in Turkey. Northern Cyprus must liberalize prices and ideas. But I am afraid this oil and gas exploration issue will obscure change on the island and the Turkey-centered attitude will become dominant again.

This commentary was published in Radikal daily on 12.10.2012