SEMINAR ON ECONOMIC CONVERGENCE AND A CYPRUS SETTLEMENT

ECONOMIC TRANSFERS ACROSS THE GREENLINE

Costas ApostolidesMember of Economic Committee in Cyprus Talks

LONDON SCHOOL OF ECONOMICS6th Feb. 2007

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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)

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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

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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

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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

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CONTENT

1. Movement of People2. Greenline Regulation3. Movement of Goods4. Economic Interaction5. Conclusion

The following will be covered:

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DATA

1. No comprehensive systematic studies2. Estimates based on various sources3. Economic transfers estimated incomes /

expenditures, not GDP4. Value added and GDP is not estimated5. Data from ad hoc surveys, various sources

from authorities, assumptions

Recommend: A systematic approach to data

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G/C & T/C MOVEMENT ACROSS THE GREENLINE 2003-2006 (ANNUAL TOTALS)

MONTH G/C T/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

4,499,562 19,713,059 11,872,721

Note: (1) Tourists included in G/C figures(2) From end of August to present, no SBA data

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GC & TC MOVEMENT ACROSS GREEN LINE 2003-2006

TOTAL

T/C

G/C

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GREENLINE CROSSINGS…1

JUNE 2005 (6-12/6/05) & 2006 (5-11/6/06)

G/C T/C

2005 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

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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%

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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

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EU ACCESSION The whole of Cyprus excluding the British SBA’s

acceded to the EU on 1st 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

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ECONOMIC TRANFERS…1

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

Estimated Value of Transfers from April 2003 (CY£mln)

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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 0.3 1 2.8

Total 82.3 116 109.8

T/C to G/C 2004 2005 2006

TC Visits 16 23 20

2. Greenline Trade 0 0.1 0.6

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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

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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

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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

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THE EU GREENLINE REGULATION…4

Greenline Regulation: Intra-Island Trade (CY£m’s)

T/C Sales G/C Sales Total2004 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 TCCINote: TCC Sales began in August 2004 and GCC sales in May 2005

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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