Introduction North Cyprus economy has been under economic embargoes for many years, and has been struggling to eradicate the income difference with the south of this island with extremely limited facilities. Successive governments have accordingly developed distinctive responses to cope with these difficulties. The political division in Cyprus has been a long standing political dispute of the world political scene. Despite various attempts by the international community, the division in the island still remains as it is; the Turkish side on the north and the Greek side on the south. The Turkish community on the northern side has been struggling for political recognition as a sovereign state by the international community, and has been under sever political and economic embargoes since 1983. So far, Turkey has been the only country that recognizes the sovereignty of North Cyprus, and has established close political and economic ties with it. In particular, economic isolation from the world economy to generate foreign currencies sources, which are inevitably required for a sustainable development of a small island economy, and this leaves North Cyprus economy extremely dependent on the Turkish economy and foreign currency inflows. In additional to political problems, North Cyprus also deals with economic problems of being a small island with limited natural resources and a very small domestic market which constitutes insufficient domestic demand that is required for any sectorial development . Due the almost full integration into the Turkish economy, the Turkish Cypriot economy is also exposed to all the real and monetary shocks and instabilities prevailing in the Turkish economy. The economic performance of the Turkish Cypriot economy has been far from the impressive in recent years, where is the economy grew on average , only 7% in the period 1985-1989, the same figure dropped to 2.9% for the period 1990-1998, and then increased slightly and reached 3.9% in the period 1999-3002. The Greek side, on the other hand performed remarkably well in growth in per capital income from 1988- 2002, averaging 3% annually. Under favorable conditions this impressive performance of the economy of the Greek side is expected to continue in the next decade. The present disparity between two sides of the island becomes even more evident when we look at the difference in per capital income. In 2003 Turkish Cypriots achieved only 5.949$ per capita income, whereas the Greek side reached 17,644$ per capita in the same year, estimate that per capita income of North Cyprus must grow steadily at around 5% in the next decade in order to catch up to the Greek side. Ayres (2003) is on the other hand presents growth rate estimates which would be sufficient to close the present income gap between two sides of the island, accordingly, he predicts that with in an acceptable period of time, say 15-20 years the capita income of the Turkish Cypriot economy has raise to over 7 % per annum. He respectively postulates that the resolution of the political dispute would be beneficial mostly for the Turkish side and with an appropriate macroeconomics policy and most important, the removal of all economic and political embargoes, the Turkish Cypriot economy would be able to generate sufficiently high growth rates in order to eradicate the income disparity between the two sides of the island.

This is clearly an unsustainable income disparity that could afflict a possible long-standing federal settlement of the political between two sides of the island. The elimination of these disparities should there for be considered as the pre-condition for the political stability and a possible future federal settlement in the island, the unification under the Annan plan was expected to boost income in North Cyprus by almost 12%. The Annan Plan was a United Nations proposal to resolve the Cyprus dispute. The proposal suggested to restructure the Republic of Cyprus as a "United Republic of Cyprus", which would be a federation of two states. It was revised a number of times before being put to the people of Cyprus in a referendum. The proposal was supported by 65% of Turkish Cypriots, but only 24% of Greek Cypriots. But the Annan Plan failed first because both sides lacked information on what federalism is and how it can be made to work. Second, the plan was deficient in terms of power-sharing, providing for the collection and allocation of indirect taxes. The third is the wrong perception, particularly in the south that economic inequalities would require large and persistent subsidies to the Turkish side by Greek Cypriots. After the failure of Annan plan in 2004, Turkish Cypriot were accordingly urged to implement appropriate policies in order to eradicate these disparities. However economic isolation offers little scope for closing the present development gap between two sides of the island , and a political settlement of the dispute allowing for the removal of economic embargoes must be considered as a pre-condition for launching appropriate macroeconomic policies which would yield sustainable high growth rates .although we would not be of Corse certain about the extent of the income-generating effects of appropriate macroeconomic policies after the settlement, there is at least one thing sure at the moment that economic embargoes and isolation have certainly had negative impact on the achievement of significantly high growth rates in the north Cypriot economy. Moreover, economic embargoes and isolation over time yield a distinctive economic structure as an income generating mechanism with some distortion which may constitute additional constraints on the nature of economic growth. Therefore the purpose of the paper is first to examine the impacts of economic embargoes on restructuring North Cyprus economy, and accordingly to examine the features of the income generation process. The second aim of the paper is then to measure how North Cyprus economy has dealt with the adverse effect of this isolation. Lastly the paper also seeks some answers as to what extent the removal of this isolation would contribute to the economic growth performance particularly in the eradication of the income divergence between the two sides. In doing so, it is additionally investigated which sectors would have capability of generating high growth rates.

Macroeconomic back ground and economic embargoes
A large number of empirical studies in the economic literature postulate that economic growth is the result of a sound macroeconomic policy stance and high investment in physical and human capital. In this respect TNC exhibits a mixed picture. The country seems to enjoy a high level of education, particular in recent years. As a crude indication of the physical stock, the country seems to have failed to attain in sound macroeconomic policy stance over the period 1985-2007. In particular inflation appears to have been the most crucial weakness of the economy, despite a declining trend in recent years, in an empirical examination -Çiftçioğlu - (2000) show the inflation has a negative effect on economic growth. A 10% increase in inflation seems to lead the economy to a 0.9% decline in economic growth . The economic performance of North Cyprus economy has been astonishing after failure of the Annan plan in 2004. The economic growth rate reached almost 10% in the period 2007-2007 after low and sluggish growth periods in the 1990s and in the early 2000s.
Economic growth in any economy shows the need for the finance which could be provided by four different ways in practice, namely domestic and foreign saving, aid and inflation. In the case of north Cyprus, inflation rather imported from turkey due to the adaption of Turkish lira as a national currency, and cannot be used for generating income in north Cyprus to finance economic growth. Utilizing foreign savings through borrowing and capital inflows is also restricted due to economic embargoes, and domestic saving seems to have been insufficient to finance high domestic expenditure and economic growth. The resource saving gap measured by difference between the ratios of saving and investment in GNP, persistently exhibits deficits in North Cyprus economy. Current account deficits of the country can also be considered as another indication of resource gaps, and a 6.3% deficit in the current account can account for the external finance requirement in the period feature of 2004-2007. This requirement is not a novel feature of North Cyprus economy. In the late 1980s , the economy achieved almost7% growth rate by generating only 5.4% current account deficit as share of GNP. With the slower pace of economic growth in the 1990-1998 and 1999-2003 periods, the current account deficit appears to have declined to 3.5%. However the recent distinguished performance of North Cyprus economy once again brought about the need of a large external finance resources to finance a 6.3% deficit of GNP in the period of 2004-2007. The sectorial decomposition of these deficits indicates a curial feature of north Cyprus economy and puts particular emphasis on the dominate role of the public sector in the use available resources in the economy. Accordingly the share of the budget deficit appears to have been around 7% of GNP with the only exception occurring in the period of 1999-2003. Despite a 3.9% low growth rate in this period. The public sector deficit jumped to 15.7% in the period of 1999-2003 from 7.6% in the period of 1990-1998. However this deficit seems to have closed in the following period. With the lack of foreign borrowing and insufficient domestic saving, North Cyprus remained extremely dependent on aid and credit from turkey in order to meet the finance requirement, and this appears to have reached 7.1% in the latest period.
When compared to the other factors other macroeconomic policies matter even more in the context of open economies. In a small open island economy, the overall economic performance is likely to be affected by openness to trade. This is mainly because the lack of sufficiently high domestic demand can be compensated by external demand. However the presence of economic embargoes in the case of North Cyprus and international restrictions on direct flights to the Turkish side of the island afflicts North Cyprus economy by stifling external demand. In the regard, the removal of exogenously imposed restriction on the trade of North Cyprus has been the subject of a long political dispute for some time, but there appears to be no positive result in this line so far. As a consequent of these restrictions on external demand, export earnings have remained insufficient to meet import bills. In particular, whereas exports seem to account only for 27% of imports in the period 1985-1989, this ratio drastically declined first 13% in the period 1999-2003, and then 5.8% in the period 2004-2007. The sectorial composition of GDP shows another interesting feature of North Cyprus economy. First of all the share of the agriculture sector seems continuously to decline from 13.9% in the period of 1985-1989, to 9.1%, 8.1% and finally to 7.5% in the 1990-1998,1999-2003, and 2004-2007 periods respectively. This trend implies that the agriculture feature of North Cyprus economy gradually disappeared. The manufacturing sector, on the other hand, does not seem to have taken over the declining position of agriculture. Despite a relatively high share in the 1985-1989 and 1990-1998 periods, this sector too has apparently lost its importance in GDP in recent years, and reached almost 10% in the latest period. Most interestingly these two sectors in North Cyprus economy are the only sectors producing tradable goods which could involve foreign trade and generate international liquidity through trade. Unlike them other sectors like domestic trade, public services, and transport and communication sector available in North Cyprus economy are mostly inward-oriented sectors, and are only able to generate income on local currency through domestic demand expansion. Despite its 23.5% share, the highest in the period of 1985-1989, the transport and communication sector becomes the second after public services in the latest period.
With respect to the capabilities of each sector to involve into international trade, we become able to group nine sectors available in north Cyprus economy as tradable and non-tradable sectors. This decomposition is especially important for a developing country. This is mainly because the size of the tradable sector can considered as an indication of foreign exchange earning capability of the economy. Accordingly the tradable sectors appears to be the agriculture and manufacturing sectors and their markets can considered as global in the event of free trade. The non-tradable sectors on the other hand have a local nature, and meet the local need with domestic supply. This decomposition shows that the non-tradable sectors and activities in North Cyprus economy gradually become overwhelmingly dominant activities. In the latest period the tradable sectors in GDP was 17.2% in comparison with 73% share of non-tradable output. These shares in the period of 1985-1989 were 25.2% and 67.3% respectively. This is clear indication that North Cyprus economy possesses an economic structure which largely produces non-tradable goods with limited capability of generation foreign earnings. In addition to this feature of the economic structure, embargoes also put the economy under an extra burden by restricting the involvement of the already existing tradable sectors into foreign trade, and reduce the capability of generating foreign currency through foreign trade which extremely necessary to close up resource gaps.
My idea of increasing economic growth of North Cyprus
There is a lot of ideas can bring growth to TRNC. After studying what the North Cyprus needs to achieve the growth I figure an idea which can bring investors and increase the tourist’s rate.
My idea is to build a fashion shopping mall for the worldwide fashion brands and make North Cyprus an open market for the fashion industry to make the fashion shows and expose.
By encouraging the investors to open in North Cyprus and make it as an open market for the fashion industry, people who travel to Paris and other countries to do shopping will start looking to North Cyprus as a new market where they can enjoy their shopping and nature in the same time.
The mall will have a food court section which also will be worldwide restaurants which provides all types of food.
One of the main incomes of North Cyprus is the high education. Students can spend a 1000$ monthly, but the shoppers can spend double this amount in less than a week. Of course, we will consider that North Cyprus has casinos which also those types of people can enjoy playing there.
As the food court section a small example that people demand a worldwide restaurants to be open , students demand MacDonald's and Starbucks to be here in North Cyprus. Of course, opening worldwide restaurants in the food court inside the mall will make even the students to go and enjoy the meals there.

Conclusion North Cyprus is a small island economy with a limited domestic market and natural resources. There has also been a political dispute with the Greek side of the island in existence since 1974. Since then, North Cyprus has been under several economic and political embargoes. A search for peaceful settlement of dispute is subject to existing to the existing income differences between the two sides of the island. The most recent attempt of finding a resolution of the dispute, namely the Annan plan, was accepted by a great majority on the Turkish side whereas it was rejected by the south. This income difference constitutes one of the major obstacles and it urges the need of appropriate macroeconomic policies to eradicate this inequality. However with the presence of economic embargoes, North Cyprus economy has had a very limited choice of action in this direction.
The response of North Cyprus economy to embargoes, and indicate that the income divergence between the two sides requires attaining high economic growth rates and expenditure accordingly. As one way of achieving this, the North Cyprus government has adopted the TL (Turkish lira) as a national currency. This has then enabled the economy to reduce the stringency of liquidity constraints on domestic expenditure and most importantly on imports directly from turkey. Direct and easy access to the Turkish capital market hence allows the availability of liquidity to surge without ever increasing production towards turkey and other foreign markets. Building a close economic, other than political, relationship had helped North Cyprus to by-pass the restrictions of the economic embargoes. Higher expenditure capacity of the economy to sustain the high domestic demand is provided by easy access to the Turkish capital market, high income policies and transfer payments. But these policies have also accounted for high saving gaps and current account deficits of the economy.
Another important feature of North Cyprus economy is the dominant feature of non-tradable economic activities, and the novelty with this feature is that the economy has eventually become able to generate foreign exchange income, namely in TL, from non-tradable economic activities such as tourism related economic activities and higher education and other services.
The exports and final demand were two crucial components of growth. Due to insufficient private sector and domestic markets the public sector becomes, more important in generating final demand. But the fiscal stance of the economy in generating public-sector-driven economic growth would be the main concern in this regard. Exports, on the other hand, are another contributor to growth. However, economic and political embargoes seem to be the main disadvantage of the economy, restricting its ability to access the international markets, particularly to the European Union market. The removal of the embargoes in this respect would generate substantial economic growth for North Cyprus economy, and this should be considered as a pre-condition for eradicating the income gap between two sides of the island before reaching a peaceful settlement of the political dispute.
Another important issue is that the economic embargoes appeared to have been implemented asymmetrically on the external economic relationship of the economy, and despite various practical difficulties and high dependence on imports from Turkey the North Cyprus economy has access to international markets. The flow of imports from Turkey constitutes a crucial source of economic growth. However, a strict imposition of embargoes on imports would create drastically high output losses. The paper therefore implies that the economic embargoes have not been strictly imposed on the North Cyprus economy, but possess a significant impact on output growth. As a final point, the removal of the community’s isolation would generate not only economic growth for North Cyprus, but also generate hope for a peaceful settlement in the island.

References
Ghafoor,A. and V. Yorucu (2002). “Public expenditure and productivity puzzle: The case of Northern Cyprus”
Ayres, R. (2003), “The economic Costs of Separation: the North-South Development Gap in Cyprus”
Günçavdı, Ö. and S. Küçükçifçi, (2007), “The Sources for Economic Growth and Employment in the Turkish Republic of Northern Cyprus”