articles | 07 March 2014

Big business getting behind solution

The island's business giants are throwing their weight behind a Cyprus solution, highlighting the enormous benefits it would bring to the economy across multiple sectors.

Attending an invite-only Brussels conference attended by the two communities’ peace negotiators, Cyprus businesses called for a settlement. 'It’s the economy, stupid,' was the basic message leading Cypriot businesses from both sides of the divide passed on to the two negotiators, Andreas Mavroyiannis and Kudret Ozersay, who were invited to attend the two-day seminar analysing the peace dividend of a Cyprus solution. In a tweet posted on social media site Twitter, Danish Ambassador to Cyprus Casper Klynge indicated the size of the peace dividend foreseen in the preliminary report: “Nordic Cyprus Seminar: 20 years after a #CyProb (sic) settlement the GDP at today’s prices would be €20b higher than without a solution.”

According to sources, the “great atmosphere” at the conference indicated that big business players in Cyprus are starting to put their weight behind a solution, seeing the positives that could come from reunification. This was reflected in a joint statement issued recently by the two Chambers of Commerce and Industry on the island where they stressed that a solution would bring “considerable benefits to all sectors of the economy and consequently enhance the welfare and prosperity of all Cypriots”. The two Chambers further reiterated their commitment to support the political leadership in their peace efforts by contributing “to the creation of a positive atmosphere” and in implementing confidence-building measures (CBMs).

During the opening session, held behind closed doors, Greek Cypriot and Turkish Cypriot business leaders highlighted the huge economic benefits to be gained from a solution in a range of sectors, including tourism, construction and industry, maritime trade, and oil and gas. Cypriot business representatives emphasised the benefits a solution would bring to tourism, particularly cruise ship tourism, which is by and large absent at present. Cruises could take in regional cultures, offering stops in Turkey, Greece and Cyprus.

On tourism branding for a united Cyprus, one participant suggested: “One country, two cultures, a unique identity.” They also discussed benefits that could come from CBMs like opening Famagusta port to international traffic. One participant argued that oil and gas players Total and ENI-KOGAS could immediately take advantage of Famagusta port to service their drilling needs as their offshore Cypriot concessions are much closer to Famagusta than Limassol. This would save the energy companies hundreds of thousands of euros per day. Another suggested Famagusta stick to hosting cruise ships and yachts, in line with a vision of rebuilding the area into an eco-city. On the issue of developing a gas industry, the seminar heard that Cyprus could attract gas revenues much quicker with a solution, and use pipelines to export the gas instead of waiting for the lengthy and costly construction of a liquefied natural gas plant. This in turn will make the privatisation of the electricity authority more attractive as cheaper electricity production will spark an increase in demand.

The same goes for the Ports Authority which could also sell for a higher price post-solution as it would see a surge in container traffic heading to Turkey. Until now, Malta has been servicing a lot of that traffic as Turkey has closed its ports to Cypriot-flagged ships. As one source put it, “basically the message was with a solution, you get more bang for your buck on gas than without one”. The two negotiators listened and scribbled notes as Cypriot business reps brainstormed on how to maximise the peace dividend.

One participant noted that some of the ideas and positions put forward by business leaders even deviated from the official positions held by their community representatives at the negotiating table. For example, Turkish Cypriot business reps argued in favour of clarifying the property and territory situation as soon as possible so everyone knew were they stood, and voiced support for free trade across the island with no permanent derogations.

Speaking to the press, Danish ambassador Klynge said there was a “fantastic atmosphere” in the seminar, with a real engagement and sense of commitment on behalf of the private sector to be more vocal during the peace negotiations. International relations and Cyprus expert James Ker-Lindsay said the economic and business arguments raised at the seminar were “utterly compelling. It is just so clear that with a solution there are going to be enormous benefits. The other message that came out of this is that if a deal is reached, it’s going to require business leaders to really come out and support it,” he said.

The London School of Economics-based academic noted that the last time a solution plan was on the table in 2004, there was a very negative and hostile atmosphere which may have put off business leaders from voicing their support, along with fears that a solution would be economically damaging. “That’s not the case now. I hope this time round, if a deal is done and agreed upon, it is absolutely vital that business leaders speak up, come out and say, this means jobs, economic investments, growth. That’s the clearest message. People have to be informed.” According to economist Fiona Mullen, preliminary estimates on government revenues post-solution suggest that in the long-run, at least in terms of GDP, a solution would pay for itself as the benefits are clearly “much biggerthan the cost”.

The seminar was organised by the Cyprus branch of the Peace Research Institute Oslo (PRIO), and funded by the Nordic countries (Finland, Sweden, Denmark and Norway). The aim was to let Cypriot business representatives and experts assess the results of a study by three economists, Fiona Mullen, Alex Apostolides and Mustafa Besim, on the economic benefits of a peace solution to Cyprus. The three worked on updating existing research on a Cyprus peace dividend, by incorporating two models: a short and long-term look at productivity in a reunified Cyprus; and taking a bottom-up approach analysing the impact on various sectors.

An older study on the potential benefit of a solution found that the island’s reunification would translate into a peace dividend coming to an average of €12,000 per family. Based on feedback, the researchers will configure their findings and release the latest results in the coming weeks. The three economists found that, despite the current economic crisis plaguing both sides of the divide, the prospect of oil and gas revenues and other significant factors will create a higher ‘peace dividend’ than previously thought.

Examining the latest report in detail, the island’s top business practitioners suggested the economists had under-emphasised the benefits of a solution in their estimations. They passed on the message that if a solution was handled properly, the dividend could be much higher. They will also discuss professional and banking services, retail and wholesale sectors, and education.

Source: Cyprus Mail

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