One of the most abiding characteristics of the Cyprus problem is number inflation. Someone cites a number, often a wrong one, others round it up, and before you know it, 25,000 has turned into 45,000 and 38,000 has turned into 200,000. Cyprob geeks will know the numbers to which I am alluding.
The problem with inflated numbers is that they frighten people. Therefore they only serve to prevent a solution of the Cyprus problem.
The most recent victim of number inflation is the cost of property compensation. As the UN has said on more than one occasion, there is as yet no official figure on the cost. But that has not stopped people throwing numbers about and adding in a bit of Cyprob hyperinflation into the mix.
In the space of just a few weeks, a figure cited at $25bn (€19bn at the current exchange rate) has already more than doubled to €35bn – the equivalent of $45bn.
But it shouldn’t even be €19bn. My own extensive number-crunching suggests that if property compensation costs any more than €5bn, though admittedly this is based on aggregated data. I shall explain how I get there in future articles.
The job of working out how much it will really cost has fallen to the World Bank. Armed with detailed data from both sides of the island, its team should be able to come up with an accurate figure of unit property values.
Then to come up with a final figure on the total cost of compensation, the leaders will have to decide on the appropriate mix of reinstatement, exchange and compensation.
Accurate figures will be critical to attracting the kind of private-sector investment that will be needed to help finance the property settlement.
With pressure on international generosity coming from millions of Syrian refugees stuck in Turkey, Lebanon and Jordan, it is clear that little international support is going to come in the form of donations. Instead, we shall have to find innovative ways of leveraging that huge asset called land.
The good news is that there is already some private-sector interest out there.
“Both the EU and individual countries have publicly stated their interest in contributing to the up-front costs related to a settlement, and there have also been expressions of private sector interest,” the UN Spokesperson’s office told the Cyprus Weekly in January.
Thanks to low eurozone interest rates and volatile emerging markets, investors are looking for new opportunities.
As UN Special Adviser Espen Barth Eide has said, “Today’s world is full of private money with nowhere to go.”
Investors will need data
However, private investors are not going to put money in the fund that is being talked about unless they have done a lot of due diligence – and that means numbers.
How much affected property is out there, who owns it, who uses it, who will end up owning it, what is its market value today and what might be its market value in future?
They will also need to know about the legal framework: how does the court system work, what protections exist for investors and how will this all operate under a federal model?
Of course, in the midst of negotiations, these are all rather sensitive questions. But until investors have this information, there’ll be no fund and no compensation.