The problem of “Idle Capital.”
Idle funds refer to money that has not been invested and is, therefore, not earning interest or investment income. Idle funds are simply funds that are not deposited in an interest-bearing or investment tracking vehicle, that is, are not participating in the economic markets.
A quick glance at the headlines in North Cyprus would lead you to think that corruption is the biggest problem on the island. Seventy-two per cent of residents say bribery and corruption was ‘very common’. Bribery was found to be most rampant among the ‘prime minister’ and ‘ministers’. According to the study, which was based on Transparency International’s Corruption Perceptions Index (CPI) methodology, the corruption perception score of the North for 2022 is 27 out of 100. On a scale of 0–100, zero indicates very high corruption, and 100 indicates no corruption.
However, I believe the major problem on the island of North Cyprus is not corruption. The real problem is that there is too little money to share and/or go around. If our GDP is *€4Bn (2019 records), it means there are too little funds to go around and on top of that, very little wealth is being created. The little capital that is available is very much idle- locked up in deposits and sometimes luxury consumer spending, which is why we see mechanisms designed to tie the funds down and keep it even more idle, for example, car dealerships/ lots/ garages springing up on every corner even if car sales are not increasing at the same rate.
I often wonder- all the billions earned by universities in reveune from intl students every year, where does it go? Very few universities do major projects (although a lot of them “pretend” to be building however, a lot of those buildings are never finished). Where do universities invest those monies?
Data from KredoCyprus show that lots of people in North Cyprus do not use a budget for their personal finances, much less save or think about investing (not that there is much to invest in or there is corporate governance to protect said investment), so MSMEs and SMEs also struggle since there are no credit lines. One of the outcomes of “idle capital” is that luxury cars outsell budget/ more affordable cars, which should make zero sense on an average day. Compared to productive economies like the UK, for example- that have no luxury car on the top 10 best-selling list.
