What Europe should know about North Cyprus

Last week, Turkey saw its first current account surplus in 16 years. That would cause for celebration if it wasn’t due to the Turkish Lira’s rapid depreciation, and the deep recession we’re in. The area of constructive ambiguity in economic policymaking has absorbedly ended with the sacking of the governor of the Central Bank. Markets are now clear about the kind of institutions they are dealing with in Ankara. This, of course, will not help the recession, no matter how rapid the impending rate cut is going to be. So success stories are hard to come by these days.

 So I was happy to see that the Turkish Republic of Northern Cyprus (TRNC) has a growing current account surplus over the years. And this is not just due to Turkish aid to the enclave. Just on the contrary, it appears capable of earning its economic survival. This comes as a surprise. Turks like to call North Cyprus “yavru vatan” roughly meaning “infant homeland,” which in addition to its affectionate intent, also reflect the mainland’s assumptions about Turkish Cyprus’s ability to fend for itself.

 I was looking at the Turkish Cypriot balance of payments figures lately. It appears to have a trade deficit of 42 percent of its GDP. This is financed by Turkish aid and service sector revenues reaching 49.4 percent of the GDP. Hence there is a 7.4 percent current account surplus.

 Of the 49.4 percent invisible earnings, Turkish direct aid represents less than 10 percent, mind you. More than 40 percent comes from tourism revenues and more than 40 percent from university earnings. That’s what I call viability, mind you. Good for Turkish Cypriots. They make a living out of nothing. No wonder that despite the political division of the island, surveys always report high happiness among Turkish Cypriots.

 The strategic bet Ankara made around 15 years ago to turn North Cyprus into a viable entity seems to be working out against all political odds. Good for Turkish Cypriots. Two new sectors, tourism and education, seem to have emerged out of nothing in the last 15 years. About 2 million tourists are visiting the northern part of the island and there are more than 100,000 university students, with about a third coming from third countries (neither from Turkey nor Cyprus.) the Eastern Mediterranean University there is even ranked in the Times Higher Education list of 1,000 Universities.

 The world needs to revisit the issue of political division on the island. The U.N.-led Crans-Montana Cyprus inter-communal talks crashed about two years ago. Two years of political stalemate with no talks is a long time. The Greek Cypriot policy of turning Cyprus into part of a bigger (Middle Eastern) problem won’t make the situation on the island more sustainable.

 The EU decision to bring sanctions against Turkey regarding the situation in the eastern Mediterranean simply does not make sense. The EU is the major culprit in the unsustainable situation on the island today. It is about to make things worse by making Cyprus part of the broader Middle East dispute. This is a bad idea. We should strive to divide out problems into smaller pieces and solve them that way. It doesn’t help to bunch problems together into giant intractable things, the way EU is doing.

 The only positive thing in this mess is the economic viability of North Cyprus. That opens a broad framework of new possibilities for Turkish Cypriots, if you ask me. Now it is the time to build upon the gains of the strategic bet that was made about 15 years ago.

 All this debate makes me recall an old Chinese proverb. “If you must play, decide about three things at the outset: The rules of the game, the stakes, and the time to quit.” Good advice for all the stakeholders in the eastern Mediterranean.