Source: EURLEX
Language: en
Format: md

#### CO:M.\AISSION OF THE EUROPEAN COI\t.\IDNITIES

COM(93) 313 final

Brussels, 30 June 1993

COMMISSION OPINION ON THE APPLICATION

BY THE REPUBLIC OF CYPRUS FOR MEMBERSHIP

##### _-A-_

COY.llSSION OPINION ON THE APPLICATION

BY THE REPUBLIC OF CYPRUS FOR MEMBERSHIP

FOREWQRD

1. On 3 July 1990, the government of the Republic of Cyprus submitted

to the Counci I of the European Communities an application for membership of

the European Coal and Steel Community CECSC), the European Economic

Community (EEC) and the European Atomic Energy Community C-EAEC).

2. At Its meeting on 17 September 1990, the Councl I noted the

appl lcatlon and decided to set in motion the procedures laid down in Article

98 of the ECSC Treaty, Artlcie 237 of the EEC Treaty and Article 205 of the

Euratom Treaty, asking the Commission to draw up an opinion, as reQuired by

these provisions.

3. Applications have recently also been received from several EFTA

countries and from Malta, and an application was previously submitted by

Turkey. The Commission delivered its opinion on Turkey's application in

December 1989, followed by opinions on the applications of Austria (August

1991), Sweden (July 1992), Finland (November 1992) and Norway (March 1993).

It Is transmitting its opinion on the appl lcation submitted by Malta

simultaneously with this document.

4. The European Counc i I cone luded Its discuss ion of the Quest ion of

enlargement at its Lisbon meeting on 26 and 27 June 1992 with the fol lowing

observations relating to the EFTA countries:

                                 - 2 

"The European Councl I considers that the EEA Agreement has paved the

way for opening enlargement negotiations with a view to an early

conclusion with EFTA countries seeking membership of the European Union

... The official negotiations wi I I be opened immediately after the Treaty

on European Union is ratified and agreement has been achieved on the

Delors I I package."

In the I lght of the decisions taken by the European Counci I at its Edinburgh

meeting on 11 and 12 December 1992, enlargement negotiations got under way

in February 1993 with Austria, Finland and Sweden, and in April 1993 with

Norway.

As regards applications from other countries, the Lisbon conclusions

continue as fol lows:

" The European Counci I considers that if the cha I lenges of a

European Union composed of a larger number of Member States are to be met

successfully, para I lei progress is needed as regards the internal

development of the Union and in preparation for membership of other

countries.

In this context the European Councl I discussed the applications

wh i eh have been submitted by Turkey, Cyprus and Ma I ta. The European

Council agrees that each of these applications must be considered on its

merits.

Relations with Cyprus and Malta will be developed and strengthened

by building on the Association Agreements and their application for

membership and by developing the pol ltical dialogue."

5. The European Counc I I wh I eh met In Copenhagen on 21-22 June 1993

"considered that its guidelines with regard to enlargement with the EFTA

countries shall be without prejudice to the situation of other countries

which have appl led to Join the Union. The Union wl I I consider each of these

membership applications on its own merits.

The European Council welcomed the Commission's intention to present

shortly its opinion on Malta and on Cyprus. These opinions wi I I be examined

rapidly by the Counci I taking into consideration the particular situation of

each of the two countries".

                                - 3 

INTRODUCTION

6. Since the Island was declared Independent In 1960, the "Cyprus question"

has constantly been before the United Nations and has never left the agenda

of the Security Councl I.

The existence of the Greek and Turkish communities side by side, but

differing in language, culture, religion and national traditions, conferred

on the young republic a turbulent history, I ittered with crises and

outbreaks of intercommunal violence, culminating In 1974 in a coup inspired

by the supporters of Integration with Greece. This resulted in a military

intervention by Turkey. The outcome of the crisis of August 1974 and the

occupation of part of the territory of Cyprus by the Turkish army was the de

facto partition of the Island, which led to large-scale population movements

across the cease-fire I lne and, more especially, from the northern to the

southern part of the Island.

This de facto separation of the two communities, Turkish in the north and

Greek in the south, remains to this day. With very rare exceptions neither

people nor goods nor services can cross the dividing I ine. In 1983 the

northern part of the Island declared itself an independent republic. With

the solitary exception of Turkey, no member of the international community

has recognized this republic. Until recent years the diplomatic efforts

conducted under United Nations auspices to bring about a mutually acceptable

institutional solution had been blocked by the Intransigence of both sides.

7. In 1992 it seemed at first that the intercommunal negotiations arranged

through the good off ices of the United Nations Secretary-General might

provide the means of gradually hammering out a solution based on a

two-community and two-zone federation. The principles of this solution were

approved unan I mous I _y_ by the Se cur i t _y_ Counc I I in Apr I I 1992

(resolution 774/92). The lntercommunal discussions that took place In

October and November 1992 revea I ed, however, that a great many po I nt s of

disagreement remained, including on general principles and institutional

                               - 4 

aspects of the future federation. The discussions were resumed in the

spring of 1993 and although it is hoped that they may lead to a final

agreement, the poss i bi I i ty of continuing disagreements can st i II not be

ruled out.

a. When presenting its application for accession, the government of the

Repub Ii c of Cyprus, recognized by the European Community and its Member

States as the only legitimate government- representing the Cypriot people,

addressed the Community on behalf of the whole of the island. The

application was strongly challenged by the de facto authorities of the

northern part of the island. Whl le acknowledging that it would be in the

interests of the Turkish Cypr lot community to form part of the European

Community, these authorities rejected the right of the government of the

Repub Li c of Cyprus to speak for the who I e of Cyprus in such an approach.

They based their position on the Guarantee Treaty and the wording of the

1960 Constitution, which grants the president and vice-president (a Turkish

Cypriot) a veto over any foreign policy decision, particularly any decision

on Joining an international organization or alliance that does not count

both Greece and Turkey among its members. They consider, accordingly, that

in the prevai I Ing circumstances the Community should not take any action on

the app I i eat ion.

The Community, however, fo I low Ing the logic of Its estab Ii shed posit ion,

which is consistent with that of the United Nations where the legitimacy of

the government of the Republic of Cyprus and non-recognition of the "Turkish

Republic of Northern Cyprus" are concerned, felt that the application was

admissible and initiated the procedures laid down by the Treaties in order

to examine it.

9. The Community has therefore to establish its position on whether Cyprus

is eligible for membership, its capacity to adopt within a reasonable time
scale the acguis communautaire, in particular the rules concerning the

single market and the common policies, in order to become a dynamic member

of the economic and monetary Union and participate actively in the common

foreign and security policy.

                                 - 5 

This opinion deals with all these factors and for the most part confirms 
at least with regard to the southern part of the island - the Commission's

assessment in its communication of 24 June 1992,1 namely that "adoption of

the acgu!s communautaire would not appear to present insurmountable problems

in the case of Cyprus". This assessment covers both how democracy is

organised and how it operates in Cyprus - confirmed as satisfactory in the

last presidential elections - and also the structure of its economy and its

regulatory framework.

10. As a result of the de facto division of the island into two strictly

separated parts, however, the fundamental freedoms laid down by the Treaty,

and in particular freedom of movement of goods, people, services and

cap I ta I, right of estab I I shment and the uni versa I I _y_ recognized po I it i ea I,

economic, social and cultural rights could not today be exercised over the

entirety of the island's territory. These freedoms and rights would have to

be guaranteed as part of a comprehensive settlement restoring constitutional

arrangements covering the whole of the Republic of Cyprus.

11. In examining the eligibi I ity of Cyprus for membership and its capacity

to be a fully participating member of the Community and the European Union,

the Community must therefore also have the greatest regard to the special

links binding one of the Cypriot communities to one of the Member States,

and the links between the other Cypriot community and a country which is

associated with the Community - and also an applicant for accession - and

one which is of major strategic, pol iti.cal and economic importance to the

Community.

12. In drawing up this opinion, the Commission relied on information on the

situation in Cyprus provided by missions visiting the island or by the

authorities of the Republic of Cyprus, with which it has maintained close

contact, notab I _y_ through the Miss ion of the Repub Ii c of Cyprus to the

Communities.

Europe and the challenge of enlargement.

                                - 6 

In keeping with their challenge to the application for accession lodged by

the government of Cyprus, the Turkish Cypriot authorities declined to

cooperate with the Commission In the technical preparation of this opinion.

Data on the northern part of the Island were therefore obtained from the

government of the Republ le of Cyprus or from aval lable International

sources. They m I ght therefore have to be supp I emented at a I ater stage.

The Commission Is of the view, however, that the range of Information In Its

possession Is such as to enable It to back up the analyses and conclusions

of this opinion.

                                - 7 

PART ONE

I. Outline of the de facto situation in Cyprus

I I. Prospects for a settlement of the Cyprus question and Integration with

the Commun I ty

Ill. Current state of relations between Cyprus and the European Community

IV. Economic aspects of Cyprus's transition towards integration with the

Community

V. Cyprus's participation In Community institutions

VI. Cone lus ions

                   - 8 

I. Qutllne of the de facto situation In Cyprus

13. Cyprus is an island strategically located in the north-east

Mediterranean with a population of approximately 700 OOO occupying an area

of 9 251 km 2, i.e. a relatively low density (76 inh./km 2 ) and, at about 1%

per year, low popu I at Ion growth. There is a high degree of urban I zat ion,

with rates of literacy and school enrolment and even secondary and higher

educat Ion, in the southern part of the Island at least, are comparable to

levels In the most advanced countries.

A popu I at ion of some 570 OOO Ii ves in the south of the is I and, wh I eh Is

controlled by the government of the Republic of Cyprus. In addition to the

130 OOO Turkish Cypriots I iving in the north, there is also a Turkish

military force (some 30 OOO strong according to United Nations' estimates)

and a large number of Turkish settlers (between 45 OOO and 50 OOO according

to the same source) who have moved in since the 1974 military intervention.

It should be mentioned that part of the Turkish Cypriot population that was

present on the Island In 1974 has since emigrated, notably to Western

Europe. The northern part of the Island as currently divided represents 37%

of the total area.

14. The Island's economic development since its de facto division has

fol lowed very different courses. The south has experienced remarkable

economic growth, based largely on service Industries and especially tourism,

giving a GDP per inhabitant of about ECU 9 OOO on average for 1991, i.e.

higher than In several Community Member States. Development in the north,

which ls more agriculture oriented, has not been so fast. As a result of the

north's diplomatic Isolation, its potential and Infrastructure for tourism

have not been fully exploited. The contribution of agriculture to

employment, added value and foreign trade continues to be very signlf lcant

In this part of the Island. The GDP per Inhabitant is three or four times

smaller than in the south.

15. Politics in Cyprus has also fol lowed different courses since 1974. The

Republic of Cyprus, whose authority extends in practice only to the south of

the island, has retained the constitution of 1960 although, of course, all

                    - 9 

provisions relating to the participation of the Turkish community in the

exercise of executive, legislative and judicial powers are no longer

applied. Indeed, some have not been applied since the inter-communal crisis

of 1963.

Cyprus has a presidential-type constitution and a par I lament with a single

chamber. The current President, Mr Clerides, was elected for five years in

February 1993 with the support of two parties forming a majority in the

chamber.

There Is a wide consensus in par I I ament beh Ind Cyprus's app l I eat I on for

Community membership and the long-standing, liberal-influenced economic

policy which has been fol lowed for several years and has been maintained by

the government of Mr Cler ides.

16. The government in the north, which is not recognized by the

international community, adopted a constitution by referendum in 1975. The

constitution was later modified In 1985.

Mr Denktash was elected President under this constitution and

re-elected In 1985 and 1990. He holds a large majority in parliament owing

mainly to the Turkish settler vote. Mounting opposition is being voiced by

some sections of public opinion to the Mr Denktash's stance both on

economic issues and on the settlement of the Cyprus question.

17. On the subject of respect for democracy and human rights, two points

must be taken Into account, namely that the Island's forced partition alone

represents a serious Infringement of the fundamental freedoms of citizens of

Cyprus and that the rights of victims of the events of 1974 have not yet

been restored owing to the lack of apolitical settlement. The presence of a

considerable number of Turkish settlers and the demographic changes that

result from this are also considered as an infringement of the political and

economic rights of the people, including by some sectors of Turkish Cypriot

pub I I c op In ion .

                          - 10                           

Apart from the direct and indirect consequences of the partition of

the Island, human rights situation is as fol lows. The constitution of Cyprus

protects the rights of people belonging to the three national minorities and

establishes freedom of speech and the right to free assembly, equality of

al I before the law and bans al I forms of discrimination. The Independence of

the Judiciary Is guaranteed. Al I these provisions are effectively respected.

However, In the North of the Island, opposition parties have mentioned

certain constraints and restrictions In their activities, in particular as

regards access to the media.

18. Another aspect of the pol ltlcal tension in Cyprus comes in the shape of

the extensive mi I itary presence and excessive presence of weapons.

In addition to the estimated force of some 30 OOO Turkish troops,

there is a permanently mobilized Turkish Cypriot force- In the north of

Cyprus of an estimated 4 OOO. A further 26 OOO form the reserve force. In

the south, Greece maintains a force of Just under a thousand alongside the

Greek Cypriot national guard consisting of 10 400 men plus reserve force of

100 OOO.

Weapons on the Island are becoming increasingly sophist lcated, to.

the point where the defence effort maintained by each party is eating deeper

into national budgets.

The United Nations .force UNFICYP (1 513 strong in March 1993), which

was dispatched in the wake of the civi I war in 1964, sti 11 occupies the

ceasefire I ine. After much hard debating, the United Nations recently

adopted a dee is Ion wh I eh changes the way this force is financed and Its

structure and is to reconsider Its mandate in December 1993.

Mention should also be made, finally, of the two military bases in

southern Cyprus maintained by the United Kingdom under British sovereignty.

                           - 11                           

11. Prosoects for a settlement of the Cyorus question and Integration with

the CQllftlnlty

19. The need for close cooperation between the two communities to

achieve the integration of Cyprus with the European Community Is highlighted

In the "set of Ideas on a comprehensive framework agreement on Cyprus". This

document, unanimously endorsed by the Security Council under resolution

774/92, formed the basis for Inter-communal negotiations carried out by the

Secretary-General of the United Nations during 1992. It proposes a

settlement based on a Cypriot state with a single sovereignty, International

personality and citizenship, with guaranteed territorial independence and

Integrity and Including two pol ltlcal ly equal communities In a bl-zonal, bi

communal federation.

However, as it stands, the text was not accepted by the

representatives of the two communities. Amongst Issues which stl II remain to

be settled, as can be seen clearly from the report presented by the United

Nations Secretary-General at the conclusion of the talks In October-November

1992, Is the fact that the Turkish Cypriot side wants a solution to the

constitution question which Is more "confederal" than the solution

suggested by the "set of Ideas". President Clerldes, on the other hand,

while accepting the "set of Ideas", has expressed the will, since his

election, to Introduce amendments, notably so as to reinforce references to

human rights, make Improvements on the operational side of the executive

branch and make It more compatible with future membership of the Community.

As a result, the final balance of the settlement, especially on the

institutional Issues, Is still the subject of talks between the parties

concerned.

20. As a measure of support for the efforts of the Secretary-Genera I,

the Security Council has called on all parties to continue striving for a

pol ltlcal settlement. More recently, the emphasis seems to have shifted

                           - 12                           

towards Implementation of practical measures aimed at building confidence

between the two communities. Agreement on these measures could make clear

the wl I I lngness of both parties to advance to an overal I settlement.

21. It Is of the utmost Importance that the process started by the

United Nations Secretary-General leads to an equitable solution which deals

fairly with the Interests of each community. It is equally Important that,

whatever the institutional balance decided In the final settlement, the

process results in the establishment of Institutions which ar·e capable of

carrying out their responslbi I I ties both effectively and efficiently.

In this context care should therefore be taken with a view of the

posslbi I ity of Community membership to ensure that the decision-making

process of the executive and legislature is compatible with the Community's

discussion and decision-making apparatus and wi I I enable the Cypriot

authorities to adopt the acguls communautaire and Implement It effectively

throughout the Island.

22. In relation to the Common Foreign and Security Policy, the need to

promote a political settlement is all the more paramount as the current

situation would make It difficult for Cyprus to accept and Implement

commitments made under the European Union Treaty. The political problems

linked to the status guo would Inevitably have an Impact on the Community's

policies, especially those concerning Turkey. Cyprus must also give up Its

membership of the Non Aligned Movement of which it was a founder-member and

In which It continues to participate actively.

                           - 13                           

Ill. Relations between Cyorus and the Eurooean community

The Association Agreement

23. Cyprus has been I Inked to the European Community s i nee 1973 by an

Assoc i at Ion Agreement wh i eh provides for the estab Ii shment of a customs

union In two stages. This Agreement excludes discrimination between Cypriot

or Community nationals and contains arrangements on trade and on f lnanclal

and technical cooperation which are to be applied for the benefit of the

entire population of the Island.

The f I rst stage provided for the phased reduction of tar I ffs on

Industrial goodJ and agricQltural products. This stage was due to expire In

June 1977 but was extended to the end of 1987, the dead I lne by which all the

alms we~e achieved.

The Protocol governing the transition to the second stage of the

Agreement, I.e. the completion of the customs union, I ikewlse In two phases,

entered Into force on 1 January 1988.

The f lrst chase, from 1988 to 1997, provides for:

the reduction by Cyprus of customs duties and quantitative restrictions

on Industrial products (except for petroleum products and 15 categories

of sensitive products) and on the 43 agricultural products covered by

the Agreement;

the adoption of the Common Customs Tariff by Cyprus;

the harmonization of accompanying policies: competition, state aids,

approximation of laws.

The second phase, from 1997 to 2002, provides for the free and

unrestricted movement of industrial and agricultural products and the

adoption of the accompanying policies required for completion of the

customs union, including, in principle, the abolition of the origin

rules appl lcable to manufactured products.

                             - 14 

Current trade arrangements

24. The customs union agreement covers 82% of all trade between Cyprus

and the Community. The current situation is as fol lows:

the Community has entirely eliminated the final remaining restrictions

on imports into the Community of industrial products originating In

Cyprus, including text I le products, ~lothing and processed agricultural

products not falling under Annex I I to the EEC Treaty;

by 1 January 1993, the Republ le of Cyprus had already reduced duties by

64.25% by comparison with the rates applied to the Community in 1973.

However, the dismantling of tariffs in the north of the island has not

kept pace with the timetable fixed in the Association Agreement and

Community exports attract duty at rates wh i eh are usua 11 y far higher

than those appl led in the south.

Adaotlng to the acguls communautaire

25. A large number of the instruments required for the progressive

adaptation of the Cypriot economy to the mechanisms of the single market

established by the Community and to the lmpl !cations of the common

commercial pol Icy are already contained therefore In the Association

Agreement and the 1988 Protocol.

The Commission considers that continuing with the proper

implementation of the abovementioned instruments in accordance with the

agreed timetable is the best means of ensuring a smooth passage for the

Cypriot economy towards possible accession.

26. On the subject of the adoption of the acguis communautaire,

Article 27 of the 1988 Protocol guarantees that certain principles laid down

in the EEC Treaty are applicable in relations between the two parties to the

Association, e.g. competition rules, provisions on tax and approximation of

laws. It is also stipulated that the measures relating to the application of

these principles which are essential to ensure the smooth functioning

                                - 15                                 

of the customs union shall be agreed by common accord by the beginning of

the second phase at the latest, which should normally mean by 1998. If this

deadline is to be met, the Cypriot government and the Commission must work

in close collaboration to ensure that the two parties can honour the

commitments made and that Cyprus can adapt Its legislation in ful I knowledge

of the facts.

Financial and technical cooperation

27. Fi nanc i a I a Id from the Commun I ty to Cyprus began with the First

Financial Protocol on 1 January 1979. From that date, up to and including

the Third Financial Protocol, which is currently in force, the Community has

granted Cyprus a total of ECU 136 mi II ion in the form of EIB loans (ECU 92

mi 11 ion), grants (ECU 29 m I I I ion) and spec I a I loans or risk capita I

CECU 15 mill ion). The projects financed mainly concern Infrastructure (urban

development, drainage, electricity) and have benefited the entire population

of the island. These projects have mostly been concentrated in the area of

Nicosia.

                                 - 16                                  

IV. Economic asoects of cvorus•s trans It Ion towards lntegrat Ion wl th the

community

28. Study of the economic situation of Cyprus confirms the view that not

only would its accession to the Community create no insurmountable

difficulties but, on the contrary, as long as it was carefully planned and

backed up by the appropriate policies, would bring about greater prosperity

and, In particular, would help the north make up the economic ground on the

south.

29. In the introduction to this opinion, reference was made to the

island's political division and how this went hand in hand with different

levels of economic development.

Th Is different I at I on Is ref I ected eQua I I y In structures of

production, In the extent of openness to the outside world and of

international specialization, In monetary policy and, in the long run, In

economic performance In terms of income, ful I employment, lnf lat ion and

foreign trade.

30. The southern part of the island is more geared towards Industry and

services - mainly International tourism - though its comparative advantages

in agriculture are also worth mentioning. Industry accounts for three
quarters of exports of goods. The large trade deficit is more or less

compensated by the earnings from tourism. More than half of all trade is

with the Community.

31. Economic growth Is strong, averaging 6% over the last decade and, on

account of a lack of manpower, the Republic of Cyprus resorts to labour from

Eastern Europe and, lately, has even agreed to al low workers from the north

to cross the border for the day. Despite overheating of the economy and full

employment, inflation has been pegged to a level of 6%. These good

performances have been greatly aided by adherence to a long-term policy of

stabilization of the Cypriot pound against the currencies of its trading

partners and, more recently, the ECU.

                                 - 17                                 

32. Despite this record, accession to the Community wi I I require

determined efforts from the state and the business sector.The economy

continues to be overdependent on tourism, which implies a risk, in the long

term, of an excessive drain on limited natural resources (e.g. water) and

Infrastructure and represents a factor of considerable uncertainty for the

economy In apolitically sensitive region, as the Gulf crisis demonstrated.

It Is vital, therefore, to diversify services and to consolidate

industrial development, especially as analysis of industrial structures

reveals a considerable degree of vulnerabi I ity to the required level of

exposure to international competition. Despite the steps taken so far

towards approximation to the Common Customs Tariff, most sectors of industry

still hide behind high tariffs. Duty in excess of 50% is not uncommon, even

in trade with the Community, where there is also local production. Many

sectors suffer from a lack of innovation and the quality of their products

Is vastly Inferior to equivalent Community goods. Unti I now, foreign

Investment, one source of technological advance, has received little

encouragement and Is subjected to severe restrictions. Maintaining the

competitiveness of industry is thus still too closely linked to external

protect Ion and espec i a 11 y to aid in a var I ety of forms: guarantees, tax

exemptions, investment or export f lnance subsidies from the state.

33. Progress towards Community membership would Involve completing the

dismantling of tariff protection, reducing aid and giving foreign investors

greater freedom. The restructuring that such a policy requires, and which is

already one of the economic goals of the present government, will be made

easier by the situation of ful I employment in Cyprus.

34. Changes would also be necessary in the banking and financial system.

Although payments relating to current transactions with the outside world

are relatively unrestricted, capital movements are strictly

                                 - 18                                  

regulated. Liberal lzlng capital movements wi I I require a fundamental reform

of the f i nanc i a I and monetary system and of procedures for credit and

currency regulation.

With the exception of Interest rates, which are f lxed by law at 9%,

this regulat Ion of the markets is carried out solely on a Quantitative

basis. The introduction of market mechanisms in the system, i.e. use of the

interest rate and greater compet It ion In the banking sector, wou Id he Ip

improve economic performance by reducing the activities of speculators 
e.g. investment In the property market - and at the same Increasing the

range of Instruments for macroeconomic regulation available to the

authorities, which at the moment consist only of exchange rate management

and budgetary policy.

35. The Isolation of the northern part of the island has weighed heavily

on its development policies and economic performance. The economy in the

north is closely linked to the economy of Turkey, from where it receives a

substantial amount of budgetary support and which provides 40% of Its

Imports, as wel I as being the second export market after the Community. The

absence of International air links, except to Turkey, has not allowed the

north to take full advantage of international tourism, despite possessing

the initial potential in the way of infrastructure. Tourist arrivals,

including three-quarters of Turkish nationality, generate only a quarter of

the earnings from tourism in the south. Agriculture, In which the north has

considerable potential, provides a quarter of employment and 10% of added

value. Industry provides about 10% of employment and contributes some 11.5%

of GDP. Public service workers form a high percentage of total employment

and state-owned enterprises play a significant role In economic activity.

36. The Turkish lira Is the currency used in transactions. There was a

proposal to Introduce the north's own currency, but It never came to

fruition. The Cypriot pound is in paral lei circulation. Inflation is high at

about 60% in 1991; the public sector finance deficit is substantial and is

only partially covered by the budgetary aid from Ankara. Borrowing Is thus

standard practice. To improve this situation would require a considerable

                                 - 19                                  

effort and would present the future federal government and the heads of the

future Turkish Cypriot federal state with the delicate task of deciding on

the al location of tax resources.

37. Thus, in the northern part of Cyprus, the main economic issue,

whether In relation to the settlement of the Cyprus Question or with a view

to Community membership, Is how to make up the ground lost to the south.

The potent i a I in terms of agr i cu I tura I and tourist resources and

manpower exists, as does the basic infrastructure required to launch the

economy, but a large productivity gap has opened with the south as a result

of the north's isolation and under-capital lzation, which Is in turn linked

to uncertainty about the political future of this part of Cyprus.

If Cyprus were to Join the Community, resources could be allocated

to the Improvement of infrastructure. A political settlement would also

re-establ lsh the complementarities between the two parts of the island.

Likewise, the restoration of international I inks and the full opening-up of

Community markets would boost local and foreign investment. Taking into

account the orders of magnitude involved for a region of 130 OOO

inhabitants, there is no shadow of a doubt that the north could make up the

ground on the south or at the very least enjoy a substantial improvement of

its economic performance and income as a result of a successful accession to

the Community and a satisfactory po lit i ea l sett I ement. In this respect, in

addition to the transitional problem of the reduction of the public sector

financial imbalances referred to above, mention should a1s·o be made of the

dlff iculty of choosing a common currency and of the need, at the least in a

first phase, to maintain wage differentials between the two parts of the

island.

38. The adopt Ion of the acgu is communauta ire In re I at Ion to

macroeconomic, industrial and trade policy wi I I therefore present the

southern and the northern parts of Cyprus with several problems, although

none of these appears to be insurmountable in the context of an overal I

settlement of the Cyprus Question.

                                 - 20                                  

In the south, as was shown in sect ion 111 of this opinion, the

Instruments to carry out the transition and the political will to use them

are a I ready ava i I ab I e. The Community, wh i eh has a I ready g I ven techn I ea I

assistance for the Introduction of VAT and for other measures related to the

transposition of the acguis communautaire, is prepared, If the government so

wishes, to step up its technical cooperation.

In the north, the prospect of a settlement is an Indispensable

requirement to break the Isolation to which this part of the Island has been

subjected and which prevents al I contact and all preparation for accession.

However, It Is evident that considerably more effort wl 11 be required to

adjust to the acguls communautaire than in the south. Nevertheless, the

Commission Is convinced that, when the time is ripe and with close

cooperation from the authorities of the Turkish Cypriot community, this

effort can succeed as part of the necessary economic transition of this part

of Cyprus.

V. Partlcloatlon In eommunlty Institutions

39. In sect ion 11 of this opinion, the Commission raised the issue of

Cyprus's active participation in the Community's Institutions in the context

of the prospects for a pol ltical settlement of the Cyprus question.

Aside from this key Issue, the Commission observed in its report

"Europe and the challenge of enlargement" that the Question of participation

by Malta and Cyprus in the Community institutions would have to be resolved

in an appropriate manner in the accession negotiations. The Commission

envisaged addressing 'this Question in its opinions on these countries'

app I i eat ions ' .

In the same report the Commission expressed some initial thoughts

(in points 23 to 26) on the various institutional Questions which will have

to be addressed and resolved if the institutions of an enlarged Union are to

operate smoothly and efficiently.

                                - 21                                

40. In the case of Cyprus, one Quest ion is the introduction of an

additional language, Turkish, which is one of the two official languages of

the Republ le of Cyprus.

41. There wou Id a I so appear to be the pract i ea I di ff i cu It i es i nvo I ved

for a state of Cyprus's characteristics in coping with the ful I range of

responslbllltles and obligations entailed in the day-to-day running of the

Community's institutions.

The Republic of Cyprus has senior public officials with experience.

As there Is not sufficient information available and In view of the north's

long I so I at Ion, the Commission is unable to draw a similar conclusion in

respect of that part of the island. In short, the Turkish-Cypriot community

may have difficulty In finding appropriately Qualified persons amongst Its

own peop I e and, as a resu It, prob I ems concerning the respect I ve

representation of the two communities in Community bodies could wel I occur.

42. Another Question that has to be asked in the light of the above is

whether Cyprus would, in the foreseeable future, be able to take on the wide

range of responsibilities and obligations entailed by the Presidency of the

Councl I.

43. The Institutional problems that would be posed by the possible

accession of Cyprus or any other applicant of siml lar size should be

examined as part of a more general assessment of the Institutions of an

enlarged European Union that has a vocation for even further enlargement.

The Intergovernmental conference scheduled for 1996 should address

these Issues with a view to streamlining the operational structures of an

enlarged Community and improving the efficiency of its decision-making

procedures, while at the same time ensur Ing that each new Member state 
regardless of its size - including possibly Cyprus, is able to take part in

an appropriate manner in the discussion and adoption of decisions and to

assume Its responsibll I ties as a member.

                                 - 22 

VI - CONCLUS I ONS

44. Cyprus's geographical position, the deep-lying bonds which, for two

thousand years, have located the Island at the very fount of European

culture and civilization, the intensity of the European Influence apparent

in the values shared by the people of Cyprus and in the conduct of the

cultural, political, economic and social I lfe of its citizens, the wealth of

its contacts of every kind with the Community, all these confer on Cyprus,

beyond al I doubt, its European identity and character and confirm Its

vocation to belong to the Community.

45. A pol It lcal settlement of the Cyprus Quest Ion would serve only to

reinforce this vocation and strengthen the ties which I ink Cyprus to Europe.

At the same time, a settlement would open the way to the ful I restoration of

human r lghts and fundamental freedoms throughout the Island and encourage

the development of pluralist democracy.

46. The Commission is convinced that the result of Cyprus's accession to

the Community would be increased security and prosperity and that It would

help bring the two communities on the island closer together. If there were

to be a political settlement, the prospect of the progressive re
establ lshment of fundamental I lberties would help overcome the Inevitable

practical difficulties which would arise during the transition period In

regard to the adoption of the relevant Community legislation. In regard to

economic aspects, this opinion has shown that, In view of the progress

towards a customs union achieved thus far, the adoption of the acguls

communautaire by Cyprus wi I I pose no insurmountable problems. The Commission

Is not underestimating the problems that the economic transition poses.

However, the economy of the southern part of the Island has demonstrated an

ab 111 ty to adapt and seems ready to face the cha 11 enge of I ntegrat Ion

provided that the work already started on reforms and on opening up to the

outside world is maintained, notably in the context of the customs union.

This opinion also has also shown that there wi 11 be a greater chance of

narrowing the development gap between north and south in event of Cyprus's

integration with the Community.

The government of the Repub Ii c of Cyprus shares this conv i et ion.

Even though they object to the conditions under which the application for

membership was made, the leaders of the Turkish Cypriot community are fully

conscious of the economic and social benefits that integration with Europe

would bring their community.

                               - 23                                

47. This opinion has also shown that Cyprus's integration with the

Community Implies a peaceful, balanced and lasting settlement of the Cyprus

question - a settlement which will make it possible for the two communities

to be reconciled, for confidence to be re-established and for their

respective leaders to work together. While safeguarding the essential

balance between the two communities and the right of each to preserve its

fundamental Interests, the institutional provisions contained in such a

settlement should create the appropriate conditions for Cyprus to

participate normally In the decision-making process of the European

Community and in the correct application of Community law throughout the

island.

48. In view of all the above and In the expectation of significant

progress in the talks currently being pursued under the au$pices of the

Secretary-General of the United Nations, the Commiss.ion feels that a

positive signal should be sent to the authorities and the people of Cyprus

conHrming that the Community considers Cyprus as eligible for- membership

and that as soon as the prospect of a sett I ement is surer, the· Community is

ready to start the process with Cyprus that should eventual·ly ~ead to its

accession.

49. The United Nations Secretary-General is aware that he can count on

the Community's support in his continued endeavours to produce a political

settlement of the Cyprus question.

Even before such a settlement is forthcoming, the Commission

undertakes to use al I the instruments available under the Association

Agreement to contribute, in close cooperation with the CypriQt government,

to the economic, social· and political transition of Cyprus towards

integration with the Community.

If the Council agrees, and in the hope of facilitating the conduct

of the future accession negotiations, the Commission is wi IHng to begin

Immediately talks with the government of Cyprus. These talks would serve to

familiarize the Cypriot authorities with all the elements that constitute

the acguis communautaire, partly in order to al low them to prepare their

negotiating position under the best possible conditions and partly to permit

an assessment of the need for any technical cooperation and assistance that

their country might require to adopt and implement Community legislation and

                                 - 24                                 

the policies and instruments that wi I I be needed for Its Integration and to

prepare the way, in due course, for the north of the island to catch up

econom I ea I I y .

The Commission also undertakes to examine the Issue of Cyprus's

future institutions and their compatibi I ity with the requirements of active

participation in the day-to-day running of the Community in the event of

accession.

50. The Community must ensure, moreover, that the general

assessment to be carr led out in the context of the 1996 intergovernmental

conference results in greater efficiency in the operation of the

institutions of an enlarged Community - and one that could wel I be enlarged

further - whl le at the same time providing Cyprus, and any other new Member

state of asimilar size, with a guarantee that it will receive appropriate

treatment In the decision-making process and in the discharging of Its

responsibl I itles.

51. Lastly, the Commission must envisage the possibi I ity of the failure of

the I ntercommuna I ta I ks to produce a po Ii t i ea I sett I ement of the Cyprus

question in the foreseeable future, in spite of the endeavours of the United

Nations Secretary-General. Should this eventuality arise, the Commission

feels that the situation should be reassessed in view of the positions

adopted by each party in the talks and that the question of Cyprus's

accession to the Community should be reconsidered in January 1995.

1.

2.

3.

4.

s·.

6.

7.

8.

9.~ .,

1 ().

11'.

12.

13.

.14.

15.

16.

                     - A/1 

PART TWO

SPECIFIC ASPECTS

Agriculture and f lsherles

Internal m~rket and Industrial affairs

customs and. indirect taxation

Employment, working conditions and social affairs

Competition

Financial Institutions, company - 1aw and ~irect taxation

Energy

Environment

Telecommunications

Transport

Enterprise policy and tourism

Consumer policy

lmpl !cations for the Community budget

Cooperation In the fields of Justice and home affairs

Regional pol Icy

Statistics

Stftlstrcal annexe•, Country Profile

                 - A/2 

1. AGRICULTURE AND FISHERIES

I. AGRICULTURE

Although agriculture in the southern part of the island accounts for
only 7.2% of GDP and 12.8% of total employment, it sti I I provides 20% of
total exports, which go mainly to the Community (75%) and comprise new
potatoes, citrus fruit and grapes. Most farmers have an additional Job
in one of the urban areas.

In terms of cultivated area, non-irrigated agriculture is preponderant
(cereals, fodder, olives, almonds and wine grapes), although it accounts
for only 30-40% of production by value. The rest, i.e. the bulk, comes
from irrigated farming and takes the form of lemons, bananas, fresh
vegetables and table grapes. Cyprus imports cereals, animal feed, beef
and veal and sheepmeat, and also milk products and sugar.

Cypriot agr i cu I ture is strong I _y_ organized and receives government aid
and protection in various forms. The market is fairly extensively
regulated. Production of wheat, barley and grapes receives direct
subsidies; state or semi-state monopolies have been established for
cereals, olive oil, potatoes and grapes; imports of milk are prohibited
and beef and veal imports are covered by strict Quota arrangements;
imports of the main agricultural and food products are still subject to
a I icensing system - discretionary for the most part. Coordination
between government and trade bodies is close and provides the necessary
flex ibl 1 lty to feed the population plus the 2 mi 11 ion tourists who
visited the island in 1992, for example. The Protocol on customs union
signed In 1987 left this system largely Intact and put off completion of
customs union for agr i cu I tura I products unt I I the f i na I stage between
1999 and 2003.

From the budget standpoint (see section 13), statistical analysis by
productC1) points to the following estimated reQuirements in the event
of accession: ECU 64 million in all, comprising ECU 25 million for
cereals, ECU 14 million for sheepmeat, ECU 9 million for wine,
ECU 8 mi I I Ion for fruit and vegetables, ECU 6 mi 11 ion for f lanl<ing
measures and ECU 2 mi I I ion for oi I seeds.

Accession would be unlikely to have any notable impact on production of
the typically Mediterranean products, given existing production levels.

If Cyprus wished to develop its agricultural production, it would have
to do so through diversification. Early-season products such as
potatoes and table grapes might even gain from access to the single
market. On the other hand, the subsidy arrangements for grapes (and
hence also for wine), price fixing and the ban on milk imports, import
Quotas for beef and veal and also the various monopolies would have to
be adapted. Imports from the mainland would probably increase and
consumer pr Ices on the Cypr lot market wou Id probab I _y_ tend to rise.

(1) Assuming the fol lowing:
(i) CAP reforms to apply in ful I as from the entry into force of
the accession treaty;
( i I) access ion to take p I ace at a point when the reformed CAP
wi I I be fully operational.

                           - A/3                           

I I. FISHERIES

1. GENERAL

The f lsher les sector in the southern part of the island makes only a
marginal contribution to the country's economy (0.3% of GDP).

As product Ion can not meet nat Iona I demand, Cyprus re Ii es heav 11 _y_ on
imports, which far exceed its exports; the resulting trade deficit was
ECU 18. 3 mi I I ion in 1991, i nc I ud i ng ECU 6. 2 m I I I ion in trade with the
Community. Cyprus appl les preferential rates to Imports from the
Community, but the Community grants no preferences to Cyprus, other than
under the generalized preferences system.

2. ADAPTATION TO THE ACQUIS COMMUNAUTAIRE

The Cypriot authorities have proved themselves capable In the
conservation and efficient management of stocks. The accession of
Cyprus would, however, have to be accompanied by a strengthening of the
necessary research and inspection resources (eQuipment, institutions and
staffing).

Given its size, the Cypriot fleet could probably be Incorporated Into

the Community fleet without difficulty. It wi 11 be necessary to see
that the loans scheme in this sector is in I lne with Community
directives.

The main problem concerning the Cypriot fishing fleet relates to the
registration of fishing vessels with foreign owners. The Community will
be unable In any circumstances to accept such a practice and flagging
terms w i I I conseQuent I y have to be a 11 gned on those In force in the
Commun I ty.

Generally speaking, the aQuaculture sector In Cyprus Is marginal
compared to that of the Community. However, the rapid development of
fry product ion, espec i a I I _y_ of sea bass and sea bream, may have some
et fects on the hatchery sector In some Convnun I ty Med I terranean
countries.

Adopt Ion of every aspect of the common organlzat ion of markets could
present administrative problems for Cyprus, as no legislation exists on
pricing systems, trade bodies or marketing and Qual lty standards.

The existing restrictions or prohibitions, the import I icensing system
and the income support measures are contrary to established Community
rules and practices.

Lastly, the state aids which represent operational assistance for firms
would also have to be abolished.

                              - A/4                              

CONCLUSION

The size and nature of the Cypriot fishing fleet are such as to suggest
that its incorporation into the Community fleet would not be difficult.
The hardest task for Cyprus would I le, from the administrative
standpoint, in adopting al I aspects of the common organization of
markets.

                 - A/5 

2. INTERNAL MARKET AND INDUSTRIAL AFFAIRS

I. INDUSTRY IN CYPRus1

Uni ike agriculture, industry has been of growing economic importance in
the southern part of the island during the last ten years. In 1990,
manufacturing Industry contributed 14.5% of GDP at current prices,
accounted for some 20% of the employed workforce - estimated to number
252 700 in 1990 - and provided 73% of total exports of locally produced
products. The corresponding figures are lower for the northern part of
the island, which possesses 25% of total industrial capacity, as wel I as
the copper mines. In the north, manufacturing industry contributed
11.5% of GDP at constant prices In 1991, accounted for 9.5% of the
employed workforce and, in 1990, provided 54% of total exports.

In the southern part, nevertheless, industry is less important
economica I ly than the service sector, particularly tour ism and trade,
which between them accounted for 21.3% of GDP in 1990. The service
sector also has a higher growth rate, reaching 10% in 1988 and 1989,
whereas manufacturing production growth slipped back from 7% in 1988 to

3% in 1989 and 1990. The average growth rate for manufacturi-ng has also
fallen back in the northern part since 1990, though for different
reasons, from a level of over 15% to below 5%.

Industrial development in the southern part wi I I depend on I ight
industry, notably the clothing, agri-food, furniture, footwear and metal
fabrication sectors, which account for 75% of total industrial
production.

In value terms, the food Industry is dominant (26.8% of industrial added
value), fol lowed by textiles and clothing (18.5%). Leaving aside the
two cement works in operation, the food industry also has the highest
productivity and the heaviest investment.

The biggest employer, on the other hand, is the textile and clothing
sector, with 30% of the industrial workforce - against 18% for the food
industry; It Is also the main export industry, with the Community as
its chief market. The wood and furniture industry employs 12% of the
workforce and accounts for 10.4% of added value. Chemicals are also
important, employing 5.2% of the labour force and accounting for 7.3% of
added value.

Cypriot industry is dominated by family firms and is viewed by the World
Bank as being seriously deficient from the standpoint of the technology
in

Detailed information on industry relates only to the situation In

the southern part of the island.

                               - A/6                                

use, workers' skills and production quality. Not having undergone any
process of rationalization or special lzation, many Industrial firms
would be. very vulnerable to international competition on both external
markets and the domestic market.

The studies on specific sectors carried out by the Commission on the
basis of the information aval lable back up this assessment, particularly

in the case of the footwear Industry, whose lack of competitiveness is
put - down to structural weaknesses such as absence of specialization, the
shortcomings of labour (both skilled and unskilled), poor management,
difficulties with supplies of raw materi~ls and lack of innovation.

Chemicals, notably on the organic side, together with electrical and
mechanica1 - engineering, are also considered to be vulnerable, with
Cypriot products in the latter two sectors being markedly inferior to
Community products.

Cyprus'ss dependence on external markets, especially the Community
market, for its supplies of chemicals and also engineering, electrical,
electronic and transport eQuipment should be noted.

Notwithstanding· the measures already adopted to dismantle tariffs and
approximate the Cypriot customs tariff to the Community customs tariff,
Cypriot industry sti I I operates behind high tariff wal Is, duties of over
50% be Ing not unusua I, even on Community products, In sectors where
there exists a local Industry.

Cypriot 1·ndustry also enjoys varied forms of official assistance for

investm~nt and exports. The first category Includes exemptions from
customs duty, tax concessions to promote the modernization of firms and
the creation of Jobs for· graduates, faci I lties to encourage the
establishment of firms in the seven Industrial and regional development
areas - soon to be Joined. by three more - and also further tax
advantages for firms setting up in the Larnaca free zone. On top of al I
these there Is the government guarantee for industrial schemes helping
to modernize local industry and make it more competitive, the granting
of loans on favourable terms for Industrialists who moved from the north
of the Island following the events of 1974, and grants for industrial
firms setting up jn rural areas. Export aids take the form of export
guarantee arrangements < gov·ernment guarantee for obtaining finance,
export ~redit insurance), the halving of tax on export earnings from
products manufactured locally, and the refund of customs duties charged
on raw ma~erials used in the manufacture of export products.

There has been I lttle encouragement in the past for foreign investment
in industry, despite the fact that it can be a source of technological
progress; in, the traditional industrial sectors, there are rules
preventing· non-residents from taking a majority holding; In the most
sens i t i v'e .

" _,,'<:.·_

                               - A/7                               

sectors, such as pumps and turbines, furniture, leather and footwear and
the food Industry, the maximum holding is normally 24%; In exceptional
cases It may r I se to 49%, If the proposed investment Is regarded as
part lcular ly advantageous. However, the restr let ions do not apply to
new Industries, nor to industrial or commercial projects geared
exclusively to export.

I I. ADAPTING CYPRIOT LEGISLATION TO THE ACQUIS COMMUNAUTAIRE

Because of the lack of adequate information on existing legislation in
Cyprus, It Is difficult at this stage to assess the extent to which
approximation to Community legislation has already taken place.

In the sphere of technical rules, i.e. standardization and conformity
testing, alignment of Cypriot legislation on that of the Community is a
priority target for the Cyprus authorities. It would seem that this
alignment is either already partially under way or is being prepared.

It will be necessary to check, however, whether the technical
specifications currently in force in Cyprus are optional or mandatory,
as this is crucial for assessing the arrangements for testing the
conformity of products to technical rules. It should also be noted that
Cyprus Is still not a party to the GATT Agreement on technical barriers
to trade.

With regard to Intellectual, industrial and commercial property, the
Cyprus authorities point out that they have either already adopted
measures to align local legislation on Community rules or that they are
preparing such legislation. Nevertheless, it is considered that there
are still gaps in Cypriot legislation where it should correspond to the
Community acguls.

Similarly, there wi I I certainly have to be changes in the rules
currently governing public procurement, where the requirement for
national preference is incompatible with Community rules.

I I I. IMPACT OF ACCESSION ON CYPRIOT INDUSTRY

The instruments providing the means for Cyprio-· industry to adjust to
the Community's single market and the impl ~ations of the common
commercial policy already exist. This is because, even while the
accession of Cyprus to the Community is still only a possibility,
appl icatlon of the Association Agreement and the 1988 Protocol providing
for completion of the customs union by the end of the second stage wil I
compel Cypriot industry to adjust progressively to a market open to
competition not only from Community firms but also from non-Community
countries.

It would seem, however, that the Cypriot business community is adopting
a wait-and-see po Ii cy; though fu 11 y aware of the need to reorganize
their business methods, they are putting it off untl I competitive
pressure starts to become a reality. It is impossible, therefore, to
overestimate the need for the proper application, in accordance with the
agreed timetable, of the

                                - A/8                                

instruments referred to above. This would appear to be the best means
of ensuring that Cypriot industry - given the vulnerability - to which
attention has already been drawn - is given a smooth preparat'lon for the
new situation.

As for Cyprus taking over Community legislation, the 19.88 Protocol
ensures that certain principles of the EEC Treaty will be applicable in
relations between the two parties In the context of the association.
They Include the competition rules, tax provisions and the article on
approximation of laws. It Is also stipulated that provisions for
implementing these principles are to be adopted by mutual agreement not
later than the start of the second stage. Hence this should hormal ly
take place in 1998. The new period then beginning wU L provide an
opportunity for any additional adjustments required.

It is of vital Importance that the industrial restructuring and
reorganization· programme being implemented by the Cypriot government be
carried out effectively. The aim Is to help the productive sector
become more f I ex I b I e and better adapted to the chang Ing cond It ions of
the wor Id market. It shou Id be observed that the po Ii cy 1 nit i ated by
the Cyprus government is geared to modern I zat ion of the - ma-in existing
industries, i.e. the food industry. clothing, footwear, .furniture and
metal fabrication, rather than to conversion and the developm~nt of new
industrial activities.

                               - A/9                                

3. CUSTOMS AND INDIRECT.TAXATION

I . CUSTOMS UN I ON

In the event of accession, Cyprus wl 11 ~ave to adopt the whole of the
Community customs acguls. Should Cyprus so request, transitional
arrangements could probably be made,· w1·th a view to al lowing the
Cypriots to adjust fully to the Common customs Tariff and the provisions
of the Community customs Code.

With regard to computerized customs clearance, the Cypriot
administration is currently engaged in setting up a system .with a view
to computerization of the tariff and Importers' data bases, the
Introduction of the single administrative document and the automatic
calculation of customs duties and VAT - from - this year onwards. This
would constitute a first step towards the upgrading of procedures which
wi I I be necessary to match Community standards.

Along with the Common Customs Tariff, Cyprus would also have to adopted
the Combined Nomenclature, which is considerably more .detal led than the
Harmonized System currently In use In Cyprus.

customs legislation proper, which forms part of secondary legislation,
wi I I have to be adopted by Cyprus, subject naturally to certain
adjustments during the transitional period.

11. TAXATION

1. Value added tax

Since 1992 Cyprus has been operating a VAT system based on that of the
Community. In principle it Is a single ra_te system which is notable by
being very low, i.e. 5%. However, zero rating, I .e. exemptions with
credit for previously paid VAT, Is applied to a range of goods and
services such as foodstuffs, water supplies,- pharmaceutical products,
newspapers, periodicals and books, children's clothing and footwear,
urban and rural bus services, fertilizers and agricultural machinery,
etc.

As for the taxable person's right to deduction for goods and services
used for the purpose of his taxable transactions, the rules are In
general siml lar to those set out in the Community VAT legislat Ion.
However, . arrangements for refund of VAT to taxab I e persons not
estab 1· I shed in Cyprus st i 11 have to be enacted.

Cyprus does not operate any flat-rate or slmi tar scheme for smal I
farmers. However, farmers are not requ I red to register and most of
their fnputs and outputs are covered by the zero rate.

                              - A/10                               

The processing of the VAT returns Is computerized and is based upon a
system developed for the Danish VAT system, adapted to Cyprus'ss
requirements.

The VAT system applied In Cyprus conforms In the main to the VAT system
of the Community. In the event of Cyprus'ss accession certain technical
adjustments would be needed, In part lcular as regards the rate level.
Adjustments regarding the adoption of the new Intra-Community VAT system
wi I I also be required.

2. Excise duties

In addition. to VAT, Cyprus levies excise duties on a I imited range of
goods such as alcohol le beverages, tobacco products, mineral ol ls and
soft drinks. In addition to customs and excise duties, Imported goods
are subject to the payment of a temporary levy. This levy wi I I need to
be abolished in the event of Cyprus'ss accession. Furthermore, imported
goods will need to be treated the same way in respect of taxation as
slmi lar domestlcal ly produced products.

                               - A/11                                

4. EMPLOYMENT. WORKING CONDITIONS AND SOCIAL AFFAIRS

The Information available would suggest that, broadly speaking, the
accession of Cyprus would not raise major difficulties in the social
sphere.

The social situation In Cyprus Is comparable in many respects to that of
the Community Member States and should enable it, In the event of
accession, to take over the Community acguis in social matters without
too many problems and with only a few adjustments.

I . EMPLOYMENT

For a long time there has been little unemployment, and the level has
been stayed below the high Community rates of the last ten years.
Neither women nor men are particularly disadvantaged by unemployment and
there is relatively I ittle youth unemployment. Similarly, the long-term
Jobless are few in number.

I I. HEALTH AND SAFETY AT WORK

Cypriot legislation is similar to that of the United K~ngdom.

at present adopting draft legislation for transposing
directives into national law.

I I I . FREE MOVEMENT OF WORKERS

Cyprus is
Community

The number of work permits Issued to Community nationals by the Cypriot
authorities has been fairly stable since 1986. In 1990 nearly 9 OOO
permits were issued, more than half of them to British nationals. The
permits are valid for one year.

IV. LABOUR LAW AND INDUSTRIAL RELATIONS

Collective bargaining is the foundation of the Cypriot labour relations
system and there is a strong tripartite tradition.

Labour legislation is kept to a minimum: it forms a framework in which
the main principles established are freedom of association and the right
to strike. There is also some legislation on protection of certain
vulnerable categories of workers on the labour market.

                             - A/12                             

1 n the event of accession, Cyprus wou Id In any case have to adopt
cert a In adjustments in Ii ne w Ith specific Community directives
(ma I ntenance of workers· rights In cases of transfer of ownersh Ip of
f lrms, and protection of w~ges or salaries due in cases of bankruptcy of
employers).

V. EQUAL TREATMENT FOR WOMEN ANQ MEN

Here too, In order to be fully In line with Community law, Cyprus would
have to. adjust somewhat its current legislation or contractual
provisions In such matters a~ equal treatment, equal pay and the
protect I on of pregnant - women.. The same app I I es in the case of the
directive on equal treatment fo.r m_en and women who are self-employed,

including In farming.

Application of the EEC soci.al security Directive (statutory systems)
does not present major diff icultles; in occupational schemes there is
sti I I a degree of dlscrimiriatlon.

VI. EUROPEAN SOCIAL FUND

In the context of aid granted under the Structural Funds, some
operat Ions could be con~_idered as coming under Objective 1 and hence
could take the form of operations to develop human resources (training
and employment).

Certain data would seem to- indicate significant Investment in
implementing social policies. The percentage of GNP al·located to
education and training (5.3% In 1990) compares to the Community average
and is-bi'gher than in some Member States. I I literacy would appear to be
non...:existent_ and the educational qualifications of people in employment
seems to be fairly.hJgh: for example, 17% of the active population is
of graduate - I eve I. on· th~ c)'ther hand, the stay Ing-on rate for young
people t;>etween 15 and 1'9 years of age Is rather low, as compulsory
school Ing_ ends at the 'age - of 15. Administrative services (notably the
employment services) are of good quality.

The above:-· cons tderat ions suggest that any operations undertaken to
combat unemployment under the European Social Fund would be re I at ively
margina·I from. the standpoint of the Community, though by no means
negligible for Cyprus~

                             - A/13                             

5. COMPETITION

1. COMPETITION RULES FOR COMPANIES

The relevant legislation is the law to ensure competition, which was
adopted In 1989 and entered Into force In June 1990. It reproduces the
text of Art'tcles 85 and 86 of the EEC Treaty, and also certain
provisions of Regulat Ion No 17. A close watch wl 11 have to be kept,
however, on state-controlled undertakings, which are not covered by the

I eg Is I at ion - .

With regard to merger control, there Is a requirement that mergers must

be_ notif led not later than 30 days after they take place, which raises a

questionm~rk over the effectiveness of such supervision.

Although 'there is as yet I lttle case-law, there has been one instance in
the insurance sector, where the Commission objected to Joint pr lcef ix ing practices.

The conclusion to be drawn from the foregoing is that the Cypriot

legislat ton dat tng from 1990 approx I mates to that of the Commun I ty, but
it - Is -too ear I _y_ to pronounce on the effectiveness of its imp lementat Ion.

2. STATE AfDS 

Gover·nment . guarantees are given for a number of purposes (e.g.
industr'lal 'i:>"r:OJects, tourism, exports). It Is not clear whether these
guarantees are given under commercial conditions and whether In case of

losses lncurre.d on guarantees the Cypr lot government claims from the
recipient th~ amount due, If necessary by legal means. The above is
especl'ally_important In the case of the export sector. If state aids
are -Involved, H- should be pointed out to the Cypr lot author It les that
the Cornmlssion does not approve of any aid for exports within the
Communl.ty - . 

Except -for special facilities for export-oriented companies and the
tourist sector, no information has been given about a Id programmes
directed. at specific sectors. However, it should be signal led to the
Cypriot _authorities that schemes which grant aid to companies in general
are restricted in what concerns aid to companies pertaining to
industrial sectors covered by specific Community policy state~ents, and
also aids to the agriculture, fisheries, transport and coal sectors.1

1 Aid to the agriculture and transport sectors has not been subject of
this analysis.

                             - A/14                              

For the establishment of Industrial estates and free zones, the aid
element must be evaluated and cumulation conditions with other aids must
be specified. This may constitute· an operating aid, and such is
normally not acceptable. In addition, the free zone may Include some
export aid that would not be acceptable.

No aid Is mentioned for R&O. If state aid for R&D Is granted to
companies, the necessary information should sti I I have to be provided.

As regards pub I ic undertakings and holdings in which the government
participates several points should be mentioned. For example, it is not
clear whether the conditions on the transparency of financial relations
are fulfilled or whether the activities are in I ine with the
Commission's communication on public enterprises in the manufacturing
sector.

A first assessment of the state aids situation in Cyprus shows that the
information provided is sti I I Incomplete (tax exemptions, tax
incentives, regional aids, loans for industrial restructuring, role of
the Cyprus Development Bank, etc.). In view of the extent of the
Cypriot e.conomy, the probable size of the companies involved and the
nature of their activities, it Is however I ikely that in many cases the
threshold of "de minimls" rules wi I I be exceeded.

3. STATE MONOPOLIES - UNDERTAKINGS WITH SPECIAL OR EXCLUSIVE RIGHTS

A. Trading monopolies

There are monopolies In Cyprus for electricity, oil and wine. Various
restrictions relating to these monopol les are clearly contrary to
Article 30, 34 or 37 of the EEC Treaty.

B. Public undertakings

The Cypri'ot authorities contend that there is full transparency of
financial relations between public authorities and public undertakings.
but no details appear in the aval lab le information.

In the. telecommunications sector, the Cyprus Telecommunications
Authority (CTA) is the only authorized body for the provision of
telecommunications services in Cyprus. The Cypriot authorities
recognize that the present legislation would be incompatible with
Community law. Some further liberalization Is also needed in the field
of telecommunications equipment.

The posta I serv Ice has an over a 11 monopo I y, except for express ma i I
services, which are provided both by the public service and by private
firms. The Cyprus government is at present examining the legal
framework for the postal service with a view to institutional reform.

There do not appear to be any special or exclusive rights in Cyprus for
air or sea transport.

                 - A/15 

6. FINANCIAL INSTITUTIONS. COMPANY LAW AND DIRECT TAXATION

On the basis of the available legislative Information which ls quite

I imlted the situation appears to be as fol lows.1.

I. BANKS

The Central Bank of Cyprus has prepared a new banking bi II, the purpose
of which ls to modernize banking practice and align It with most EC

banking legislation.

EC banks appear to receive national treatment as regards both
establ lshment and the carrying-on of activities. Two EC banks have
branches In Cyprus and one is incorporated as a subsidiary. The
establishment of offshore business2 is also al lowed for foreign
financial services firms, subject to specific conditions.

II. INSURANCE

EC insurance companies appear to receive national treatment as regards
both establishment and the carrying-on of the activities. They may be
estab Ii shed as either a subsidiary or as a branch. The number of EC

insurance companies present is 25, onshore and offshore.

Ill. SECURITIES

The present Cyprus securities market is an unoff lcial over-the-counter
market, which does not have any EC presence.

A stock exchange bi I I has been submitted to Parliament providing for the
development of the securities market~ the establishment and operation of
a Cyprus Stock Exchange, the establishment of a Stock Exchange Council
and other related matters. This proposal does not contain any reference
to access or to operation by foreign companies.

IV. CQMPANY LAW AND DIRECT TAXATION

The Commission is not in the possession of any legislation pertaining to
company law and direct taxation.

V. ASSESSMENT

It Is not possible to assess at this stage which specific points
concerning the application of Community law pertaining to financial
institutions, company law and direct taxation will need to be addressed
In the accession negotiations. Although the laws of Cyprus generally set
the framework for national treatment pertaining to establishment and the
carrying-on of activities, the legislation does not go as far as EC

legislation, so the fol lowing comments are called for.

1 OnlylvaAcduferceanuhaa~aiaet of the island.
2 Offshore banks are licensed to carry on banking business from within
Cyprilbe batqwhs I t:.>mmnauta::itf:shmrsrt: t:Ds i accalla~at bJrnlChl;usus l-blmseis

rest U et et1.t I ., x d lnJB 8neht a t>ion p rtSm:mei:rfanrU y tle <lldi war e:d Wlm" ar es hoot
permpeerhd>d ms itdsret&ooa I ltne t 6e~rtazprdfl ttCyt:JJ~I and amn i clisteat i ve

otheadl~lattbe.C}¥Pnlet~rtttansitional period should be of strictly

                              - A/16                              

limited duration, sensitive questions could arise regarding the
capacity of the authorities of Cyprus effectively to apply the
prudential regime imposed by the Community directives.

2. Aoproxlmatlon of laws

The Association Agreement with Cyprus does not contain
provisions relating to financial services, company law or direct
taxation. Although Cyprus has decided to align its legislation
with Community law in these areas specific efforts appear only
to have been made In the banking area. Cyprus should be
encouraged to align Its legislation in the other areas as
quickly as possible, as this would only faci I itate the accession
negotiations.

VI. CONCLUSION

It would be useful if the authorities of Cyprus could be persuaded to
continue and Intensify the exercise of approximation of laws in the area
of financial Institutions, company law and direct taxation.

                              - A/17                               

7. ENERGY

1. Cyprus has no indigenous energy resources and is therefore
completely dependent on imported energy, particularly oil, with
50% of export earnings being spent on petroleum products. There

Is some scope to develop hydroelectric power and other
renewables such as solar power heating, which is already well
estab I I shed In the domestic sector. Tota I f i na I energy
consumption In Cyprus is 1.2 mill Ion toe (1990) compared to 723
million toe in the Community (12). Energy intensity in Cyprus
(gross Inland consumption /GDP) in 1990 was 610, more than
double the EC figure of 286. Cyprus is taking steps to
encourage energy efficiency and conservation to reduce the
growth in energy demand. This is done main I _y_ by the private
sector w Ith support I ve measures and f i sea I I eg is I at ion by the
government.

2. Electricity power generation (+/-500mw) is oil-based and uses
about a third of oi I imports. Electricity generation and supply
is the sole responslbi I ity of the Electricity Authority of
Cyprus, which supplies the whole island, for which there is an
integrated grid network, an important link between the two parts
of the island. A major problem for this Authority Is the
unbi I led consumption of electricity suppl led to the Turkish
commun I ty.

3. In the event of accession to the Community, Cyprus may have some
difficulty in meeting the Community's crisis and stock
d I rect Ives. It is not a member of the I nternat Iona I Energy
Agency. Moreover. at the moment stocks to meet only around 30
days ol I consumpt Ion are held. lnformat Ion on the north of the

Island Is not avai I able. Given Its vulnerabl I ity to
developments in oil markets, the government is currently
reviewing this situation. Cyprus may also find difficulty in
conforming to directives prohibiting the development of new oil
based generating units in the future expansion of its
electricity generating system. As regards the environmental
impact of energy use. at the moment power generators do not
operate in conformity with EC directives, although steps are
being taken to remedy this.

4. In conclusion, given Cyprus'ss island situation, somewhat remote
from the existing Community of twelve, Its energy situation wi I I
have I ittle Impact on the Community's energy situation and
present energy po I icy deve I opment . On the other hand Cyprus
wi II have to adapt or introduce legislation to meet EC
requirements in the energy sector.

                              - A/18                              

8. ENVIROt&tENT

It can be said that there Is no major environmental problem In Cyprus.
G I ven the spec If I c geographic, c I I mat I c and economic cond it Ions, some

Issues are of more particular importance than others, for instance :
ensuring a sustainable development of industrial, tourist and
agricultural activities, protection of the scarce water resources,
preservation of the quality of the marine environment and of the natural
assets of Cyprus, AND management of waste.

Existing contacts between the Community and the Cypriot authorities show
the obvious wl 11 ingness and also the capacity of Cyprus to conduct a
sound environmental pol Icy, based on its integration with the overal I
development policy. Approximation of Cypriot environmental policy and

legislation with those of the EC is actively sought and has already
taken place in some f lelds.

The most recent environment-specific legislation adopted or planned for
adoption Is based on principles in I ine with relevant EC legislation.
This concerns areas such as water and atmospheric pollution, dangerous
substances, noise or Industrial effluents.

Therefore one may well conclude that as long as this trend is followed
and cooperation between the EC and Cyprus continues on the same basis,
Cyprus would not meet any major difficulty in integrating EC
environmental po I Icy and leglslat ion Into its system in the event of
accession. It would only benefit from the expertise and experience
acquired already at EC level, including in areas not yet tackled by
Cyprus.

                 - A/19 

9. TELECQMMUN I CAT I ONS

The Information available Indicates that the current legislation
covering telecommunications, which confers on the CYTA1 both regulatory

funct Ions (or the respons I b 111 _ty_ for prepar Ing dee Is Ions) and
operational functions, and also gives It a monopoly over the supply of
services, Is Incompatible with Community rules. Should negotiations
take place on accession, the Cypriot authorities would have to adopt
appropriate measures In this respect, subject to the usual transitional
provisions.

In many other respects, however, accession would raise no particular
difficulty. An example ls standards, where the CYTA applies both
international standards and those set by ETSl,2 of which Cyprus was a
founder member. The same applies to telecommunications terminal
equipment, for which the market was liberalized In 1989.

Moreover, in the southern part of the island the network Is wel I
developed. With 46 direct I Ines for every 100 inhabitants, Cyprus
stands slightly above the overall average for the Community and EFTA
(43); In add it Ion, new serv Ices cover Ing data transm i ss Ion, fax and
mob lie phones are already available.

1 Cyprus Telecommunications Authority.
2 European Telecommunications Standards Institute.

                              - A/20                               

10. IRANSPORT

I. ROAD TRANSPORT

WITH regard to market access, pub I ic transport in Cyprus Is
subject to licences. A majority of Member States have signed

International road transport goods agreements with Cyprus.

In the areas of social legislation, technical standards, taxes
and road safety, there exists a legal basis. Current legislation
concerning environment and pub I le health Is minimal.

I I . SEA TRANSPORT

Conditions for the establishment of shipping companies in Cyprus

and accession to Its flag are too loose as compared with those
generally appl led by EC Member States.

Operating conditions under the Cyprus flag may raise problems of
distortions of competition due to low taxation and non-existence
of manning nationality requirements.

Moreover, the degree of imp I ementat ion of i nternat Iona I
standards of safety and pollution prevention differs from the
Community fleets' average.

111 .AVIATION

Air transport is largely governed by traditional bi lateral
agreements. Cyprus has signed 35 bilateral agreements, Including
with all EC Member States. Cyprus is a signatory of the ICAO as
wel I as of Eurocontrol and ECAC agreements.

Regarding market access and ownership and air fares,
restrictions are much less apparent in the Community than they
are in Cyprus.

CONCLUSION

In the course of any accession negoclations, the fol lowing would have to
be discussed in detail :

Road transport legislation on social aspects, environment,
public health and technical standards.

Maritime transport cargo reservation, conditions for
registration and the implementation of maritime safety and
pollution prevention standards.

Aviation the legislation concerning the liberalization
process.

                 - A/21 

11. ENTERPRISE POLICY AND TOURISM

The Cypriot economy is dominated by smal I and medium-sized enterprises.
Enterprise policy is general in nature, rather than being targeted
according to the size of businesses, as this meets the Cyprus
government's main alms of encouraging Investment in rural areas (by
means of grants), stimulating exports (through guarantees and grants for
missions) and implementing industrial projects (guarantees, grants for
studies on restructuring).

Since mld-1992 Cyprus has been connected to the BC-Net network and It is
planned to set up a Euro-Info Centre in 1993/94.

The recent growth of tourism in Cyprus is impressive. For example, both
the number of beds and the number of tourists visiting the island more
than doubled between 1985 and 1990.

Since 1990 the government has been pursuing a tourism policy aimed at a
more targeted growth in tourist numbers and also a more varied range of
tourist attractions, with the aim of achieving a more even spread of
tourist visits throughout the year.

This Is entirely consistent with Commission policy in this f leld.

CONCLUSION

It Is clear from the foregoing that the accession of Cyprus would not
present any special problems in respect of enterprise pol Icy or tourism.

                             - A/22                             

12. CQNSUMER POLICY

1. Health and safety

The Information available does not permit a conclusive assessment
regard Ing the genera I safety of products. It wou Id appear, however,
that the rules In force In Cyprus would have to be revised completely In
order to be brought into line with the relevant Community directive.

The current regulatory situation in Cyprus with regard to cosmetics is

incompatible with Community rules.

2. Consumer transactions

There does not appear to exist any legislation at present comparable to
the Community legislation on the following: misleading or comparative
advert Ising, package holiday tours, t imeshar ing, contracts other than
those negot I ated in commerc i a I estab Ii shments and unfair c I auses in
contracts. It would therefore be necessary to incorporate the Community
directives Into Cypriot law.

3. Information and orotection of consumers' economic interests

In the case of textiles, the provisions contained in the Community
directives have to a large extent been incorporated Into Cypriot
legislation, but gaps - major ones in some cases - still exist. It
would also appear that the Cypriot rules concerning labelling of
products and ana I yt I ea I methods used in conformity test Ing are mere I y
optional, and this would not be acceptable.

Cypriot legislation on the labelling of foodstuffs does not present any
special problems, even though generally speaking it falls short of the

relevant Community directives.

In the matter of the pricing of foodstuffs and non-food products,
Cypriot legislation is far removed from the relevant Community
directives and major adjustment efforts would be required.

To sum up, the accession of Cyprus would entai I adjustments to Cypriot

legislation on consumer policy, and in some cases the adjustments would
be substantial.

                              - A/23                              

13. IMPLICATIONS FOR THE COMMUNITY BUDGET

The estimate of the budget Impact was drawn up on the assumption that
the Commun I ty acgu Is w 111 app I y, and on the basis of the Commun I ty
budget adopted for 1992.

It was not possible to allow for any dynamic aspects of the Impact of
access I on on the econom I c structure of Cyprus, 1 the main features of
which from the budget standpoint are as fol lows:

( I)

( I i )

( i i I)

agricultural production accounts for some 7% of gross domestic
product and falls short of ensuring self-sufficiency, as
Indicated by the fact that Imports of agricultural products
exceed exports by over 20% In value terms;

external trade Is substantially in deficit because of the
considerable need for intermediate products to be used in
production and the demand for manufactured consumer goods.
Trade wl th the European Community accounts for over ha If of

total trade flows;

GNP In Cyprus Is equivalent to some 1% of that of the Community,
which corresponds to a oer caoita average of 48% of the
Community level. In the northern part of the Island, the
average Is only one third of the level in the southern part
(viz. 19% as against 55% of the average per capita Community
GNP).

In the light of all this the following quantified estimates have been
arrived at:

1. Expenditure

A. Agricultural expenditure

A basic calculat Ion was carr led out by product In the I lght of the
recent developments In the common agricultural policy. The assumptions
used concern both economic parameters (production, consumption, trade,
unit assistance rates, and so on) and structural ones (numbers of
persons involved in agriculture, herd numbers, and so on).

Total requirements were estimated at some ECU 60 million, Including
ECU 24 ml I I Ion for cereals and ECU 14 mil I ion in the sheepmeat sector.

These figures are a guide only, since the statistics available are not
sufficiently detailed.

E.g. changes in trade flows or the structure of agriculture.

                             - A/24                             

B. Structural Funds

Given the average per capita GNP of Cyprus, applying the amount of aid
per head of population for Greece, taking all regional and social
assistance (Including IMPs} together, to the population of the Island
results In a figure of around ECU 120 ml I I ion, the distribution of which
between the two parts of the island would be establ I shed at the
appropriate time. This figure covers contributions from the regional
funds, the Social Fund, the EAGGF Guidance Section and assistance for
the f lshery sector.

c. Other policies

Applying the GNP ratio In respect of Industrial policy expenditure and
the population ratio In respect of administrative expenditure results In
figures of ECU 3 ml I lion and ECU 4 ml I I Ion respectively.

D. Language

In present circumstances the accession of Cyprus would Involve a further
language- (Turkish} which would require some 200 translators and
Interpreters at an annual cost of around ECU 8 mi I I ion.

2. Income

Own resources as trad It Iona 11 y def I ned wou Id br Ing In an est I mated
ECU 55 ml I I Ion, given the level of trade, and would compr lse
ECU 8 mill Ion from farm levies and ECU 47 million from customs duties.
At the same time accession would result in an estimated drop In budget
receipts of ECU 6 ml I I Ion. Resources from VAT and GNP would bring in
ECU 39 million and ECU 14 mll I Ion respectively.

CONCLUSION

In budget terms the accession of Cyprus might result In Increased
expenditure of ECU 195 million, notably on account of payments from the
Structural Funds. Income would increase by ECU 96 mi I lion, however, due
allowance being made for the loss of duties and levies on trade between
Cyprus and the Community and the costs of collection. Overall,
therefore, accession would represent an additional budget cost of some
ECU 100 m I I I I on.

                           - A/25                            

14. COOPERATION IN THE FIELDS OF JUSTICE AND HOME AFFAIRS

1. The Cyprus government has undertaken to meet al I obligations and

responslbllltles deriving from the Treaty on European Union.
This Imp lies acceptance by the Cypriot authorities of al I
dee Is Ions concern Ing cooper at Ion in the f I e Ids of Just Ice and
home affairs as set out In Title VI of the Treaty on European
Union.

2. The Involvement of Cyprus in the obligations resulting from
Title VI of the Treaty could entail a major effort on the part
of the authorities of the island in order to ensure that al I the
necessary means are employed so that fu I I cooper at ion in the
areas concerned becomes a rea I i ty. The ex tent of this effort
can be established only by Joint examination of the details of
the relevant acauis.

                           - A/26                           

15. CQtA4UNITY REGIONAL POLICY

Given the total population (around 700 OOO) and the average size in
population terms of the NUTS II regions of the Community, Cyprus would
constitute a unique NUTS II reglon.1 Under Community rules the regions
eligible under Objective 1 of the Structural Funds are NUTS II regions
whose oer caolta GDP Is, over the last three years, less than 75% of the
Community average.

According to the various estimates available, it would appear that
Cyprus as a unique NUTS I I region, could be included under Objective 1.

1 NUTS: Nomenclature of Territorial Units for Statistics, subdividing
the territory of the Community into statistical regions.

                 - A/27 

16. STATISTICS

on the basis of the limited information available and the few bilateral
contacts there have been In the past, the s I tuat ion appears to be as
fol lows.

THE CYPRIOT STATISTICAL SYSTEM

The stat i st i ea I system of Cyprus is based around the Department of
St at i st I cs and Research CDSR) wh i eh Is a separate department of the
Ministry of Finance. It was founded under the British colonial
administration. Since Independence In 1960 the government has drawn up a
succession of f lve-year development plans in statistics.

The DSR fulfl Is a role similar to that of a central lzed national
statistical office in one of the Member States. We have I lmited
knowledge of the workings and resource base of the DSR, but its
pub I lcatlons have a full set of statistical information in the economic,
agricultural and social fields.

STATISTICAL LAW

As In many EC Member States there is a legal act underpinning
statistical activities. This was passed in 1968 and empowers the DSR to
co I I ect any necessary sta t I st I ea I I nf or mat I on and protect its
confl.dentlal nature. This outlines the rights and responsibilities of
the DSR. The subject of confidentiality Is becoming increasingly
Important with Community statistics.

ASSESSMENT

Given the size of the country, Cyprus has a relatively well-developed
statistical system which could, given the necessary resources, be
adapted to the statistical acguls after a reasonable transition period.

The subject areas covered by the DSR are broadly in I ine with the
statistical requirements of the Community. There Is, however, no guide
to the quality of the statistics produced (this Is particularly
Important In the f lelds such as national accounts where statistical data
are used to determine contributions to the EC budget). This type of
lnformat Ion would have to be obtained at the t lme of the start of
membership negotiations.

                           - A/28                           

_LIST_ _OF_ _TABLES_

_1._ _GDP/Inhabitant_ at _current_ _prices_ _and_ _exchanges_ rates

2. _GDP_ _growth_ _In_ _Cyprus_ _and_ _the_ _EC._ _1978-1992_

3. _Unemployment_ _In_ _Cyprus_ _and_ _the_ _EC,_ _1978-1991_

_4._ _Investment/GDP_ _ratio_ _In_ _Cyprus_ _and_ _the_ _EC._ _1978-1991_

5. _Public_ _deficit_ _(%of_ _GDP)_

                 - * * * *

# **GDP/inhabitant at current prices and exchange rates**,.. (% of EC average).

80

70

60

'.)0

_•W_
PORTUGAL

###### '-'0,) 1· •••o:yo••n• ;I'
### _I I_ _:w .f. I_

1982 1983 1984 1985 1986 1987 1988 1989 1990

_Sources_ _IFS_ & _EUROSTAT_

)>

.........

_N_
'°

                                 - A/30                                  

                                     GDP growth in Cyprus and the EC 1978 1992.
Arinual volume growth, % p/a

1978 1980 1982 1984 1986 1988 1990 1992

Sources; EUROSTAT, EC Commission services, Cypriot Ministry of finance.

                  - A/31 

Unemployment in CYPRUS and the EC, 1978  - 1991

EUR12

1978 1980 1982 1984 1986 1988 1990
Source: EUROSTAT (EC) and national sources (C'yprus).

40

                - A/32 

                                       Investment/GDP ratio in Cyprus and the EC 1978 1991
% of GDP; current prices

0 78/81 0 82/86 1987 1988 1989 1990 1991
##### ~Cypr~s .EC

Source: EC Commission services, Cypriot Ministry of finance.

                               - A/33 
# PUBLIC DEFICIT

% of **GDP**

-1

1981 1983 1985 1987 1989 1991

Sources: EC Commission services. Cypriot Ministry of finance.

                              - A/34                              

_CYPRUS_             - _PROFILE_

I. Area : 9.250 km2

II. POPUiation 700.000 en 1990 dont population active 277.000

Ill. GDP per Capita : 9.000 Ecus

IV. GDP Growth Rate

8,6% 8,3% 6,5% 1% 8%

v. Inflation Rate in 1991 5. 1

VI. Unemployment: 1,8% en 1991

VII. Structure of employment and GDP in 1990 <X>

Origine du PIB (X)

7%

15%
68%

10%

Exports

41%

12%

35%

5%

Agr i cu I ture

Industry
Services
Construction

VI. Trade Relations (en mio US$)

Imports
Exports
Trade Balance

NB : Tourism incomes

Trade structure ( X of 1991 total)

Manufactured Goods
Transport Equipment
Food Products, Beverages
Mineral Fuels

CQnnunltY Share in 1991

- In Cypriot Exports
- in Cypriot imports

EEC-Cyprus Trade (MECU)

Imports
Exportats
Trade Balance

43,4%

51 ',.,

Emploi

14%

20%
57%

9%

2621
951
-1670

1243

lmoorts

34%
28%
15%

10%

596
2029

1433