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North Cyprus is a micro-state which has a
landmass area of less than 10,000km.
The population is approximate 300,000 people.
About 50.2% of the population lives in rural
areas.
39.8% lives in urban centers.
According to 2009 statistics, the literacy level is
90%, while the percentage of graduates is 68%.
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The economy of TRNC is predominated by
services sector which account for 69% of GDP
in 2009
Industries and Agriculture contributed 22%
and 9% respectively to GDP in 2009.
Though North Cyprus is suffering from trade
restrictions, it has done remarkably well by
increasing her Per Capita Income from $350 in
1974 to over $16,000 in 2009.
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Harrod-Domar growth model is used in
development economics to explain an
economy’s growth rate in terms of the level of
savings and productivity of capital.
The model implies that economic growth
depends on policies to increase investment by
increasing saving and using that investment
more efficiently through technological
advancement.
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We try to outline the development challenges
of North Cyprus based on Harrod-Domar
theory.
(1) The saving rate is not high enough in North
Cyprus. The more an economy saves, the more
it will grow.
Saving History of North Cyprus as a
Percentage of GNP
(2) The level of investment/GNP in North Cyprus
is low.
Investment/GNP (%)
25,0
20,0
15,0
Investment/GNP (%)
"
10,0
5,0
Years
2009
2006
2003
2000
1997
1994
1991
1988
1985
0,0
1982
Percentage ( % )
30,0
(3) Another challenge of North Cyprus is lower
per capital income, which is used to measure
the standard of living. The richer the country,
the better she saves.
Per capital income was $16,000 in 2009 while
that of Singapore was $52,000.
(4)Harrod-Domar model also takes into
cognizance, technological progress as a major
component of growth.
North Cyprus is not really investing in
Research and Development which can boost
technology in future.
Also, investment in capital is low in North
Cyprus. The growth rate of output per worker
in 2009 was 2.1% while that of Singapore was
5.6%.
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In order to overcome the aforestated challenges
in North Cyprus, these are the recommended
policies:
(1)Saving rate is not enough in North
Cyprus, therefore, this saving rate needs
to be increased to a significantly higher
percentage.
(2) The government should establish microcredit loans in line with Harrod-Domar
model of government intervention.
This will speed up rate of investment.
(3) Government should encourage savings
and deposits to be made into TRNC
banks and not “foreign” banks.
(4) Government of North Cyprus may
overcome her economic challenges by
engaging in capital accummulation and
Research and Development leading to
advancement in technology in future.
(5) Finally, the government of TRNC should
work toward settling the dispute with the
Republic of Cyprus in order to break
trade restrictions.
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Having looked at the development challenges of
the North Cyprus within the context of HarrodDomar growth model, we can say, apart from
increasing savings which generates investment, the
government must prevent further diversion of
savings and invest more on research and
development which brings advancement in
technology.
With this policies in place, North Cyprus may soon
emerge as a high income country with appreciable
increase in standard of living and welfare for the
entire population.
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We appreciate your attention!!!
Presentation was prepared by:
Tunde Benjamin Ayeni
Okechukwu Christian C.
Firat Emir
Korhan Koc
Rafiat Atilola
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