The prospect of a reunified Cyprus has never been better, and that has business leaders on both sides of the Mediterranean island eyeing investment opportunities.
Cyprus has been divided along ethnic lines since 1974 after Turkey invaded the island to prevent its unification with Greece. Turkey keeps about 35,000 troops in northern Cyprus and is the only country to recognize a Turkish Cypriot state. With the two parts of the island now led by strong reunification advocates – Cyprus President Nicos Anastasiades in the Greek-speaking south and Mustafa Akinci in the Turkish-speaking north – reunification talk is filling the air waves.
“This is probably the time where we have the best climate ever in negotiations,” Phidias Pilides, president of the Cyprus Chamber of Commerce and Industry, which represents about 8,000 companies, said in an interview in Nicosia.
Across the United Nations-controlled buffer zone that separates the two sides of Cyprus, Fikri Toros, president of the Turkish Cypriot chamber of commerce, agrees. "There is a unique window of opportunity," he said in an interview in the Turkish-occupied section of Nicosia, Europe’s only divided capital.
"Reunification will make up for a huge number of lost economic opportunities." His organization represents about 3,500 enterprises.
Economic output in a reunified Cyprus could reach 45 billion euros ($49 billion) at constant prices by 2035 compared with about 25 billion euros for the two sides together, with an annual average growth rate of 4.5 percent over 20 years, compared with just 1.6 percent without a solution, according to Fiona Mullen, director of Nicosia-based Sapienta Economics and co-author of the report "The Cyprus Peace Dividend."
Core sectors of the Cyprus economy: professional services, shipping, and property and tourism stand to gain “and we’re seeing a lot of interest from foreign investors focused on these three areas," Libor Kroska, head of the Cyprus office of the European Bank for Reconstruction and Development said in an interview. "Cyprus-based professional companies would be able to provide accounting, legal and fiduciary services to Turkey, the largest and fastest-growing regional market.”
Buying property in Cyprus at a time when the country is preparing to exit its international bailout program at the end of March, makes it a good investment, Stelios Haji-Ioannou, chairman of easyGroup and founder of the Stelios Philanthropic Foundation, said in an interview in Nicosia.
“Bricks and mortar is probably a good, safe investment," he said. "It might be too late if it’s obvious to everyone that Cyprus is out of its memorandum. Prices after reunification will go up."
A boost to the property sector, especially in the south, would allow banks to sell non-performing loans at better prices, Kroska said. Cypriot lenders have the highest level of non- performing loans in the EU, according to the European Banking Authority.
“The dividend for the banking system for supporting a recovered combined economy would be substantial," John Hourican, chief executive officer of Bank of Cyprus, the country’s largest lender, said in an interview.
Bert Pijls, chief executive officer of Hellenic Bank, concurred. With eight mainstream banks in the south, including Cypriot units of Greek banks, and many smaller lenders in the north, a consolidation may be in the cards, he said.
Rejuvenating Famagusta, including its port, the country’s largest before the Turkish invasion, and its ghost resort suburb of Varosha – sealed off since 1974 and once the top tourist destination on the island – could generate investment of as much as 15 billion euros, Mullen said.
Shipping in Cyprus, which has the third-largest fleet in the European Union and is the bloc’s largest ship-management center may also get a boost, Pilides said. Turkey’s embargo on Cyprus-flagged ships would be lifted, boosting demand for shipping services and allowing transshipment of containers at Cypriot ports for ships from Asia and the Middle East via the Suez Canal for distribution to Turkish ports.
Recently discovered gas deposits in the eastern Mediterranean could be exported to Europe via a pipeline to Turkey, Mullen said. Companies offering offshore services to the oil and gas sector are also interested in being based in a reunified Cyprus while servicing the wider region following discovery of the Zohr natural gas field in Egypt, she said.
While businesses eye potential gains, political leaders are ironing out the logistics.
A solution could be reached "in coming months," Turkish Prime Minister Ahmet Davutoglu said Nov. 29 after talks between his country and the EU. “Things are moving in the right direction," European Commission President Jean-Claude Juncker said the same day. If an agreement can be reached on “tough” property-dispute issues, “we believe we can see the light at the end of tunnel,” Akinci said Dec. 1. Cyprus President Anastasiades said Dec. 8, “We can overcome our disagreements in the near future."
A reunification deal is likely toward mid-2016, Eurasia Group analysts James Sawyer, Naz Masraff and Mujtaba Rahman said in a Dec. 1 note, adding that the move will “require significant funds – potentially in the tens of billions of euros,” which will come from the EU, private investments and donations from the international community.
Global support is wide. Russia continues to support reunification efforts, Foreign Minister Sergei Lavrov said Dec. 2 in Nicosia. So does the US. “A resolution to the longstanding division of Cyprus is within reach,” US Secretary of State John Kerry said Dec. 3 during a visit to the island.