Documents Conclusion of the First «Regular Report from the Commission on
Cyprus’ Progress towards Accession», November, 1998
In the political
field, continuing attention needs to be paid to avoid measures which could create
additional tensions on the island and could make the creation of a bizonal and bicommunal
federation more difficult.
Despite the efforts to achieve a political
solution to the continuing division of the island, it has not been possible to reach a
comprehensive settlement in accordance with UN Security Council resolutions. The
invitation of the Cyprus Government to include representatives of the Turkish Cypriot
community in the negotiations has not so far been taken up. This has meant that the
analytical examination of the acquis could not cover Cyprus as a whole.
In the economic field, developments since 1993
confirm that the Cyprus economy possesses the ability to adapt to the challenges posed by
the adoption of the acquis and that the authorities appear committed to restoring a stable
macro-economic environment and a favourable business climate. As a result of the
characteristics of the country, notably its insularity and the continuous wage pressures
and wage rigidity (also related to the full employment situation), Cyprus has in recent
years lost competitiveness in traditional sectors (industry and tourism). This is also
reflected in the declining trend of domestic exports to the EU. But the importance of the
tertiary sector has continued to increase, while efforts have been made to reduce the
overdependence of the economy on tourism. This trend can be expected to continue. The most
notable development has been the large and growing importance of the international
business sector, in particular the international banking sector. It will be important to
ensure that the sector’s activities are in line with the acquis. Another equally
important challenge will be to restructure the
domestic financial sector with a view to ensuring that it can withstand competition
stemming from capital account liberalisation.
The integration of the northern part of
Cyprus, especially if it takes place in the context of Cyprus’ accession to the EU, will
not raise major economic difficulties, because of its relatively small size and its
potential, in particular in terms of agriculture and tourism. However, it will be
important to bring the basic infrastructure up to the standards of the southern part of
the island.
As regards the adoption of the acquis, a large
number of the instruments required for the progressive adaptation of the acquis are
already contained in the 1973 Association Agreement and the 1987 Protocol. On the basis of
these instruments, Cyprus has made significant progress in adopting the acquis, most
notably in the context of the Customs Union. However, substantial efforts have yet to be
undertaken in the internal market field and, in particular, in the international business
and financial sectors. Furthermore, maritime transport, telecommunications and justice and
home affairs constitute other areas of particular concern. Cyprus should not face major
problems in adopting the acquis with regard to the 16 chapters already screened.
It seems that major problems will not be
encountered as concerns Cyprus’ administrative and judicial capacity to apply the
acquis. However, administrative capacities need to be strengthened in a number of areas,
including the internal market, maritime transport, telecommunications, environment, and
justice and home affairs. |