T U R K I S H R E P U B L I C O F N O R T H E R N C Y P R U S

M I N I S T R Y O F E C O N O M Y A N D E N E R G Y

S T A T E P L A N N I N G O R G A N I Z A T I O N E C O N O M I C P L AN N I N G D E PAR T M E N T

Ö D Ü L M U H T A R O Ğ L U

D I R E C T O R

1

TURKISH REPUBLIC OF NORTHERN CYPRUS (TRNC)

ECONOMY

Turkish Republic Of Northern Cyprus(TRNC) had the real growth rate in the period 2000 - 2006 was increased from -0,6% to 13,2%, while for the years 2007 , 2008 and 2009 it was enormously

decreased to 1,5% ,-3,4% and -5,6% respectively.

The TRNC economy recovered in 2010 and it has a positive growth

rate 3,6%.It is estimated that the TRNC economy will grow %4,2 at 2011.

At the same time, the effort of reduction of inflation had as result a

decrease from the 76,8 % in 2001 in the 2,7% in 2005 and 14,5% in

2008. In 2009 inflation rate was %5.7 and %3.27 in 2010, which were below the inflation rates in Turkey in those years.

2

The economy of TRNC is dominated by the services sector (78.7% of

GDP in 2010), which includes Trade-Tourism, Transport-Communication, Financial Institutions, Ownership of Dwellings, Business and Personal Services, Public Services and Import Duties.

In 2010 Industry (light manufacturing & construction) contributes

9.8% of GDP and agriculture 5.9%.

3

GNP Per Capita($)

12.04.2012

4

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

2003 2004 2005 2006 2007 2008 2009 2010

5,949

8,095

10,567

11,837

14,765 15,984

13,354

14,703

Export from TRNC to EU countries is quite low due to the ambargoes and disability to direct trade, on the other hand, export to Turkey and Middle East countries are high.

Looking at the import data, import in 2010 has increased by %30 from 2009 to 2010.

5

Export Products for TRNC($) Products 2010($) 2011($) % exchange

Citrus(kg) 27,166,238 31,403,502 16

Dairy Products (kg)

25,826,381 26,915,239 4

Rakı(lt) 7,669,936 10,309,496 34

Scrap(kg) 6,476,706 14,303,827 121

Confection 4,022,957 3,724,569 -7

Concantrated (kg)

3,007,110 2,906,639 -3

Chicken meat (kg)

2,747,256 5,194,539 89

gypsum(Ton) 1,889,140 2,803,425 48

Total (+other)

96,419,909 115,706,735 20

6

Import Products for TRNC($) Products 2009($) (2010$) % Exchange

Transportation means

110,733,801 117,320,193 5,9

Medicine 29,086,914 32,828,272 12,8

Furniture 23,443,271 31,850,521 35,8

Confection 32,326,015 38.178,881 18

Reinforcing iron 24,858,369 29,600,999 19

Electrical equipmnet

17,322,067 20,268,820 17

Fual oil 72,879,792

97,518,380 33,8

Total (+others)

1,326,165,192 1,604,180,665 30

7

Total Exports by Islamic Countries($)

12.04.2012

8

Tear Total A changed compared the previous year(%)

2007 9,702,231

2008 14,220,271

31

2009 13,833,521

-2.7

2010 31,104,188

55

Total Imports by Islamic Countries($)

12.04.2012

9 Year Total A changed compared

the previous year(%)

2007 66,253,726

2008 56,482,297 -17

2009 52,507,371 -7,5

2010 69,000,395 25

The economic links with Turkey as the biggest trading partner.

The export rates to Turkey increased since then and became %54.1

of total exports in 2009 and %46.4 of total exports in 2010. Looking at the import data, again Turkey is the biggest import partner of North Cyprus.

The statistica data shows that about %70 of the imports were from

Turkey in 2010. The most important export goods of TRNC are citrus and milk

products and these products can only be exported to EU countries through Turkish ports which increase the costs of the producers in North Cyprus.

10

Green Line Regulation 11

From North to South regulates the transportation of ;

Goods

People

Services

• It does not regulate the transportations that is from South to North.

What are the products?

Products which are produced in TRNC

While raw materials of the products comes from abroad:

They have gone their last,substantial,econimacally justified processing or working in an undertaking equipped for the purpose in TRNC

12

Total Exports,According the Green Line regulations

2011(July,August,September electricity export total export:24,085,774.55 €)

2008 2009 2010 2011

Total 7,172,115.72 6,006,856.14 5,875,254.77 29,954,867.19

13

The Tourism Sector,Total Number Of Bednights

12.04.2012

14

1566580

885393

1083738

522547

181697015655391468570

1355614

1523261

13065641284761

1635566

2275856

911033

1230593

669550

607059581101 601688

613023

778000623664

621526

950451642282

572365586992

878046653824

837006

0

500000

1000000

1500000

2000000

2500000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

total TR Foreigner

The Number Of Tourists In Tourist Accomodation Establishments

12.04.2012

15

423396

497236

225052

336240285419368891

306244

478392474600

272162

335235

590718

265273 317509

304942

165872177388

171518162790

389145

112921

108343

8246589139

100841 106124103613 114218

127338

156330

0

100000

200000

300000

400000

500000

600000

700000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Total TR Foreigner

Net Tourism Income 16

0

50

100

150

200

250

300

350

400

450

2002 2003 2004 2005 2006 2007 2008 2009 2010

114.1

178.8

288.3

328.8 303.2

381 383.7 390.7 405.8

Milyon USD

Higher Education

12.04.2012

17

0

10,000

20,000

30,000

40,000

2007-2008 2008-2009 2009-2010 2010-2011 2011-2012

29191

33202

30264

28679 29357

10660 10646 9251

9774 10096

3638 4059 3813 5066

7607

Turkey

TRNC

Other Countries

Why TRNC Universities?

12.04.2012

18

Appropriate student fees

Comfort and affordability of residential facilities

Foreign language education

Established and accredited universities

Secure environment

INCENTIVES FOR INVESTORS 19

The Law numbered 47/2000 is named as “Incentive Law”. This Law includes the regulations and rules for local and

international investors and entities contributing to social and economic developments in the country.

Those real or legal investor that would like to benefit from incentive

has to apply to Economic Planning Department of SPO and fill out the Feasibility Form and other requested information.

The feasibility of the project is reviewed by the Department and

Incentive Certificate is issued after the evaluation of its contribution to the economy and employment, its profit rate and repayment period for the project.

20

Before issuing Incentive Certificate, projects have to go through the City Planning Department, Environment Protection Department and the Ministry related with the sector. Once the negative opinion is given by any of the institutions, SPO does not issue the Incentive Certificate.

If the investor cannot finalise the investment within the time period stated in the Incentive Certificate, the investor can apply to SPO with the valid justifications and the period can be extended 3 times.

Incentive legislation is for those projects that provide value added

producation and not for trade. The Incentive Law treats the local and foreign investors equally

once they set up the company at the Company Register Office.

Investment Incentives Applied Under the Incentives

Law The following incentives are applied to investments with ,incentive

certificates, regardless of whether an investor is local or foreign. Incentive Certificates are granted from the State Planning Organization.

Investment Allowance Investment allowance is 200% on the initial fixed capital investment

expenditure for the investments in Priority Development Regions and in sectors with special importance.

Investment allowance is 100% on the initial fixed capital investment expenditure for the investments in other sectors and regions.

Güzelyurt and Karpaz were determined as Priority Development Regions by the Council of Ministers.

21

Investment Incentives Applied Under the Incentives

Exemption From Custom Duties and Funds Import of machinery and equipments concerning the project are exempt from every kind of custom duties and funds in accordance with Incentive Certificate. Regulations on importation of raw materials and semi-finished goods are specified by the Prime Ministry and is subject to the approval of the Council of Ministers. Zero Rate VAT Zero rate VAT is applied for both the imported and locally purchased machinery and equipment in accordance with the Incentive Certificate.

22

Investment Incentives Applied Under the Incentives

State Owned Land and Building Lease State owned land and building lease is possible for the investments

that are granted Incentive Certificate in accordance with the regulations in force.

Fund Credits Long term and low rate investment credits are available from the

Investment and Export Incentive Fund. Exemption From Construction Licence Fee Investments that are granted Incentive Certificates are exempt from

all kinds of taxes and fees related with construction licence.

23

Investment Incentives Applied Under the Incentives

Reduction of Stamp Duty for Capital Increase

Reduction of stamp duty concerning capital increase is provided for the investments that are granted Incentive Certificate.

Reduction of Fee on Mortgage Procedures

Reduction of stamp and registration fees is applied

on mortgage procedures necessary when using bank credit

for the investments that are granted Incentive Certificate.

24

Incentive Certificates Issued Under 47/2000 Law According to

Sectors

12.04.2012

25

SECTOR Health Education Industry Tourısm Transportation

Press-

Release

Communicat

ion TOTAL

2001 1 1 1 - -

- - 3

2002 4 8 40 38 4

1 2 97

2003 1 - 27 9 -

- - 37

2004 1 - 26 13 -

- - 40

2005 - 11 28 18 -

- - 57

2006 1 20 22 13 -

- - 56

2007 3 3 20 4 -

1 1 32

2008 3 1 13 10 -

- 1 28

2009 1 - 15 10 -

- - 26

2010 1 - 21 8 -

- 1 31

2011 - - 13 7 -

1 - 21

TOTAL 16 44 226 130 4

3 5 428

Incentive Certificates Issued Under 47/2000 Law According to Sectors

(2001-2011)

12.04.2012

26

SECTOR PCS FIX CAPİTAL INVESTMENT

THE SHARE OF FIXED CAPITAL INVESTMENT

Health 16 209.697.426 4,72%

Education 44 234.919.967 5,29%

Industry 226 678.468.432 15,27%

Tourism 130 3.249.286.988 73,13%

Transportation 4 20.418.250 0,46%

Press-Release 3 33.006.040 0,74%

Communication 5 17.193.130 0,39%

Total 428 4.442.990.233 TL

($2.613.523,52)

100,00%

27

Thank you

Ödül Muhtaroğlu Director of the Economic Planning Department