The Effects of Isolation on the Turkish Republic of Northern Cyprus

The economic development of the Turkish Republic of Northern Cyprus remains to be volatile mainly due to the isolation of the de facto Turkish Cypriot state. While on one hand, high costs of energy in the Turkish Republic of Northern Cyprus associated with the isolation, remains as a huge obstacle for the increment in Turkish Cypriot production, embargo placed upon her, including closure of ports and airports, on the other, restrains international trade for Turkish Cypriots, thus making the Turkish Cypriot economy a challanged one. Therefore, after indicating the burdensome effects of isolation on the economy of Turkish Republic of Northern Cyprus, this paper proposes how the Turkish Cypriot economy needs to overcome her self-reliance issues and suggests alternative solutions to the Turkish Cypriot economy. For this purpose, by using time-series analysis this paper provides a double-model approach in which the economic growth of the Turkish Republic of Northern Cyprus is mainly dependent on aid transfers from Turkish government and is suffering from isolation in the first, and is determined by the free-trade and free-movement of international capital brought by becoming a transition economy and therefore easing the contractions on the economy, on the hypothetical second model. While the results of the analysis employed in this paper confirms that main problems of Turkish Cypriot economy are associated with the isolation, it also indicates that Turkish Cypriot economy would be better off in an isolation-free environment. Thus, this paper aims to assert the importance of self-determination rights for the Turkish Cypriots.