Impact of Investment Incentives on Employment in TRNC

After 1974, North of Cyprus became a unique country, and the markets in the country faced various obstacles due to its international unrecognition and controversial property regime. TRNC governments have developed various incentive programs to eliminate market failures, increase investment attractiveness and eliminate geopolitical problems. The Investment Incentives Law (47/2000), which is operated under the State Planning Organisation, is the most comprehensive and widely used of the implemented programmes. Although a priority sector has not been determined within the scope of this law, the main beneficiary sectors are tourism and industry. The Law provides investors with various tax breaks and exemptions, as well as land allocation, subsidized loans, and other exemptions. This study examines the relationship between investment incentives given in Turkish Republic of Northern Cyprus since 2002 and employment in the country. The main research point of the study is to what extent investment incentives affect domestic employment and sectoral employment. In line with the results obtained, it has been concluded that investment incentives given to the industrial sector affect domestic employment, while tourism investment incentives affect more of foreign employment. In addition, industrial investment incentives positively affect employment in the industry sector and service sector investment incentives positively affect employment in the services sector. It has also been determined that industrial investments affect employment with a lag of one year and tourism investments with a lag of two years. Keywords: Investment, Incentives, Employment, Northern Cyprus