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Despite the continued levels of prívate investment, if there was crowding out in the
economy of the Republic, the signs are not obvious, at least until after the economic
crisis of 1974 was over (see Figure 5.14 above) 50 . In every year after 1976 private
investment (as seen in gross fixed capital formation - GCF) was rising faster than
public investment. Only in 1974 did private investment fall whilst public investment
began to rise, but there are perhaps unique circumstances for that, unconnected with
the displacement of investment by the public sector. Only in 1976 is there some
evidence of possible crowding out, though it is difficult to know how much private
gross fixed capital formation (GFC) failed to enter government statistics (see
argument below). What seems more likely is that the quasi-state sector, Church and
co-operatives, worked in conjunction with the state, boosting investment when more
independent private investors may have shunned Cyprus. The argument is that the
state co-opted the large institutional investors into maintaining investment levels.
Conversely, the recovery programme worked as planned, marrying some
government finance, extended credit facilities and other direct and indirect
incentives, with the management of the private sector; a quasi-private finance
initiative.
Both the nature of the majority of Cypriot business (small family oriented firms)
and the legal basis of Co-operative Credit Societies, also do not allow these
suppositions to be fully explored. Consequently, official figures on domestic
investment may lead to misrepresentations
of economic reality by under
representing the private sector (and the quasi-public sector) in domestic fixed capital
formation. Co-operatives have been legally constrained from offering credit to
companies and individuáis for commercial (other than agricultural) purposes. As
50 Ideally tliis sliould have entailed an econometrie exercise, though data limitations prevent the
pursuance of such an approach. The data presented above, however, suggests that there was no
obvious, significant crowding in the immediate aftermath of 1974.
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