Cyprus Mail
Opinion

Famagusta, confidence building and economic growth

By Costas Apostolides

One of the victims of the economic crisis has been the UN sponsored talks for a Cyprus settlement, which have now been put back until October. President Anastasiades has his hands full dealing with the economic crisis, while on the Turkish Cypriot side the political scene is in turmoil and will not clarify until parliamentary elections at the end of July. Add to that the demonstrations and the fall from grace of the Erdogan government in Turkey, and the omens do not look good.
Given the economic crisis a Cyprus settlement would get Cyprus (as a whole) out of the economic crisis, benefitting both communities, but for most Cypriots that prospect is too far away and many have written it off completely. Given this situation the Greek Cypriot side has proposed that in parallel to the Cyprus talks a proposal for major confidence building measures (CBMs) be resuscitated and seriously examined as a way of giving the negotiations a new momentum. This would encourage the two communities to use the opportunities provided by the CBMs to exploit the growth potential for both economies.
Ever since 1974 the proposal for confidence building measures involving the resettlement and reconstruction of Famagusta by its Greek Cypriot owners has been considered, in part because the uninhabited closed area of Varosha and the agreement that it should have priority, made it an obvious starting point. Today, given the crisis, such a major development as the reconstruction of Varosha would have massive positive effects on the economy.
The most serious effort to agree on a package of major confidence building measures was undertaken by the UN in 1993. It involved the resettlement of Varosha and the opening of Nicosia airport for both communities with aces from either side. A UN team of experts visited Cyprus to examine the economic impact of the measures proposed. Their report suggested:
•    The UN would assume responsibility for the area, and enlist the support of both sides.
•    The area would be opened in two stages, first the area to the south, and then the area further north in adjacent to the Famagusta port would be resettled.
•    The area would have a special character for intercommunal contact.
•    Both communities would be able to enter the area without formalities, and it would be a link between the two communities.
•    There would be unhindered travel of foreign visitors through a reconstructed Nicosia airport.
•    The laws to be applied in the area would be the laws in force in the Republic of Cyprus in 1963 before the intercommunal fighting of 1963/64.
The UN proposals were accepted by President George Vassilliou at the time but rejected by Rauf Denktash.
A different confidence building package emerged after Cyprus’ accession to the European Union in 2004, when owing to the Greek Cypriot rejection of the Annan Plan the government of Cyprus came under pressure from the European Union and was isolated internationally. The specific problem was the draft Direct Trade Regulation of the European Commission prepared for the Turkish Cypriot Community in 2004. This was blocked by the Cyprus government and it was therefore necessary for a counter proposal to be made. President Tassos Papadopoulos proposed the following:
•    Resettlement of the closed area of Varosha by the Greek Cypriot owners with an appropriate direct trade regulation offered to the Turkish Cypriots, with Famagusta port under EU administration and investments for the port to be modernised and developed.
•    The TCC considered that there was an imbalance of benefits owing to the great value of Varosha and its beach. They requested that direct flights be allowed into Tymbou/Ercan airport to provide more benefits to the Turkish Cypriots.
The Greek Cypriot side did not accept the inclusion of the airport, and negotiations continued to find a solution that did not imply recognition of the Turkish Cypriot regime.
Drawing upon the past experience it would seem that the components of an agreement could be found with the following provisions.
1.    The European Commission should change its proposal for the Direct Trade Regulation for the Turkish Cypriots, so that it complies with the views of the Greek Cypriot community, and the legal opinion of both the European Council and the European Parliament.
2.    In general whatever arrangements are made there must be no recognition of the Turkish Cypriot regime, otherwise no progress can be made.
3.    Famagusta port can be opened under EU or UN administration, empowered by the Republic of Cyprus, with special arrangements to ensure Turkish Cypriot involvement in management.
4.     Direct flights could be arranged to Tymbou/Ercan as long as no recognition of the regime is implied.
5.    The main problem would be the Flight Information Region (FIR) for Tymbou/Ercan flights, which could be settled under similar arrangements as the port and airport. It is expected that the government of Turkey and the military would not agree but this needs to be examined.
It is not clear that even with such a package the Turkish Cypriots would have matching gains, but certainly their gains would still be substantial as they would contribute considerably to the reconstruction of Varosha. There are insufficient Greek Cypriot resources in the region to use contractors only from the south, likewise with labour. Furthermore, much of the infrastructure (notably the utilities such as electricity, sewerage and water, and possibly gas) would require cooperation from both sides.
The cost of reconstructing Varosha was put at 1,270 million Cyprus pounds in 2004. In today’s prices the cost could be about €4,000 million.
A lot of work is required to get a clearer picture of requirements, and the above figure does not include expenditure for Famagusta Port, and infrastructure improvements and the reconnection of utilities that will be required for both communities.
It is important that an economic study be carried out. A team of Greek and Turkish Cypriot economists submitted a proposal for an economic study in 2005, but that was rejected by the Cyprus government at the time.
A lot of serious work by both communities (working together) needs to be done if we are to make progress on the confidence building measures, transform the political climate and move on to a Cyprus settlement.
Costas Apostolides is chairman of EMS Economic Management ([email protected]) and a member of Conciliation: Peace Economics Network

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