Cyprus has limited quantities of raw materials, and this situation restricts the scope for industrial activity. Before the partition of the island, most manufacturing was of goods produced for the domestic market by small owner-operated plants, and a considerable number of those plants were located in the area occupied by the Turks in 1974. Industries in the Republic of Cyprus were subsequently reoriented toward export production, and many factories were built in the south. Petroleum refining, cement and asbestos-pipe manufacturing, and thermal electricity production are the republic’s heavy industries, and its light industries produce goods such as clothing, footwear, beverages, and some machinery and transport equipment. Printing and publishing also contribute to the Greek Cypriot economy.

Finance and trade

The Central Bank of Cyprus issues the Cyprus pound, while Turkish lira are circulated in the Turkish-occupied area. The Republic of Cyprus began to expand financial services, including offshore banking, in 1982. Light manufactures, particularly clothing and footwear, and foodstuffs, including potatoes and citrus fruit, constitute the republic’s major exports. Petroleum, petroleum products, foodstuffs, and machinery are the chief imports. Chronic trade deficits are offset by receipts from tourists, remittances sent home by expatriate Greek Cypriots, and receipts from the British military bases on the island. In the Turkish sector citrus fruits, potatoes, carobs, and textiles are the principal exports; foodstuffs, machinery, and transportation equipment are the major imports.

Services

Tourism became one of the major components of Cyprus’s economy after 1960. Most of the tourist accommodations, however, were in the portion of the island occupied by the Turks in 1974. After the partition the tourist trade recovered rapidly in the Greek Cypriot sector: to counter the loss of Kyrenia and the Famagusta-Varosha area, which had been the leading seaside resorts, the southern coastal towns of Limassol, Larnaca, and Paphos were further developed to accommodate tourists. Since the mid-1980s, tourism has been the largest source of foreign income for the Greek Cypriot sector.

Labour and taxation

With the exception of the years immediately following the Turkish invasion, Cyprus has maintained a low overall level of unemployment—among the lowest in Europe—and labour union activity has been strong, with nearly two-thirds of Cypriot workers belonging to unions. Roughly one-fourth of the Cypriot workforce is employed in trade, while the service industry is the second largest employer, with more than one-fifth of workers engaged in some service-related occupation, mostly in the tourism sector. Agriculture, once the mainstay of the Cypriot economy, now employs less than one-tenth of the workforce.

Taxation is a major source of state revenue, and the government of the Republic of Cyprus levies direct taxes, including an income tax, and indirect taxes, including various excise taxes and a value-added tax introduced in the mid-1990s.

Transportation and telecommunications

In Roman times the island had a well-developed road system, but, by the time of the British occupation in 1878, the only carriage road was between Nicosia and Larnaca. An extensive new road network was built under the British administration. A narrow-gauge public railway proved uneconomical and was closed in the early 1950s, and since then inland travel has been entirely by road. The Greek Cypriot sector continues to develop and maintain an extensive network of modern highways. In 1994 a highway connecting Nicosia, Anthoupolis, and Kokkini Trimithia was completed.

International air services provide connections to all parts of Europe and the Middle East and to some areas of Africa. Nicosia International Airport was closed in 1974, and the airport at Larnaca was developed instead to service the Greek Cypriot sector. An airport at Paphos, also handling international flights, opened in 1983. Flights to the Turkish-occupied sector arrive from or through Turkey and use an airport at Geƈitikale (Lefkoniko).

There is no significant coastal shipping, and much of the merchant marine registered to Cyprus is foreign-owned. The great bulk of the island’s international trade remains seaborne, and the main ports of the Greek Cypriot sector, Limassol and Larnaca, are thoroughly modernized; Vasilikos is a major industrial port. Turkish shipping uses Famagusta.

The Greek Cypriot sector became a major international telecommunications hub in the 1990s, installing submarine fibre-optic cables and satellite linkup facilities.