Archive for June, 2009

Turkish Cypriot economy

The economic disparity between the two communities is pronounced. Although the Turkish Cypriot area operates on a free-market basis, the lack of private and governmental investment, shortages of skilled labor and experienced managers, plus inflation and the devaluation of the Turkish lira (which the Turkish Cypriots use as their currency) continue to plague the economy.

Turkey is, by far, the main trading partner of the “T.R.N.C.,” supplying 55% of imports and absorbing 48% of exports. In a landmark case, the European Court of Justice (ECJ) ruled on July 5, 1994, against the British practice of importing produce from Northern Cyprus based on certificates of origin and phytosanitary certificates granted by “T.R.N.C.” authorities. The ECJ decision stated that only goods bearing certificates of origin from the Government of Cyprus could be recognized for trade by EU member countries. That decision resulted in a considerable decrease of Turkish Cypriot exports to the EU: from $36.4 million (or 66.7% of total Turkish Cypriot exports) in 1993 to $24.7 million in 1996 (or 35% of total exports) in 1996. Even so, the EU continues to be the “T.R.N.C.’s” second-largest trading partner, with a 24.7% share of total imports and 35% share of total exports.

Assistance from Turkey is the mainstay of the Turkish Cypriot economy. Under the latest economic protocol (signed January 3, 1997), Turkey undertakes to provide Turkish Cypriots loans totaling $250 million for the purpose of implementing projects included in the protocol related to public finance, tourism, banking, and privatization. Fluctuation in the Turkish lira, which suffered from hyperinflation every year until its replacement by the New Turkish Lira in 2005, exerted downward pressure on the Turkish Cypriot standard of living for many years.

The Turkish Cypriot de facto authorities have instituted a free market in foreign exchange and permit residents to hold foreign-currency denominated bank accounts. This encourages transfers from Turkish Cypriots living abroad.

PEPSIco is known to have a major factory in the Turkish sector of Lefkosa (Greek: Lefkosia English: Nicosia). Even though the North is under an embargo, PEPSIco has still chosen to operate a major factory there, where they produce Pepsi, Yedigu and many more PEPSIco brands. The factory is run with EKTAM.

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