Embassy Newsletter       Washington, DC      December 1998


[01] Crafting A Strategic Vision For the Economy in the New Millennium
[02] Finance Minister Christodoulos Christodoulou recently spelled out the details of where Cyprus's economy stands today.
[03] Breakout box
[04] U.S. Pushes for Movement on Cyprus Problem
[05] United Nations Update
[06] An Honorary Texan
[07] World Heritage List
[08] Did You Know?
[09] Cyprus & the EU - Support for Settlement Efforts
[10] Turkey Ignores Court's Damages Award

[01] Crafting A Strategic Vision For the Economy in the New Millennium

As the last year of the century begins, and Cyprus prepares to join the European Union (EU), ambitious plans are underway to further promote Cyprus as a dynamic regional business center in the coming millennium.

Senior officials from President Glafcos Clerides on down, are studying ways the economy needs to be structured for "the beginning of a new era" that entry into the European Union will bring to the island.

President Clerides and Commerce, Industry and Tourism Minister Nicos Rolandis outlined for a conference in London Nov. 23, the advantages Cyprus already enjoys as an industrial, business and services' center, pointing to the island's strong economy and the incentives offered to attract investments.

Noting that throughout its history Cyprus has been known as an important trading center, the President said that "during the last two decades we have witnessed the transformation of Cyprus into a regional business center and a center for services of high quality."

He attributed this to "the stable macroeconomic environment and favorable business climate, the versatility and adaptability of its business community, the high education level of its manpower and the low cost of services provided." The President also cited sound domestic industrial relations, and Cyprus's strategic location, "as well as the modern infrastructure in ports, airports and telecommunications."

Referring to government policy for attracting foreign investment, he said that "foreign investors benefit from tax incentives and the relatively low level of taxation" and noted that the government recently liberalized and simplified procedures for the approval of foreign direct investment.

The President also said the peace process in the Middle East and the transition of former socialist countries in Central and Eastern Europe "have created a new climate conducive to entrepreneurial activity and economic development" in these geographical areas.

"Within this changing environment, a new challenge as well as a new potential for Cyprus is created to enhance its role as a regional business center, and as a base for foreign enterprises wishing to penetrate the promising markets of these regions," he added.

Rolandis told the conference that the island's economy this year is expected "to show a higher rate of growth, 4.7 percent in real terms," with inflation of 2.5 percent and unemployment at 3.2 percent. "The growing importance of Cyprus as a business and distribution center in the region" is underlined by its export performance, the Minister said, adding that the attraction of foreign investment is among the primary objectives of Cyprus's development policy. "Exchange controls are being phased out and over the last years there has been a further relaxation regarding investments by non-residents," he said.

[02] Finance Minister Christodoulos Christodoulou recently spelled out the details of where Cyprus's economy stands today and where it is going.

"The development of an ambitious and at the same time feasible vision to serve as a guidance for our planning and policy formulation is, indeed, in our sphere of competence," the Minister said, listing the economy's strengths, and the weaknesses that must be addressed. "The economy of Cyprus is characterized by a comparatively high level of economic and social welfare, satisfactory growth, full employment conditions, low inflation, comfortably manageable foreign debt and a tolerable fiscal position," he said. As for constraining factors, Christodoulou noted "the small size of the domestic market," which means enterprises have to rely on foreign markets, "in order to exploit economies of scale and contain production costs. . . . Noteworthy progress has been achieved in addressing rigidities," he said and further liberalization will take place in the context of EU harmonization.

Under emerging globalization import substitution and protectionist policies "are virtually ineffective," he said. "Enhancing competitiveness in world markets is the only road to success." Therefore, stability-oriented macroeconomic policies are necessary "in order to create the appropriate conditions for low inflation and interest rates and, in parallel, earn the confidence of markets and investors and attract foreign capital," he said. "This is the objective of the Treaty of Maastricht and the Economic and Monetary Union."

The service sector, he noted, and particularly knowledge-intensive areas are crucial in the emerging information society. "At the same time, investment in human capital is becoming a significant factor of production," he said.

Future Lies in the EU

In laying out Cyprus's strategic vision, the Minister said the future lies in the EU as a participant in the Economic and Monetary Union. This means, "safeguarding competition in all areas." Cyprus needs to maintain the main features of its present economic system, while reinforcing market mechanisms, dismantle the remaining trade barriers and reform the financial system."Export diversification and promotion remains the only viable strategic option for Cyprus," he noted.

In conclusion, the Minister said: "Promoting the harmonization with the EU, preserving macroeconomic stability, strengthening the functioning of the free market mechanism, redefining the role of the state, enhancing competitiveness, promoting export diversification, making labor markets more flexible and adapting our education and training systems to the requirements of the new emerging societies, are all elements, that should, in my opinion, be integrated in the vision for Cyprus."

[03] Breakout box

In appearances before numerous seminars in Nicosia, with titles such as, "A leap into the new millennium" and "Towards a vision for Cyprus in the year 2020," government officials are outlining plans for the future.

[04] U.S. Pushes for Movement on Cyprus Problem

On Dec. 3, President Bill Clinton, along with National Security Advisor Sandy Berger, State Department Special Coordinator for Cyprus Thomas Miller and other U.S. officials, met with prominent Greek and Cypriot Americans who urged Mr. Clinton to become personally involved in the Cyprus problem.

White House spokesman Joe Lockhart reported that, "The President reaffirmed that making progress next year towards resolving the Cyprus conflict and reducing tensions between Greece and Turkey are among his highest foreign policy priorities. Discussion focused in particular on ways in which greater progress on Cyprus can be made."

Efforts continued also as Miller consulted in early December with U.N. Deputy Special Representative for Cyprus Ann Hercus, British High Commissioner for Cyprus David Madden and U.S. Ambassador Kenneth Brill on the continuing effort to resolve the problem of a divided Cyprus.

At the conclusion of his meeting Miller indicated that there will be some sort of movement soon. "We're in the middle of a process. . . . I would just urge you to wait and see what our efforts turn out to be, it's not going to be that long," he said. "There's a number of things that are going to happen in the next couple of weeks, including deliberations at the Security Council so let's just wait and see when they come out . . . when there are results, you'll see them, we're not going to keep them private," he continued.

Upon his arrival Miller had emphasized that the "objective is, has been, and will be a solution to the Cyprus problem." With regard to President Bill Clinton's determination to find a solution for Cyprus Miller said, "he definitely made it clear to everybody . . . that he really does want to do something about it and to contribute."

After his meetings in Cyprus, Miller joined U.S. Presidential Emissary for Cyprus Richard Holbrooke for a meeting of the bicommunal business group in Turkey which was attended by Greek Cypriot, Turkish Cypriot, Greek and Turkish businesspersons. This was the third such meeting, and "the largest so far," State Department spokesman Jim Foley reported. A number of agreements were reached including one establishing working groups to move projects forward. In addition, the group agreed to hold another meeting in 1999.

Following those meetings both Miller and Holbrooke went to Athens to meet with senior Greek officials.

In late November, Clinton issued his bimonthly report on Cyprus covering the period August 1 to September 30. The President wrote, "U.S. efforts to bring about a negotiated settlement of the Cyprus issue based on a bizonal, bicommunal federation remained steadfast. U.S. officials encouraged the Greek Cypriot and Turkish Cypriot leadership to focus on the core issues of the Cyprus dispute and encouraged all parties to prepare for eventual comprehensive negotiations."

[05] United Nations Update

On Dec. 10, U.N. Secretary General Kofi Annan issued his report to the Security Council on U.N. operations in Cyprus for the period between June 9 and December 6. In the report Annan urged the Turkish side to reconsider its position on prohibiting contact between the two communities on the island and the fact that there has been "no Turkish Cypriot participation in bicommunal meetings on the island." He called the presence of the United Nations Peace- keeping Force in Cyprus (UNFICYP) "indispensible for the maintenance of the ceasefire between the two sides" and while noting that troop levels remain unchanged, "the situation in Cyprus is not static, and the continued upgrading of military equipment and infrastructure gives cause for concern." He, therefore, recommended that UNFICYP remain in Cyprus for another 6 month period.

Nevertheless, on Dec. 14, Annan wrote the Security Council that his envoy Ann Hercus's "shuttle talks" between the two sides were progressing, noting that the "sequence of confidential meetings" that began on Oct. 16 deal with "three clusters of problems: reduction of tension, core issues and humanitarian/goodwill issues. . . . The declared objective," he added is to continue working "toward achieving agreement on the core aspects of a comprehensive settlement of the Cyprus problem."

UNFICYP is comprised of 1,230 troops and 33 civilian police from Argentina, Austria, Canada, Finland, Hungary, Ireland, Slovenia, the Netherlands, and the United Kingdom and Northern Ireland. Of the $45 million appropriated for the maintenance of UNFICYP between July 1, 1998, and June 30, 1999, $14.5 million are voluntary contributions from Cyprus and $6.5 million from Greece.

Meanwhile, the Cyprus government has requested a debate on the Cyprus situation at the General Assembly in the new year--the first since 1983.

[06] An Honorary Texan

The Ambassador of Cyprus to the U.S., Erato Kozakou-Marcoullis, briefed Texas Governor, George Bush, on U.N. and U.S. efforts to solve the Cyprus problem and on the EU accession process. During the Nov. 10 meeting, the Governor pronounced Ambassador Marcouliis an "Honorary Texan."

While in Austin, Mrs. Marcoullis gave a lecture at the University of Texas. In her closing remarks Mrs. Marcoullis articulated her hopes for the future. "Our dream is to see our country enter the new millennium whole and free . . . to see our children, Greek Cypriots and Turkish Cypriots alike, to join hands and to grow up in peace, prosperity and harmonious coexistence. . . . let us all work together to make this dream a reality," she said.

The Ambassador also visited Houston where she briefed local officials and the media on Cyprus issues.

In a Nov. 12 editorial entitled "Island Divided," The Houston Chronicle pointed out the urgent need for a Cyprus solution, noting that while the government of Cyprus had offered "significant concessions" to facilitate the peace process, the "Turkish government does not want a settlement that would end the island's division and seems to prefer the status quo to the available avenues to peace."

[07] World Heritage List

The United Nations Educational, Scientific and Cultural Organization (UNESCO) has included the neolithic settlement of Choirokitia in its World Heritage List. The people who lived there cultivated livestock, hunted animals and traded with other communities. They lived in "beehive" shaped buildings with foundations of stones and superstructures of mud or sun-baked mud bricks.

[08] Did You Know?

On Nov. 24, Cyprus and the U.S. signed the Global Learning and Observations to Benefit the Environment (GLOBE) agreement. GLOBE is an international environmental science and education program that brings students, teachers and scientists together to study the global environment.

On Nov. 27, Cyprus and the European Commission signed a contract entitled, "Integrated Control of Industrial Pollution and Chemical Substances" for the control of industrial pollution. The main aim of the project is to control chemical substances and to assist in streamlining Cyprus's environmental legislation and policies with those of the EU.

Commerce, Industry and Tourism Minister Nicos Rolandis plans to visit Japan next June in order to discuss "trade and export issues with Japanese officials, as well as investments in industrial, high-technology and the services fields."

On Nov. 19, Cyprus signed the Convention of the Rights of the Child. Labour Minister, Andreas Mousiouttas noted on that occasion that children living in the occupied area have been deprived of their fundamental rights to freedom, family, education and security.

On Dec. 9, Cyprus honored Jews born in internment camps in Cyprus between 1946 and 1948 when the island was a British colony.

In late November, an exhibition of Picasso engravings opened at the Nicosia Municipal Arts Centre. The exhibition, which will be on display until late January, features 156 engravings produced by the artist between 1968 and 1972.

In late November, Cyprus appointed its first woman Auditor General, Chrystalla Yiorkadji.

[09] Cyprus & the EU - Support for Settlement Efforts

European Union leaders have expressed support for United Nations Secretary General Kofi Annan's efforts to resolve the Cyprus problem. The EU position is outlined in the conclusions of the Austrian Presidency in Vienna on Dec. 11 and 12. In a separate paragraph devoted to Cyprus, the EU Council "reaffirms its support for the efforts of the U.N. Secretary General for an overall settlement of the Cyprus problem and in particular for the process which his Deputy Special Representative has developed with a view to reduce tensions and achieve progress towards a just and  permanent solution."

The EU leaders noted with "satisfaction" that "the six accession conferences with Cyprus, Hungary, Poland, Estonia, the Czech Republic and Slovenia have entered into substantive negotiations and reached the first concrete results." The EU Presidency further called on the Council and Com- mission "to maintain the momentum in order to permit intensive negotiations in the first half of 1999." The EU Council welcomed the fact that the enlargement process is "well underway."

In Vienna, EU Commissioner responsible for enlargement, Hans van den Broek also met President Glafcos Clerides and told him that Cyprus is way ahead of the other candidate countries for accession to the EU, as far as harmonization issues are concerned. He also indicated that Cyprus has the ability to overcome any difficulties relating to the Maastricht criteria.

Noting the need to reduce tensions, a subject that came up in Vienna, Foreign Minister Ioannis Kasoulides has underlined that Cyprus has sent a message communicating "our readiness to cooperate to find mutual ways of reducing tension" on the island in order to "create conditions through which negotiations for a settlement . . . can be carried out."

Meanwhile between Dec. 5 and 7, the chief negotiators of the six candidate countries for accession agreed during meetings in Bucharest to accept George Vassilou's invitation to meet next March in Cyprus. During the Bucharest meetings the chief negotiators exchanged views on a number of issues including the environment, labor and social policy, energy and free movement of capital.

Vassilou said that in Cyprus "hard work is being done, with enthusiasm by all associates and departments working toward accession." He further noted that the chief negotiators had agreed on the new chapters which will be handed in to the EU.

On Dec. 4, Cyprus's Council of Ministers approved the negotiating positions on eight chapters which were presented to the Presidency of the European Union on Dec. 7. Vassilou explained that most of these chapters concern consumer issues as well as free movement of goods as part of the unified market. "Negotiations on these eight chapters will take place in the first six months of the next year, during the German EU Presidency," he noted.

Cyprus has taken a number of steps involved with its accession process. In December, Cyprus and the EU signed a bilateral agreement providing for the island's participation in the EU "Media II" program. Media II promotes the development and distribution of European audiovisual productions and organizes courses of professional training in that field.

In late November, Cyprus also signed a 50 million ECU loan by the European Investment Bank (EIB), an arm of the EU. This is the 5th loan to the Cyprus Development Bank since 1991 but it is the first given within the framework of the "Pre-accession Financial Protocol" which was set up to support investments in the 11 EU candidate member states.

[10] Turkey Ignores Court's Damages Award

A 1996 decision by the European Court of Human Rights to hold Turkey accountable for $640,000 in damages to a Cypriot woman who lost her property in the 1974 invasion, could have widespread implications.

Turkey has refused to pay by the deadline set for last October, although it officially accepted the jurisdiction of the court in 1990, and in the court's 48-year history no state so ordered has refused or avoided paying monetary awards.

Meanwhile, on the 50th anniversary of the Universal Declaration of Human Rights this month, President Clerides wrote to Secretary General Annan saying, "Cyprus attaches utmost importance to the issue of Human Rights and is committed to promoting their application for all nations and all peoples" and the people of Cyprus continue to rest their hopes in the U.N. for "full restoration and safeguarding of their human rights and fundamental freedoms."


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