Cyprus to gain EUR 1.8 bln per year from reunification—research

A solution to the Cyprus problem would yield a peace dividend of at least EUR 1.8 billion per year in new business with Turkey and other opportunities for the island, with each Cypriot family standing to gain an extra EUR 5,500 per year, according to new research from an all-island team of economists.

In a report entitled, “The day after: Commercial opportunities following a solution to the Cyprus problem” and sponsored by the Cyprus Centre of the Peace Research Institute of Oslo (PRIO), the Cyprus-based researchers, who together have more than 40 years’ economic analysis and forecasting  experience, project growth in trade between Cyprus and Turkey for the first seven years after a solution to the Cyprus problem. As an initial reference for the forecast, before making downward adjustments, they take the breathtaking rise in commerce that followed the thawing of relations between Greece and Turkey from 1999. Trade in goods and services between these two countries rose at an annual average rate of 25 per cent in 2000-06, while the tourism market increased at an astonishing average rate of 275 per cent per year. Greece is now the ninth largest investor in Turkey and Turkey is one of the fastest growing tourism markets for Greece.

Using the results for Greece-Turkey trade, before making downward adjustments, as well as the particular strengths of an all-Cyprus economy, such as dynamic sectors of business services and tertiary education, the team forecast both reunification and continued division scenarios. Deliberately avoiding the economics of any specific solution, the team made a simple assumption: that the solution that would gain the majority support of both communities would be politically and economically sustainable. According to the team’s calculations, the reunification of Cyprus would add, on average, in the first seven years:

·         EUR 700 million per year in new tourism business, including EUR 385 million from Turkey

·         EUR 393 million per year in new business for Cypriot construction companies

·         EUR 155 million per year in new business for Cypriot real estate companies

·         EUR 162 million per year for the Cypriot university education sector

·         EUR 103 million per year for Cypriot accounting and legal firms

·         EUR 184 million in new foreign direct investment into Cyprus, not including the already substantial investment in construction and real estate

In sum, the annual average boost to the economy amounts to EUR 283 million in 2009 (Year 1) and EUR 3.9 billion, or just over 10% of all-island GDP, in 2015 (Year 7). This is an average of EUR 1.8 billion (over CYP 1 billion or more than YTL 3 billion) per year. Translated into household income, the annual dividend per family comes to approximately EUR 5,500. This is 20% of the average income in the southern part of the island and more than 40% of the estimated average income in the northern part of the island.

The report concludes that this is the very least that could be expected given that the research focuses primarily on the sectors that would be expected to benefit most. Moreover, the peace dividend calculated could be almost doubled if important regional developments, such as new business from the Baku-Ceyhan oil pipeline (EUR 1.3 billion) and the implementation of the Ankara Protocol (EUR 187 million per year) are taken into account.

“I am very proud to present this research today and I look forward to the debate on its findings,” said Arne Strand, Manager of the Cypriot PRIO Centre. “I also hope that this research helps us to think beyond the solution to the great and ongoing benefits everyone stands to gain from a settlement.”

 

For press queries contact the PRIO Cyprus Centre at 22 456 554. The report is downloadable at www.prio.no.cyprus