Introduction

Abstract

This introductory chapter starts with an insight of motivations of the author in writing the book. After sketch of his past in relation to the history of northern Cyprus, Ekici outlines the organization, content and purpose of the whole book. In the second section, the author briefly summarizes the history of the island of Cyprus until 1974 division, thereby opening up the history to the present day of northern Cyprus which is the book’s remit. Although the historical conflict between the ethnic groups is not the concern of this book, the ideological and political context from which the Turkish Cypriot experience and northern Cyprus’ story arose is told.

A Turkish Cypriot’s Tale

I grew up in an ambiguous and discordant country. Most of the households had multiple vehicle ownership and even multiple house ownership, yet most households did not have clean drinkable water until recently. Similarly, most individuals received regular income from at least two sources, but they didn’t necessarily pay their taxes regularly. Citizens rarely worried about the poisonous exhaust coming out of their cars, parking their car literally anywhere they liked (including the middle of the road), or adding extensions to their house without any approval from the state, because there was no monitoring by the state. The state provided free healthcare, but state hospitals lacked the necessary personnel and equipment. There was free primary and secondary education provided by the state, but most families also sent their children to private tutoring after school hours to be taught by the very same school teachers who had taught them a couple of hours earlier even though those same teachers were prohibited from holding a second job. We claimed to be living in a democratic country where the same person had served as the ‘leader’ of the people for more than 25 years and some of the MPs who were in parliament when I was in elementary school are still in office. Democracy in the eyes of my compatriot involved the right to vote but does not really require civic engagement or transparency and accountability of governments. Although as a country we complained about the performance of governments, we rarely acted collectively to change things.

In our daily lives, we didn’t have major economic difficulties. Or at least our parents never expressed that to us. I grew up in a traditional family where my mother was a housewife who took care of the house and my father provided income. My father worked in the civil services until his retirement in his early 40s. After retirement, he continued working for a private company where he worked long hours but with generous work benefits. When that company went bankrupt, he formed his own business and entered the private sector. We had a house and a car and a comfortable living. Well, that is apart from the power outages and the lack of clean and adequate water at our home in the city. It was later, in secondary school years, that we perfected our night vision and specialized in working in the dark because power outages had become a very common occurrence. But since the teachers went on strike regularly, there was not much homework to do anyway. In accordance with teenage spirit, we used to make fun of the accents of small number of students in school who were immigrants from Turkey. We supported Turkish football teams fanatically but rarely went to a local football match. Although being an islander, we ate fish only on special occasions, but red meat was abundant. Since we had extended family in a village, we visited them every weekend and brought all the fruits and vegetables from there. In terms of our education, we started ‘preparing’ for some kind of an exam from as early as ten years old, continuing all the way until university. As a teenager, I never thought about economics or politics of my country, and our parents always reminded us that what we had was an economic heaven compared to their childhoods.

My high school years were a little bit different. My generation of Cypriots grew up on a divided island with a demilitarized buffer zone patrolled by UN forces, with communities on both sides of the border having been stripped off some of their basic rights. In an era of no internet and no social media, complemented with an authoritarian government regime, I grew up only hearing one-sided stories of pre-division events. The brain washing started from the early years. While in elementary school, aged seven, we were taken on a field trip to a museum that showed the grotesque pictures of a murdered family in a bathtub. As we grew older, we heard exploding bombs and of the execution of journalists, but didn’t really understand their political implications. During the last two years of high school, I had the opportunity to have a closer look at ‘the other’ side of Cyprus. The first occasion was when we had special permission to attend a fair organized by universities from the UK on the other side of the buffer zone, and the second was when several people from the other side tried to cross the border which resulted in the deaths of two people. When we first crossed the ‘border’ under UN escort to get to the conference venue, we all realized how much ‘nicer’ the roads and the environment were. My first thought was that it looked like London, which I’d visited a year earlier. But a year later, some people on motorbikes tried to cross the border to our side and two of them were killed. Although the local media portrayed those events in the most nationalistic way possible, I began to have some questions in my mind. Having seen the better economic development of the other side and inhumane execution of individuals, I began to ask more questions about the history of northern Cyprus.

Things changed after high school. Although I wasn’t able to obtain a scholarship to go to the USA for my higher education, and despite my objections, my family decided to send me anyway. In travelling to the USA, we intended to transfer in Germany, and unfortunately I found out for the first time that the passport of my ‘country’ was not valid in Germany; thus I applied for a temporary Turkish passport so that I could obtain a transit visa from Germany. I had trouble explaining myself at the US customs with two different passports. After one hour of interrogation and ‘checking with the managers’, I was able to go through. During the four years of undergraduate studies in the USA, I obtained student visas eight times because the visas were given for ‘single entry’, and I used to come back to Cyprus for both Christmas and summer holidays. Many years later in another visa interview (this time with Republic of Cyprus passport), a counsellor told me that, looking at my history of visas, she had never seen so many visas for one applicant. But the interesting point of going to the USA was the opportunity it gave me to meet people from the ‘other’ side of Cyprus whom I have never met before in my life. Once I started hearing conflicting stories, I became puzzled and began to read other sources and learn about the story of the other side.

I began to accumulate research skills after I began graduate studies in economics. Many people think that economics is solely about the study of money. Any first-year economics textbook defines the discipline more or less as the study of efficient allocation of scarce resources among unlimited wants. However, when we were growing up, the policymakers in northern Cyprus thought that the resources were not scarce, and they did not allocate those resources in an efficient way. During my graduate studies, I began to apply my training to my country and began asking the following questions to myself: ‘Why is my country economically wealthy but not developed?’ ‘Why is there a large pool of young retirees?’ ‘Can social security be sustained with these large number of retirees?’ ‘Why are the public services so poor?’ ‘Why don’t we produce more value added products?’ ‘Why can’t we export more goods and services?’ ‘Why do people complain all the time and yet still vote for the same politicians over and over again?’ ‘Why did the state-owned airlines company go bankrupt after more than 30 years?’ ‘Why was there so much Turkish influence on our budget?’ ‘Why does the “other side” perform so much better than us in economic matters?’ The answer given to most of these questions by the government officials in northern Cyprus has been ‘because of the Cyprus Problem’. I was persuaded by that response for a while, but no more.

After completing doctoral research in the USA, as a native Cypriot, I returned to Cyprus and started working as a lecturer in economics at a university in northern Cyprus, and wanted to conduct research on northern Cyprus, but I encountered two main problems. The first was the lack of data for an empirical social scientist. The existing data (whose quality was questionable) was simply not shared with or by the public. After a while, as is typical in social science research, I started meeting, networking and collaborating with more senior researchers who also had contacts in the public sector which made my access to data easier, but still inadequate and arbitrary. The second problem arose when I submitted my work, for international academic journal publication, and as one reason for receiving rejections was the use of TRNC data.¹ Thanks to my co-authors’ persistence, we managed to publish some of our work in international journals. However, this also made me realize that international scholars were unaware of the history of northern Cyprus, by no fault of their own since there are very few works in English (or any other language) about northern Cyprus. It is out of this personal experience that this book is an attempt to correct those errors and omissions albeit with a focus on the economic history of northern Cyprus, and to draw together the extent of economic data and major analysis of northern Cyprus into one place.

Although per capita gross national income in northern Cyprus had been increasing over recent years in local currency (the Turkish lira (TL)), its dollar value has decreased due to depreciation of Turkish lira against foreign currencies. Regardless, per capita income in 2016 was $13,902 according to official statistics which placed the northern Cyprus among ‘high-income countries’ classification by World Bank. However, in terms of business competitiveness, northern Cyprus is still classified as ‘efficiency driven’ stage of economic development instead of a transition to an ‘innovation driven’ stage of development, if judged only by income levels.² Furthermore, according to a corruption perception index in 2017—which was calculated for the first time for northern Cyprus—it ranked 81st among 180 countries in this list.³ Looking at health indicators, in 2015, there were 536 persons per doctor, 434 persons per nurse and 4.5 beds for 1000 people which is worse than the statistics of other developed nations. But the statistics show 92.8% enrolment ratio in tertiary education and favourable teacher-student ratios in public schools. According to the 2008 Household Budget Survey (HBS), 64.8% of the households own their dwelling and 79.3% of households have at least one car. The reliability of these official statistics notwithstanding, they show that there is economic wealth but not a developed economy in northern Cyprus.

Since the de facto division of the island in 1974, the demilitarizing of the UN-administered buffer zone and demarcation of the Green Line under annually renewed UN Security Council resolutions and the growing international isolation of northern Cyprus, there has been a corresponding bifurcation in the development of the two zones of Cyprus. Whilst the original 1960 broken constitution of the Republic of Cyprus continued uncorrected and the Republic of Cyprus continued to enjoy full international recognition, full international relations and eventually full membership in 2004 of the European Union, the northern polity endured a discordant, oblique, neglected and outcast development. The provisional post-1974 polity became permanent in the November 1983 unilateral declaration of independence as the Kuzey Kıbrıs Türk Cumhuriyeti (KKTC), hereafter anglicized to the Turkish Republic of Northern Cyprus (TRNC ). No matter the permanent UN-mediated missions dedicated to the peaceful settlement of the ‘Cyprus problem’, including the singular opportunity offered by the Annan Plan and 2004 Referendum (voted against by 76% of the Greek Cypriot electorate on an 89% turnout; voted for by 65% of the Turkish Cypriot electorate on an 89% turnout) but squandered, and notwithstanding the significant economic, environmental, social and cultural benefits which many have argued would arise from any settlement, today the island remains as firmly divided as ever.

The readjustment to life in Cyprus was not easy. Although I was able to obtain a good job and have decent earnings, I was still puzzled with so much of the everyday life. Northern Cyprus had changed since the last time I had spent significant time here. Notwithstanding that people were living in luxury (large houses, big cars, expensive clothing), there were now more congestion, more environmental problems, more social problems (murder, rape, stealing, divorce) and more structural problems compared to the time at which I left for the USA. What is more puzzling for me was why people didn’t seem to be bothered by these discordant developments. So I joined a civil society association who were interested in a ‘clean society, clean politics’ and attempted to act as a watchdog monitoring domestic government in northern Cyprus. This is when I started to learn more about legal and institutional framework of northern Cyprus development and find out how poorly politicians have governed the north. At the same time, I became frustrated and was angered when I learned what the highest level of government discussed during their weekly meetings. That’s when I decided to dig further and go back to the roots of the political and economic status quo in northern Cyprus.

A Tale of a Discordant Polity

Thus, the primary ambition and novel purpose of this book became the attempt to identify, trace and explain the discordant economic development of northern Cyprus. Southern Cyprus—the internationally recognized Republic of Cyprus (RoC)—has experienced a relatively comfortable economic development with full benefits of a sovereign state. Where the Republic of Cyprus, in enjoyment of its international legal status, has contributed to and receives the support of advanced economic reporting systems such as the World Bank, International Monetary Fund (IMF), European Union (EU), World Trade Organization (WTO), UN agencies and organizations such as the Food and Agriculture Organization (FAO) or World Health Organization (WHO), northern Cyprus’ pariah status has meant that none of these organizations is able to support TRNC, whether in simple economic data collection, let alone concrete economic advice, support and development. By contrast northern Cyprus has been outcast by the international community, only recognized by Turkey which has assisted the Turkish Cypriot community (since as early as 1955 when the bi-communal conflict first began) after the 1974 division and subsequent to the establishment of the Turkish Republic of Northern Cyprus (TRNC ) in 1983 to the present day. The aftermath of this separation deserves some attention as it is a unique example of a self-proclaimed state and blighted by common experiences of poor governance. Yet it is imperative therefore, in this light, to have a better understanding of the political and economic development in the northern part of the island if there is ever going to be a reunification.

Thus, the historical evolution and development of the northern Cyprus economy since 1974 forms the first of two ambitions of this book. The second ambition, predicated on the adequacy of presenting an economic history of northern Cyprus, is to critically discuss the quality and forms of economic governance of the north to the present day. The contents of this book are not new for those who have lived in northern Cyprus. It is impossible to have a conversation in northern Cyprus without some reference, usually critical, to the political past of the island. Motorists while driving will be stressed about the road safety and quality and blame the potholes, the poor road marking or lack of lighting, or low standards of driving on the deficiencies of parliament. Private entrepreneurs while trying to seek licences or permissions from government offices will invariably become angry at the civil servant (if he/she is not already using torpil or nepotism) and blame past governments for hiring so many incompetent individuals into the public sector. Farmers complain about the difficulties of farming without government subsidies and then curse at the government for bad policies. Walking around the city, shoppers realize that prices are rather high compared to Turkey or even in some cases compared to southern Cyprus and will speculate on the reasons. The owner of a shop will insist that import taxes and other government policies are to blame for high prices, while union member and business boss alike will both complain about the minimum wage, albeit in different directions, but both blaming the self-interest of governments. But one common denominator of all these discussions and many more will be the inability of governments to manage the state. In other words an analysis of the weaknesses or failures (as well as some successes) of economic governance comprises the second ambition of this book.

Nevertheless, several warnings are in order before we continue any further. The purpose of the book is not to discuss the causes of ethnic conflict or the course of Cyprus peace talks since 1974. Although in this chapter a very brief history is provided of Cyprus until de facto separation, there have already been plenty of scholarly analysis on politics and international relations of modern Cyprus one more such monograph need not be added. Similarly, the interminable Cyprus peace negotiations have been on the world agenda, for example, at the UN Security Council, since at least 1963. And whilst it has dominated—some would say suffocated or even poisoned—local politics, there has been much heat but almost no light. Indeed, it is important to contextualize the main content of this book by emphasizing that the ever-present ‘Cyprus problem’ has been blamed as the scapegoat for any number and variety of domestic socio-economic problems. The ‘Cyprus problem’, however important it may be, has nevertheless served as a permanently available excuse for stasis. I will show throughout the book that this over-determination or reductionism to the Cyprus problem is a great myth. Here I do not pretend to address the conflict, negotiations, settlement or reunification (except by way of relevant context), and instead seek to address how successive Turkish Cypriot governments, and the governance regime more broadly, have shaped, regulated, developed and elaborated the northern economy since the division of the island. Whilst not wishing to pre-empt the conclusion, it is worth indicating at the outset that the story is not, generally, a happy one.

One last advisory is in order on the use of certain terminology. Throughout the book Turkey’s military operations, particularly in 1974, will be referred to by the neutral, technical term ‘intervention’. Greek Cypriots prefer the word ‘invasion’ and Turkish Cypriots prefer the term ‘peace operation’. My chosen term of ‘intervention’ is the least normatively loaded term, conveying neither approval nor condemnation of the conduct. Second, as explained in more detail in Chap. 2, the general spatial area of the northern third of the post-division island will be referred to as ‘northern Cyprus’. Where the particular political regime is referenced, either the term Turkish Federated State of Cyprus (TFSC; Kıbrıs Türk Federe Devleti, KTFD) operating between 1975 and 1983 will be used or Turkish Republic of Northern Cyprus (TRNC ; Kuzey Kıbrıs Türk Cumhuriyeti, KKTC ). Similarly, throughout, I will refer to the Republic of Cyprus (RoC) as the 1960 established state and constitution, but implying especially since 1974 the Greek Cypriot administration. Again when referring to the general spatial area of two-thirds of the island of Cyprus, I occasionally use the phrase southern Cyprus or the south. The use of this particular vocabulary—frankly, any naming practice—is always challenged by locals. Turkish Cypriots prefer the phrase ‘Cyprus Greek administration’ instead of the Republic of Cyprus, and they refer to the president of Cyprus as ‘the leader of Cyprus Greek administration’. Greek Cypriots on the other hand refer to TRNC as ‘the occupied territories of Cyprus’ and the president as ‘the leader of the Cyprus Turkish community’. However, regardless of how some choose to refer to each other, the two sides have met on innumerable occasions since 1974 and certain ‘agreements’ have been signed with each other⁴; thus I am not going to be stymied by approved legal terminology. Finally, insofar as the official language of northern Cyprus is Turkish (and was the second official language, with Greek, in the 1960 Republic of Cyprus constitution), wherever Turkish terms are used, on first use I shall give the full Turkish phrase followed in parentheses by the Turkish acronym (where appropriate) and then the standard English translation. Thereafter I will use the Turkish term or acronym.

Throughout this book ‘official’ data from the departments and offices of the TRNC will be used. My training as an economist, love of working with numbers and most importantly the belief that without empirical evidence it is in vain to discuss most matters motivate the approach here. The TRNC’s State Planning Organization (SPO) which is in charge of collecting economic data and publishing results has provided most of the main economic indicators; however, the quality and reliability of data in the past had been questionable. It is a truism in economics that analysis will be only as good as the quality of the data being used, and therefore I will discuss the quality of the various data and its sources as I engage with each topic. This criticism is important because it is one of my intentions that this book could also serve to provide data for other researchers and that the state offices continue to improve publishing data in the public domain on a continuous basis allowing proper time-series analysis. That being said, the data presented here is nowhere near complete but I also hope that people who have documented data from post-1974 period will come forward and help me make it available to the public.

Another distinct contribution of this book is the use of parliamentary proceedings. The discussions held at the parliament have several interesting features. First of all, they show how the policymakers in the north have been behaving at the highest level meetings among themselves. Not surprisingly we will see that the meetings were most of the time nothing more than coffee-shop conversations. I’ve adopted the practice of assigning some of those parliamentary debates to text boxes, as a means of highlighting the quality and typical characteristics of the debates, but also as a means of signalling and encouraging to read the information in the boxes, although neglecting it will not cause any derailment from the overall purpose of the book. Secondly, the reports reveal the extent to which politicians considered some of the important bills that influenced the economic development of northern Cyprus. Although some of the names referred to in this manuscript may not mean a great deal to the readers—hence again the use of text boxes—my aim in including those is to have it on record to show how past members of the parliament (and corresponding political parties) contributed to or refrained from the discussions of key issues. Finally, these reports include some important data (used by politicians in their addresses of the chamber) that are not publicly available in other sources. Unfortunately for international readers the reports are in Turkish; thus the quotations and citations presented throughout this book are translations made by the author (unless otherwise indicated).

Outlining the Discordant Polity

The substantive chapters begin by offering up, in Chap. 2, a number of theoretical approaches, including conceptual vocabulary which will help in the examination of different governance systems that have emerged in northern Cyprus, as well as to introduce the political and institutional frameworks in the north. After the division in 1974, the Turkish Cypriot community was managed under an unofficial federated state which then turned into a distinct republic in 1983. Equipped with a conceptual language will then enable us to discuss possible classificatory models of this new system of governance in the north in the first substantive chapter. The new administration, free from the Republic of Cyprus, quickly set up its own institutions and government bodies, held parliamentary and presidential elections and introduced a constitution and many laws. On the surface, northern administrators seemed to be in charge of an independent state, but as far as international law is concerned, it is more accurate to label it a de facto state or even an occupied state or even a puppet state under full influence of Turkey. Despite all the laws and regulations designed for any democratic country, the administrators followed somewhat a ‘dictatorship’ model whereby they used political clientelism and rentierism as their key tools of governance. Following that sketched history designed to orientate the reader, though perhaps unnecessary for those familiar with northern Cyprus’ history, Chap. 3 begins to discuss in detail these institutional and political developments on the economic governance regime of northern Cyprus and ends with the abiding issue of the ‘resettlement’ of Turkish Cypriots which includes the allocation of immovable property to the refugees who left their homes in the south of the island in the 1974 period, as well as migrants who were subsequently brought from Turkey to settle in the north. As much as this may appear to be a humanitarian matter, the policymakers managed to take advantage of this to strengthen their political power and make this the most difficult item of Cyprus peace negotiations in the years to come.

This is followed immediately in Chap. 4 by a discussion of comparing the economic developments in the north with the south, and its relationship with the ‘motherland’. Although I will not go into detail about economic development of the Republic of Cyprus in the post-1974 period, a comparative outline should prove useful in order to be able to judge the divergences between either economy over the past almost half century. One of the ultimate desires of the leaders of Turkish Cypriots had been to have an independent nation that manages itself. This wish was turned into a necessity after the intervention of Turkey in 1974. Being the only country that subsequently recognized TRNC, Turkey continued to assist financially as well as politically to the governance of the north over the years. In this chapter we shall see whether the assistance from Turkey was a ‘free lunch’ and how it contributed to the economic development, if any.

Having discussed the structural and political foundations of this breakaway state, the next natural step is to talk about how state has contributed to the growth of the economy. Unfortunately, in the case of northern Cyprus, the growth, if any, was not state-led but actually state-hindered. One would expect that with plenty of spoils of war and financial assistance from Turkey, the state should have no problem in promoting a planned economic development. Instead, policymakers utilized the resources at their disposal to strengthen their own political power and distribute wealth unequally, unfairly and probably unlawfully. Thus, in the remainder of the book, we shall discuss how the state utilized public employment opportunities, funds accumulated in social security funds and other semi-state-owned enterprises in achieving the aforementioned goals. Only after analysing the impact of government policies on hindering economic growth, we turn to the only catalyst that could have neutralized the process, namely, the private sector. This order of analysis may sound unconventional in a classical economic history, but this should be expected from a discordant history.

The labour market in northern Cyprus in tandem with the social security system is discussed in Chaps. 5 and 6. After the division, there was much physical capital in the north, but entrepreneurial skills to manage those were not abundant. Most of the Turkish Cypriots were working in agricultural sector and had low levels of education at the time of separation. However, the new state demanded plenty of the workforce to be employed in state institutions; thus they stepped in by offering plenty of public sector employment to the citizens with very generous working conditions. Social security and retirement laws had also been very generous but economically inefficient and unsustainable. For example, civil service employees were allowed to retire after 15 years of contributions to social security system. Furthermore, successive governments have ignored parliamentary statutes and pushed the social security system to the brink of bankruptcy. Until 1997, the state did not pay any of its required contributions to the social security system, and even more disturbing, they allowed social security to borrow money from banks with government guarantee. Chapters 5 and 6 therefore show the development of these areas and begin to explain the implementation of weak or ineffective policy in the early years of the republic, which have had chronic effects on social welfare in northern Cyprus.

One of the most significant yet unanticipated outcomes of the 1974 division was the transfer of the ‘spoils of war’ (called ‘ganimet’ in local language). With particular consequence for tourism, industrial and agricultural sectors, abandoned real estate and capital equipment was appropriated into the new regime in the north. Although as ‘spoils of war’ such assets did not belong to 60,000 Turkish Cypriots who had been forcibly transferred from the south, the newly established northern authorities did not hesitate to utilize these assets to help with economic development. That being said, the opportunities were not exploited in the most efficient manner, and sudden acquisition of a range of capital assets soon became burden rather than an advantage, as discussed in Chap. 7. The newly formed so-called state economic enterprises (SEE) were enterprises that were co-owned by Turkish Cypriot public authorities and enterprises from Turkey, and they were supposed to be managed independently from the political influence. However, these enterprises had been from the outset major victims of political interference. The high-level managers without any prior experience in the related sector at these enterprises were appointed by either the Turkish partners or the incumbent governments in northern Cyprus. Not only that, the board of governors of these enterprises have employed many incompetent and unnecessary workers in exchange for votes. Although the budgets of these enterprises were supposed to be under their own control, central governments have meddled and used the revenues to transfer to central budget for other purposes. For example, there was no electricity supplied by northern administration until 1994 (electricity was ‘purchased’ from south), but the electricity board collected fees from the public regardless. What has happened to all that money is uncertain, and this board started borrowing money from banks (with state guaranteed bonds) immediately after they established their own power plants to pay for gasoline. The historical development of some of the SEEs and their poor management by governments in the north will be analysed in Chap. 7, and the failure rather than potential success of these key enterprises will be explained.

Most of the developed economies in the world owe their economic development to the success of private sector with government as a vital supporting, complementing and enforcing agency (see Mazzucato). The private sector in northern Cyprus did not develop professionally until the early 2000s. Most of the private sector businesses consisted of small- to medium-sized enterprises and were operated by the young retirees from the civil services or managed by civil servants as a second job. After the collapse of SEEs in the middle of 1990s, some entrepreneurs used the opportunity to fill this gap, but they needed favours from government. The agriculture and tourism sectors had survived through government subsidies with the justification that these industries had to be ‘protected’ until they develop substantially. But the subsidies were merely used for clientelistic purposes without any economic rationale, and there were only a handful of beneficiaries in those respective sectors. So these and the development and other major sectors of the economy will be examined in Chap. 8.

The final chapter of the book has two separate subsections. In this concluding chapter, in mirror image of the Introduction, I revert from the voice of an academic economist to the tone of a frustrated Turkish Cypriot. First I will discuss the responsible parties, in my mind, for discordant state practices in northern Cyprus. It has been suggested many times that the politicians are the major contributors of the discordance, but do they deserve all the blame? In my view, the people of northern Cyprus including labour unions, civil society associations and the media are all culpable. Nor should one forget Turkey which never allowed north to develop into a fully independent state and continued to exercise a deepening authority on the north through various means. Finally, in the last subsection, the future status quo of the island—since there is no new dynamic foreseeable—especially in light of the most recent general elections in 2018 will be examined. It is not the ‘Cyprus problem’ that contributed to the lack of economic development of the north. It is those actors that I have already mentioned. The most recent developments both in local government and in Turkey have only worsened matters, not only for Turkish Cypriots but also for anyone dreaming of a unified Cyprus.

But before detailing the discordant history of northern Cyprus in the post-1974 period, let’s offer a historical sketch of earlier periods.

A Brief History of Pre-1974 Cyprus

Insofar as the focus of this book is to set out and examine the recent economic history of northern Cyprus, nevertheless an outline of general history of the whole island of Cyprus is necessary to contextualize that focus. As already indicated, there are plenty of scholarly analysis of the major moments and periods of Cyprus’ history, and these are in almost all fields from archaeology to anthropology, from ecology to imperialism, from politics to peace-keeping. Therefore, for current purposes, no comprehensive historical survey is attempted, but instead an outline is presented of the events that led to the de facto division of Cyprus. It is this context which is crucial and pertinent to make sense of the subsequent economic history and economic policy analysis of northern Cyprus, and therefore the following historical outline addresses the formation and rise of the political-economic structures in northern Cyprus and gives an idea of the emergence and backstory to Turkish Cypriot administration. Those interested in detailed analysis are referred to the sources cited earlier, as well as in this sketch.

The island of Cyprus has been colonized by many civilizations throughout history. The widespread availability of copper on the island had sparked interest of merchants as early as 2000 BCE.⁵ The geographic close location of the island to North Africa, Middle East and Europe contributed to its early commercial crossroads status. Human habitation in any case had dated back to the Palaeolithic era, and the island of Cyprus had been host to or target of numerous orders from the Mycenaean (c. 1500 BCE), Assyrian, Hellenic, Egyptian and Persian civilizations; to the Roman (58 BCE–395 CE), Byzantine-Caliph condominium (395–867), Byzantium (867–1192 CE) and Venetian (1489–1570) empires; the imperial houses of the Lusignans (1192 and 1489) and Ottomans (1571–1871); and the British Colonial Empire (1878/1914–1960), have all had a presence on the island. Having been occupied by so many different civilizations, the island has syncretized many different cultures and traditions. The current occupants of Cyprus mainly identify and consist of Turkish Cypriots and Greek Cypriots.⁶ ‘Identification’ and hence proper labelling or naming has been central to the island’s politics, particularly over the last half century and more. Thus, the conventional view—but by no means universally accepted and often criticized—is that Greek Cypriots on the island are believed to have been descendants of Achaean and Mycenaean Greek settlers c. 1500 BC.⁷ Turkish Cypriots on the other hand have their roots in the Ottoman Empire when many people from Anatolia were transferred to the island upon the Ottoman conquest in 1571. In this fashion, those labellings and dates are used by many during the often bitter arguments on ‘who was on the island first’ discussions resulting in bogus but extremely powerful utis possidetis (or ‘permanent belonging’) claims.

The ethnic identity of the current inhabitants is actually ambiguous. Although they are referred to as Turkish Cypriots and Greek Cypriots, more appropriate criteria of classification might be as Muslim Cypriots and Orthodox Christian Cypriots. The roots of Greek Cypriots on the island go back to Mycenaean Greek settlers who lived alongside the Eteocypriots (indigenous inhabitants).⁸ Since then many different civilizations have been on the island, and the descendants of these early Greek settlers have also lived alongside numerous ethnic groups. Similarly, in the conventional view, Turkish Cypriots are descendants of people who were sent to the island from Anatolia (who were mainly poor villagers⁹ and likely to be from different ethnic backgrounds) after the Ottoman invasion of 1571 whose descendants also lived alongside Orthodox Christian inhabitants of the island for 300 years under the Ottoman rule and another 80 years under British rule. Under these circumstances it should be difficult to claim a Greek or a Turkish identity (especially noting that the modern Greek state, itself a creation of British imperialism, came into being in 1830 and the multinational, multilinguistic, multireligious Ottoman Empire was reduced into the monoethnic, monolinguistic, secular Republic of Turkey in 1923). In fact, both Greek Cypriots and Turkish Cypriots today are divided in terms of how they see their ethnic orientation. On the one hand, there are individuals who associate themselves with their so-called motherlands of Greece and Turkey and see themselves purely as ethnic descendants of their respective countries’ ethnic heritage. On the other hand, there are some people (probably a minority) on both sides who see themselves as ‘Cypriots’ first and foremost who happen to belong loosely or strongly to Islam or Orthodox denominations.

Did the tension between Greek Cypriots and Turkish Cypriots begin during Ottoman rule of the island? Ottoman rule on the island allowed Orthodox Christianity to flourish, whereas previous Lusignan and Venetian rulers had suppressed Islam. The new inhabitants of Cyprus (Muslims brought from Ottoman territories) were populated on the properties of those left behind by feudal-aristocracy of the Lusignans (a France-originating dynasty) and republican Venetians.¹⁰ According to a survey in 1832, about 37% of the villages were ‘mixed’, where Muslim Cypriots and Orthodox Cypriots were living together.¹¹ The Ottoman regime effectively cared only about taxation and timely payment of taxes and were indifferent to ethnic or religious origin although Muslims were taxed at a lower rate than the millet Orthodox and Roman Catholics (who were, in turn, exempt from other obligations to the state, e.g., military service). The poor segment of the general public, whether Muslim or Orthodox, suffered taxation and pressure from the aristocracies which included Ottoman rulers and Orthodox church. In fact, there were uprisings jointly organized by Muslim and Orthodox leaders during the Ottoman rule on the island, as was the case across all Ottoman and other imperial territories.¹²

The first tensions between emergent ethnic identities in the modern period can be traced to the period in which Cyprus passed from Ottoman to British control (1878), itself the result of the British demand for compensation for the latter’s support for the Ottoman Empire against imperial Russia. The deal in which the Ottomans placed Cyprus under the administration of the British for the express purpose of allowing Britain to receive the full tax revenue extractable from Cyprus that had previously been farmed for the Ottoman treasury had initially been welcomed by Greek-speaking Orthodox church-led political order on the island. Archbishop Sophoronios, for example, declared to the British at the time that he ‘hope[d] that Great Britain will help for unification of the island with the motherland Greece’¹³ as Britain had done and was continuing to do with respect to other Greek Orthodox territories. However, the new British administration had other plans. They taxed the general public heavily to raise money otherwise owed by the Ottomans and, given the terms of the original Ottoman-British agreement, had little incentive to invest in the economic development of the island. According to a survey in 1881, the total population of the island was 185,630 where 25% and 74% of them were categorized as, respectively, Muslims and Greek Orthodox (Kızılyürek 2001, p. 34).¹⁴ The same survey also revealed that 5.4% of Muslims spoke Greek which may reflect the degree of religious conversions in order to benefit from lower taxes during Ottoman rule.

The particular roots of Greek nationalism in Cyprus can be traced to several key moments. When there was an uprising by the Greeks under Ottoman territories, Küçük Mehmet Pasha (the Ottoman administrator of Cyprus at the time) ordered the public execution of the Archbishop and three priests despite the fact that the Archbishop at the time announced that he would not support the uprising in Cyprus but only contribute financially.¹⁵ After Greece’s independence in 1827, there was a new ideology of the Megali Idea which basically aimed at uniting all the Greek-speaking Orthodox people of the region under one state. This quickly spread among the higher social echelon of Greek Cypriots, but the Ottoman authorities frustrated all such attempts on the island. When the island became part of the British Empire officially in March 1925 (after the Republic of Turkey formally gave up all claims on Cyprus under the terms of the Treaty of Lausanne), Britain continued her practices on the island without giving any hope of enosis (unification of Cyprus with Greece) to the Greek Cypriots. When the British authorities on the island overruled in 1931 the only representative legislative institution in the island regarding a tax bill, riots broke out that led to the British governor enforcing emergency regulations.¹⁶ It was after this period that Greek Cypriots started to organize more systematically against British rule.

There was also unrest among some Turkish Cypriots such as Dr Fazıl Küçük who was very unhappy with the measures of British after 1931 riots.¹⁷ Dr Küçük was complaining that the British had started treating Turkish Cypriots very badly, and the people who were supposed to protect the rights of the Turkish Cypriot community (the leader of Evkaf, Sir Münir) sided with the British and hence made him useless. Küçük claimed that he was labelled as ‘anti-British’ but that did not stop him from applying to run a newspaper (Halkin Sesi) after receiving encouragement from Turkish Counsel Recep Yazgan in 1942. The first issue of the newspaper on March 1942 listed its principles as ‘to protect the rights of Turkish community’, ‘to be independent’, ‘to fight against colonial rule and Greek aims’, ‘to uphold the love for and attachment to the Motherland’, and ‘to support the cultural activities in the nation’. They also listed the main topics as ‘unconditional return of schools and Evkaf back to Turkish community’, the ‘creation of Muftuluk’, and ‘the laws regarding Islam, custody and inheritance should be similar to the ones practiced by the courts in Motherland’. So, it was obvious that Küçük had declared his loyalty to the Motherland, that is, Turkey, and he began to start bring the idea of self-determination of Turkish Cypriots to life.

Armed uprisings on the island date back to 1955. Some nationalist Greek Cypriots organized themselves into a militia organization called EOKA (the National Organization of Cypriot Fighters) to fight against British authorities on the island in order to achieve enosis. On 1 April 1955 several administrative buildings were bombed. EOKA leaders made an attempt to inform Turkish Cypriots that the violent action was not targeted towards them but to Britain only. Obviously Turkish Cypriots did not welcome this uprising since the ultimate goal of EOKA remained union with Greece. British authorities, in turn, used this opportunity to draw Turkish Cypriots closer to the colonial government, employing more and more Turkish Cypriots in the police force and set up a special unit composed entirely of Turkish Cypriots to fight against EOKA. It was in this year that Dr Fazıl Küçük was allowed by the British to form a political party (although he had been labelled as ‘anti-British’ two decades earlier) and Turkish Cypriots formed an underground militia group called Volkan whose activities were left unpunished by the British authorities.¹⁸ It was also during this time that Britain ‘consciously and without any such scruples drew mainland Turkey into Cypriot affairs’.¹⁹ These actions and re-actions laid the basis of the growing bi-communal conflict of the island, but historians agree that there was no major conflict between Turkish Cypriots and Greek Cypriots before 1955. Many cite the beginning of EOKA struggle against the British and the corresponding inclusion of Turkish Cypriots to the other side of the uprising as the start of the conflict. Certainly, there were several incidents where Turkish Cypriot police officers were killed by EOKA members, not because of their ethnicity, but because they represented the colonial police force. For every Turkish Cypriot killed, Volkan responded by vandalism or other means. It was in this context that Rauf Denktaş, a British trained lawyer working as a crown prosecutor and a member of the Turkish Affairs Committee, emerged alongside Dr Fazıl Küçük as leaders of the Turkish Cypriot community. Even before the events in 1955, he started writing in Halkin Sesi newspaper and promoting the idea of self-determination. As time passed, Denktaş thought that Volkan, led by Küçük, was ‘reactionary’ instead of ‘proactive’. He also wanted more involvement of Turkey in the domestic matters and continually promoted the idea of taksim (separation, or the ethno-nationalist division of the island). Finally, on 27 July 1957, the idea of the Turkish Resistance Movement (Türk Mukavemet Teşkilatı, TMT) surfaced, and military personnel from Turkey was sent to lead the movement on 1 August 1958.

Between July 1957 and August 1958, the TMT was led by Rauf Denktaş, Burhan Nalbantoğlu (a Turkish Cypriot doctor) and Kemal Tanrisevdi (administrative attaché to the Turkish consulate in Nicosia). It is said that these three did find Volkan too soft and did not approve of Küçük’s leadership.²⁰ The same source also claims that there were some violent incidents (so-called false flag operations) planned by TMT during this period aimed at Turkish Cypriots in order to manipulate them to fight against EOKA for ‘self-protection’.²¹ It was also during this period that some Turkish Cypriots who were members of ethnically MIXED labour organizations and supported the idea of unified Cyprus were also murdered. Although the evidence that these people were murdered by TMT is arguable, the two prominent newspapers Halkin Sesi and Bozkurt gave the news of these murders with apathy.²² Regardless, Turkish Cypriot leadership made it clear that they would push for separation in the years to come.

The clash between EOKA and TMT continued between 1955 and 1960. Both groups were responsible for the death of many Greek Cypriots and Turkish Cypriots as well as British soldiers. What is more interesting is both groups killed members of their respective ethnic groups. So, this was not an ethnic conflict, but it was a political conflict over sovereign power expressed as enosis or taksim. Is it plausible that EOKA would have stopped its campaign if they had been successful against the British? And how would they have treated the minority Turkish Cypriots once they have achieved enosis? Or did Turkish Cypriots have no intention of engaging in intercommunal conflict and naïvely fell into the trap of British plans? How would Turkey have reacted to the situation of their Muslim brothers/sisters being treated like a minority on the island? Or maybe more importantly, losing authority over a territory that some thought to be geo-strategically important? It is hard to provide answers to these, but what is clear is that after this initial period of politically directed intercommunal conflict, there was no turning back.

Meanwhile there was the growing realization in Britain, especially in the context of the post-Suez crisis of imperial governance, that the domestic uprising in Cyprus would only worsen unless a political solution was secured. Prime Minister Macmillan organized a tripartite (Greece, Turkey and Britain) conference to discuss his proposals for the internal self-government of Cyprus, although creating a lot of opposition among Greek Cypriots since it officially brought Turkey into Cyprus politics. After Archbishop Makarios, ethnarch, political leader and figurehead for the independence of Cyprus, opposed the Macmillan proposals, he was sent into exile in 1956 by the British, inadvertently allowing Colonel George Grivas, a former Greek army general, founder of EOKA and Cyprus-born fascist to become the effective head of the enosis movement.²³

Whatever the effects of EOKA’s armed struggle, the British brought Makarios out of exile and convened a series of meetings in Zurich and London to negotiate Cyprus’ independence and thereby frustrate both enosis and taksim. To get out of the domestic problems, Britain along with other allies administered the formation of the Republic of Cyprus in 1960. This republic was to be governed by both Turkish Cypriots and Greek Cypriots, and Britain would retain two sovereign military bases (equivalent to 2.8% of the area of the island). Turkey and Greece (along with Britain) were named as the guarantors of the new republic. Killings of innocent people who supported the new Republic continued during this period.²⁴ It was obvious that extremists on both sides were not going to settle down, but this was no longer the problem for the British as they had already secured sovereign space on the island. When Archbishop Makarios proposed amendments to the constitution in 1963 which would have reduced the power of Turkish Cypriots, the latter group opposed and bi-communal conflict resumed. Immediately Turkish Cypriots withdrew from the administrative duties and did not subsequently return. The UN Security Council Resolution 186 (4 March 1964) paved the way to the establishment of United Nations Peacekeeping Force in Cyprus (UNFICYP), which has been present on the island ever since, and effectively recognized the Greek Cypriots as the ‘government of Cyprus’.

Although with the independence of Cyprus in 1960 there was somewhat more formal political representation of Turkish Cypriots in governmental bodies, their economic representation was not very prominent. Turkish Cypriots made up 17.9% of the population in 1962, and most of those were living in rural areas. In terms of the monetary value of the land and real estate, Turkish Cypriots controlled, respectively, 13.3% and 17.5%.²⁵ Greek Cypriots also had the largest share (81.7%) of agricultural land and businesses (more than 90%) as of 1962.²⁶ But it is not known if these numbers include the holdings of the church and Evkaf (religious pious organization of Turkish Cypriots). Given that Turkish Cypriots consumed only 6.1% of electricity in 1963, it can be said that either they were living in areas with limited access to electricity (mainly villages) or they had more crowded residential units. The contribution of Turkish Cypriots to GNP was 7.5% which is a lot lower than their 17.9% population ratio.

After the events in December 1963, Turkish Cypriots were never officially represented within governmental bodies of the Republic of Cyprus. The civil servants working in the Republic of Cyprus had left despite objections from Turkey.²⁷ A third of Turkish Cypriots (including 25,000–30,000 internally displaced from 90 plus villages) was forced to live in increasingly isolated enclaves (about 2–3% of Cyprus) with minimal and controlled contact with each other, and the rest continued to live under the Republic of Cyprus controlled territories.²⁸ The sea and airports were also under the control of Greek Cypriots which meant that Turkish Cypriots were not able to get out of the island if they wished. Although the enclaves were technically under the control of Turkish Cypriot leadership which consisted of 13-member General Committee under the leadership of ‘Vice-President’ Dr Küçük and the now-notorious Rauf Denktaş,²⁹ the enclaves were all scattered around the island which diminished the possibility of effective communication. However, the real control of the Committee was with the Turkish commanders in TMT, and they were further divided among themselves as those who favoured and those against Dr Küçük.³⁰ Despite all of this disunity and fragility, Turkish Cypriots had to find ways to continue surviving.

A typical day in the enclaves consisted of working in the farmland during the day and keeping guard at night. In an enclave where my parents were living, they told me that they formed their own self-sustained community where people assisted each other in order to survive. My uncle who was 15 at the time says that the weapon he was given during day watch was almost as tall as he was at the time. When the youngsters were on military duty during the day, the adults were resting and attending the fields. They also established ‘schools’ where an educated villager or in some cases a senior university student provided basic education. In some areas, proper teachers were assigned by the Central Committee, but not all of the enclaves were as lucky. It is thus not difficult to imagine the level of education the people living in the enclaves received during that time. When the tensions were partially alleviated in 1968 and embargos on the enclaves were lifted, a pool of young adults with limited formal education were suddenly given quotas to be educated in many Turkish universities for free, and they were also given significant stipends. Some people took this opportunity, and by 1974 there was a pool of engineers, architects and medical doctors who graduated from prestigious universities in Turkey. These individuals later had the opportunity to form the foundations of Turkish Cypriot government on the island.

For several years intercommunal violence continued especially in rural regions. Finally, in 1968, Turkish Cypriots declared Otonom Kıbrıs Türk Yönetimi (Autonomous Turkish Cypriot Administration, OKTY) within the Republic of Cyprus and attempted to administer their own affairs in a more structured framework. Turkish Cypriots even held elections for ‘vice presidency’ of the Republic of Cyprus which simply implied the president of the autonomous state. Although there was another candidate (Mehmet Zeka), he backed out due to pressure from Turkey, and Dr Küçük became the vice-president again. However, Küçük’s leadership of Turkish Cypriots ended in 1973 when he was replaced in elections by Denktaş.³¹ In other words, the Turkish Cypriot leadership was simply dictated by Turkey. Turkish aid to the island increased during the 1967–1973 period.

The conflict between the two communities reached a climax in the summer of 1974, but not because of increased tensions between Greek Cypriots and Turkish Cypriots. Paradoxically the division of the island and the definitive separation of the two principal communities arose because of the ultimately failed coup attempt within the Greek Cypriot community. Receiving support from the ruling fascist colonels in Athens, Grivas’ successor as head of ‘EOKA B’—the post-independence militant enosis movement—Nikos Sampson, staged a military coup against Makarios on 15 July 1974. Shortly after Makarios’ plea to the UN Security Council for the restoration of (an already broken) constitutional order, Turkish armed forces intervened in Cyprus, landing on 20 July 1974, invoking as justification for the intervention the obligations upon the Republic of Turkey expressed in the Treaty of Guarantee. Whilst Greek Cypriots fought against the coup attempt, Turkish nationalists saw this clear collusion between enosis-driven Greek Cypriots and Greek nationalists in Athens as an opportunity to partition the island and secure their ambition of taksim. Significant fighting took place between the Turkish troops supported by the local Turkish Cypriot militia on the one hand and the Greek Cypriot army on the other hand. A second wave after 15 August of Turkish troops consolidated the Turkish military presence on the island, securing its presence to 37% of the northern part of the island and instituting the forced population transfer. This intervention marked the beginning of de facto geo-political division of the island and the definitive separation of the two principal ethnic communities.

Notwithstanding its lack of legitimacy under international law, the Turkish Cypriot community emerged into a distinct, albeit disputed, polity with its own institutions and taking its precarious place in the world order. Since then numerous rounds of negotiations by the leaders of both communities, most under the good offices of the secretary-general of the United Nations, have taken place to ‘re-unite’ the island, or solve the ‘Cyprus problem’ as it is commonly referred. As yet, to no avail. However, these dense, continuous and arcane peace talks are not the subject of this book and will be referred in passing only where they bear directly on the evolution of the political-economic institutions, policies and processes of the north. Thus, some of the turning points during the negotiations have shaped the evolution of Turkish Cypriot administrations, whilst at the same time constituted opportunities to further strengthen domestic dominance by politicians through torpil or rentierism. If there is ever a hope for a unified island, these developments must be understood properly. This is the tale of a community which had plenty of opportunity to become an economically and socially highly developed nation but was hindered by individualism and self-indulgence contrary to the nationalistic visions that once led to the separation.