Northern Cyprus Economy Competitiveness Report
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arise from any remarkable success on the part of Northern Cyprus. The general and main cause of these decreases is that Southern Cyprus has been exposed to enormous economic and financial difficulties during the 2008-2016 period. The overlap of the effects of the global financial crisis that began in 2008 with Southern Cyprus’s (and Greece’s) own crisis has led to significant falls in the competitiveness of Southern Cyprus in all major components. In this respect, the fact that competitiveness differences with Southern Cyprus have somewhat narrowed down during this period should not be regarded as a pleasing or a promising development on the part of Northern Cypriot policy makers. According to the calculations made, EE is the only field in which Southern Cyprus’s rate of decline is equal to Northern Cyprus’s rate of progress. At GCI, BR and ISF, the decline rate of Southern Cyprus has been higher than the progress rate of Northern Cyprus. In other words, the dominant source of the narrowing down of the competitiveness gap is the relative failure of Southern Cyprus, and not the relative success of North Cyprus. While Southern Cyprus has experienced a period of “lost years”, Northern Cyprus has exhibited a very negligent tendency in many areas of competitiveness. Nonetheless, in order not to be so unfair to Northern Cyprus, it should be noted that the two countries do not compete on equal terms, as one of them is politically non-recognized and subject to economic isolation, whereas the other one is politically recognized and an EU member state. If Northern Cyprus was politically recognized and an EU member country, expectedly it would of course exhibit a much better competitiveness performance in the period under consideration. In the light of all these evaluations, the main result that emerges from the comparison with Southern Cyprus is again worth emphasizing at the expense of repetition. The most neglected areas in Northern Cyprus are “health and primary education” and “labor market efficiency”. Relative to Southern Cyprus, the areas in which Northern Cyprus has achieved partial success are “institutions”, “infrastructure” and “innovation”. Above, we have emphasized that the performance of Northern Cyprus in “institutions” is not satisfactory at all. It seems that, during the period in question, Southern Cyprus has experienced a very large decline in the field of “institutions”, implying the need for a very formidable recovery in future. On the other hand, Southern Cyprus was ahead of Northern Cyprus in 2008 in the areas of “macroeconomic environment” and “financial market development”. As of 2016, Northern Cyprus is now ahead of Southern Cyprus in these two areas. However, it is clear that the main reason for this conjectural development is the macroeconomic and financial crisis that Southern Cyprus has experienced during the period in question.
Northern Cyprus, Southern Cyprus, Turkey and Greece The island of Cyprus has important historical, political and economic ties with Turkey and Greece. For this reason, both the South and North of the island are also compared to the competitive performances of these two countries. In summary, in the period of 2008-2016, the best relative performance among these four countries has been achieved by Turkey, and the worst relative performance by Southern Cyprus. As of 2016, Turkey is the leader with 4.4 points in the GCI, while the scores of both Southern Cyprus and Greece are equal to 4.0points. And, Northern Cyprus has a GCI value of 3.7points in 2016. In other words, as of 2016, in terms of general competitiveness, the distance of Southern Cyprus and Greece from Turkey is greater than that of Northern Cyprus from Southern Cyprus and Greece. The relative superiority of Turkey over Southern Cyprus and Greece arises dominantly from EE. The differences in BR are quite small, and these three countries are equal in ISF. Interestingly, the best area of Turkey, EE, is the area where Northern Cyprus has the highest differences with Southern Cyprus and Greece. It is understood that there is a relative disadvantage of Northern Cyprus in an area where Turkey has a relative advantage. This can be expected to be indicative for the course of Turkey-Northern Cyprus relations. In other words, it is possible that the technical and institutional support that Turkey gives to Northern Cyprus will give more fruitful results especially in the field of EE. At this point, it is useful to recall the pillars of EE: higher education and training, goods market efficiency, labor market efficiency, financial market development, technological readiness and market size. On the other hand, it seems that the area that is generally most neglected in Northern Cyprus is EE, and therefore it is clear that EE is the main priority in front of Northern Cypriot policymakers. It seems necessary to intervene immediately in the very apparent decline that is observed in this area especially after 2014. Finally, another result obtained from within this comparison framework is that Northern Cypriot policy-makers must begin to think about the ways to stimulate the very stagnant BR field. On the other hand, ISF has been rising as a promising area in Northern Cyprus, especially in recent years. Therefore, it is of great importance to implement elaborate policies, develop state-private partnerships and provide functional R&D supports in the field of ISF.
Northern Cyprus Economy Competitiveness Report 2016-2017