Transcript Symeon Matsis

The problem of the displaced
Series of policies implemented
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Economic conditions in 1974
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August 1974 situation - a planners nightmare
Because :
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One third reduction in economic activity.
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Partly, because of withdrawal of Turkish Cypriots.
Contributing estimated 11% to production
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47% reduction in gainful employment - from 253.000 in 1973 to
135.000 in 1975.
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Massive unemployment - end of 1974 was 29,6% of
Economically Active Population
Loss of productive resources in all sectors
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particularly heavy in tourism, agriculture, mining and transport
Closely integrated economy
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Economic conditions in 1974
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Collapse of business confidence
capital outflow and human emigration –
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Between 1974 and 1979 35 to 40.000 people or 7% of
population (excluding TC) migrated.
Migration: beneficial through reduced unemployment to more
manageable levels
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inflow of foreign exchange to families of workers
Loss of social and economic infrastructure such as:
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Housing stock
Schools and hospitals
Major road arteries
Only international airport in Nicosia and deep water port of
Famagusta.
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Social conditions in 1975
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But the country also faced extreme social
problems
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162.000 persons or 30% of population displaced,
enclaved and unemployed
fully dependent on the state for everyday needs
 Homelessness – about 45,000 households did
not have shelter over their head
All these at a time when government revenues
collapsed.
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introduction of measures was extremely difficult to
implement.
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Economic conditions in 1974
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Economic and social adversities required:
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Programmes and schemes to
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short term approach rather than medium term
boosting confidence
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enhance business environment,
mobilise resources and reactivate production
Through reactivation and employment creation
Adopt labour intensive production techniques
But also alleviate poverty
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Ensure survival of unemployed, enclaved and displaced
Strengthen social cohesion
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One important advantage
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One advantage at the time
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Low level of public debt in 1974
Period 1960-1973 implementation of conservative
fiscal policies with surpluses
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There were surpluses in 9 out of thirteen years (1960-1973)
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public debt in 1973 only 10% of GDP.
This advantage not available now
Whatever required in case of solution more
difficult
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Variety of implemented policies
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Approaches adopted in 1974 varied and radically
different
 First important differentiation:
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emphasis on aggressive and expansionary Keynesian policies
- large fiscal deficits
Funding mostly from external sources - limited banking sector
Made easier by
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low level of preexisting public debt and
responsible past public sector approach
Situation today - complete opposite
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Large public sectors on both sides with high remuneration levels
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Variety of implemented policies
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Aggressive Keynesian fiscal policies adopted 2
pronged approach
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Stimulate economic activity
Provide economic and social support to the indigent
measures to boost economic activity, through
infrastructure :
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Roads (particularly connect Famagusta district)
New international Airport at Larnaca
New deep water port in Limassol
Expansion of electricity, water, and telecommunications
Infrastructure to support new housing areas
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Economic policies
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Plus measures to boost private sector activity
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Tax Incentives to businesses
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Included strong incentives to attract
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emergency income taxation
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offshore activities
special system of taxation for shipping register
signing of double tax agreements with many countries
Trade Unions accepted 20% reduction of wages and salaries
Government guarantees to banks for lending to private
sector enterprises.
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Economic policies
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Second radical change
 Encouraging workers to seek temporary employment abroad
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1977 - 14.700 persons registered as working temporarily
abroad
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agreement with government of Bulgaria
represented 9% of gainfully employed in Cyprus
Economic measures helped recovery
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very strong rates of economic growth (1975-1985 average 8%
annually)
Within 3 years (1978) attainment full employment conditions
These lasted until 2009, when
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international crisis and
endogenous structural problems
Reversed the employment situation
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Variety of implemented policies
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Third radical change:
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social policies reform - public assistance backed legally
Before 1974 - administrative system based Council of
Ministers decisions
Public assistance law
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indigent persons - guaranteed minimum legal standard of
living
Assistance included:
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Cash disbursements
Aid in kind (food rations, clothing, household utensils- some from
international assistance)
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continues to be provided to remaining enclaved persons
Income transfers and grants
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Various Housing programmes
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Fourth radical change (No housing schemes prior to 1974)
 Ambitious housing policy programmes (because housing
situation desperate):
 Construction of low cost housing on government land
 Assistance to buy from local contractors
 Variety of self help housing schemes
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Assistance to build either on owned or on government plots
Government would built infrastructure in roads, shops, schools
and health centers.
Displaced provide some owned funding and own labour
Use of TC abandoned houses
Rent subsidies
Housing schemes continue to operate to this date.
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Incentives to the unemployed
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Fifth radical change
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incentive scheme to those finding gainful employment
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Because wages and salaries were reduced and welfare
assistance relatively generous
Possible disincentive to low wage employment
Unemployed securing gainful employment entitled to
continue receiving unemployment benefit:
 for 6 months - half the benefit
 for further 6 months- quarter benefit
When full employment attained – measure allowed to lapse
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Educational and health policies
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Education
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Intensive construction programme for new schools
at all levels
Extensions to existing schools
Use of TC abandoned schools
Providing financial assistance for third level
educational studies abroad.
Health
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Construction of new hospitals
Establishment of urban and rural health centers.
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Importance of housing for growth
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Comments on housing policy,
 between 1977 and 1982 housing investment on
average 12% of GDP
 almost 70% financed through budgets.
 Annual number of housing completions reached 8,000
units (1978) compared to 5,000 (before 1973)
 Gave boost to construction - between 1975 and 1980
annual growth of construction 20%
 extremely strong push on economy
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Conclusions
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What can we learn from this enumeration of policies in different
fields implemented after 1974
 policies flexible both through
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country has collective experience to formulate and implement
right policies
flexibility to reinvent these policies if and when they are needed
because of solution
capacity to implement policies
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adoption of radical new measures
abandoning them when circumstances changed.
meet housing demands for those to be displaced and move to areas
administered by one or the other constituent government.
position to implement both economic and social policies to meet
different set of circumstances
Implementation will be more difficult because already existing
public debts.
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Thank you
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