Possible impacts of a federal solution to the Cyprus problem on the tourism industry of North Cyprus

Possible impacts of a federal solution to the Cyprus problem on the tourism industry of North Cyprus

Hospitality Management 19 (2000) 295±309 Possible impacts of a federal solution to the Cyprus problem on the tourism industry of North Cyprus L. Alti...

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Hospitality Management 19 (2000) 295±309

Possible impacts of a federal solution to the Cyprus problem on the tourism industry of North Cyprus L. Altinay* School of Hotel and Restaurant Management, Oxford Brookes University, Gipsy Lane Campus, Headington, Oxford OX3 0BP, UK

Abstract For many years, the North Cyprus Tourism Industry has been sensitive to the political instability on the island which has arisen from the political problems between Turkish and Greek Cypriots. Federation with Greek Cypriots is considered to be a solution to these problems. This paper evaluates the possible impacts of federation with the Greek Cypriots upon the future of the North Cyprus Tourism Industry. In this respect, the views of experts and senior managers from private and public organisations in the tourism industry are studied through in-depth interviews. The ®ndings suggest that a federal solution to the Cyprus problem would have a favourable impact on the tourism industry of North Cyprus and would provide new development opportunities and eliminate major problems it currently faces. # 2000 Elsevier Science Ltd. All rights reserved. Keywords: Federation; Political environment; Instability; Tourism industry; North Cyprus

1. Introduction Tourism is widely sensitive to political instability and the political environment has a great impact on the tourism industry in any region (Scott, 1988; Edgell, 1990; Hall, 1994; Clements and Georgiou, 1998). The case of North Cyprus and South Cyprus provides a good example to support this assertion (see Fig. 1). The political unrest and its impact on tourism development in Cyprus have been widely discussed in a number of previous studies (see Lockhart and Ashton, 1990; Witt, 1991; Kammas, 1992; Ioannides, 1992; Wilson, 1992; Martin, 1993; Lockhart, 1993; *Tel.: +44-1865-483858; fax: +44-1865-483878. E-mail address: [email protected] (L. Altinay). 0278-4319/00/$ - see front matter # 2000 Elsevier Science Ltd. All rights reserved. PII: S 0 2 7 8 - 4 3 1 9 ( 0 0 ) 0 0 0 1 9 - 0

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Fig. 1. North and South Cyprus.

Mansfeld and Kliot, 1996). For example, Lockhart (1993) explains how the ongoing dispute between the two partitioned communities has been threatening the tourism industries of both sides for many years. Mansfeld and Kliot (1996) further discusses a number of constraints in¯uencing the tourism development on both the North and South sides of the island. A number of key issues emerge from a critical review of the above studies on Cyprus. For example, these studies examine the impact of war and the consequent partition on the tourism performance of both societies, Turkish and Greek Cypriots. These studies also reveal that the tourism industry plays a key role in both societies' economies in terms of revenue and employment. A further issue is that most of the above studies appear to focus more on the tourism industry in the South and they often provide a limited discussion on the tourism industry in the North. Concerning the North side, one of the emerging conclusions drawn from these studies is that the international economic sanctions imposed on the Turkish Cypriots have had a negative impact on the tourism industry in the North Cyprus since the intervention of Turkey in 1974. It is stated that the ongoing political instability on the island prevented the development of the tourism industry in North Cyprus. Therefore the

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development of the tourism industry in the North relies heavily on ®nding a political solution to the Cyprus con¯ict. To overcome the Cyprus con¯ict and reach a solution desirable to all sides, intercommunal discussions have been going on since 1974. Following the decisions taken by the heads of state of the European Union (EU) in December 1999 at the Helsinki Summit Meeting, inter-communal talks between the leaders of the two communities in Cyprus have resumed (European Union Commission, 1999). The decision by the European Union to give Turkey a ``candidate member'' status and to accept Cyprus as a member irrespective of whether a political solution can be found, provided pressure/an incentive to both sides to have proximity talks under the auspices of the United Nations' Secretary General Ko® Annan. Thus, a federal solution to the Cyprus problem appears to be closer than ever at any time before. With that in mind, this paper therefore aims to evaluate the possible impacts of a Federal solution between two diverse societies on the future of the North Cyprus Tourism Industry. In particular possible impacts of a federal solution on transportation, accommodation, marketing and fund raising issues will be discussed. This paper commences by reviewing the political aspects of federation and giving a short account of the recent political developments in Cyprus and its relation with the European Union (EU). It then summarises the North Cyprus tourism industry's performance. Further to explaining the method employed to collect primary data from North Cyprus Authorities, the paper presents the research ®ndings regarding the possible impacts of a Federal solution on the future of the Northern Cyprus Tourism Industry. The paper concludes by discussing the implications of the research ®ndings. A number of suggestions for further research are also provided. 2. Federation as a viable political solution Federalism refers to a form of government in which power is constitutionally divided between di€erent authorities (Bogdanor, 1987). Each authority exercises its own responsibility for a particular set of functions and maintains its own institutions to discharge those functions. In a federal solution, the main debate is the degree of authority that might be delegated to central and regional governments. A group of researchers, such as Derbyshire and Derbyshire (1996) and Theophanous (1996) argue that a federation consists of a highly centralised government which allows more e€ective and quicker decision-making and greater ¯exibility in the implementation of decisions taken in a federal constitution. However, the application of this type of federation might cause the erosion of the rights of some participating states. On the other hand, a decentralised federation, which is also called as confederation, consists of two or more states which still maintain their sovereignty as states (Bogdanor, 1987). Although this type of governance protects the local governments against the erosion of central government and helps to build up con®dence of participating societies to each other, it might cause ``deadlocks'' within the federal constitution and result in slower decision-making and implementation of decisions taken.

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In spite of these arguments, Robertson (1993) advocates that federalism is a favoured system of government in culturally diverse states. This author also states that it is much more appropriate to use a federal system to govern a country which is small in size and has a diverse structure. The next section of this paper describes the historical evolution of the Cyprus con¯ict. 3. Political developments in Cyprus in retrospect 3.1. Short-lasting Cyprus Republic (196021963) and afterwards The ``Cyprus Problem'' has been going on for many years between Turkish Cypriots and Greek Cypriots. After the Ottoman Rule (157121878), and at the end of the First World War, in which Turkey had shared the defeat of its German allies, the British annexed the Island. From 1925 onwards, Cyprus remained a British Colony in accordance with the 1923 Treaty of Lausanne. British Rule continued until the establishment of the 1960 Constitution of the Republic of Cyprus, which was based on the Zurich and London Agreements of 1959 between the Turkish and Greek Cypriot Communities to which UK, Turkey and Greece was also parties as guarantors of the sovereignty and independence of the Republic of Cyprus (Ertekun, 1984). Greek Cypriots being unsatis®ed with the constitution tried to change the constitutional framework from a democratic system to a unitary state where the Turkish Cypriots would no longer possess veto powers over the decisions of the Greek Cypriot majority (Heinze, 1986). As a result a civil war broke out on December 23, 1963. Early in 1964, the United Nations Peacekeeping Force moved to the Island to prevent clashes between Turkish and Greeks. The negotiations between the Turkish Cypriot leadership and Greek Cypriot leadership on re-establishing a constitutional order of The Republic have continued till 15, July, 1974. In 1974, the Greek junta staged a coup in Cyprus to overthrow Archbishop Makarios, president of republic, who was deposed and replaced by Nikos Sampson, a former EOKA (National Organisation for Cypriot Fighters formed in 1955) member who used to agitate for Enosis, the union of Cyprus with Greece (EIU Country Pro®le, 1995. Travel and Tourism Analyst). This organisation and its supporters proceeded to massacre both their Greek Cypriot opponents and innocent Turkish Cypriot civilians (Ertekun, 1984). Turkey intervened in the problem by using its guarantor right on the island (Ertekun, 1997). Nine years after this intervention, in 1983, The Turkish Republic of Northern Cyprus was declared which is internationally recognised only by Turkey. During 1984, the Secretary General of the UN, Javier Perez de Cuellar, produced his ``Draft Framework Agreement'', which underwent various modi®cations until 1986 following proximity talks with the Greek and Turkish Cypriot leaders. The agreement called for an independent, bi-zonal, bi-communal, and non-aligned federal republic. Nevertheless, there were not enough incentives for a solution to the

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Cyprus problem and the negotiations ended in failure. In 1992, the Secretary General of the UN, Butros Ghali, produced the ``Set of Ideas'' for consideration by the two sides. This was intended as an ``Overall Framework Agreement'' for a comprehensive solution to the Cyprus problem. The ``Set of Ideas'' was a 100-point document that expanded the issues addressed in the previous ``Draft Framework Agreement''. In 1993 presidential elections were held in the south, and won by Glafkos Klerides. With this change in the political environment, the UN General Secretary proposed Con®dence Building Measures (CBM) to open the way for the overall agreement. CBM included the transfer of the fenced area of Varosha (see Fig. 1) to UN control and access to it for both communities; the opening of Nicosia airport (see Fig. 1) under UN administration for the use of both communities; joint cultural and educational activities; business contact and a reduction in the number of military posts along the `Green line' (see Fig. 1) in Nicosia (UN s/26026, July, 1993). This new proposal of the UN did not succeed in providing an opening for the overall framework agreement (United Nations, 1992, 1993). For next three years, the Greek Cypriot Leader, Glafkos Klerides, argued that there was not enough common ground between the two sides to warrant further negotiations. In 1997 the two leaders, Rauf Denktas, Turkish Cypriot Leader, and Glafkos Klerides, Greek Cypriot Leader, met twice, during which time the Agenda 2000 of the EU named Cyprus among the European States with whom accession negotiations would start. However, negotiations between the two leaders again stopped until after the Helsinki Summit Meeting of the EU in 1999. 3.2. Cyprus 2 European Union relations Cyprus has always maintained close relations with the European Community (EC). Since the establishment of the Republic of Cyprus in 1960, the United Kingdom (UK) had been applying preferential tari€s to imports from Cyprus. The UK was a very important market for Cyprus. When the UK applied to the EC for membership in 1961, Cyprus, in fear of losing its UK market, also applied to the EC for membership in the ®rst half of 1962. The decision to apply was taken with the consent of both communities on the island. As the Turkish Cypriots were thrown out of the Cyprus Government in 1963, the negotiations resulting in an Association Agreement between Cyprus and the EU were conducted with the Greek Cypriots only. The Association Agreement, which was put into force in 1973, favoured two ®ve-year periods at the end of which a Customs Union with the EC would be achieved (BicËak, Forysinsky and Kodotzie, 2000). After the ®rst period, Cyprus' relations with the EC continued, with annual protocols from 1977 until 1987, at which time the Customs Union Agreement with the EC was signed. The Customs Union Agreement, put into force on 1 January 1988, planned to have a customs union between Cyprus and the EU within 15 yr. On 3 July 1990, the ``Cyprus Government'' submitted an application for membership to the European Union (EU). Turkish Cypriots insisted that the application was against the Treaty of Guarantee and the Cyprus Constitution, which prohibited the membership of Cyprus to any economic or political entity in which

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the Guarantor States are not members. Such an application and membership also contradicted the provisions of Gali's ``Set of Ideas''. In 1995, Turkey signed a Customs Union Agreement with the EU. This required a unanimous decision in the Council of Ministers and thus the signature of Greece. In return for the approval of Greece, the Council of Ministers agreed that accession negotiations with the Greek Cypriots would start six months after the end of the inter-governmental conference of the EU. The Luxemburg Summit decision con®rmed the Council's previous decision and the accession negotiations with the Greek Cypriots started in 1998 (Dodd, 1999). The attitude of the EU not only hardened the attitude of the Turkish Cypriots in the inter-communal talks but also intensi®ed the discussions on economic integration with Turkey. Turkish ocials visiting North Cyprus assured the Turkish Cypriots that the same level of economic and political integration would be realised between Turkey and North Cyprus, as with the economic and political integration between the EU and South Cyprus. The Helsinki Summit in 1999, partly managed to improve upon the decisions of the 1997 Luxemburg Summit. Turkey was given a ``candidate member'' status and had to compromise on the Aegean and Cyprus issues with the EU. The Helsinki Summit Decision provided the required impetus for the re-start of the negotiations between the two communities, within the framework of proximity talks under the auspices of the UN. The announcement by the EU that they would start accepting new members after 2003 increased hopes that there could be a federal solution to the Cyprus problem by that time. 4. The tourism industry in North Cyprus As being a small island in the Eastern Mediterranean Sea (see Fig. 1), Cyprus has limited natural resources and a small market. Therefore, service sector industries in North Cyprus play a key role in its economic development. One of these, the banking sector, experienced a fast growth in the 1990s and currently there are 36 commercial banks, 43 o€-shore banks and 33 currency exchange bureaus operating in North Cyprus (The Central Bank of TRNC, 1999, pp. 16221). The universities in North Cyprus are another major source of income. Currently, at the ®ve existing universities, there are 21,729 students, of whom 33% are Turkish Cypriots, 58% are Turkish from mainland Turkey and 9% are from 68 other countries (State Planning Organisation, 1999). Since 1986, tourism has been the leading sector of the North Cyprus economy and, especially until 1991, has contributed substantially to the economic development of North Cyprus. In 1998, with a $42.6m value added, the tourism sector contributed 4.8% to the GNP, and created 3269 jobs or 3.9% of the total employment (State Planning Organisation, 1999, pp. 3, 18). As the number of tourists increased from 220,237 to 393,027 from 1991 to 1998, the net tourism revenues increased parallel to this development from $153.6m to $200.1m While the number of beds increased from 6633 to 9365 and the occupancy rate from 22.6% to 37.3%, the average length of stay fell from 5.3 to 4.6 nights (see Table 1).

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Table 1 Selected tourism indicators of North and South Cyprus Indicators

1. Tourism Revenues (net), $m 2. Number of tourists (103 s) Turkish Other 3. Number of beds 4. Occupancy rate (%) 5. Average stay (nights) Turkish Other

North Cyprus

South Cyprus (1998)

1991

1998

153.6 220 179 41 6633 22.6 5.3 4.7 8.1

200.1a 393 316 77 9365 37.3 4.6 3.6 7.3

1694.5b 2222 } } 86151 49.1c 11.3 } }

a

Estimate. Gross tourism revenues. c For 1996. Sources: 1. Ministry of State and Deputy Prime Ministry, TRNC, 1999: 8, 60, 81, 105. 2. Department of Statistics and Research, Ministry of Finance, Republic of Cyprus, (1997, p. 88). 3. Cyprus Tourism Organisation (1999, pp. 123). b

A comparison of the ®gures of North and South illustrates the gap between the tourism industries of both sides. In 1998, North Cyprus attracted relatively few tourists compared to South Cyprus. For example, as can be seen in Table 1, South Cyprus attracted eight times as many tourists in 1998. This resulted in comparatively low tourism revenue for the North. The latter also has an under-capacity of beds compared to South Cyprus. 5. Research methodology A qualitative research strategy was adopted as the most suitable approach for an exploratory study of this kind. As suggested by Easterby-Smith et al. (1991), Patton (1990), and Robson (1993) through the use of qualitative research tools it is possible to thoroughly investigate and evaluate the potential impact of the establishment of a federation on the tourism industry in North Cyprus. In order to investigate and explore the possible impacts and developments in the tourism industry of North Cyprus after a federal solution, semi-structured interviews with experts and senior managers of private and public institutions within the industry were chosen as an appropriate data collection method. Since the research aims to investigate an issue in depth qualitatively, a purposeful sampling method (Hemmington, 1999) was employed to choose the appropriate people to interview. Based on their experience, role and in¯uence in policy making in the tourism industry, ten key people were chosen among government ocials and senior executives from the industry (see Table 2). The purposely chosen sample included representatives of di€erent views in

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Table 2 Interviewees and their job titles Job title

Name of the institutions

Deputy Prime Minister Undersecretary of the Deputy Prime Minister responsible for Tourism Director of the Marketing Department of the Tourism Oce Director of Evkaf

Tourism Ministry Tourism Ministry

Director Director Director Director/owner of the Agency, the biggest tourism agency in North Cyprus Director of the European Information and Research Centre Director of the Cyprus Studies Research Centre

Marketing Department of the Tourism Oce Evkaf Administration (which owns almost 20% bed capacity) Cyprus Turkish Travel Agents Association North Cyprus Hoteliers Association Istanbul Airlines ARTUR Tourism Agency Eastern Mediterranean University Eastern Mediterranean University

the research project and thus enlarged the perspective, and added richness to the research. All ten experts were interviewed by means of a semi-structured questionnaire, including questions about the possible impacts of the federal solution on the transportation, accommodation, funding and promotional activities in the country. Each respondent was further probed when necessary. All interviews were recorded on tape and notes were taken before, during and after each interview. All interview tapes and notes were transcribed in verbatim format soon after completion, while still fresh in the researcher's mind. This was important in terms of capturing and re¯ecting all verbal and non-verbal aspects of the interviews and observations. A coding scheme was derived based on the interview schedule. As suggested by Miles and Huberman (1994) the interview transcripts and notes were then read many times in order to identify key themes (Miles and Huberman, 1994). Much of the data analysis consisted of breaking down the interview transcripts and notes into manageable blocks in order to classify them under each code/grouping. Following Ritchie and Spencer's (1994) guidelines, a ``cut and paste'' approach was adapted whereby ``chunks'' of verbatim texts and notes were regrouped according to their categories. Each passage of text was annotated with a particular reference and entered on the chart. The original text was cross-referenced so that the source could be traced and the process of abstraction could be examined and replicated. The emerging ®ndings of this research were disseminated to the participants and feedback received from them was also incorporated in the research ®ndings. The next section reports on the empirical ®ndings obtained from the research process.

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6. Findings The following ®ndings re¯ect upon the key issues which emerged from the investigation. Lack of con®dence was identi®ed as an obstacle to the federal solution. Additionally, possible impacts of the federal solution on areas such as promotion and marketing, transportation, accommodation and funding were recurrent. 6.1. Lack of con®dence as an obstacle to the federal solution Although all the interviewees believed that the e€ects of a federal solution upon the Northern Cyprus tourism industry would be immense, both in terms of demand and supply, there was evidence that lack of trust is still fresh on the North Side. One person stated that Federation could be a very favourable solution to our side but bear in mind that Federation cannot not be established unless Turkish Cypriots feel secure enough. Further investigation indicated concerns that the more developed community would suppress the less developed community after establishing federation between both sides. This was re¯ected by one of the respondents as: For the time being, we cannot compete with Greek Cypriots. They are economically stronger than us. Additionally we want to live in a secure environment. There was a common belief that a transitional period would be essential to enhance the development of the Turkish side, allowing it to become as competitive as South Cyprus and thus to overcome the lack of con®dence. When interviewees were asked how to overcome the con®dence problem, almost all of them believed that it would take a long time to overcome the mistrust between the societies. Two of them seemed to be pessimistic regarding the future. For example, one stated that ``The gap is getting bigger between the societies, especially between the new generation who have not met before and do not know about each other''. Respondents who believed that con®dence could be created suggested that con®dence building measures should be put into action and that the ``isolated city'' Varosha and Nicosia Airport (See Map 1) should be opened and operated jointly. Additionally, it has been suggested that the establishment of a ``Central Joint Co-ordination Organisation'' for tourism would help to build con®dence. Such an organisation should represent both societies. Furthermore, ®ve interviewees emphasised the importance of tourism, de®ning it as ``peace facilitator'': That travelling, organised excursions and tours, sport activities, concerts and conferences would bring the two societies together and help them to develop an understanding about the expectations of each. When interviewees were asked what kind of federal solution they would propose under these circumstances, there were mixed views. One group suggested the need to

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delegate the authority to the states rather than the central government. In the case of a strong central government, there is a danger of the overdeveloped community, Greek Cypriots, suppressing the less developed community, Turkish Cypriots. On the other hand, other group indicated that after a successful transitional period the states can delegate their authorities to the central government. The rationale behind this idea is re¯ected by the following: After a federal solution, we will be competing with countries such as Turkey, Greece, Italy and Spain. Consistency and cohesion between societies are essential. We cannot waste our time with deadlocks in the decision-making process. We have to operate e€ectively. Accordingly, a federation with a strong central government allows quicker decisionmaking and implementation of decisions taken which is essential for the dynamic competitive environment of the Mediterranean basin. 6.2. Promotion and marketing All respondents stated that the lack of international recognition of the Turkish Republic of Northern Cyprus and the political-economic embargo imposed on North Cyprus have made promoting and marketing the North Cyprus tourism industry very challenging. For example, one person stated that: We are not recognised internationally. Because of this it has been extremely dicult for us to promote our tourism establishments worldwide, particularly in Europe. Most of the interviewees stated that the lack of recognition of the state and the political embargo imposed on her were the main sources of many problems preventing a smooth economic development of North Cyprus. One interviewee re¯ected his anxiety as follows: I am afraid our nation, our people, is becoming hopeless about the future. We are forced to live in a closed box. Turkey is the only `window' for us opening to the rest of the world. Some believed that Turkish Cypriots had not done anything wrong to warrant their situation, and they considered embargoes unjust. It was a general view among the interviewees that the federal solution on the island would provide recognition to the Turkish Cypriots; would end their political and economic isolation from the world; and would end embargoes imposed by third parties. All interviewees believed that international travel agencies and tour operators would have a more positive approach to marketing the Turkish Cypriot hotels. As a result, the perceived risks and dangers would vanish and the image of North Cyprus would change positively.

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This would increase the number of tourists visiting North Cyprus. It was stated that with its unspoilt beaches, magni®cent historical places, relatively cheap prices and the scarcity of concrete/hotel buildings, the tourism industry of North Cyprus would ¯ourish in a very short period of time. Furthermore, the variety of tourism products would be enriched with agro-tourism, cruise tourism and other initiatives that would promote the tourism industry of North Cyprus. In terms of marketing and promotion, the respondents generally believed that under a federal solution the country should be promoted and marketed as a whole by the central government. Since both sides are similar in terms of cultural wealth, sunshine, beaches and landscape, the choice of customer pro®le and marketing strategies could be co-ordinated relatively easily. Most of the respondents stated that it was essential for the North side to consider the disadvantages of receiving a large number of tourists during one season. For example, one stated that ``We should avoid the bad e€ects of mass tourism. We should be careful not to destroy the unspoilt environment of North Cyprus.'' Moreover, interviewees stated that there should be an increased sensitivity toward the environmental destruction caused by the movement of large numbers of people. Tourism development, marketing and promotion should take into account the needs of local populations to maintain certain historic and local values. This would help to preserve the cultural heritage and similar attributes of the country's culture when determining its international tourism policies. 6.3. Transportation Transportation was considered to be another factor that would need improvement to support the tourism industry at a desirable level. One of the respondents stated that: We can consider transportation as the ``artery'' of the tourism industry. Unfortunately, it does not work properly under these current political circumstances. Further investigation of this issue showed that, due to the Turkish Republic of Northern Cyprus being politically unrecognised, the aviation agencies could not gain membership in international aviation organisations. Consequently, air-¯ights are required to touch down in Turkey before proceeding to North Cyprus (Martin, 1993). The general view among the respondents was that following a federal solution, direct ¯ights would reduce the travelling time and the cost of accessing North Cyprus. Access to North Cyprus would be not only from the existing Ercan Airport of North Cyprus, but also from the international airport of Nicosia. As some of the interviewees stated, direct ¯ights would provide competitive prices against other countries such as Spain, Greece and Turkey; should contribute to the ¯ow of tourists to the country; and would eliminate the negative e€ects of long journeys, especially on European Travellers.

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It was also indicated that tourists willing to enter North Cyprus from the South are faced with a number of diculties at the border. Tourists are obliged to return on the same day before dark. Under a federal solution, a massive ¯ow of tourists would take place from South Cyprus. Freedom of movement would also encourage domestic tourism. 6.4. Accommodation Under a federal solution, the quality, size and variety of tourist accommodation would be improved. Varosha, having 6000 hotel beds and other recreation facilities, would contribute substantially to the existing tourism potential. However, several interviewees were cautious about of the future of the accommodation establishments in North Cyprus. One expressed his anxiety as follows: We have been talking about the federation for many years. However, we are not prepared for that. . . We do not have enough rooms to host large number of tourists who will arrive after a federal solution. On top of this, the existing ones do not meet the international standards. There was a concern expressed by the interviewees that accommodation establishments in North Cyprus will have to compete with the South in order to survive. At present the existing accommodation units could not compete equally with South Cyprus. A substantial investment is needed in order to close the gap between North and South. 6.5. Funding All the interviewees believed that North Cyprus would be highly dependent upon foreign aid further to establishing a federation. Due to the limited funds available to private entrepreneurs and the public sector, investment in all sectors is below the desired level. A federal solution would open the channels for low interest and longterm loans to potential tourism investors. Furthermore, as three of the respondents stated, a federation would create the con®dence necessary for investment in the tourism industry of North Cyprus. Foreign entrepreneurs and multinational corporations would be encouraged by the new prospects and would invest directly in the tourism industry. These would all contribute to the regeneration of the North Cyprus tourism industry. It was emphasised by the interviewees that most infrastructure investments in North Cyprus are ®nanced by Turkey. Modern highways, electricity plants and water supply from Turkey are the main infrastructure projects proposed. They further stated that under a federal system, the infrastructure in North Cyprus, namely water and electricity supply and public transportation would be improved and raised to EU standards. However, as one of the interviewees pointed out, the development of the tourism infrastructure and facilities must be compatible with the

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local environment and the natural ecosystem in order to maintain a sustainable tourism product. Based on the above ®ndings, several conclusions can be drawn. 7. Concluding remarks and further implications This research sought to evaluate the possible impacts of a federal solution on the tourism industry of North Cyprus. The ®ndings of the study show that decisions taken in the political environment have a great impact upon the economic environment, particularly related to the tourism industry. Politics and tourism seem to strongly interface in the case of Cyprus. These ®ndings support studies that suggest that political instability in¯uences the tourism development of a state (Clements and Georgiou, 1998; Hall and O'Sullivan, 1996). The ®ndings also provide support to Lockhart (1993), Mansfeld and Kliot (1996). It is evident that political issues play an important role in the Cyprus case and establishing political stability is essential for the development of the North Cyprus tourism industry. The study also suggests that political instability has a much more negative impact on North Cyprus, than on South Cyprus, both sociologically and economically. South Cyprus is much more developed and has more knowledge and experience in the tourism ®eld. Although the North has advantages over the South in terms of having an unspoiled environment and cheaper tourism products (Altinay and Bicak, 1995), without political stability the tourism industry of North Cyprus will never be competitive. Given the importance of tourism for North Cyprus (Bicak et al., 2000), it is essential to ®nd a solution. The ®ndings demonstrate that Federalism is a highly desirable option. A decentralised federation (Bogdanor, 1987) would possibly be preferred. However, under a federal umbrella, tourism development in Cyprus is expected to be a complex task as the two states tend to have di€erent sets of objectives and expectations. Therefore, a realistic solution should meet the needs of the two societies while surrendering a cetain degree of sovereignty. Extreme demands of the two parties would create a great barrier to the achievement of a compromise. A federal solution was perceived by interviewees to be a key ingredient in providing a positive image and improved transport routes to tourists. The ®ndings also suggest that establishing a federation would provide immense improvements on the tourist accommodation of North Cyprus. A political solution could provide the business con®dence necessary for investment in the tourism industry. Therefore, it can be concluded that a federal solution, which would lead to peace on the island, is expected to make a positive impact on the performance of the tourism industry of North Cyprus. These conclusions are consistent with studies that indicate that political stability and political relations between states are extremely important determinants for the success of the tourism industry (Hall and O'Sullivan, 1996; O'Neill and Fitz, 1996). Although interviewees had strong beliefs that the federal solution to the Cyprus problem would provide signi®cant opportunities to the tourism industry, a certain

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lack of con®dence in its application has been identi®ed. Therefore, it was considered essential to ®rst eliminate the mistrust between the two societies resulting from past incidents. As noted earlier, several studies emphasised tourism role as peace facilitator between unfriendly states and societies. For example, D'Amore (1988) argues that tourism contributes to a better understanding between nations. Additionally, Var et al. (1989) advocate that tourism activities allow easy communication and interpersonal contact and break down cultural barriers. Given negative the experience of Turkish and Greek Cypriots, it can be argued that tourism can be used as a potential facilitator of political reconciliation between the two communities. Overall, the current research ®ndings provided an optimistic picture regarding the possible impacts of a federal solution to the Cyprus problem, not only on the tourism industry of North Cyprus but also on the tourism industry of the South. Respondents felt that peace on the island will help to eliminate the negative impacts of political instability on the tourism industry of both sides. It is obvious that under the current circumstances no side wins. The political instability is not only a major issue for North and South Cyprus but also for Greece, Turkey, European countries and even for the USA. Concerning further research, a number of possibilities emerge. Previous studies on tourism in Cyprus have mainly concentrated on the history and current situation of the Cyprus and their impact on tourism. This study attempted to show how a possible federation could impact the tourism industry. It is recommended that a similar study will be carried out by Greek Cypriots on the tourism industry of the South. Further research can also investigate the possible contribution of tourism to better communication and understanding between these two societies.

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