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12° Nicosia,
11 August, 2020
 
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PRIO: A Cyprus solution could reap high economic benefits

Research has shown that the island's division is severely inhibiting its economic growth and prosperity

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A solution to the Cyprus problem will create large new markets, research conducted by the independent, bicommunal research centre PRIO showed.

According to the study, the huge economic potential cannot currently be realized due to a number of factors that exist as a consequence of the island’s enduring division.

The authors of the study believe that the economies of both the Greek Cypriot Community (ECC) and the Turkish Cypriot Community (TCC) suffer from a lack of competitiveness due to, among other things, high and unstable energy costs, poor public transport, and poor governance, shortcomings which come as a result of the absence of certain checks and balances due to the Cyprus problem.

As the research shows, since both communities suffer from the small size of their market, the division of the island is a factor that does not allow them to take advantage of economies of scale.

A solution would create new markets for Cyprus as a whole, as it would open the Turkish Cypriot €650billion market to the Greek Cypriot community, particularly in areas such as tourism and business services. The TCC would also have immediate access to the EU market, worth €16trillion.

The authors of the study also expressed the belief that a solution would attract EU capital for the upgrading of ports, airports, and other infrastructure, particularly in Turkish Cypriot territories.

In addition, a solution would also lead to a convergence of real estate valuations, as settling the property issue would eliminate the burden of legal uncertainty on the affected properties in both communities. As a result, the study found that real estate prices in the TCC and in other areas affected by the territorial adjustment, would rise

The study also argued that these dynamics would attract significant foreign private investment, bringing about a widespread positive impact on the real estate market.

Given the extensive opportunities that would arise in the event of a solution, the authors believe that a solution would produce a significant 'peace dividend' - the difference between the island’s financial performance with a solution and its financial performance without a solution.

Significantly, the findings forecast that a best case scenario ‘peace dividend’ that can be achieved if appropriate policies are implemented can reach as high as €17.4 billion.

On the contentious subject of natural gas, the study highlighted that a solution would lead to a faster and more profitable exploitation of offshore natural resources, at a time when opportunities for its exploitation are shrinking due to rapidly rising global competition from renewable energy sources.

Greater economic development would also lead to a more rapid creation of jobs, the study found. Although employment growth depends on several variables, the authors assume that under certain conditions, a solution would create around 100,000 new jobs in the first 10 years, 30,000 of which would be created in the tourism sector, 18,000 in wholesale and retail trade, 10,000 in construction, and some 6,000 in the aviation and shipping sectors.

The study also refers to research conducted by global reputable organizations which suggest that if a united Cyprus succeeded in achieving gender equality in the workplace and increased female participation in the labor force, this would have a significant positive impact on corporate profits and economic growth.

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