SEMINAR ON ECONOMIC CONVERGENCE AND A CYPRUS SETTLEMENT

SEMINAR ON ECONOMIC CONVERGENCE AND A CYPRUS SETTLEMENT LONDON SCHOOL OF ECONOMICS 6 th Feb. 2007 ECONOMIC TRANSFERS ACROSS THE GREENLINE Costas Apostolides Member of Economic Committee in Cyprus Talks

ECONOMIC CONVERGENCE… 1 § The evolution of the European Union from the Steel & Coal Community (1951) to the European Economic Community(1957) to today’s European Union demonstrated: § § § How economics can be used to achieve PEACE That mutual interest facilitates the peace process That economics can contribute to the Peace process through the creation of mutual interest (business, trade, economic exchange) 2

ECONOMIC CONVERGENCE… 2 § The term ECONOMIC CONVERGENCE is used here in four different ways: 1. The establishment of mutual interest through trade, economic interaction and cooperation 2. Macroeconomic convergence especially in relation to per capita GDP, tax revenues, inflation 3. Institutional Convergence primarily adoption of the Acquis Communautaire 4. Economic Convergence in relation to a Cyprus settlement and reunification of the island This presentation on Economic Transfers across the greenline refers to (1) above, but influences all four definitions / interpretations 3

GREENLINE BACKGROUND… 1 § The Greenline is the dividing resulting from the 1974 Turkish Intervention § 1974 -1990 Economic interaction and movement of people across the Greenline was very difficult § 1990 -2003 Movement of people was restricted, but possible thereafter under difficult circumstances § April 2003 Relative freedom of movement became possible 4

GREENLINE BACKGROUND… 2 § Economic Interaction was virtually ZERO from 1974 to 2003 except for: § Water, Electricity from G/C to T/C § Health services to Turkish Cypriots § Limited Turkish Cypriot employment (maximum 1, 000), owing to crossing restrictions 5

CONTENT The following will be covered: 1. 2. 3. 4. 5. Movement of People Greenline Regulation Movement of Goods Economic Interaction Conclusion 6

DATA 1. No comprehensive systematic studies 2. Estimates based on various sources 3. Economic transfers estimated incomes / expenditures, not GDP 4. Value added and GDP is not estimated 5. Data from ad hoc surveys, various sources from authorities, assumptions Recommend: A systematic approach to data 7

G/C & T/C MOVEMENT ACROSS THE GREENLINE 2003 -2006 (ANNUAL TOTALS) MONTH G/C TOTALS 2003 1, 123, 720 1, 371, 099 2, 494, 819 2004 1, 173, 825 1, 159, 541 3, 333, 366 2005 1, 319, 899 2, 222, 199 3, 542, 098 2006 882, 118 1, 620, 320 2, 502, 438 OVERALL TOTAL Note: 4, 499, 562 19, 713, 059 11, 872, 721 (1) Tourists included in G/C figures (2) From end of August to present, no SBA data 8

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GREENLINE CROSSINGS… 1 JUNE 2005 (6 -12/6/05) & 2006 (5 -11/6/06) G/C 2005 T/C 2006 2005 2006 Mon. 2, 956 2, 192 6, 814 5, 618 Tue. 2, 824 2, 461 7, 053 5, 103 Wed. 2, 916 2, 625 7, 035 5, 256 Thu. 3, 487 2, 550 7, 417 6, 319 Fri. 3, 486 3, 180 7, 567 6, 547 Sat. 5, 799 4, 480 5, 393 5, 023 Sun. 5, 375 5, 591 4, 119 2, 782 Total 26, 843 23, 079 45, 398 36, 648 10

GREENLINE CROSSINGS… 2 § T/C’s cross in higher numbers weekdays § § § Employment (mostly) Shopping Visits § G/C’s cross in higher numbers weekends and holidays § § Saturday (shopping) Visits (especially Sunday / holidays) § In 2006 crossings were reduced § § G/C’s minus 14% T/C’s minus 19% 11

T/C EMPLOYMENT SOUTH OF GREENLINE Sector 2005 (%) Construction 76 Industry 10 Hotels 5 Agriculture 4 Others 5 Total 100 Source: Centre of Applied Research, Cyprus College, June 2005 12

EU ACCESSION § § § The whole of Cyprus excluding the British SBA’s acceded to the EU on 1 st May 2004 The Acquis Communautaire is not applied to northern Cyprus, which is not under the control of the Republic of Cyprus The British SBA’s are covered by a separate EU directive on their relationship with the EU and the Republic of Cyprus The SBA’s are responsible for movement across the Pergamos and Strovilia Greenline crossing points T/C’s with ROC identity cards / passports have full ROC and EU rights 13

ECONOMIC TRANFERS… 1 Estimated Value of Transfers from April 2003 (CY£mln) To T/C’s To G/C’s TCC GNP (% from G/C’s) 2003 37 n/a 6 2004 82 16 10 2005 115 23 11 2006 108 20 10 14

ECONOMIC TRANSFERS… 2 G/C to T/C (CY£ m’s) 2004 2005 2006 1. T/C Employment 40 43 32 2. G/C Visits 12 32 25 3. Tourists 9 12 17 4. Casinos 10 15 20 5. Social Insurance 11 13 14 6. Greenline Trade Total T/C to G/C TC Visits 2. Greenline Trade 0. 3 82. 3 2004 16 0 1 116 2005 23 0. 1 2. 8 109. 8 2006 20 0. 6 15

THE EU GREENLINE REGULATION… 1 § The EU Greenline Regulation was introduced because of the situation in Cyprus, to regulate: § Greenline crossings of persons § Facilitate intra-island trade across the Greenline 16

THE EU GREENLINE REGULATION… 2 § Movement of People § EU citizens may enter Cyprus from any point of entry without consequences § Third country citizens need a VISA which they cannot get at crossing points § Turkish nationals cannot cross Greenline at crossing points but can enter through Larnaca airport or Larnaca / Limassol ports and they cross the Greenline 17

THE EU GREENLINE REGULATION… 3 § Greenline Trade § Facilitates intra-island trade in: § Items produced wholly in Cyprus § Items imported but processed § Prohibits intra island trade in: § All livestock products § Fish and Honey § All imports Similar rules were introduced by the TCC 18

THE EU GREENLINE REGULATION… 4 Greenline Regulation: Intra-Island Trade (CY£m’s) T/C Sales G/C Sales Total 2004 275, 557 0 275, 557 2005 978, 144 146, 055 1, 124, 199 2006 1, 887, 195 597, 011 2, 484, 206 Total: 3, 140, 896 743, 066 3, 883, 962 Proportion (%) 81% 19% 100% Growth 06/05 (%) 93% 308% 121% Source: EMS Economic Management Ltd. , on data from CCCI and TCCI Note: TCC Sales began in August 2004 and GCC sales in May 2005 19

CONCLUSION § Economic interaction is significant but needs to b further developed and encouraged § Movement across the Greenline is falling § Economic interaction is significant § Trade has disappointed but grew rapidly in 2006 from low base Recommendation: Economic interaction should be encouraged given that the policy of the GCC, TCC, Greece, Turkey and the EU is that economic convergence in Cyprus facilitates a solution to the Cyprus Problem 20