Europaudvalget 2000-01
EUU Alm.del Bilag 236
Offentligt
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FROM THE COMMISSION
ON
CYPRUS'S
PROGRESS TOWARDS
ACCESSION
***********************
8 November 2000
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Table of contents
A. Introduction.............................................................................. 5
a) Preface .............................................................................................................5
b) Relations between the European Union and Cyprus ...................................7
Recent developments under the Association Agreement (including bilateral
trade) ........................................................................................................................... 7
Accession Partnership................................................................................................. 8
Community Aid .......................................................................................................... 8
Twinning ..................................................................................................................... 9
Negotiations ................................................................................................................ 9
B. Criteria for membership ....................................................... 10
1. Political criteria.................................................................................... 10
Introduction............................................................................................................... 10
Recent developments ................................................................................................ 10
1.1. Democracy and the rule of law .....................................................................11
The Parliament .......................................................................................................... 11
The Executive ........................................................................................................... 11
The judicial system ................................................................................................... 12
Anti-corruption measures.......................................................................................... 14
1.2. Human rights and the protection of minorities...........................................14
Civil and political rights............................................................................................ 15
Economic, social and cultural rights ......................................................................... 16
Minority rights and the protection of minorities ....................................................... 17
1.3. The situation in the northern part of the island..........................................17
1.4. The efforts for a political settlement ............................................................20
1.5. General evaluation.........................................................................................22
2. Economic criteria................................................................................. 23
2.1. Introduction....................................................................................................23
2.2. Economic developments ................................................................................23
2.3. Assessment in terms of the Copenhagen criteria ........................................25
The existence of a functioning market economy ...................................................... 25
The capacity to cope with competitive pressure and market forces within the
Union......................................................................................................................... 30
2.4. General Evaluation........................................................................................32
2.5. The economic situation in the northern part of the island.........................32
3. Ability to assume the obligations of membership............................. 35
Introduction............................................................................................................... 35
3.1. The chapters of the
acquis.............................................................................37
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Chapter 1: Free movement of goods ..............................................................37
Overall assessment.................................................................................................... 38
Chapter 2 Free movement of persons ............................................................40
Overall assessment.................................................................................................... 40
Chapter 3: Freedom to provide services ........................................................41
Overall assessment.................................................................................................... 42
Chapter 4 Free movement of capital..............................................................44
Overall assessment.................................................................................................... 44
Chapter 5: Company law ................................................................................45
Overall assessment.................................................................................................... 46
Chapter 6 Competition....................................................................................47
Overall assessment.................................................................................................... 48
Chapter 7: Agriculture....................................................................................49
Overall assessment.................................................................................................... 51
Chapter 8: Fisheries .......................................................................................53
Overall assessment.................................................................................................... 53
Chapter 9: Transport Policy ...........................................................................54
Overall assessment.................................................................................................... 56
Chapter 10: Taxation......................................................................................57
Overall assessment.................................................................................................... 58
Chapter 11: Economic and Monetary Union ................................................59
Overall assessment.................................................................................................... 60
Chapter 12: Statistics ......................................................................................60
Overall assessment.................................................................................................... 61
Chapter 13: Social policy and employment ...................................................62
Overall assessment.................................................................................................... 63
Chapter 14: Energy.........................................................................................64
Overall assessment.................................................................................................... 65
Chapter 15: Industrial Policy .........................................................................66
Overall assessment.................................................................................................... 66
Chapter 16: Small and medium-sized enterprises .........................................67
Overall assessment.................................................................................................... 67
Chapter 17: Science and Research ................................................................68
Overall assessment.................................................................................................... 69
Chapter 18: Education and training ..............................................................69
Overall assessment.................................................................................................... 70
Chapter 19: Telecommunications and Information Technologies...............71
Overall assessment.................................................................................................... 71
Chapter 20: Culture and audio-visual policy.................................................72
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Overall assessment..........................................................................................72
Chapter 21: Regional policy and co-ordination of structural instruments ..73
Overall assessment.................................................................................................... 73
Chapter 22: Environment...............................................................................74
Overall assessment.................................................................................................... 75
Chapter 23: Consumers and health protection..............................................77
Overall assessment.................................................................................................... 78
Chapter 24: Co-operation in the fields of justice and home affairs .............78
Overall assessment.................................................................................................... 81
Chapter 25: Customs Union ...........................................................................84
Overall assessment.................................................................................................... 85
Chapter 26: External relations.......................................................................85
Overall assessment.................................................................................................... 86
Chapter 27: Common foreign and security policy.........................................87
Overall assessment.................................................................................................... 87
Chapter 28: Financial Control.......................................................................88
Overall Assessment................................................................................................... 88
Chapter 29: Financial and budgetary provisions..........................................89
Overall assessment.................................................................................................... 89
3.2. General evaluation.........................................................................................90
C. Conclusion .............................................................................. 93
D. Accession Partnership and National Programme for the
Adoption of the
Acquis:
Global assessment......................... 96
1. Accession Partnership ......................................................................... 96
Short-term priorities.................................................................................................. 96
Medium-term priorities........................................................................................... 100
2. National Programme for the Adoption of the
Acquis
.................... 101
Annexes ....................................................................................... 102
Human Rights Conventions ratified by the Candidate Countries,
September 2000 .....................................................................................103
Statistical data ...............................................................................................104
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A. Introduction
a)
Preface
In Agenda 2000, the Commission said it would report regularly to the European
Council on progress made by each of the candidate countries of Central and Eastern
Europe in preparations for membership, and that it would submit its first report at the
end of 1998.
The European Council in Luxembourg decided that
“From the end of 1998, the Commission will make regular reports to the Council,
together with any necessary recommendations for opening bilateral intergovernmental
conferences, reviewing the progress of each Central and Eastern European applicant
State towards accession in the light of the Copenhagen criteria, in particular the rate at
which it is adopting the Union
acquis”
… “The Commission’s reports will serve as
the basis for taking, in the Council context, the necessary decisions on the conduct of
the accession negotiations or their extension to other applicants. In that context, the
Commission will continue to follow the method adopted by Agenda 2000 in
evaluating applicant States’ ability to meet the economic criteria and fulfil the
obligations deriving from accession.”
After the European Council in Cardiff the same approach has been followed for
Cyprus.
On this basis, the Commission presented a first series of regular reports in October
1998, with a view to the Vienna European Council; a second series was adopted in
October 1999, with a view to the Helsinki European Council. The Helsinki European
Council noted that the next regular reports would be presented in good time before the
European Council in December 2000.
The structure followed by this regular report on Cyprus is largely similar to that of the
Commission’s 1997 Opinion and of the subsequent regular reports; however, it differs
from that used in previous years on two minor points. Firstly, the part of the present
report assessing Cyprus’ ability to assume the obligations of membership (Part
B.3.1.)
has been structured to follow the list of twenty-nine negotiating chapters covering the
acquis.
Secondly, this part has been broadened to cover also Cyprus’ administrative
capacity to apply the
acquis
under each of the negotiating chapters (previously
discussed in a separate section of the report).
In line with previous regular reports, the present report:
-
-
describes the relations between Cyprus and the Union, in particular in the
framework of the Association Agreement;
analyses the situation in respect of the political criteria set by the 1993
Copenhagen European Council (democracy, rule of law, human rights, protection
of minorities);
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-
assesses Cyprus’ situation and prospects in respect of the economic criteria
defined by the Copenhagen European Council (a functioning market economy and
the capacity to cope with competitive pressures and market forces within the
Union);
addresses the question of Cyprus’ capacity to assume the obligations of
membership, that is, the
acquis
as expressed in the Treaties, the secondary
legislation, and the policies of the Union. It encompasses not only the alignment of
legislation, but also the development of the judicial and administrative capacity
necessary to implement and enforce the
acquis,
as requested by the Madrid and
Feira European Councils in December 1995 and June 2000 respectively. At
Madrid, the European Council underlined the necessity for the candidate countries
to adjust their administrative structures, so as to create the conditions for the
harmonious integration of those States. The Feira European Council in June 2000
emphasised the vital importance of the candidate countries’ capacity to effectively
implement and enforce the
acquis,
and added that this required important efforts
by the candidates in strengthening their administrative and judicial structures. The
Feira European Council invited the Commission to report to the Council on its
findings on the matter.
-
This report takes into consideration progress since the 1999 regular report. It covers
the period until 30 September 2000. In some particular cases, however, measures
taken after that date are mentioned. It looks at whether intended reforms referred to in
the 1999 regular report have been carried out, and examines new initiatives.
Furthermore, complementing the assessment of new developments since the last
regular report, this report provides also an overall assessment of the global situation
for each of the aspects under consideration, setting out for each of them the main steps
which remain to be taken by Cyprus in preparing for accession.
In accordance with this approach, the assessment of progress in meeting the political
and
acquis
criteria (including Cyprus’ administrative capacity to implement the
acquis)
focuses on what has been accomplished since the last regular report,
complemented with a view of the global situation for each of the aspects discussed.
The economic assessment, for its part, is based on a forward-looking evaluation of
Cyprus’ economic performance.
As has been the case in previous reports, “progress” has been measured on the basis of
decisions actually taken, legislation actually adopted, international conventions
actually ratified (with due attention being given to implementation), and measures
actually implemented. As a matter of principle, legislation or measures which are in
various stages of either preparation or Parliamentary approval have not been taken
into account. This approach ensures equal treatment for all the candidate countries
and permits an objective assessment and comparison between countries in terms of
their concrete progress in preparing for accession.
The report draws on numerous sources of information. The candidate countries have
been invited to provide information on progress made in preparations for membership
since the publication of the last regular report. The information they have provided in
the framework of the Association Agreement and in the context of the analytical
examination of the
acquis
(screening) and the negotiations, have served as additional
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sources. Council deliberations and European Parliament reports and resolutions
1
have
been taken into account in the preparations. The Commission has also drawn on
assessments made by various international organisations, and in particular the
contributions of the Council of Europe, the OSCE and the International Financial
Institutions, as well as that of non-governmental organisations.
b) Relations between the European Union and Cyprus
As the accession negotiations progress, the relations between the EU and Cyprus are
intensifying. This relationship is based on an Association Agreement of 1973 as well
as a new Accession Partnership
2
, supported financially by a Council Regulation
3
on
the implementation of operations in the framework of the pre-accession strategy for
the Republic of Cyprus. This regulation replaces the Fourth Financial Protocol, which
expired at the end of 1999.
The European Council in Helsinki underlined that,
“The European Council welcomes the launch of the talks aiming at a comprehensive
settlement of the Cyprus problem on 3 December in New York and expresses its
strong support for the UN Secretary-General’s efforts to bring the process to a
successful conclusion.
The European Council underlines that a political settlement will facilitate the
accession of Cyprus to the European Union. If no settlement has been reached by
completion of accession negotiations, the Council’s decision on accession will be
made without the above being a precondition. In this the Council will take account of
all relevant factors.”
Recent developments under the Association Agreement (including bilateral
trade)
Cyprus and the European Community have been linked since 1973 by an Association
Agreement, which was intended to lead to a customs union. The Agreement contains
arrangements on trade as well as on financial and technical co-operation. Full
liberalisation of trade, as foreseen in the second phase of the Agreement, has not been
completed in view of the start of the accession negotiations. Cyprus has continued to
implement the Association Agreement correctly.
Since the publication of the last regular report the EC-Cyprus Joint Parliamentary
Committee (JPC) has met three times, in Luxembourg in November 1999, in Nicosia
1
2
For the European Parliament the
rapporteur
is Mr Jacques Poos.
Council Decision (EC) No 248/2000 of 20 March 2000 on the principles, priorities, intermediate
objectives and conditions contained in the Accession Partnership with the Republic of Cyprus,
which entered into force on 1 April 2000
3
Council Regulation (EC) No 555/2000 of 13 March 2000 on the implementation of operations in the
framework of the pre-accession strategy for the Republic of Cyprus and the Republic of Malta, which
entered into force on 19 March 2000
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in April 2000 and in Brussels in October 2000, to assess the progress made in Cyprus’
accession process.
The EC has long been the major supplier of goods to Cyprus, accounting for 57% of
total imports in 1999 and receiving 51% of Cyprus’ total exports in 1999. The main
imports were consumer and capital goods such as manufactured, agricultural and
construction products as well as transport equipment. The main domestic exports to
the EC were industrial products, mostly clothing, unprocessed agricultural products
(potatoes and citrus fruits) as well as wine.
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Accession Partnership
On the basis of the new Financial Regulation, an Accession Partnership was
established by a Council Decision of 20 March 2000. The Accession Partnership sets
out in a single framework the priority areas for further work, the financial means
available to help Cyprus to implement these priorities and the conditions which will
apply to this assistance.
In mid September Cyprus submitted a first National Programme for the Adoption of
the
Acquis
(NPAA) to the Commission, in which it outlines its strategy for accession
including how to achieve the priorities contained in the Accession Partnership (see
Chapter D below).
Community Aid
Four financial protocols were signed with Cyprus between 1978 and 1999. The
instruments used were mainly loans (including special loans for infrastructure
projects), grants (equipment, technical assistance training…) and also risk-capital
funds (joint ventures and European Investment Bank participation in Cyprus
Development Bank capital). The priorities covered were mostly in the fields of
environment and SMEs. The Fourth Financial Protocol, signed in 1995, expired in
1999 and comprised a budget for grants of
€
22 million. In 1999, four projects were
committed for a total
€
7,775 million: development of civil society; creating a system
of selection and promotion of bi-communal civil society activities; participation in the
Fifth Framework Programme for Research and Development and a project for
harmonisation with the
acquis
to improve the capacity of the Cypriot administration to
integrate and implement it in key sectors.
After the expiry of the Fourth Financial Protocol with Cyprus on 31 December 1999,
the Council adopted on 13 March 2000 Regulation (EC) 555/2000, on the
implementation of operations in the framework of the pre-accession strategy for
Cyprus and Malta. The global amount of pre-accession aid available to Cyprus for the
whole five-year period 2000-2004 will be
€
57 million.
4
Also see chapter 2, economic criteria
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Cyprus currently participates in the Fifth Framework Programme for Research and
Development, in Media II, and in the Life II. It is expected also to fully participate in
Customs 2000, Save, Altener, Culture 2000, Media Plus and Fiscalis. In addition,
Cyprus has been participating in Socrates, Leonardo and Youth for Europe and will
continue to do so in the new phase of the programmes from 2001.
Cyprus has been participating in the Third Multi-Annual Programme for SMEs since
1 September 2000. This participation in the programme will further strengthen its
infrastructure supporting SMEs, in addition to helping prepare enterprises themselves
for accession.
Cyprus will implement certain targeted projects in the field of judicial and
administrative capacity and in the area of Justice and Home Affairs, such as the
training of judges, external border control, law enforcement issues and the setting up
of support and technical structures such as computerised databases compatible with
European technical infrastructures (National Schengen Information System). These
projects will address two main areas: on the one hand, adapting the organisational
framework and procedures and training of personnel, and on the other hand the
improvement of the existing systems and equipment.
The Financial Regulation mentions the importance of bi-communal projects. In 2000,
€
3 million will be earmarked for these.
Twinning
For the time being no twinning projects have been implemented but the possibility of
using twinning is being envisaged for 2001.
Negotiations
The analytical examination of the
acquis
(screening) for Cyprus started in April 1998
and concluded in autumn 1999 with the examination of the agricultural chapter. An
updated screening exercise started in February 2000 to cover the new
acquis
up to 1
January 2000.
Since the opening of accession negotiations in March 1998, Cyprus has participated in
four rounds of ministerial negotiations. As a result of these negotiations sixteen
chapters have been provisionally closed. These chapters are Company Law; Fisheries;
Economic and Monetary Union; Statistics; Employment and Social Affairs; Industrial
Policy; Small and Medium Sized Undertakings; Science and Research; Education and
Training; Telecommunication and Information Technologies; Culture and Audio-
Visual Policy; Consumer and Health Protection; Customs Union; External Relations;
Common Foreign and Security Policy as well as Financial Control. Negotiations for
the remaining chapters continue.
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B. Criteria for membership
1. Political criteria
Introduction
The political criteria for accession to be met by the candidate countries, as laid down
by the Copenhagen European Council in June 1993, stipulate that these countries must
have achieved “stability of institutions guaranteeing democracy, the rule of law,
human rights and respect for and protection of minorities.”
In its 1999 regular report on Cyprus’ progress towards accession, the Commission
concluded that:
“Cyprus
fulfils the Copenhagen political criteria. There has been little progress in
the last year in finding a just and lasting settlement to the overall problem of Cyprus
although there was a welcome reduction in tension when the government decided not
to deploy additional weaponry.“
The section below aims to provide an assessment of developments in Cyprus since the
1999 regular report, as well as of the overall situation in the country, seen from the
perspective of the Copenhagen political criteria, including the overall functioning of
the country’s executive and judicial systems. Developments in this context are in
many ways closely linked to developments regarding Cyprus’ ability to implement the
acquis,
in particular in the domain of Justice and Home Affairs. Specific information
on the development of Cyprus’ ability to implement the
acquis
in the field of Justice
and Home affairs can be found in the relevant section (Chapter
24 – Co-operation in
the field of Justice and Home Affairs)
of part
B.3.1.
of this report.
Recent developments
Since the last regular report, a number of developments have taken place which may
contribute towards a political settlement, notably the resumption of the UN peace
process, the improvement in Greek-Turkish relations, and the new status of Turkey as
a candidate country for EU accession. Rounds of proximity talks were held in New
York (December 1999) and Geneva (February and July 2000), with the aim of
preparing the ground for substantial direct negotiations. In the fourth round of
proximity talks, which took place in New York in September, it was reported that the
two sides engaged in substantial discussion on the core issues (territory, property,
security and constitution). The next round of talks was scheduled for early November
in Geneva.
In the framework of the accession negotiations, the European Union regularly refers to
the offer extended by President Clerides, inviting the Turkish Cypriot community to
participate in the negotiations. This offer remains on the table. This would ensure
that Turkish Cypriot concerns are taken into due account, and assist the Union’s
determination that accession should benefit the whole of the island. It would also
allow for the implementation of the
acquis
throughout the island.
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1.1.
Democracy and the rule of law
As stated in the previous reports, Cyprus has achieved stability of institutions
guaranteeing democracy and the rule of law. This section focuses on the most
significant developments of the past year. It has to be taken into account that, as no
political settlement has been achieved so far, the provisions of the Constitution of the
Republic of Cyprus regarding power-sharing at the different levels between the
Turkish and Greek Cypriots communities are not being applied.
The Parliament
The Parliament continues to function in full respect of democratic principles, and has
again made impressive efforts to pursue an intense legislative programme. A great
number of bills regarding alignment with the
acquis
have been adopted over the past
year.
The special Committee for EU and External Affairs established last year continues to
function well. This Committee, consisting of 19 members, examines all legislative
instruments that are required for the approximation of the national legislation to the
acquis,
with the possibility of a fast-track procedure. All bills, which are submitted to
the Parliament in the context of the harmonisation process are examined directly by
this Parliamentary Committee, irrespective of the specific topic they seek to regulate.
During 1999 and the first half of 2000, 21 harmonised laws and regulations were
adopted by the normal procedure, whereas 61 were adopted in the framework of the
fast track procedure; however, the aim of the initial proposal in the latter is sometimes
softened by amendments or ‘reviewing right’ clauses.
The Planning Bureau, which co-ordinates the harmonisation process at the national
level, has recently issued a Schedule ("Project 2003 - Harmonisation Monitoring
System"), together with a very comprehensive National Programme for the Adoption
of the
acquis,
which includes deadlines for legal drafting and legal vetting, submission
to the House of Representatives, and approval through the fast-track procedure. The
House of Representatives supervises the Government’s ability to implement the
various harmonisation bills once they have been enacted.
The Executive
The institutions of the state continue to operate smoothly. Since the previous regular
report, efforts have been made to reinforce the Law Office, which plays a central role
in the approximation of legislation, to strengthen the co-ordination of the
harmonisation process within the various ministries, to speed up the computerisation
of the public administration, and to enhance administrative capacity at sub-national
level.
In view of Cyprus’ preparation for accession, within the Law Office a European Union
Section has been created, and its staffing has been reinforced with a number of
lawyers qualified in European Law. The Law Office staff take part on a continuous
basis in training courses on legal drafting and EC law. Collections of EU-related
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textbooks and reference material in the Law Office library have been reinforced and
are being kept up to date.
The chief negotiator in the negotiations for the accession of Cyprus to the European
Union continues to have overall responsibility for the guidance and management of
the negotiations, the supervision and co-ordination of the harmonisation process, and
for the dialogue with the House of Representatives and the private sector. Within
each ministry, an overall co-ordinator for the harmonisation process and the pre-
accession strategy has been nominated.
Particular efforts have been made over the past year to speed up the computerisation
of the public administration, and, in parallel, the re-engineering of certain
administrative processes. The actual amount spent on computerisation in 1999 (€13.3
million according to provisional estimates) was more than double the corresponding
amount for 1998 (€ 6.2 million). Continued progress in this regard will be required.
No significant developments are to be reported as regards the structure and
functioning of the public administration. The Cypriot civil service is largely
independent from political interference. Appointments, promotions and the exercise
of disciplinary control over civil servants are performed by the Public Service
Commission, an independent body. The agency responsible for the operation of the
civil service, as well as for the assessment and improvement of its effectiveness, is the
Public Administration and Personnel Service of the Ministry of Finance.
The Cyprus Academy of Public Administration (CAPA), with the approval of the
Council of Ministers, continues to focus its activities on training civil servants with
regard to the EU’s institutions, structures, policies and legal framework.
Efforts are underway to enhance administrative capacity at the sub-national level
(regional, district and local levels). Thus, through a decision of the Council of
Ministers in November 1999, a further decentralisation of competencies to the district
level has taken place. The tasks of the District Officers, who co-ordinate the activities
of the various Government Departments at district level, now also include the
monitoring of the implementation of development and infrastructure projects, the
issuing of identity cards, passports and certain construction and town planning permits
at the district level.
The Office of the Ombudsman, whose task is to investigate, report and recommend on
acts or omissions of the administration, including local authorities, as well as on
alleged ill-treatment by members of the police, continues to function well. During
1999, a total of 1.267 complaints were submitted to the Ombudsman’s Office, out of
which 1.050 were considered to be within his competence, representing an important
increase compared to previous years.
The judicial system
As already stated in previous reports, the principle of the separation of powers is fully
applied in Cyprus, and the standard of justice is high. Most criminal and civil cases
start in district courts, from which appeals can be made to the Supreme Court. No
special courts exist for security or political offences. Cyprus inherited many elements
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of its legal system from the United Kingdom. A fair public trial is provided for in law
and accorded in practice.
The scale of remuneration of judges, with the exception of district judges, is fixed,
and cannot be altered to their detriment. The salaries of the judges of the Supreme
Court are not dependent on the approval of the budget.
Over the past year Cyprus has taken a range of measures to address issues identified in
the previous regular report, notably to reduce the backlog of civil and administrative
cases, to enhance the training of judges, to upgrade the infrastructure in the courts, and
to develop a legal aid system for civil cases.
In order to reduce the backlog of civil and administrative cases, the civil court system
has been restructured, involving such measures as extending competences of judges
and the reform and simplification of procedural rules in administrative cases. In
addition, nine new judicial posts have been created, bringing the total number of
judges from 75 (including the 13 Judges of the Supreme Court) to 84. Furthermore, a
third permanent Assize Court has been set up, and a third Rent Control Court. A new
branch of the Industrial Disputes Court has been established.
In order to reduce the total number of cases before the courts, in early 2000 a Tax
Tribunal became operational to arbitrate in cases between the Inland Revenue
Department and individual taxpayers. This new Tribunal can revoke or affirm any
decision taken by the Inland Revenue Department, and return the tax file for
reconsideration to this Department.
Other measures to address the delays in civil and administrative procedures include
the transfer of part of the original jurisdiction of the Supreme Court to the District
Courts, and calculating interest on the amount of final judgement from the date of
instituting court proceedings and not from the date of issuing the judgement.
As a result of these measures in the courts of first instance, the number of cases
pending at the end of each year has shown a marked decrease. For second instance
administrative jurisdiction of the Supreme Court, the number of appeals heard and
concluded yearly is now higher than the number of cases filed.
In order to enhance the training of the judiciary, a committee consisting of judges of
the Supreme Court has been set up to prepare and monitor a comprehensive
programme for the training of judges in matters of EC law. A programme for the
training of judges from first instance courts has been established which covers such
fields as Human Rights, European Community Law and Civil Procedure.
The existing court infrastructure - buildings and equipment - is currently being
modernised and upgraded. An automated Court administration system is being
developed, which will facilitate the monitoring of all civil and criminal cases and
which will automate the Court’s functions. This system is expected to be operational
before the end of 2000. In addition, a legal information data bank is being developed,
which is also expected to be ready in 2000.
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Finally, regarding legal aid in civil matters, new legislation is under preparation.
However, the envisaged legal aid law is expected to cover human rights cases only.
Parties would thus receive legal aid, both in criminal and civil matters.
In the meantime, the significant delays which exist in the publication and enforcement
of judgements by the Supreme Court remain a source of concern.
Anti-corruption measures
As indicated in last year’s regular report, Cypriot legislation contains extensive
provisions to prevent and combat fraud and corruption. Various bodies are involved in
the enforcement of anti-fraud legislation, including the Unit for Combating Money
Laundering (MOKAS, which was reinforced at the end of last year), and special
investigation units. The Attorney General co-ordinates all investigations concerning
fraud.
While corruption does not seem to present a major problem in Cyprus, an important
case occurred at the end of 1999. Several high-ranking Cypriot police and immigration
officers were involved, including the head of the Migration Office. The problems
faced by the Office of the Migration Officer (charges of corruption as well as a large
number of pending visa applications) led the Council of Ministers to decide in
November 1999 to restructure it.
Over the past year, Cyprus has made further progress in acceding to the major
international conventions in this field. In November 1999, Cyprus signed the Civil
Law Convention on Corruption. In July 2000, the House of Representatives adopted
the act ratifying the Council of Europe Criminal Law Convention on Corruption,
which it had signed in January 1999. In March 2000, Cyprus applied to accede to the
1997 OECD Convention on Combating Bribery of Foreign Public Officials in
International Business Transactions. However, there are indications that the accession
procedure to this latter Convention is stalled, allegedly due to objections raised by one
OECD member state.
Cyprus is a member of the Group of States against Corruption (GRECO), and has
volunteered to be among the first ten participating states to be evaluated in the
GRECO framework before the end of 2000.
1.2.
Human rights and the protection of minorities
As indicated in the previous regular reports, Cyprus continues to respect human rights
and freedoms. The following section focuses on the main developments during the last
year.
Cyprus has ratified most of the international legal instruments in the field of human
rights. In January 2000 Cyprus ratified Protocol 6 to the European Convention on
Human Rights concerning the abolition of the death penalty. In September 2000,
Cyprus also ratified Protocol 7 to the European Convention on Human Rights as well
as the revised European Social Charter (see Annex).
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The Office of the Law Commissioner - who monitors the implementation of Cyprus’
obligations under these international instruments and has the competence to propose
necessary action - continues to function well. Due to the increasing workload,
however, the Commissioner's work in updating and reviewing legislation has been
evolving at a slower pace than expected. The Law Commissioner also chairs the
National Institution for the Protection of Human Rights. He is entirely independent
and is respected by the legal community as well as by the government.
Civil and political rights
Besides the ratification by Cyprus of Protocols 6 and 7 to the European Convention on
Human Rights, a number of other positive developments can be reported in this field.
Over the past year, new legislation was enacted on asylum as well as on the trafficking
in human beings and the sexual exploitation of minors, and amendments were made to
legislation regarding homosexuality.
In January 2000, Cyprus adopted new
asylum
legislation. The Refugee Law lays down
principles for the treatment of refugees, specifies their rights and obligations, provides
for the entry of asylum seekers and the issuing of temporary residence permits to
them, specifies the procedure for the recognition of refugee status as well as the
appeal procedure, and establishes a relevant authority. To complement this legal
framework, implementing regulations will now need to be adopted, including the
creation of a Refugee Authority.
Also in early 2000, existing legislation on the
trafficking
in human beings and sexual
exploitation was enhanced by new legislation on action to combat the trafficking in
persons and the sexual exploitation of minors. Under the provisions of the legislation
on combating trafficking of persons, the Council of Ministers has created the office of
the Patron of Human Rights, which will operate from within the Department of Social
Welfare of the Ministry of Social Insurance, in close co-ordination with the Police
Force.
The House of Representatives furthermore enacted amendments to the homosexuality
law, removing elements which had been objected to by the Council of Europe. The
age of consent, set at 18, remained unchanged.
The legal framework specifically prohibits
torture
and the authorities generally respect
these provisions in practice. Specialised courses in the respect and protection of
human rights are now being taught in the Police Academy. However, in the past there
have been instances of Cypriot police mistreating suspects in detention, mostly
involving non-Cypriots. One officer is on trial in connection with the October 1998
beating of illegal immigrant detainees by members of a special police unit.
The police continues to respect laws providing freedom from arbitrary arrest and
detention.
Judicially issued arrest warrants are required. No-one may be detained for
more than a day without referral of the case to the courts for extension of the period of
detention. Most periods of investigative detention do not exceed 8 to 10 days before
formal charges are filed. Attorneys generally have access to detainees; bail is
permitted.
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No new developments can be reported with regard to
prison conditions.
The existing
regime and prison living conditions continue to comply with the minimum standards
expected of penal institutions. An issue requiring further attention is the fact that, as a
result of staff shortages, there continues to be an inadequate separation of inmates
serving different sentences for different crimes.
Freedom of speech
and of
the press
are provided for by law, and so is the freedom to
hold meetings,
to associate and to organise.
These rights continue to be respected in
practice.
Freedom of religion
continues to be generally respected. The Constitution of the
Republic of Cyprus recognises five religions that are exempted from taxes and receive
government subsidies.
Other religions may register routinely as non-profit
organisations and receive tax exemptions, but not subsidies. Turkish Cypriots residing
in the southern part of the island and non-Muslims in the north (see below) are
allowed to practise their religions. A positive development over the past year has been
the resumption of investigations to resolve the problem of persons missing after the
inter-communal violence that started in 1963-64 and the events of July 1974 and
thereafter. In November 1999, the autonomous tripartite (United Nations, Greek
Cypriot, Turkish Cypriot) Committee on Missing Persons in Cyprus (CMP), formally
met for the first time since early 1996 and agreed in principle to resume
investigations. The official list of missing persons was published in the Government
Gazette on 10 July 2000 and contained 1493 names compared to the original 1619
known to date. It excludes 126 names of persons whose files were not submitted to
the CMP for investigation into the circumstances of their disappearance. The relatives
of the 126 were informed of the reasons why these are no longer presumed missing.
The list also excluded the names of three other persons whose remains were
identified through DNA testing.
Economic, social and cultural rights
Apart from the ratification of the revised European Social Charter, other
developments to be reported in this area concern the implementation of legislation on
spousal abuse, and the implementation of the original European Social Charter.
As regards
equal opportunities,
in Cyprus, women have the same legal status as men.
Over the past year, progress has been made in implementing existing legislation aimed
at making spousal abuse easier to report and prosecute. On the basis of this
legislation, in force since 1994, but so far largely unimplemented, all cases of spousal
abuse reported to the police are now being referred to the courts.
With regard to the rights and treatment of
disabled persons,
in July 2000 the House of
Representatives enacted the "Law Providing for Persons with Disabilities", which
provides,
inter alia,
for the introduction of the general principle of non-discrimination
as well as for specific measures in the field of employment. These include provisions
regarding recruitment, promotion in employment, vocational rehabilitation within the
enterprise, special protection in cases of termination of employment, mobility,
communications and means of transport.
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Legal provisions with regard to
children’s rights
demonstrate a strong commitment to
children’s welfare. Legislation on the employment of children is enforced through
inspection visits by qualified Labour Inspectors; in case of infringements, employers
are liable to a term of imprisonment of up to six months and/or a fine of up to 300
Cypriot pounds.
The European Committee of Social Rights -which supervises the application of the
rights guaranteed under the
European Social Charter,
of which Cyprus has ratified 43
of the 72 paragraphs-has indicated that it considers two provisions of Cypriot
legislation not to be in full compliance with the Charter. These provisions relate to the
Defence Regulations (forced labour) as well as to the system of social pensions
(residence requirement/contracting parties). In September 2000, Cyprus ratified the
revised European Social Charter.
All workers, except for members of the police and military forces, continue to have
the legal right to form and join
trade unions
of their own choosing without prior
authorisation. More than 70 percent of the Cypriot work force belong to independent
trade unions. Trade unions freely and regularly take stands on public policy issues
affecting workers, and maintain their independence from the authorities.
Minority rights and the protection of minorities
By virtue of Article 2 of the Constitution all Cypriot citizens belong either to the
Greek or Turkish Cypriot community. The small Maronite, Armenian and Latin
(Roman Catholic) communities, for their part, have opted to belong as a group to the
Greek Cypriot community.
Legislation provides for protection against discrimination based on national, racial or
ethnic origin and this legislation is largely respected. While the 300 to 400 members
of the Turkish Cypriot community living in the southern part of the island are not
otherwise discriminated against, they cannot vote in presidential or local elections,
given that the Constitution of the Republic of Cyprus provides for separate voting in
relation to the two Cypriot communities.
In contrast, the Maronite, Armenian and Latin (Roman Catholic) communities, not
only benefit from normal voting rights in the context of the Greek Cypriot community,
but also elect special non-voting representatives from their respective communities to
the House of Representatives. The House is obliged to consult these representatives
before the adoption of any legal measure that directly concerns the religious group(s).
They are entitled to deliver their position or to express their view before the House,
any subcommittee of the House or any authority. The minority representatives enjoy
the same benefits as the rest of the Members of the House of Representatives.
1.3.
The situation in the northern part of the island
In the existing political circumstances it is not possible at this stage to identify and
describe with precision the opportunities and problems which might arise for the
northern part of the island as an integral part of the EU. In every chapter of the
accession negotiations the EU makes a special reference to the future participation of
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the Turkish Cypriot community. This would give the possibility to take account of its
specific concerns and situation. A recent opinion poll showed that over 90% of the
Turkish Cypriots are in favour of EU accession.
The area of Cyprus north of the UN buffer zone amounts to 3335 km
2
or
approximately 37% of the island. In 1996 a total population of some 200000 persons
lived in the north, of these 107000 are Turkish Cypriots.
Turkish forces have an important influence in Turkish Cypriot society. Since 1974
there has been a Turkish mainland force on the island estimated at around 30000
persons. Under the Turkish army are the Cyprus Turkish Security Forces (CTSF), a
small force consisting almost entirely of conscripts which is deployed largely to guard
the areas of the buffer zone in and around Nicosia. The ‘police’ in the north is under
the command of the CTSF. Concerning the rule of law and respect for human rights
and the protection of minorities, issues identified in the 1999 regular report remain
largely unchanged. While restrictions on free movement have been slightly eased,
obligations under the 1975 Vienna III agreement concerning the treatment of Greek
Cypriots and Maronites are still not fully respected. Furthermore, the continued non-
execution of the judgement by the European Court of Human Rights with regard to the
right of a Cypriot living in the south to property in the northern part, as well as recent
developments with regard to the freedom of speech, give rise to serious concern.
Restrictions on the freedom of movement of the approximately 600 Greek Cypriots
and Maronites living in the north have been somewhat eased. Turkish Cypriot
‘authorities’ usually grant the applications of Greek Cypriot residents in the north to
visit the south. Applicants must return within a designated period or risk losing their
right to return and to keep their property, although this rule is rarely enforced in
practice. Turkish Cypriot ‘authorities’ have also eliminated the previous monthly
limit on visits by close family relatives of Greek Cypriots resident in the north (once a
month until 1996 and twice a month thereafter).
At the same time, fees imposed on Greek Cypriots and Maronites crossing at the
Ledra Palace checkpoint have been reduced. The significant charge of £15 has been
replaced by a £1 ‘administrative levy’. Furthermore, Greek Cypriots and Maronites
visiting the northern part of the island are now allowed to stay for a ‘reasonable period
of time subject to confirmations from the relevant ministries’. Previously people
visiting enclaved relatives were restricted to no more than two nights and three days in
the north.
In the meantime, access by the United Nations Peacekeeping Force (UNFICYP)
5
to
Greek Cypriots and Maronites living in the north remains limited. Obligations under
the Vienna III agreement of 1975, concerning the treatment of Greek Cypriots and
Maronites, are still not fully implemented. The agreement provides in general for
voluntary transfers of populations, free and unhindered access by the UNFICYP to
Greek Cypriot and Maronites living in the northern part and Turkish Cypriots living in
the southern part, as well as facilities for education and religious worship. This
5
The UNFICYP was established in 1964, in order to prevent a recurrence of fighting between the
Greek Cypriot and the Turkish Cypriot communities. Its mandate is renewed every six months.
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agreement also foresees medical care by a doctor from the Greek Cypriot community;
however, in practice only care by a doctor registered in the northern part of the island
is permitted. A Greek Cypriot request to replace a retiring Orthodox priest in the
north has been pending for more than two years. Both Greek Cypriots and Maronites
living in the north continue to be unable to change their housing at will. They can
only bequeath their properties to close family members who are also resident in the
north.
So far, no Greek-language educational facilities for Greek Cypriot or Maronite
children in the north exist beyond the elementary level. Parents are thus forced in
many instances to choose between keeping their children with them or sending them
to the south for further education. All textbooks sent from the south to the Greek
Cypriot schools in the northern part must be screened, causing lengthy delays and
shortages of up-to-date texts. For this reason most of these children move to the south
for their secondary education; some of them choose to stay there for good. They are
allowed to return but have to face heavy restrictions. There is no possibility of return
if they complete military service with the Greek Cypriot National Guard.
As regards the ruling of the European Court of Human Rights that Turkey is
continuing to violate the rights of the Greek Cypriot Mrs Loizidou by preventing her
from going to her property located in the north, in July 2000 the Committee of
Ministers/Deputies of the Council of Europe adopted a Second Interim Resolution
concerning the case of
Loizidou vs. Turkey.
In this interim resolution, the Committee
of Ministers deeply deplored the fact that Turkey had still not complied with its
obligations under the judgement delivered by the European Court of Human Rights on
28 July 1998 to pay about
€
800000 (plus annual interest of 8% until settlement). The
Committee of Ministers declared:
6
“Recalling
its Interim Resolution DH (99) 680 of 6 October 1999, in which, inter
alia, the Committee of Ministers strongly urged Turkey to pay the just satisfaction
awarded in this case so as to ensure that Turkey […] meets its obligations under
the Convention;”
and “emphasising
that the failure on the part of a High
Contracting Party to comply with a judgement of the court is unprecedented;”
further
“declares that the refusal of Turkey to execute the judgement of the Court
demonstrates a manifest disregard for its international obligations […]”
and
“[…] strongly insists that Turkey comply fully and without any further delay with
the European Court of Human Rights’ judgement of 28 July 1998.”
7
Similar cases of Cypriots against Turkey, now pending before the Human Rights
Court, are estimated to number around 150-200.
While freedom of speech is generally respected in the northern part, recent events
related to the closure of the Turkish Cypriot daily newspaper ‘Avrupa’ (Europe) give
raise to serious concern. At the end of 1999, ‘Avrupa’ was convicted and fined $
300,000 in a libel action following a complaint by the Turkish Cypriot leader Rauf
Denktash regarding articles and reports it had published. In May 2000, ‘Avrupa’ had
6
7
Resolution DH (2000) 105
Resolution DH (2000) 105
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all its property seized, as it was unable to pay this large sum. Furthermore, both the
newspaper and several of its journalists were accused of inciting hatred against the
‘Turkish Republic of Northern Cyprus’ as well as humiliating the ‘government’.
These actions were regarded as attempts to silence the newspaper and therefore
evoked international protests from journalist unions and associations.
The OSCE (Organisation for Security and Co-operation in Europe) Representative on
Freedom of the Media:
“addressed
the Turkish Government [in May 2000] asking them to use their
influence in the northern part of Cyprus to try to return the equipment to its
rightful owners. […] He believes that the case of Avrupa is a flagrant violation of
the commitments undertaken by an OSCE participating State regarding freedom of
expression and expects the authorities in northern Cyprus to stop their attacks
against Avrupa.”
Subsequently, in July 2000 the editor-in-chief of ‘Avrupa’, Shener Levent, and others,
were arrested on ‘spying charges’ against the ‘Turkish Republic of Northern Cyprus’
and for allegedly collaborating to pass secret military information to Greek Cypriots.
They were to be tried in a military court. A group of 37 Members of the European
Parliament signed a declaration condemning the arrests of the ‘Avrupa’ journalists and
demanding their immediate release. In the meantime, the court, citing a lack of
evidence against them, set the accused free.
1.4.
The efforts for a political settlement
Since the previous regular report, the main development has been the launching of
proximity talks. In the context of a G-8 initiative, on 29 June 1999
8
the Security
Council asked the UN Secretary-General to invite the Greek and Turkish Cypriot
leaders to hold negotiations in the autumn. It also called on the two sides in Cyprus,
including the military, to work constructively with the UN representatives to create a
positive climate on the island that could pave the way for these negotiations.
As an important step forward to achieving a political settlement, on 3 December 1999
the first round of “proximity talks” started in New York. The UN Secretary-General’s
Special Adviser for Cyprus, Mr Alvaro de Soto, stated that the proximity talks should
be seen as the beginning of an extended process. The first round was held with the
aim of preparing the ground for future substantial direct negotiations on the Cyprus
problem.
In December 1999 the European Council underlined in its meeting in Helsinki that,
“The European Council welcomes the launch of the talks aiming at a comprehensive
settlement of the Cyprus problem on 3 December in New York and expresses its
strong support for the UN Secretary-General’s efforts to bring the process to a
successful conclusion.”
8
Resolution 1250/1999
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Second and third rounds of talks took place in Geneva in February and July, without
significant discussion of issues of substance. A fourth round of proximity talks was
held in New York in September. Mr. de Soto reported that in this round the two sides
engaged in substantial discussion, which he regarded as a “qualitative step forward”.
He had put on the table ideas on the four core issues: territory, property, security and
constitution, but he stressed that there were no formal proposals at this stage. Mr. de
Soto referred to contacts with the EU in order to ensure that there was no
contradiction between the EU accession process and the goals of the UN process. The
next round of talks was scheduled for early November in Geneva.
Concerning the UN peacekeeping mandate, the General Assembly by its Resolution
53/231 appropriated an amount of about $ 45 million for the maintenance of
UNFICYP for the 12-months from 1 July 1999 to 30 June 2000. This amount
includes the pledged voluntary contributions of one third of the cost of the force,
equivalent to about $ 14 million from the Government of Cyprus and the annual
pledge of $ 6.5 million from the Government of Greece.
On 14 June 2000, the Security Council adopted a Resolution extending the mandate of
the UN Mission in Cyprus, after lengthy discussions on a controversial addendum to
the Secretary-General’s Report, which referred to the position of Turkish Cypriot
‘authorities’. This was finally withdrawn.
The Turkish Cypriot side took measures against UNFICYP in reaction to the
withdrawal of the addendum to the UN resolution on 15 June. These measures include
limitations to the movement of UNFICYP across the 180 km buffer zone. Further, the
UN is now obliged to insure all its vehicles with Turkish Cypriot insurance companies
and to allow the Turkish Cypriot authorities to collect the fees for the water, electricity
and other services consumed by UN camps in the north. The UN expressed its
disappointment at the measures.
In early July 2000 Turkish troops advanced 300m into Strovilia, the UN buffer zone.
The Government protested to the UN, which demanded that the
status quo
be
reinstated. The UN still has access to the 8 Greek Cypriots who are now enclaved in
this area, as well as to their own UN sentry post, which is also enclaved by the Turkish
forces.
Nonetheless, over the last year, contacts between Greek and Turkish Cypriots on the
island have increased. Most of them occur through events arranged with the help of
UNFICYP in the United Nations buffer zone. These events included professional
conferences, trade union meetings, a media forum, women’s gatherings, youth events
and televised discussions between journalists. For the first time in several years,
meetings took place between political party representatives from both sides. Also, a
group of Greek Cypriots and Turkish Cypriots have set up a bi-communal Teacher’s
Centre. In addition, the United Nations Development Programme (UNDP), through
the United Nations Office for Project Services, is encouraging both communities to
work together in preparing and implementing projects in areas of mutual concern,
such as the preservation of natural resources and cultural heritage, public health and
sanitation.
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1.5.
General evaluation
Cyprus continues to fulfil the Copenhagen political criteria. The predominant political
problem is the continued division of the island, but over the last year important efforts
have been made in the search for a political settlement in line with the Accession
Partnership. From the fourth round of proximity talks held in September there were
encouraging signs that the two sides were engaging in substantive discussion.
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2. Economic criteria
2.1.
Introduction
In its 1993 Opinion on the application of the Republic of Cyprus for EU membership,
the Commission concluded:
“The economy of the southern part of the island has demonstrated an ability to adapt
and seems ready to face integration 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 finding was confirmed in the 1998 and 1999 Regular Reports. In its 1999
Regular Report, the Commission found that:
"The Republic of Cyprus is a functioning market economy. It should be able to cope
with the competitive pressures and market forces within the Union."
In examining the economic developments in Cyprus since 1998, the Commission’s
approach was guided by the conclusions of the European Council in Copenhagen in
June 1993, which stated that membership of the Union requires:
•
•
the existence of a functioning market economy;
the capacity to cope with the competitive pressure and market forces within the
Union.
In the analysis below, the Commission has followed the methodology applied in the
previous Regular Reports.
2.2.
Economic developments
While economic growth is strong, and the economy is operating at full employment,
the combined effect of expansionary fiscal policy, rapid monetary growth and trade
restrictions on agricultural products led to an acceleration of inflation from the
summer of 1999 onwards. During 1999, the government failed to take any significant
measures towards curbing the fiscal deficit. More progress was made on limiting the
deficit during the first half of 2000, but the additional measures are not sufficient to
place the government accounts on a sustainable path. The speculative equity market
bubble and the inevitable correction of equity prices presents risks for financial sector
stability. The current account deficit was 2.6 percent of GDP, despite very strong
tourist arrivals. Current account financing has increasingly relied upon debt creating
inflows.
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Cyprus
1996
1997
1998
1999
2000 latest
Real GDP growth rate
per cent
1.9
2.4
5.0
4.5
:
Inflation rate
9
- annual average
- December-on-December
per cent
per cent
3.0
2.5
3.6
3.9
1.9
0.2
1.3
3.9
3.4
10
June
5.3 June
Unemployment rate, end-year
- ILO definition
per cent
3.1
3.4
3.4
3.6p
:
General government budget
balance
11
per cent of GDP
-3.4
-5.3
-5.5
:
:
Current account balance
per cent of GDP
million
€
-5.3
-375
-4.0
-299
-6.6
-537
-2.6
-219
:
:
Foreign debt
- debt export ratio
12
- gross foreign debt
per cent
million
€
137.3
4,516
204.7
7,215
293.4
10,37
1
348.6
E
13,27
4E
:
:
Foreign direct investment in
flow
- balance of payments data
per cent of GDP
million
€
:
:
4.5
335
4.1
336
3.2
268
:
:
E = Estimates
Some limited advances have been achieved in the areas of liberalisation and
structural reforms.
After many years of delay, Parliament passed legislation providing
a timetable for the abolition of the interest ceiling by January 2001. However, the
legislation also provided for a number of transitional measures, including subsidies
protecting current mortgage holders from the adverse consequences of greater interest
rate flexibility. The Cypriot Authorities have started an important health sector
reform. Comparatively little progress has been made in other areas of structural
9
PROXY HICP since 1998 (see methodological notes).
Moving 12 month average rate of change
11
Excluding local authorities.
12
Series break in 1998: more complete definition
10
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reform, and significant distortions due to government intervention remain in several
important sectors.
Main Indicators of Economic Structure in 1999
Population (average)
GDP per head
14
thousand
PPS-€
Per cent of EU
average
Share of agriculture
15
in:
- gross value added
- employment
Investment-to-GDP ratio
16
Gross foreign debt/GDP
17
Exports of goods &
services/GDP
Stock of foreign direct
investment
P= provisional figure
667.13
17,082
81
per cent
per cent
per cent
per cent
per cent
million
€
€
per head
4.2
9.3 p
17.8
155.4
44.6
:
:
2.3.
Assessment in terms of the Copenhagen criteria
The existence of a functioning market economy
As set out in Agenda 2000, the existence of a functioning market economy requires
that prices, as well as trade are liberalised and that an enforceable legal system,
including property rights, is in place.
Macroeconomic stability and consensus about
economic policy enhance the performance of a market economy. A well-developed
13
14
Population at the end of year
Figures have been calculated using the population figures from National Accounts, which may differ
from those used in demographic statistics.
15
Agriculture, hunting, forestry and fishing.
16
Data refer to Gross fixed capital formation as % of GDP.
17
The 1999 data for foreign debt are estimates.
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financial sector and the absence of any significant barriers to market entry and exit
improve the efficiency of the economy.
While there is broad agreement on the main objectives of economic policy, recently
there have been significant difficulties in implementing the necessary measures to
achieve those objectives.
Many indispensable economic reforms suffer from excessive
delays and when they are enacted, they are often burdened with additional
conditionality to moderate the effects. In some cases, most notably with the recent
increase of VAT rates, this additional conditionality has proved to be
counterproductive.
In recent years, the good macroeconomic performance in Cyprus has deteriorated.
While overall growth has remained strong, risks for macroeconomic stability have
emerged, particularly in the financial sector, fiscal accounts and the external sector.
Unfortunately, political difficulties have prevented the adoption of a coherent
economic strategy to confront these risks.
GDP increased by 4.5 percent in 1999, a third consecutive year of rapid economic
growth.
Preliminary data for the first half of the year suggest that the growth rate for
2000 could be as high as 5 percent. In 1999, real consumption growth slowed to 2
percent, down from 9.1 percent in 1998. In 1998, consumers had anticipated a rise in
VAT during 1999, and brought planned consumption expenditure forward. Early
indications suggest that consumption expenditure has accelerated during the first half
of 2000. Investment expenditures fell by 2.1 percent in 1999, as loanable funds were
diverted to equity transactions. After slowing in 1998, the contribution of exports of
goods and services to GDP growth recovered, owing to the sharp rise in tourist
arrivals.
The sectoral composition of growth has been uneven.
The service sector has enjoyed
particularly robust growth. Tourist-related sectors, such as restaurants and hotels
expanded by around 8 percent, while the explosion in the volume of equity
transactions prompted the financial sector to increase by 26 percent. In contrast, the
primary sector declined during the first half of 2000. This decline was largely due to a
fall in agricultural production, which was particularly badly affected by the recent
drought.
By international standards unemployment is low.
In 1999, 3.6 percent of the active
workforce was unemployed, marginally higher than the rate recorded in 1998. Overall
employment grew by 1 percent in 1999. Growth was particularly strong in the services
sector, while both agriculture and manufacturing continue to shed labour. Due to the
tight labour market conditions, preliminary data suggest an acceleration of wage
growth during 2000.
In 1999, the current account deficit was estimated to be 2.6 percent of GDP.
As a
result of a series of one-off defence-related expenditures during 1998 the current
account deficit was almost 7 percent of GDP, while the elimination of these items
during 1999 led to a significant correction. More recently, strong domestic demand
has led to higher imports and a deterioration of the trade balance. The effect of the
rising trade deficit was mitigated by a powerful increase in tourist receipts, largely
from UK tourists. While the current account deficit is significantly lower than in 1998,
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the deficit was almost entirely financed by debt-creating inflows used to finance the
public sector deficit.
The central government deficit was 4.1 percent of GDP in 1999, down from the 5.5
percent recorded in the previous year.
However, the reduction of the deficit was
merely due to cyclical factors, which boosted tax revenues. Significant structural
weaknesses remain, in particular the limited indirect tax revenue base, which in the
event of an economic slowdown would lead to a deterioration in the fiscal accounts.
Since 1995, central government deficits have been excessive, while public sector
indebtedness has exceeded the government's 60 percent of GDP target. In 1998, the
Ministry of Finance prepared a fiscal consolidation plan, however the implementation
of its key measures have been persistently delayed by parliament.
During the first half of 2000, Parliament passed a number of revenue measures
including a tax on equity transactions, a temporary capital gains tax on stock market
profits, and increases in a number of excises.
Unfortunately, the long delayed 2
percent increase in VAT, which was finally introduced in July 2000, was offset by a
series of expenditure measures and increased tax allowances which will be at least as
large as the additional VAT revenues.
Cyprus has embarked upon an ambitious healthcare reform agenda.
While healthcare
indicators compare favourably with the EU, the provision of services is fragmented,
and there are significant concerns about the equity of healthcare provision. The public
sector healthcare system is congested, while healthcare costs have risen sharply as a
percent of GDP. The current system will be replaced by a general practitioner based
referral system, which will be financed by a mixture of direct contributions from
employers, employees and the public sector. The new system will also include several
measures, including approved lists for pharmaceuticals and global budgets for
healthcare institutions, which will limit the growth of healthcare costs.
The average inflation rate during 1999 was 1.3 percent.
However, inflation
accelerated during the second half of the year and by June 2000 the 12 month inflation
rate had reached 5.3 percent. The severe drought, combined with the excessive tariffs
on agricultural imports, limited the domestic supply of vegetables, and added 1.1
percentage points to the inflation rate. The direct effects of international oil price rises
have been limited through the operation of price controls on oil products. The indirect
effects of oil price rises through electricity prices added a further 0.8 percentage
points. In addition, the expansionary monetary and fiscal stance boosted domestic
demand and so contributed to the deteriorating inflationary performance. While some
of these factors are external, a more restrictive fiscal policy and the elimination of the
interest ceiling, which in turn would have allowed a more effective monetary stance,
could have kept inflation lower. Rising inflation has become a policy concern.
The government included the recent VAT increase in this year's cost of living
adjustment.
This will inevitably give a further impulse to wage pressures at a time of
deteriorating inflationary performance. Moreover, there is little rationale for including
the VAT increase in the cost of living adjustment since workers will be already
compensated for the VAT increase through increased tax allowances.
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Current developments in the local stock market have become a risk for
macroeconomic stability.
During 1999, the Cypriot stock market enjoyed unparalleled
growth, with the market index rising by 850 percent. The massive speculative gains
were quickly followed by large falls in prices during the first half of 2000. By July
2000, the market index had fallen by 50 percent relative to the highs enjoyed the
previous November, prompting fears that consumption may slow as investors seek to
cover losses. Even so, the sharp fall in prices has not discouraged many local firms
from seeking a market listing. The flow of funds into the market has limited the
amount of domestic savings available for productive investment. The rise in stock
prices has also drawn liquidity from the commercial banks, and since March 2000 it
has eliminated demand for domestic treasury bills, forcing the government to borrow
abroad to finance the deficit.
The extensive financing of equity purchases by commercial banks is a particularly
troubling aspect of the speculative bubble.
Somewhat belatedly, the central bank acted
to prohibit such lending activity - a decision which contributed to the market
correction that brought prices down to more realistic levels. Nonetheless, the speed
and the magnitude of the drop in equity prices put the central bank under considerable
political pressure to reverse its previous decision, and in late July it lifted the ban on
bank financing of stock market purchases. At present, it is unclear what impact the
correction will have upon the commercial bank portfolios.
Recently Cyprus has introduced a number of measures that will further liberalise
capital movements.
Controls on inward foreign direct investments have been relaxed
for European Union residents. However, a number of other restrictions regarding
foreign ownership continue to apply, most notably on foreign ownership of real estate,
and the purchase of domestic treasury bills. Moreover, the new regulations do not
affect the banking sector. Cypriot residents are now permitted to make direct
investments abroad. Capital outflows would be permitted in cases where Cypriots
participate with a minimum of 10 percent ownership in a foreign venture. However,
important capital restrictions remain. Residents may not purchase stocks or bonds
overseas, or place deposits in foreign banks. Moreover the central bank retains the
right to prohibit foreign investments abroad in exceptional cases.
After several years of delay, Parliament has finally passed legislation, which will
remove the 9 percent interest rate ceiling.
However, the law requires that the central
bank undertake a number of measures before it can come into effect. The new legal
framework will include a number of provisions, which will provide temporary
protection to vulnerable borrowers such as students and mortgage holders. However,
the Central Bank retains the right to fix maximum and minimum interest rates which
banks may charge for loans and advances, or pay on deposits.
The interest rate ceiling continues to limit the capacity of the central bank to
undertake an effective monetary policy stance.
If the central bank had been able to
increase interest rates during 1999, it could have mitigated the expansionary
consequences of fiscal policy and the speculative stock market bubble. In an effort to
limit domestic credit expansion, the central bank introduced a 12 percent credit
ceiling. Nonetheless, credit growth for the first half of 2000 was excessive. In an
attempt to dampen the growth of monetary aggregates, the central bank increased
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reserve requirements in July 2000. However, the somewhat tighter monetary stance
implied by both the credit ceilings and increased reserve requirements was reversed in
July when the central bank effectively raised credit ceilings to 14.4 percent.
The exchange rate regime has functioned well.
The Cypriot pound is pegged to a
central parity with the euro, with intervention bands of ±2.25 percent. The level of
foreign exchange reserves is high.
In 1999, the private sector produced around 80 percent of GDP and the vast majority
of prices are freely determined.
Nonetheless, there is a highly distortionary price cap
on domestic fuel prices, while a number of residual controls remain on certain basic
consumer goods. The government guarantees a pre-defined rate of profit for domestic
fuel suppliers, and domestic oil prices have not been adjusted since 1996. In previous
years, the government charged an excise on fuel, and its revenues contributed to the
fiscal accounts. The recent rise in world oil prices coupled with the domestic oil price
cap has eliminated these oil-related tax revenues, and even forced the government to
offer large subsidies to oil suppliers. The government attempted to bring the domestic
oil price cap into line with world prices, but the proposal was rejected by parliament.
Furthermore, the authorities have not removed residual price controls on milk,
common bread, and cement.
Market entry is relatively straightforward in most sectors and bankruptcy procedures
operate efficiently.
However, there are significant barriers to entry in several key
sectors, with several semi-government organisations benefiting from legal
monopolies, including telecommunications, and electricity.
Cyprus has a long established and effective body of commercial law.
Changes are
being made to bring it into line with EC law. Notwithstanding certain complex
political issues arising from the conflict in 1974 and the subsequent division of the
island, property rights are well established.
The financial system is both sophisticated and effective.
The commercial bank sector
is well regulated by the central bank. Domestic banks are adequately capitalised. As of
the end of 1999, the average risk adjusted asset ratio of domestic banks was 11.5
percent. Significant progress has been made towards developing domestic securities
markets. With the exception of the Cyprus Development Bank, the financial sector is
in private ownership.
The weak financial supervisory structures within the credit co-operative sector is
worrisome.
The credit co-operatives, which account for around 30 percent of bank
deposits, are not subject to the normal banking sector supervision undertaken by the
central banks. In addition, the co-operatives enjoy a number of legal advantages - most
notably exemptions from both stamp duties and required reserve ratios - which places
them at a competitive advantage relative to the commercial banks.
Cyprus has an extensive off-shore sector covering a diverse range of activities,
including shipping, re-exports and financial services.
The strong legal structure, tax
incentives, and infrastructure have contributed to making Cyprus an important
regional business centre. Notwithstanding this achievement, concerns have been
raised about preferential tax arrangements enjoyed by the off-shore sector. In
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response, the authorities have announced their intention to eliminate the preferential
treatment by 2005. Lately, the Cypriot off-shore financial system has become the
subject of increasing international scrutiny as a potential location for money
laundering activities. Recent reports by the Financial Action Task Force and the
Council of Europe have given a generally positive assessment of the Cypriot
supervisory authorities. Since 1996, a comprehensive anti-money laundering law has
been in place. At the same time, the authorities put in place an information reporting
system, which has improved the detection of suspicious transactions. In 1999, the law
was further amended to improve customer identification procedures.
Cyprus is a functioning market economy. However, macroeconomic stability has
weakened recently, and there is a need to develop a credible and coherent approach to
fiscal consolidation. The current level and stance of fiscal policy is not sustainable
over the medium term. Particularly with a view to progressive capital liberalisation,
monetary policy must be made more efficient and market-oriented by the use of
indirect instruments rather than direct interventions such as the interest rate ceiling,
administrative measures and direct credit controls. Supervision must be improved in
the co-operative banking sector. Recent developments in the stock market have been
worrying, and the ultimate economic consequences of the speculative bubble may not
yet have been fully felt. The completion of price liberalisation is also required, as
remaining rigidities distort relative prices and lead to an inefficient allocation of
resources.
The capacity to cope with competitive pressure and market forces within
the Union
As set out in Agenda 2000, Cyprus’ ability to fulfil this criterion depends on the
existence of a market economy and a stable macroeconomic framework, allowing
economic agents to make decisions in a climate of predictability. Furthermore, the
more access enterprises have to outside finance and the more successful they are at
restructuring and innovating, the greater will be their capacity to adapt. Overall, an
economy will be better able to take on the obligations of membership the higher the
degree of economic integration it achieves with the Union prior to accession. Both the
volume and the range of products traded with EU Member States provide evidence of
this.
Cyprus is a functioning market economy with a sufficient degree of macroeconomic
stability for economic agents to make decisions in a climate of predictability.
Nevertheless, the risks for macroeconomic stability need to be tackled in a consistent
way in order not to endanger the competitiveness of the economy.
The Republic of Cyprus has a sufficient amount of human and physical capital,
including infrastructure.
Living standards are high, with per capita incomes
comparing favourably with current Member States. Levels of investments are high,
although capital account restrictions have limited foreign direct investment flows. The
lack of adequate sources of water has become a serious economic and environmental
constraint confronting the island. In recent years, average rainfall has been about 18
percent lower than during the first decade of the twentieth century. Furthermore, the
quantity of water stored in dams and reservoirs has also fallen dramatically. With the
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demand for water expected to grow significantly over the medium term, Cyprus needs
further infrastructure investments to provide for additional supply. The government
has proposed the construction of a new desalination plant. Unfortunately, these plans
have been delayed due to political difficulties in obtaining an appropriate site. In
addition, pricing policy should more closely reflect the costs of production,
particularly in the area of supply to agricultural users.
Government policy and legislation have provided a sheltered environment for the
growth and development of the private sector.
Nonetheless, Cyprus has also adopted a
protectionist and interventionist approach to industrial policy, which has favoured
domestic producers at the expense of foreign competitors. The semi-public sector is
extensive, and often protected by legal monopolies. Despite its comparative advantage
in new technology with its highly educated and computer-literate workforce, Cyprus
has largely failed to develop a significant internet-related service sector. This is in
large part due to the excessive dominance of the state telecommunications company in
the provision of internet services, which has limited the growth of the new economy.
While the extent of government ownership in the business sector is not large, it owns
significant equity holdings in a number of enterprises. The government has not yet
developed a strategy for divesting these state-held assets, although it recently sold its
outstanding stake in the Nicosia Hilton. In some areas, notably the oil sector, finance,
and air transport, indirect state aids are significant, and lack transparency.
The agricultural sector needs to be restructured extensively in the pre-accession
period.
Although agriculture still makes a significant contribution to GDP, its
importance has declined both in terms of GDP and employment. The prospects for
future growth are poor. The sector is heavily concentrated in irrigation-dependent
products, such as citrus fruits and vegetables. Agricultural production consumes
around three-quarters of the total water supply. Moreover, the sector enjoys high
levels of tariff protection and significant water-related subsidies.
The European Union accounts for 51 percent of Cypriot exports and 57 percent of
imports.
However, trade data understates the extent of integration between Cyprus and
the EU. The majority of tourist arrivals come from the EU with around half coming
from the United Kingdom alone. Reflecting its regional location, Cyprus also has
intense trade relations with the countries of Central and Eastern Europe and the
Middle East.
Exports are not very diversified and expose Cyprus to external shocks.
The economy
has become increasingly dependent upon tourist revenues. Many traditional sources of
export earnings, particularly within the manufacturing sector, have suffered from long
term decline. Although the financial sector has grown at a remarkable rate over the
last 18 months, much of this growth is due to domestic factors, especially the
speculative bubble within the local stock market. As such, these factors alone do not
provide a sufficient basis for sustainable growth in the future. As capital account
liberalisation proceeds, the financial sector will confront increasing competition from
foreign financial institutions, which may limit its domestic growth.
Cyprus has a strong entrepreneurial culture, demonstrated by the large number of
small and medium sized enterprises.
Notwithstanding the damage caused by the recent
speculative movements in local equity prices, the development of the Cypriot stock
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market could provide an important source of financing for local enterprises over the
medium term
(see also chapter 16 – Small and medium-sized enterprises).
Cyprus should be able to cope with competitive pressure and market forces within the
Union. Nevertheless, competitiveness is hampered by a number of structural rigidities
which protect domestic enterprises. Cyprus must prepare its private sector to operate
in the open environment that integration in the EU requires. Greater political
consensus is needed to develop a comprehensive structural reform agenda which will
address these rigidities. There is also a need to limit the extent of both implicit and
explicit state involvement in economic activities, open up key sectors to foreign
competition, and resolve important environmental constraints. The influence of the
state in the economy needs to be reduced through the divesting of its assets in private
enterprises, the further reduction of direct and indirect state aids and the introduction
of more competition in a number of key sectors.
2.4.
General Evaluation
Cyprus is a functioning market economy and should be able to cope with competitive
pressure and market forces within the Union.
The Cypriot economy continues to grow strongly and is operating at full employment.
Some progress is being made in the areas of liberalisation and structural reforms.
After many years of delay, Parliament passed legislation providing a timetable for the
abolition of the interest ceiling by January 2001. The Cypriot Authorities have started
major health sector reform.
However, macroeconomic stability has weakened recently, and the current level and
stance of fiscal policy are not sustainable over the medium term. Supervision must be
improved in the co-operative banking sector. The completion of price liberalisation is
also required. Competitiveness is hampered by a number of structural rigidities and
significant state involvement in the economy.
There is a need to develop a credible and coherent approach to fiscal consolidation.
With a view to progressive capital liberalisation, monetary policy must be made more
efficient and market-oriented by the use of indirect instruments rather than direct
interventions. Cyprus must prepare its private sector to operate in the open
environment that integration into the EU requires. Greater political consensus is
needed to develop a comprehensive structural reform agenda which should limit the
extent of state involvement in economic activities, open up key sectors to foreign
competition, and resolve important environmental constraints.
2.5.
The economic situation in the northern part of the island
The northern part of Cyprus has fallen far behind the southern part of the island in
terms of economic development and per capita income.
Excessive "state" intervention
has thwarted the growth of the private sector, while the financial dependence upon the
Turkish government has increased markedly over the last few years. The recent
banking crisis has further weakened a vulnerable and badly supervised financial
sector. There is significant evidence of poverty, particularly in the rural areas.
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1464296_0033.png
The economic data produced by the "TRNC (Turkish Republic of Northern Cyprus)
18
authorities" appears to be limited and unreliable.
Fiscal data lacks transparency
particularly with respect to transfers from Turkey. Current account data is highly
aggregated, while capital account data has only limited coverage. National accounts
data is a particular problem, and the per capita GDP of $4,500 claimed by the "TRNC
authorities" seems to be significantly overestimated. Moreover, recent data does
indicate a clear deterioration in both the fiscal accounts and the external sector.
The public sector plays a disproportionate role in economic affairs.
It is the biggest
employer and accounts for over half of fixed capital investment. The 'state' currently
has a monopoly on agricultural purchases and is thereby active in price support for
citrus, milk and cereals. In addition, a significant number of industries are in direct
public ownership, including airline, electricity, telecommunications, tobacco products,
shipping, and fuel supply.
Recent increases in public expenditure, combined with a limited tax revenue base,
have led to growing fiscal deficits.
In 1999, the deficit was in the order of 20 percent
of GDP, compared to a deficit of around 15 percent in 1995. The growing deficit is
almost entirely due to rising expenditures, which have increased from 39 percent of
GDP in 1995 to almost 50 percent in 1999. The domestic tax revenue base is very
weak with the total revenues amounting to just 30 percent of GDP.
The "TRNC administration" is heavily dependent upon fiscal transfers from Turkey.
The extent of financial assistance is difficult to ascertain. Financial aid is granted
through a series of economic protocols with the Turkish Government. There is also a
moratorium on debt repayments, while certain large public sector infrastructure
investments are financed directly by the Turkish government and are not included in
the "TRNC" budget. Reflecting the deteriorating fiscal position, transfers from Turkey
have grown significantly since 1996, such that by 1999, acknowledged financial
assistance from Turkey was in the order of $200 million, and covered around 40
percent of total government expenditures and 20% of GDP. Despite this enormous
financial support, the "TRNC government" has also accumulated domestic payments
arrears. However, the acknowledged financial assistance from Turkey amounts to
0.3% of Turkey's consolidated government expenditures and therefore has a limited
fiscal impact within Turkey.
The need for fiscal restraint in Turkey, and the deteriorating financial position within
the "TRNC" have prompted the Turkish authorities to develop a fiscal consolidation
plan for the north.
In an effort to limit the "TRNC" fiscal deficit, the authorities in
Ankara have proposed significant increases in taxes, cuts in expenditures, particularly
in the areas of social security expenditure and subsidies, and extensive privatisation.
The "TRNC" has a currency union with Turkey. As a consequence, high and persistent
inflation has been imported from Turkey. In 1999, the local inflation rate was
estimated to be around 60 percent. Recently, the "authorities" have considered giving
the local "central bank" greater independence. However, it is not clear what practical
18
The "Turkish Republic of Northern Cyprus" is recognised only by Turkey.
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implications this initiative might have, given the limited number of tasks the "central
bank" currently undertakes.
Since 1996 the current account has worsened significantly.
Both export receipts and
tourism revenues have stagnated while import growth has been strong. The
development of financial services has, in part, covered the short fall. In 1999, the
current account deficit was around 7 percent of measured GDP. However this figure
understates the true extent of financial dependence, since part of the direct transfers
from Turkey are included as current account credits, and thus reduce the deficit. The
financing gap, which excludes financial assistance from Turkey seems to be at least 25
percent of GDP.
Due to the existing political situation, the export of goods to the EC is complicated.
In
1994, the European Court of Justice ruled that the certificates for preferential
treatment of goods can only be issued by authorities with which the EC has signed an
agreement, which is not the case with the non-recognised "TRNC". Offers by the
Republic of Cyprus to provide the necessary documents have been so far refused by
the Turkish Cypriot community. The "TRNC" has continued to export through
Turkey, where Turkish officials issued the required documentation before the exports
continued to the EC. Nonetheless, the court judgement has led to a increase in
transportation and administration costs, and export volumes have fallen considerably.
The manufacturing and agricultural sectors are underdeveloped because of the
limited export possibilities.
The manufacturing base is characterised by small to
medium sized companies, mainly focused on the processing of food and beverages,
textiles (hides, leather, wool) and finished clothing. The agricultural sector was badly
affected by last year's drought, which followed devastating fires in the summer of
1998. The farmer's union has lobbied for assistance, but, given the present fiscal
difficulties, it is unlikely that the "authorities" can offer a significant contribution.
Moreover, the "agricultural insurance fund" is effectively bankrupt.
Tourism is the most important source of foreign exchange earnings.
Despite its
importance, the industry remains considerably less developed than in the south of the
island. Around 80 percent of tourists come from Turkey. The north finds it difficult to
attract high expenditure tourists from EU countries, who are unable to travel directly
to the north, and must go via Turkey. In an effort to attract more tourist revenues, the
"authorities” have encouraged the expansion of casinos, which are not permitted in
Turkey. Nonetheless, the potential for growth, in the event of a political solution is
enormous.
The north has a large tertiary education system with five universities, as well as a
Teachers' Training College and a distance learning based Open University.
This
sector now constitutes the north's fastest growing sector. The majority of students
come from Turkey, and its significance as a source of current account earnings has
grown in importance.
Despite its small size, the "TRNC" has a significant financial sector.
The domestic
sector is known to have at least 35 banks while another 38 off-shore banks are known
to operate in the north. Many off-shore banks are subsidiaries of Turkish banks and
offer higher deposits rates than those on the mainland. Some off-shore banks are
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extremely small, and seriously under-capitalised. The minimum capital required to set
up a bank is extremely small by international standards. There is also a concern that
the banking system may have been used for money laundering.
In January 2000 a serious banking crisis developed in the "TRNC".
In response to
banking difficulties in Turkey, in December 1999, the "TRNC authorities” placed the
off-shore subsidiaries of five mainland banks under the supervision of the
"government's Saving Deposit Insurance Fund". The decision provoked a run on five
domestic banks, forcing the "authorities" to also take control of them. The crisis
exposed the lack of supervisory control, and excessive connected lending within the
domestic banking system. The "judicial authorities" have also launched a number of
criminal investigations against the previous management of the affected banks. In an
effort to prevent further deposit withdrawal infecting the rest of banking system, the
"TRNC government” has offered a "state" guarantee covering all bank deposits and a
timetable for the repayment of outstanding deposits over 18 months. The ultimate
fiscal cost of this guarantee is unclear. The "central bank" received an emergency
credit line from Turkey that provided the resources to cover the initial payments.
Nevertheless, the "TRNC authorities” have found it difficult meeting later deposit
repayments.
The banking crisis has exacerbated the economic problems in the north.
Confidence
in the financial system has evaporated and there has been widespread capital flight,
particularly within the off-shore sector, which in turn has further weakened the
system. The slow speed of deposit repayment and the widespread belief amongst
deposit holders that the "authorities" have insufficient resources to refund all the
deposits have provoked considerable social unrest.
Given the present political environment, the possibilities for sustained economic
growth over the medium term are poor. There is limited potential for export growth,
and the practical difficulties with receiving EU visitors limit the extent to which
tourist revenues can increase. The financial dependence upon Turkey has distorted
economic activity, and encouraged the growth of a bloated public sector. The recent
banking sector crisis has eroded confidence in the domestic financial system and it
will inhibit future private sector investment. The Turkish fiscal consolidation plan
may help to reduce the severe fiscal imbalance, but it is unlikely to make an important
contribution to the long-term growth potential of the northern economy.
3. Ability to assume the obligations of membership
Introduction
This section aims to update the Commission’s 1999 regular report on Cyprus' ability
to assume the obligations of membership - that is, the legal and institutional
framework, known as the
acquis,
by means of which the Union implements its
objectives. Alongside an evaluation of relevant developments since the 1999 regular
report, this section seeks to provide an overall assessment of Cyprus' ability to assume
the obligations of membership, and of what remains to be done. This section has
been structured to follow the list of twenty-nine negotiating chapters, and incorporates
also an assessment of Cyprus' administrative capacity to implement the
acquis
in its
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various aspects (in previous regular reports this had been covered in a separate
section). The European Council in Madrid in December 1995 referred to the need to
create the conditions for the gradual, harmonious integration of the candidates,
particularly through the adjustment of their administrative structures. Taking up this
theme, in Agenda 2000 the Commission underlined the importance of incorporating
Community legislation into national legislation effectively, and the even greater
importance of implementing it properly in the field, via the appropriate administrative
and judicial structures. This is an essential pre-condition for creating the mutual trust
indispensable for future membership, which has become a central issue in the
negotiation process.
The European Council in Feira in June 2000 recalled the link between progress in the
negotiations and the candidate countries’ capacity to effectively implement and
enforce the
acquis,
and added that this called for important efforts by the candidate
countries in strengthening their administrative and judicial structures. The Feira
European Council invited the Commission to report to the Council on its findings on
the matter. Building on the assessment of Cyprus' administrative capacity provided in
the 1999 regular report, the present report seeks to add further depth and detail,
focusing on the main administrative structures which are required for implementing
the
acquis
in its various aspects.
In the 1999 regular report, the Commission concluded that :
“Cyprus has made very little progress in further alignment with the internal market
acquis
since the last Regular Report. There has been no new legislation in the area of
standardisation and the adoption of a new law regulating this area is urgently needed.
So far Cyprus has only adopted 15% of existing European standards. Progress in
liberalisation of capital movements has been modest and should be accelerated. In
competition there is already quite a high degree of alignment on anti trust and this has
been further improved by the adoption of a law on control of concentrations although
public undertakings with special or exclusive rights are still not subject to competition
rules. However, there is no systematic control of state aids and the adoption of a
framework law to ensure compliance with the
acquis
should be treated as a matter of
priority.
There has been some progress in preparing Cypriot agriculture to participate in the
common agriculture policy but alignment in the veterinary and phytosanitiary areas is
only partial. There is a need to strengthen veterinary controls at border posts. In
transport there is still substantial legislative work to be done, and there is a particular
need to improve maritime safety. Alignment with the environment
acquis
is well
advanced but further progress is pending, awaiting adoption of several pieces of
sectoral legislation. Cyprus needs to pay particular attention to the allocation of
sufficient budgetary and administrative resources to the environmental sector to
ensure implementation of the
acquis,
given the size of the alignment task in this
sector. In the area of justice and home affairs Cyprus has made little progress in the
fields of immigration and asylum. Attention should be paid to alignment in the area
of visa control. Cyprus has a modern customs administration but needs to take
forward the process of harmonisation and further computerisation.
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Concerning administrative capacity, whilst starting from a good base, Cyprus needs to
set up institutions in the areas of telecommunications, free movement of goods and
justice and home affairs. Further re-inforcement is needed in the maritime transport
and environment sectors."
3.1.
The chapters of the
acquis
As indicated, the review of Cyprus' ability to assume the obligations of membership
that is provided below has been structured in accordance with the list of twenty-nine
negotiating chapters. Accordingly, this section opens with an assessment of progress
related to the so-called “four freedoms”, the cornerstones of the internal market, and
continues with a systematic review of progress on each of the chapters, to cover the
acquis
in all its various aspects: sectoral policies, economic and fiscal affairs,
economic and social cohesion, innovation, quality of life and environment, justice and
home affairs, external policies, and financial questions.
Chapter 1: Free movement of goods
During the period covered by this report, Cyprus has made progress in the field of free
movement of goods.
Since the last regular report, in the area of
horizontal and procedural measures
there has been no concrete progress, although the Government has decided to speed up
the process and to give priority to the adoption of harmonised standards relating to the
New Approach Directives. Accelerating the adoption of EN standards was identified
as short-term priority.
As regards the administrative infrastructure that is necessary to apply the
acquis
in the
areas of standardisation, the establishment of a national accreditation and certification
system and the introduction and application of the notification procedure, the Council
of Ministers approved the establishment of the private organisation which will be
responsible for certification. On the basis of this decision the Cyprus Organisation for
Standards and Control of Quality (CYS) will maintain the function of standardisation
and will be assigned the responsibility of national accreditation and notification.
As regards
sector specific legislation,
new legislation on fertilisers complying with
the
acquis
entered into force in November 1999. In the field of legal metrology and
pre-packaging, a Weights and Measures Order was enacted in March 2000. There is
also new legislation to comply with the Quick Frozen Foodstuffs Directive, adopted in
early 2000, as well as with the Directives on Materials and Articles in Contact with
Foodstuffs, in effect as from December 1999. Cyprus also aligned its legislation in the
field of motor vehicles and forestry tractors as a new law concerning type approval of
motor vehicles came into force in February 2000. Cyprus has partially met the short-
term priorities identified in the Accession Partnership as regards public procurement.
Concerning
non-harmonised areas
to which Articles 28-30 of the EC treaty apply,
screening of the existing legislation is currently taking place in order to identify the
statutes to be amended through the introduction of mutual recognition clauses.
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As regards
public procurement,
a centralised statistical system was set up at the
beginning of 2000, at the Treasury Department of the Ministry of Finance, for
recording public contracts. To this end a database has been developed for keeping the
necessary statistical information according to the requirements of the relevant
provisions of the
acquis
on public procurement. In the 1999 Accession Partnership for
Cyprus further harmonisation of legislation with regard to publication, time limits and
review bodies was identified as a short-term priority.
Overall assessment
The transformation of the Cypriot legal system in this area, aiming at full integration
into the EU system as well as its implementation, requires adaptation of the legislation
and a different institutional infrastructure. This implies that the existing administrative
capacity needs to be reinforced and well-equipped in order to ensure application and
enforcement. Cyprus has already a clear understanding of the principles and
legislation covered by EC directives on products. However, continuing serious efforts
are required to transpose and implement the
acquis
as far as possible prior to
accession.
The sector specific Cypriot legislation in a number of areas covered by the New
Approach Directives, is significantly different from that applied by the EC. In other
fields no national legislation exists at all. Therefore Cyprus is in the process of
adopting a framework law on the principle of New Approach Directives and
implementing regulations covering different product groups such as mechanical
devices; personal protective equipment in explosive atmospheres; or simple pressure
vessels and pressure equipment.
Concerning
horizontal and procedural measures,
with respect to the adoption of EN
standards, according to the Government Cyprus adopted 1300 EN standards up until
August 2000. Additional human resources were made available to the Cyprus
Organisation for Standards and Control of Quality.
Regarding restructuring in the areas of standardisation, accreditation, certification and
notification procedure the above mentioned decision on the establishment of a private
organisation for the certification activities and the future role of the CYS provides the
legal basis for the operation of the basic infrastructure that is necessary to apply the
acquis
in these areas, which were identified as short term priorities. On the basis of
this organisation, framework legislation could be enacted for the transposition of the
New Approach Directives, supplemented by regulations for each of the groups of
products covered by those directives. In the 1999 Accession Partnership, continuing to
strengthen administrative structures in particular on standards, certification and
accreditation and continuing with the transposition of New Approach Directives were
identified as short-term priorities.
The Cyprus Organisation for Standards and Control of Quality takes part as an
observer in the European Co-operation for Accreditation.
As regards foodstuff legislation, further efforts are needed for the transposition of the
acquis
in this area. The Ministry of Health is responsible for the implementation of
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foodstuffs legislation. In the field of official control of foodstuffs, for Health
Inspectors provisions are foreseen for further training at the local level as well as in
other European countries including seminars and workshops, as well as scholarships
(e.g. on Environmental Health or Food Safety). An important effort to strengthen the
administrative capacities in this field needs to made.
As regards
sector specific legislation,
concerning the pharmaceutical sector: no
medical products may be placed on the market unless the competent authority,
namely the Drugs Council, issues a marketing authorisation. The criteria for the issue
of marketing authorisations as well as for their renewal are quality, efficacy and
safety. Only about 5000 products with an active licence are currently on the market.
New harmonised legislation providing for the setting up of a Drugs Price Control
Committee, which will be the body responsible for the implementation of the
acquis
relating to medicinal products should be adopted.
As regards administrative capacity, several authorities and institutions are responsible
in this sector such as the Cyprus Organisation for Standards and Control of Quality.
Different Ministries carry out market surveillance activities such as the Ministry of
Labour and Social Insurance for machinery, lifts and personal protective equipment
whereas for pressure vessels the market surveillance responsibilities lie with the
Ministry of Communications and Works. Market surveillance in the fields of toys and
electrical equipment is carried out by the Ministry of Commerce, Industry and
Tourism. Necessary laboratory tests are carried out at the Higher Technical Institute,
the University of Cyprus and the State General Laboratory as well as the Electricity
Authority and the Electrical and Mechanical Services.
The general import licensing system and the compulsory origin marking of imported
products are due to be lifted before accession. The Ministry of Commerce, Industry
and Tourism will be the administrative entity responsible for the follow-up of the
application of Articles 28-30 of the EC Treaty on
non-harmonised areas
and the
implementation of the principle of mutual recognition.
As regards the
acquis
in the field of the functioning of the internal market and
information exchange the Ministry of Commerce, Industry and Tourism has been
designated as the authority responsible. As regards firearms and the return of
unlawfully removed cultural goods, the Ministry of Interior as well as the Department
of Antiques are assigned for the implementation of the relevant
acquis.
As regards safety checks on products at external borders, Cyprus still needs to
establish appropriate customs and market surveillance infrastructure as well as
effective administration co-operation between competent authorities.
In the field of
public procurement,
the Cypriot legislation maintains at present a
national preference clause by imposing a 20% charge over the duty free value of the
respective imported goods and up to 5% on the tender amount of services and works
of foreign bidders (under certain conditions). However, in accordance with a provision
already incorporated in the existing Public Procurement Law, this type of protection
will be automatically eliminated upon accession. In addition, laws to extend the scope
of public procurement legislation to local authorities as well as to achieve compliance
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with EC review procedures still need to be enacted; however preparatory work has
been undertaken.
Concerning the
administrative remedy system,
all tenderers are entitled, during the
tendering stage, to submit to the main Tender Board comments, suggestions and
complaints in relation to the technical specifications and the general terms of the
tender. As regards the
judicial remedy system,
Cypriot legislation foresees that a
decision by a public body to award, reject or cancel a tender is treated as an
administrative act or decision subject to judicial review. During the period, June 1999
to June 2000, 31 cases in relation to public procurement were subjected to judicial
review before the Supreme Court.
The Treasury Department of the Ministry of Finance under the Accountant General, is
the competent authority for the overall monitoring of public procurement issues.
During 1999, the total number of public procurement procedures came to 1515.
Chapter 2 Free movement of persons
During the period covered by this regular report, Cyprus has continued to undertake
measures for further harmonisation with the
acquis
in the field of free movement of
persons.
In the field of the
mutual recognition of professional qualifications,
in February
2000 the Council of Ministers issued a Decision that provides for a distinct separation
between recognition of academic qualifications and professional qualifications.
Professional recognition will be vested with the various professional councils. The
Ministry of Labour and Social Insurance has been appointed as the national co-
ordinating authority for the implementation of the General System Directives.
As regards
citizen rights
no further developments can be reported since last year.
In the field of
free movement of workers,
while no further legislative changes have
taken place, the computerisation of the Public Employment Services of the
Department of Labour has been completed and is now operational.
With a view to the future
co-ordination of social security systems,
the preparatory
work to develop sufficient administrative structures is continuing.
Overall assessment
Cyprus has undertaken certain measures to abolish existing discrepancies between its
legislation and the
acquis
in this area, but important legislative work still remains to
be done.
Concerning the
mutual recognition of professional qualifications,
a number of
professions are already regulated in Cyprus but not all. For example, those not
requiring a university degree are not regulated. Common features of most of the
regulated professions are the requirements of Cypriot nationality, of residence, and
obligatory membership of professional bodies/associations.
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Further alignment with the
acquis
as regards the abolition of existing restrictive
conditions (e.g. the requirement of Cypriot citizenship, the recognition of good
character/repute certificates from other member States or the above mentioned points
concerning lawyers, architects and the health care professionals) is needed, as there
should be no provisions in the legislation which contradict Community rules, in
particular with respect to nationality, residence or language requirements.
The various professional councils are the competent authorities in their specific sphere
of responsibility. A unit dealing with the recognition of professional qualifications
still needs to be created in the Ministry of Labour.
As regards
citizen rights,
amendments to the existing legislation relating to voting
rights will be required to comply with the
acquis
on municipal elections and elections
to the European Parliament. As existing legislation on student rights is not in line with
the principle of equal treatment, further efforts for alignment will be needed.
With respect to the
free movement of workers,
with regard to the right of residence
and public order, currently residence permits are classified into temporary permits and
permanent permits. The
employment of foreign nationals
is regulated by the Aliens
and Immigration Law as well as the Aliens and Immigration Regulations issued under
this Law. All foreigners employed in Cyprus enjoy equal treatment with nationals as
regards e.g. conditions of work, salaries, social insurance benefits or income tax
liabilities. There are permanent and temporary work permits. EU nationals enjoy
preferential treatment in this regard. However, as current legislation gives Cypriot
nationals preferential access over foreign nationals to professional positions, further
alignment in this regard is needed.
Efforts will have to be continued to strengthen public employment services in view of
future participation in the EURES network.
In the field of
supplementary pension rights
of workers moving within the Union, the
existing legislation already provides that there should be no discrimination regarding
the preservation of vested rights for members in respect of whom contributions are no
longer being made and who moves to another country.
With a view to the future
co-ordination of social security schemes
existing
structures, procedures and institutions will need to be upgraded and improved in order
to meet the requirements of the
acquis.
The Department of Social Insurance, which is planned to be the competent body for
implementation of the regulations, has gained experience in the area of co-ordination
of social security through the implementation of bilateral agreements. This department
should be further strengthened.
Chapter 3: Freedom to provide services
Since last year’s regular report, Cyprus has made significant progress regarding
financial services and enhancing administrative capacity.
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In the field of
the right of establishment and the freedom to provide
services (other
than financial services) there has been no significant legislative and administrative
development since last year.
In the field of
financial services,
with regard to the
banking sector,
in December 1999
the Central Bank of Cyprus issued a directive to banks with effect from 1 January
2000 incorporating in detail the layout and content of the balance sheet and profit and
loss account, in line with the provisions of the
acquis
in this field. In addition, for
further alignment with the
acquis,
regulations for the establishment of a deposit
protection scheme were approved in January 2000. The deposit guarantee scheme for
commercial banks as well as for Co-operative Credit and Savings Societies has been
in operation since the beginning of September.
Concerning the
insurance sector,
during 1999 an Information Systems Strategy was
elaborated to provide a framework within which the Service for the Control of
Insurance Companies can develop and operate information systems to support its
supervision. As regards
administrative capacity,
an increase in the personnel of the
Service has already been approved by the Government and foreseen in the National
Budget. In addition, legislation to achieve further alignment with the
acquis
in the
field of motor insurance was approved in June 2000.
With regard to
investment services and securities markets
the Securities and Exchange
Commission has recruited additional staff to ensure compliance with the requirements
of the Securities and Stock Exchange Laws of Cyprus and has issued regulations with
respect to the clearance and settlement of transactions, including the supervision of
prospectuses information and the ongoing obligations of issuers.
Concerning the
protection of personal data and the free movement of such data
and
information society directives
there have been no legislative and administrative
developments since last year.
Overall assessment
Cyprus has progressed in the harmonisation process, although further legislative
alignment is needed.
In the field of
the right of establishment and freedom to provide services
there are
still provisions in Cyprus leading to discriminatory effects against non-Cypriot
nationals. Restrictive provisions exist, such as the requirement of Cypriot nationality
or the requirement of permanent residence, in the exercise of certain regulated
professions.
Concerning
self employed commercial agents,
the
acquis
in this field is partially
transposed; minor amendments are needed as regards the time limit for the obligation
of the principal to notify the agent for the commission due.
Concerning
financial services,
the Cypriot domestic law is already in line with most
of the EC requirements. Further alignment is needed in the field of the recognition of
contractual netting agreements, consolidated accounts and capital adequacy for market
risks.
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The question of the possible exclusion of the Co-operative Credit and Saving
Societies regulated by the Co-operative Societies Law from the scope of EC Banking
Directives is still under consideration. The authority responsible for the supervision of
these societies is the Ministry of Commerce, Industry and Tourism. Co-operative
Credit and Saving Societies are examined on-site, twice a year. According to the 1999
Accession Partnership, to ensure and complete reporting by the offshore banking
sector was identified as a short-term priority for 2000.
Regarding the administrative capacity, the Central Bank of Cyprus is the competent
authority for the regulation and supervision of the banking sector. The rules, policies
and practices are similar to the Recommendations of the Basle Committee of Banking
Supervision and to EC directives. The supervisory process includes both on-site
examination and off-site monitoring, exercised by the Banking Supervision and
Regulation Division. The competent division in the Central Bank appears to be well
staffed with qualified personnel.
As regards the
insurance sector,
some basic features of the EC supervisory system are
covered by the current legislation. However, some of the Cypriot prudential provisions
are still quite different from those contained in the
acquis;
this goes, for instance, for
those concerning reinsurance or for the minimum capital requirements. In addition,
further alignment is needed as regards accounting rules.
Concerning administrative capacity all the powers of the law are conferred upon the
Superintendent and the Assistant Superintendent of Insurance. The supervisory
authority called the Insurance Companies Control Service carries out an average of 6-
7 on site inspections every year.
In the field of
investment services and securities markets,
in order to align with the
acquis,
there is still need for certain amendments to the Securities and Stock
Exchange Laws, e.g. to ensure the ability of the Securities and Exchange Commission
to exchange information and co-operate with other competent authorities. There is
also a need to amend the existing Joint Compensation Fund for broker members of the
Stock Exchange.
The Council of the Stock Exchange and the Securities and Exchange Commission are
the relevant competent authorities for the implementation and supervision of the Stock
Exchange Laws and Regulations. In 1998 and 1999 few on-site examinations have
taken place, because of limited human resources. However, in general, the standard of
supervision in the financial service sector in Cyprus appears to be satisfactory.
In the field of the
protection of personal data and the free movement of such data,
legislation is under preparation which will have to ensure,
inter alia,
the transfer of
data to third countries with an adequate level of data protection and the setting up of
an autonomous supervisory authority.
In the field of
Information Society Services
there are no regulations in Cyprus
covering the area of the
acquis
on the provision of information in the field of technical
standards and regulations and on the legal protection of services on conditional access
to information society services respectively.
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Chapter 4 Free movement of capital
Since the previous regular report Cyprus legislation has achieved some progress in
this area and has therefore partially fulfilled the Accession Partnership short-term
priorities identified in this area.
In the area of
capital movements,
at the beginning of this year the Central Bank of
Cyprus (CBC) lifted some of the restrictions on outward and inward investments to
and from the island. With regard to direct investment in Cyprus, all restrictions
concerning the maximum or minimum allowable percentages of foreign participation
in any Cypriot enterprise were abolished in January 2000 with the very important
exception of the banking sector, where investment is limited to 50% of the total share
capital. Also, since the beginning of this year, residents of Cyprus are allowed to
undertake direct investment abroad. However, the transfer of capital is only effected
when the Central Bank of Cyprus (CBC) is satisfied that it concerns a genuine direct
investment. Where the foreign exchange cost is substantial, the CBC reserves the right
to take measures in order to mitigate the impact on balance payments.
A new law for the abolition of the existing 9% interest rate ceiling was adopted in
December 1999. Entering into force on 1 January 2001, this legislation will allow the
CBC to proceed with the gradual abolition of remaining exchange controls on capital
flows, in accordance with the liberalisation programme.
Concerning
cross border credit transfers,
an amendment to the Banking Law
extending the areas where the central Bank can issue mandatory instructions to banks,
including the matters covered by the
acquis
on cross border transfers, was approved in
June 2000, thus giving Cyprus the legal base to implement the
acquis
in this field.
In the field of
money laundering,
Cyprus has brought its legislation further in line
with the Money Laundering Directive as it enacted an amendment of the Prevention
and Suppression of Money Laundering Activities Law with respect to the threshold
amount of customer identification in October 1999.
In November 1999 the staff of the Unit for Combating Money Laundering was
increased with the permanent attachment to the Attorney General’s Office (Office of
the Unit) of four members of the police and a member of the Customs Department.
Therefore, the number of members of the Unit has now been increased to fourteen (3
attorneys and 11 investigators/analysts). During the past year emphasis was also
placed on the training of staff of the Unit on Financial Intelligence and Financial
Crime Investigation.
Overall assessment
In general, although some progress has been achieved since the last regular report,
Cyprus should make important efforts in aligning with the
acquis
in the sector of free
movement of capital. For proper functioning of the markets from the date of
accession, a timely and orderly removal of remaining restrictions on capital
movements, as well as restrictions on the acquisition of secondary residences, together
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with an appropriate strengthening of the financial sector and its supervision, will be
necessary.
As regards
capital movements and payments,
the liberalisation process is well
underway but there is considerable distance to go in complying with the
acquis.
The
law abolishing the interest rate ceiling should come into effect, as provided in the
Law, on 1 January 2001 in order to enable the Central bank to go ahead with the
implementation of its plan for the removal of the remaining restrictions.
Concerning payment systems, Cyprus has introduced a framework for the
harmonisation of the payment systems legislation by granting to the Central Bank of
Cyprus the powers to issue mandatory instructions to banks. However, further efforts
are needed to align the Cypriot legislation to the EC
acquis
in this area.
To prevent the use of the financial system for the purpose of
money laundering,
after
the amendment of the Prevention and Suppression of Money Laundering Activities
Law with respect to the threshold amount of customers identification in October 1999,
the legislation on money laundering appears to be in line with the
acquis.
Its effective
application (particularly regarding the offshore sector) will however need to be
monitored closely.
Cyprus has anti money laundering legislation in place since 1996 and since 1997 a
special “Unit for Combating Money Laundering” (MOKAS) has been created with
investigative powers. The Unit was recognised as a member of the Egmont Group
(International Group of Financial Intelligence Units). In the course of its investigative
functions, the unit is assisted by the Financial Crime Unit of the Police and the
Investigation Section of the Customs Department.
Concerning this section see also
chapter 24, Co-operation in the Field of Justice and Home Affairs.
Since January 1997, 333 cases have been reported to the Unit, MOKAS has obtained
28 freezing orders and 219 disclosure court orders. There have been 2
prosecutions/convictions, while four cases are before the courts. MOKAS supports
international co-operation in this area of combating criminal activities. To this end, it
gives priority to requests for legal assistance submitted by foreign authorities. From
the above 333 cases dealt with by the Unit up to June 2000, 70 cases represented
requests for legal assistance by foreign authorities through formal rogatory letters, 77
cases represented requests for information by foreign Financial Intelligence Units and
9 cases represented requests for information by drug liaison officers posted in Cyprus.
Chapter 5: Company law
Since last year’s regular report, Cyprus has made good progress in this area as regards
company law and the protection of intellectual and industrial property rights, the latter
being a field which was identified as a short-term priority in the 2000 Accession
Partnership for Cyprus.
Regarding
company law
as such, Cyprus enacted in early 2000 a new law amending
the existing Company Law, in order to cover the provisions of the Twelfth Council
Company Law Directive on single-member private limited-liability companies. The
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Department of the Registrar of Companies and the Official Receiver is continuing to
take various measures to exercise effective implementation of the legislation. New
computer hardware and software were installed aiming at facilitating the publication
of company documents. In this respect, the Council of Ministers approved in July
2000 new legislation, which is in line with the First Company Law Directive and now
has to be endorsed by the House of Representatives. Companies that do not comply
with the disclosure requirements of the Company Directives (to file annual reports
with the registrar of Companies), also incorporated under Cyprus Company Law, are
being struck off the register. Statistics show that the number of companies struck off
were 1205 in 1998 and 5167 in 1999. From January to June 2000 more than 900
companies were struck off the Register. Fifteen additional staff have been recruited to
strengthen the enforcement efforts.
In the field of
accounting law,
no particular developments occurred. In the field of
industrial and intellectual property rights,
the law ratifying the International
Convention for the Protection of Performers, Producers of Phonograms and
Broadcasting Organisations entered into force in October 1999.
As regards the computerisation of the Patent Registry, in June 2000 a co-operation
programme was agreed between Cyprus and the European Patent Office aiming at the
strengthening of the administrative capacity of the country through further
computerisation and training of employees working in this field so that the
implementation of the Cyprus Patent Law and Regulations may be facilitated. The
programme also aimed at assisting in the efficient retrieval of information on patents
and in bringing the patent system closer to industry.
A special unit, the IPR Management Centre, within the Department of the Registrar of
Companies and Official Receiver to deal with Intellectual Property Rights issues and
to enforce effective border control has been established. To this end, two officers have
been assigned the task of co-ordinating, at a central level, the various issues
concerning the implementation of the relevant provisions of the legislation. In
addition, the training of personnel of the services involved has started.
As regards border enforcement the number of seizures performed at the border for the
protection of intellectual and industrial property rights, amounts to 31 seizures of a
total value of
€
210 000 and up to the middle of June 2000, 7 seizures with a total
value of
€
16 500. There were 15 infringement cases in 1999; none have been reported
for 2000. During the period January 1998 to December 1999, 46 different cases under
the Trade Descriptions Law for misleading information and for infringement of
intellectual property rights were pursued. However, due to shortage of staff, there have
been no cases of prosecution so far as the existing staff is focusing on the product
safety provisions of the law.
Overall assessment
Cyprus has already achieved to a large extent alignment with the
acquis
in the area of
company law, and transposition in the field of industrial and intellectual property
rights is continuing at a steady pace.
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As regards Cypriot
company law,
even though many of the EC directives in this field
are already incorporated in the national law of Cyprus, some divergences still remain,
for instance as regards the First Council Directive on the co-ordination of safeguards.
Although some work on the implementation of the Second Directive on co-ordinating
safeguards has started, further efforts to implement the
acquis
are needed, especially
as regards the Third Directive on mergers as well as the Sixth Directive concerning
the division of public limited liability companies.
Concerning
accounting law,
Cypriot legislation is already to a large extent in line with
the
acquis.
As regards the Eighth Council Directive on the Approval of Persons
Responsible for Carrying out the Statutory Audits of Accounting Documents the legal
vetting has been completed but still needs to be enacted.
Cyprus is interested in joining the Lugano Convention, which is equivalent to the
Brussels Convention and open to third countries. With respect to the Rome
Convention, Cyprus has to prepare the necessary legislation in order to allow for swift
implementation of the convention after accession, specifically in relation to the courts.
In the field of
industrial and intellectual property rights (IPR),
Cyprus’
trademark
law
is already to a large extent in line with the
acquis.
Patent protection for
pharmaceutical products, has been provided in Cyprus since 1920. With regard to the
Supplementary Protection Certificate, all medicinal products can obtain such a
certificate, irrespective of whether they are protected by a patent under the Patent Law
or rather by a patent which has been registered before the enactment of that law.
In the field of intellectual property rights, further legislative and enforcement
measures are needed as regards copyright. As regards
administrative capacity
in the
field of intellectual and industrial property rights, the Courts and the competent
Copyright Authority are strict in implementing the provisions of the copyright law.
The Department of the Registrar of Companies and Official Receiver, consisting of
eleven persons, the Ministry of Commerce, Industry and Tourism, the Law Office of
the Republic, the Department of Customs and Excise of the Ministry of Finance, the
Police and the Courts are the institutions responsible for administering and enforcing
company law as well as intellectual and property rights.
Further efforts are required to strengthen capacity to enforce legislation in the area of
IPR, especially as regards border controls as they should be implemented more
efficiently. Also, further attention should be given to combating piracy. Particular
attention should be given to strengthening the effectiveness of the administrative and
judicial bodies involved in enforcement such as the customs services, the police and
the judiciary, and to reinforce co-ordination between them. Further targeted training is
necessary both for copyright officials and for enforcement officials.
Chapter 6 Competition
During the period covered by the regular report, Cyprus has achieved progress in the
field of anti-trust. No progress has been made with regard to the State aid sector.
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Since the last regular report Cyprus has continued to make progress in the alignment
and enforcement of its
anti-trust
policy. A Bill amending the Protection of
Competition law to achieve further alignment with the
acquis
by submitting public
undertakings and undertakings with special and exclusive rights to the rules of
competition, was enacted in June 2000. Completing the harmonisation with the anti-
trust legislation was identified in the Accession Partnership for Cyprus as a short-term
priority. An order named the Block Exemption on agreements between air transport
undertakings (concerning joint planning and co-ordination of schedules, joint
operations, consultations on passengers, on scheduled air services and slot allocation
at airports) was approved with immediate effect in June 2000 and provides for the
application of measures within the territory of Cyprus equivalent to the relevant
acquis.
A decision of the Council of Ministers for reforming the Commission for the
Protection of Competition was adopted on 16 February 2000. The reforms are
included in the second amendment to the Protection of Competition Law, which is
presently with the House of Representatives for adoption. They provide for the
Chairman of the above Commission to be employed on a full-time basis and for the
reduction of the Commission’s members from 7 to 5, aiming at enabling it to operate
in a more flexible way and reach decisions faster and more efficiently. The reforms
provide also for permanent specialised staff to be recruited, so that the Commission
acquires its own data collection and investigation capability. Its investigative powers
are also being reinforced, especially as regards examining transgressions of the
Competition Law, including dawn raids. In addition, the said amendment provides for
increased fines,
inter alia,
for cases of non-co-operation of enterprises with the
Commission for the Protection of Competition.
No progress has been made in the creation of a
State aid
control and monitoring
system since the last regular report.
Overall assessment
Although Cyprus has already achieved good alignment with the EC’s anti-trust
legislation, further efforts to establish an efficient State aid discipline are needed.
Competition legislation has been in force since June 1990 in the form of the
Protection of Competition Law. Cyprus legislation includes most of the principles of
the EC’s
anti-trust
legislation, including a large part of the secondary legislation.
Merger control has been in place since March 1999. Further alignment is still
necessary especially in view of developments in the
acquis
on vertical restraints.
Concerning administrative capacity, the Commission for the Protection of
Competition (CPC) examines cases of suspected breaches of the Law
ex motu proprio
or upon complaint. It has investigative powers and may impose fines of up to 10% of
an enterprise’s annual turnover. For its investigations the Competition and Consumer
Protection Service of the Ministry of Commerce, Industry and Tourism currently
supports the CPC. The said Service has a staff of 30 people, of which 5 qualified
officers deal exclusively with competition matters. With only 5 employees, the Office
needs reinforcing with additional qualified and properly trained staff. Since 1990, the
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CPC has examined 50 cartel cases, 49 cases of abuse of a dominant position and 5
applications for individual exemption and/or negative clearance. Additionally, since
March 1999, 14 merger control cases have been examined. The main challenge now
is to ensure that the application and enforcement of anti-trust rules is effective and that
priority is given to cases that concern the most serious distortions of competition.
With regard to
State aid,
currently no proper control exists. There is no legal base for
State aid discipline and there is no effective State aid monitoring authority.
Cyprus should consequently accelerate its efforts to establish an efficient State aid
discipline. In the framework of the preparations for the establishment of the State Aid
Unit an inventory of the existing support schemes and ad hoc measures has been
drawn up by the existing Working Group for State Aid within the Ministry of Finance,
with the aim of preparing an assessment of the compatibility of each scheme/measure
with Community State aid rules. This inventory should be continuously updated. The
alignment of State Aid legislation and an increase in transparency, identified as short-
term priorities, cannot be considered achieved.
With a view to drawing up a Regional Aid Map for the promotion of regional
development objectives, Cyprus will have to designate the regions eligible to receive
aid under the derogation of the
acquis
for this objective. This being a key area of the
state aid
acquis,
Cyprus should accelerate its efforts in this regard.
An additional priority in the State aid field concerns the taxation regime in Cyprus (in
particular the offshore tax regime) which seems to include export aids, various forms
of operating aid and other aid measures that need to be brought into line with the
Community’s State Aid
acquis.
Another special case with regard to Cyprus is the
importance of the role played by co-operatives in the Cypriot economy and the
advantages offered to these bodies. The tax regime applicable to co-operatives appears
to include State aid elements that need to be further clarified.
Chapter 7: Agriculture
Over the years the contribution of agriculture has gradually fallen to 4.2%
19
of GDP
and 9.3% of employment. Due to the fall in agricultural production, which was
particularly badly affected by the recent drought, the primary sector declined by
almost 7% in 2000. The output of the agricultural sector expanded by 7.5% in real
terms in 1999 following an increase of 6.2%
20
in 1998, due to less adverse weather
conditions as compared to previous years.
In 1999 total agricultural support was 46 million Cyprus Pounds and included various
types of direct and indirect subsidies in favour of agriculture as well as ad hoc
measures to compensate farmers for the effects of drought.
19
20
Source of all agricultural statistics is EUROSTAT unless otherwise specified
These figures have been provided by the Cypriot authorities
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In 1999 EC imports of agricultural products originating in Cyprus increased by 5% to
€
108 million. EC exports to Cyprus increased by 16% to
€
259 million. The trade
balance in favour of the Community amounted in 1999 to
€
151 million compared to
€
120 million in 1998.
21
Horizontal issues
As regards an
integrated administration and control system
(IACS) and the
establishment of a Paying Agency, only some preparatory work has been undertaken,
such as the formation of a core group in the Department of Agriculture.
Common Market Organisations
New legislation on harmonised marketing standards in floriculture has been enacted
by the House of Representatives in 2000.
Several legislative and administrative adaptations in order to achieve further
alignment with the
acquis
in the field of eggs and poultry, have taken place in the last
few months, for instance the reduction of import duties on day-old chicks and
hatching eggs in January 2000 and the enactment of legislation on the “Production,
Grading, Labelling and Marketing Standards for Poultry Meat” in July 2000. In
addition, for
fresh fruit and vegetables,
the Council of Ministers adopted in July 2000,
new harmonised legislation related to 32 standards in the fruit and vegetable sector.
Further incentives providing for the establishment and further development of co-
operative producer organisations, specifically for the fruit and vegetable sector, were
established in July 2000 by a Government decision; adoption by the House of
Representatives is not required.
Rural development and forestry
No concrete developments can be reported in this area since the last regular report.
Veterinary and phytosanitary issues
An amendment to the Welfare of Animals Law was approved in June 2000. With this
amendment the law became a basis on which further alignment with the
acquis
as
regards the directives on animal welfare will take place. As regards plant protection,
inter alia,
revised implementing regulations concerning the
acquis
in the field of the
toxicity classification of pesticides and the content of the active substance in a
pesticide were enacted in July 2000. In addition, regarding plant health, a programme
for the upgrading of offices, equipment and other facilities at the border inspection
posts is under implementation.
21
Source of trade figures: Uruguay Round definition of agricultural products, figures taken from
EUROSTAT COMEXT (see Agriculture in the EU – statistical and economic information 1999 p. 36
for definition of the products).
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Overall assessment
Although there has been some progress in preparing Cyprus’ agriculture for the
Common Agricultural Policy --notably through preparatory work with regard to the
necessary reforms such as the abolition of state monopolies-- substantial elements and
mechanisms of the agricultural
acquis
remain to be applied, in particular related to the
Common Market Organisations.
Concerning
horizontal issues,
with regard to the
European Agricultural Guidance
and Guarantee Fund
(EAGGF), Cyprus has substantial experience in support,
restructuring and development measures. Concerning budgetary and financial aspects,
agricultural policy is conceived and implemented within the framework of multi-
annual Strategic Development Plans. Some administrative and financial adjustments
are required for full harmonisation with the procedures prescribed by the
acquis.
Although preparatory work has started, the procedure for the establishment of the
IACS has to be accelerated. Under the present national agricultural support
framework, payments to farmers and other beneficiaries are made by the Department
of Agriculture and a number of other governmental and semi-governmental agencies.
Present arrangements need to be reformed and Cyprus will have to establish a Paying
Agency to handle the Common Agriculture expenditure, this being identified as a
short-term priority.
Legislation in the field of
quality policy
relating to designations still needs to be
adopted. Furthermore, Cyprus has not yet signed international agreements on
designation of origin and geographical indications. The ratification of the Lisbon
Agreement is progressing. In the field of certificates of special character, currently no
equivalent regulations exist. In addition, the
acquis
on organic farming has not yet
been adopted.
The competent authority for geographical indications, designations of origin and
certificates of specific character as a special unit within the Office of the Official
Receiver and Registrar of Companies needs to be appointed, the core of which already
exists. A body of inspectors needs to be established too.
With a view to
Common Market Organisations
the envisaged system of direct
hectare payments for cereals still requires adoption by the Council of Ministers.
Several areas in the field of arable crops need to be brought in line with the
acquis.
In
parallel to the abolition of the monopoly of the Cyprus Grain Commission,
reorganisation of the existing administrative infrastructure will have to take place in
order to create an intervention agency and intervention centres as well as management
of export and import licenses and tenders for cereal export.
For
fresh fruit and vegetables
there is no legal framework in Cyprus for the
recognition of POs according to community criteria, therefore the relevant provisions
governing the setting up, recognition and operation of Producer Organisations remain
to be adopted. As regards wine, legislation is already partially harmonised. However
further alignment with the
acquis,
mainly as regards the rules of wine growing
potential, market rules for wine and the protection of wine designations, is needed.
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Apart from fruit and vegetables, as regards specialised crops, legislative work still
needs to be done to achieve alignment with the
acquis
on marketing standards.
The monopolies of the Cyprus Grain Commission, of the Cyprus Olive Products
Marketing Board and of the Cyprus Milk Industry Organisation as well as the statute
of the Cyprus Vine Products Commission will have to be brought in line with the
acquis.
Preparatory work with regard to the necessary reforms has already been
undertaken.
In terms of administrative capacity to implement the
acquis,
Cyprus has a good basis
but the state monopolies managing the different markets hamper the necessary
restructuring of the existing infrastructure. Therefore the process of abolishing these
monopolies should be accelerated.
As regards
Rural Development and Forestry,
Cyprus has already some experience
in these areas, also comprising agri-environmental measures. However, the necessary
control bodies for the environmental scheme will have to be put in place. Furthermore,
a code of good agricultural practice needs to be established.
As regards rural development, the Department of Agriculture is gradually aligning its
procedure for authorisation, internal audit and execution of payment to those of the
acquis.
The administrative capacity for the implementation of the rural development
acquis
(also identified as a short-term priority) needs to be further enhanced .
Concerning
veterinary and phytosanitary legislation,
transposition of the
acquis
is
still partial. Cyprus should further align its veterinary and phytosanitary legislation
with the
acquis
as well as upgrade inspection arrangements, in particular at future
external borders, as this was identified as a short term priority in the Accession
Partnership.
In the
veterinary sector,
in the field of animal disease control measures, Cyprus
laboratories are capable of carrying out serological diagnosis regarding notifiable viral
diseases. Contingency plans, such as for food and mouth disease and classical swine
fever, should be developed.
As for
phytosanitary issues,
the border inspection posts,
inter alia,
will have to be
equipped with laboratory facilities for initial on the spot examination of imported
produce. The relevant market-place surveillance and control of imports and exports of
food (both of plant and animal origin) are carried out by the State General Laboratory
of Additional Veterinary Checks, required in the framework of the internal market.
Strengthening of the personnel and the diagnostic capability of the Laboratories of the
Veterinary Services will be required. A computerised system will also be needed for
recording movement of animals and products in the internal market. Inspection and
Certification of organic produce is currently undertaken by inspection bodies,
approved for this purpose in member states of the EU, since there is no relevant
legislation as yet in Cyprus.
Cyprus’ legislation has been going through a gradual process of harmonisation in key
areas, however important elements of the
acquis
have not yet been adopted. The
proposed Framework Law, under which all Community Veterinary Legislation will be
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covered -- such as for instance control systems in the internal market, expenditure in
the veterinary field, animal disease control measures, animal health (live animals and
animal products) and public health protection-- still needs to be enacted.
The process of preparing Cyprus’ agriculture for the Common Agricultural Policy
needs to be continued, notably regarding the establishment of the necessary
administrative and structural procedures. This concerns, in particular, the import and
trade of animals and animal health as well as plant health and plant quality.
Chapter 8: Fisheries
Since the last regular report, Cyprus has made progress in the field of fisheries,
especially concerning the implementation of legislation and the enforcement of its
infrastructure. However, in the field of
market policy,
no further developments have
been recorded.
As regards
resources management, inspection and control,
in the field of
monitoring and licensing, amendments of the Fisheries Law and Fisheries Regulations
to regulate the fishing licence system outside territorial waters and the monitoring of
fishing activities were adopted in June 2000. These amendments foresee, inter alia, the
obligation for the installation on all fishing vessels of a blue box for monitoring
purposes. Furthermore, a Law on Aquaculture was adopted in June 2000.
In view of strengthening Cyprus’ infrastructure and inspection capabilities, a new
patrol boat was purchased and was delivered to the Department of Fisheries and
Marine Research in February 2000. Therefore Cyprus has fulfilled the short-term
priority of the Accession Partnership concerning the strengthening of the
administrative capacity notably in the areas of inspection and control of fishing
vessels. Besides, Cyprus is initiating a project to introduce a system for satellite
monitoring.
Concerning
structural measures
(including fleet registration), further alignment with
the
acquis
in the field of licensing of fishing vessels under the Cypriot flag was
identified as a short-term priority. This priority has been met, since Cyprus has
introduced new measures for fishing vessels. All fishing vessels under the Cyprus flag
are required to obtain a fishing license from the Fisheries Department of the Republic
of Cyprus, irrespective of whether they fish in or outside the territorial waters of
Cyprus. Failure to obtain a license implies deletion from the registry.
With respect to
state aid to the fisheries sector,
no developments have been reported
since the last regular report.
Overall assessment
In spite of having achieved progress in some areas, Cyprus needs to pursue legislative
implementation as well as strengthening of institutions and instruments capable of
implementing the Common Fisheries Policy. In addition, further progress is needed
with regard to the current and planned structure of the fishing fleet under the Cypriot
flag.
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Concerning
market policy,
with regard to Common Market Organisation for fisheries
products, they are of limited importance for Cyprus, since Cyprus does not engage in
fishing of the main species covered by CMO and daily quantities are very small as
well. The majority of the products covered by CMO are not imported. Since there is
no wholesale market and representative wholesale price, Cyprus will have to submit
an equivalent representative wholesale price for imports of fish and fish products.
However, a relevant system for recording landing prices of imported products already
exists.
In the field of international fisheries agreements Cyprus is already signatory to the
General Fisheries Commission for the Mediterranean Agreement.
Concerning
resources, management, inspection and control,
according to the
Cyprus Fisheries Regulation, a ceiling to the number of licences that can be issued for
fishing within territorial waters exists. The Fishing Regulations also provide for the
issue of permits for landing catches in Cyprus.
Cyprus has initiated the procedure for ratifying specific UN and FAO agreements in
this area as well as for becoming a member of the International Commission for the
Conservation of Atlantic Tunas. Cyprus co-operates with the relevant International
and Regional Fisheries Organisations for the sustainable exploitation of fishing
resources.
With regard to the administrative capacity, the Department of Fisheries and Marine
Research of the Ministry of Agriculture, Natural Resources and Environment, is
responsible for the fisheries sector. Within the Department of Fisheries and Marine
Research, a specialised Inspectorate Service comprising 11 inspectors and 3 fast patrol
boats exists. This Service carries out regular patrolling of the coastal fishing zone as
well as on-the-spot checks
Concerning
structural measures,
Cyprus’ policy to reduce the number of fishing
vessels under its flag that operate in distant waters will have to be steadily continued.
The efficiency of the means introduced so far, including penalties for infringement
will have to be reviewed after a year. The establishment of a Fishing Vessel Register
in line with the requirements of the
acquis,
identified as a short-term priority in the
Accession Partnership, is being pursued. The legal framework was adopted in June
2000 and implementation regulations will follow.
Concerning
State aid,
there is a subsidy scheme for trawling in international waters,
aiming at the encouragement of Cypriot trawlers to fish continuously in the
international waters of the Eastern Mediterranean. The purpose of this is to increase
the production and alleviate the pressure exerted on Cyprus' fishing grounds.
Alignment with the
acquis,
in this area, should be ensured upon the time of accession.
Chapter 9: Transport Policy
Since the last regular report, noticeable progress has been made in the field of land, air
and especially as regards maritime transport. However, concerning
horizontal issues,
there is very little progress to report other than the completion in October 1999 of the
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Transport Infrastructure Needs Assessment (TINA) process, in which Cyprus
participated. Cyprus has approved the Final Report that should form the basis for
extending the Trans-European Networks to Cyprus. Within this framework, Cyprus
had proposed the inclusion of its ports, its airports and a number of its highways in the
extension of the Trans-European Networks.
In the field of
land transport,
in June and July 2000 regulations amending the Motor
Vehicles and Road Traffic Regulations were approved in order to achieve further
alignment with the
acquis.
This concerns the field of distinguishing signs, tread depth
of tyres of motor vehicles and trailers, as well as the installation and use of speed
limitation devices for certain categories of motor vehicles. In the case of speed
limiters, legislation was adopted, taking effect for all newly registered vehicles as
from 1.1.2001 and for existing vehicles from 1.1.2003. The authorities have taken the
necessary decisions to increase the administrative capacity in the different fields of
road transport by recruiting and training additional personnel,
inter alia,
on technical
inspections of public and high risk vehicles, to be carried out by the Department of
Road Transport of the Ministry of Communications and Works.
As regards
air transport,
the latest amendments and the revised Convention of
Eurocontrol were ratified by Cyprus in June 2000. Following the Council mandate of
December 1999, negotiations between the EC and Cyprus to join the draft Multilateral
Agreement on the Establishment of a European Common Aviation Area started in
January 2000. As regards administrative capacity, recruitment of additional staff has
been approved for the Department of Civil Aviation (DCA) with a view to the
implementation of the action plan “Development of Oversight Capabilities in the
DCA Cyprus”, ending in December 2002.
Concerning
maritime transport,
at the beginning of 2000 the Government introduced
a new, more restrictive policy for the registration of Cypriot ships, to enhance the
quality of the Cypriot flagged fleet and to improve its overall safety record. The
policy restricts the new registration of ships over 15 years of age unless specific
criteria are met and additional inspections are carried out by government surveyors.
At the end of 1999, the Council of Ministers adopted the International Maritime
Organisation (IMO) Code for the Investigation of Marine Casualties and Incidents.
In February 2000 the Harmonised System for Survey and Certification (HSSC) was
put in place to better regulate the role of classification societies.
In an effort to accelerate harmonisation with the
acquis,
in July 2000, five new bills
were approved under the Merchant Shipping Law of 2000, which implement the
Convention on Standards of Training, Certification and Watchkeeping (STCW
Convention). These bills separately regulate issues such as the issue/recognition of
seafarers’ certificates and the registration of seafarers and the establishment of
seafarer’s Register.
Amending legislation introducing a common model identity card for Port State
Control inspectors to align with the
acquis
was also approved.
The Convention for the Suppression of Unlawful Acts Against the Safety of Maritime
Navigation of 1988 and the Protocol for the Suppression of Unlawful Acts Against the
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Safety of Fixed Platforms Located on the Continental Shelf were ratified in October
1999.
In addition, in June 2000 Cyprus signed an Amended Agreement with Sri Lanka
deleting the relevant cargo-sharing clause in order to achieve further alignment with
the
acquis
relating to the principle of freedom to provide services concerning
maritime transport.
Promising results are expected from the implementation of the 1999 Action Plan on
strengthening the capacity of the Department of Merchant Shipping and improvement
of the safety record of the Cyprus fleet. This would ensure Cyprus’ fulfilment of its
obligations under international and European regulations in the field of maritime
safety. In 1999, Cyprus increased the number of Flag State inspections. For these
inspections Cyprus relies upon a world-wide network of inspectors. Measures have
been taken to considerably increase the total number of inspectors from 24 at present
to around 44 by the end of this year. In March 2000, the Minister of Finance approved
the recruitment of 11 additional Marine Surveyors and 4 additional Merchant
Shipping Officers for the Department of Merchant Shipping (DMS). The
administrative capacity of the DMS will be further enhanced through technical
assistance, training of personnel and computerisation of the DMS. Cyprus fulfilled its
Accession Partnership short-term priorities in this field. Likewise, with regard to Port
State Control, more inspections are being carried out and followed up in Cyprus ports.
In addition, the implementation of the new computerised Flag State Administration
System “MARCUS” of the DMS has started in September 2000.
Regarding detentions, the steady decline in their number is welcomed and reflects the
increased efforts of the Cypriot authorities in this domain (the detention rate decreased
from 10.85% in 1998 to 9.97% in 1999), however, further efforts are needed for the
Cyprus fleet to achieve a safety record corresponding to the current EU average of
3.6%.
Overall assessment
Overall, during the last year Cyprus has advanced well in its harmonisation of the
basic legislative and administrative framework with the
acquis.
Regarding
horizontal issues,
the overall responsibility for administering the
Community guidelines in the field of Trans-European Transport Networks (TEN-T)
lies with the Ministry of Communications and Works.
Regarding
land transport,
legislation to align with the
acquis
on recording
equipment (tachographs), minimum levels of driver training as well as, among others,
regarding market access, fiscal harmonisation and driving licences, still need to be put
in place.
As regards technical and safety issues, as specific legislation transposing the extensive
acquis
on transport of dangerous goods is not yet in place, Cyprus should considerably
strengthen its efforts for achieving alignment in this field prior to accession.
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The main responsibility for administering and enforcing the land transport
acquis
lies
with the Ministry of Communications and Works.
In the field of
air transport,
in view of the envisaged achievement of full
liberalisation and harmonisation of the air transport sector, the relevant legislation still
needs to be put in place. Cyprus still needs to make substantial progress in the field of
aviation safety, particularly to strengthen the applicability of the JARs (e.g. JAR
OPS), as well as the licensing and safety oversight procedures.
The Department of Civil Aviation of the Ministry of Communication and Works is the
competent authority. Recruitment of additional personnel has been approved for the
DCA.
Concerning
maritime transport,
Cyprus needs to improve its performance on Port
State Control. Care should be taken that there is a sufficient number of trained
inspectors to apply the
acquis.
Specific efforts are still required in order to ensure that
Cyprus adequately monitors the performance of the classification societies acting on
behalf of the Cyprus government.
Due to the size of the Cyprus merchant fleet further strengthening of the
administrative capacity of the Department of Merchant Shipping is needed and efforts
are in fact being focussed on this aspect. New legislation to align with further
elements of the maritime safety
acquis
still needs to be put in place. The Ministry of
Communications and Works, the Department of Merchant Shipping, and the Cyprus
Ports Authority, as regards the operation of ports, are the competent authorities in this
area.
Cyprus still needs to renegotiate its bilateral agreement with Syria in order to align
with the
acquis
regarding freedom to provide services in maritime transport, as has
already been done with Sri Lanka.
Chapter 10: Taxation
Since the last regular report, Cyprus has achieved some progress in the area of
taxation.
In the field of
indirect taxation,
the standard
Value Added Tax
(VAT) rate of 8% was
increased to 10% as of 1 July 2000. Furthermore, the House of Representatives
approved in June 2000 a VAT Bill which includes substantive alignment with the
Community VAT
acquis, inter alia,
for the abolition of the special VAT provisions in
favour of international business enterprises, which was identified as a short-term
priority in the Accession Partnership, and a refund scheme for foreign taxable persons
not established within Cyprus. However, the entering into force of the Bill, which is
not expected until sometime during 2001, is dependent on a Decision of the Council
of Ministers pending the adaptation of the existing VAT computerised system to the
new Bill.
Since the end of 1999, the
excise duties
on domestic produced spirits and petrol have
been increased. In addition, excise duties have been introduced on gas oil, kerosene
and imported spirits whereas the import duty on imported alcoholic beverages has
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been decreased. The specific duty on cigarettes was increased in June 2000, bringing
the duty level close to the Community’s minimum excise duty incidence of 57%.
Whereas no concrete progress is to be reported in the field of
direct taxation,
it
should be noted that Cyprus has undertaken a commitment towards OECD to
eliminate harmful tax practices by the end of 2005. That political undertaking is
interpreted to be valid as well as with regard to the – political - obligations stemming
from the Code of Conduct for Business Taxation and therefore must be seen as
“indirect” but substantial progress. It is however, to be noted that the rollback
obligation of harmful tax measures under the Code of Conduct is set at end of 2002 at
latest.
No further developments since the previous year can be reported in the area of
direct
taxation
and
administrative co-operation and mutual assistance.
As regards the
administrative capacity,
a new section has recently been established at
Customs Headquarters for the promotion of the harmonisation effort and the effective
implementation of the
acquis
on excise duties. In addition 53 VAT officers have been
recruited and trained. The new officers have been deployed to the field of control.
Overall assessment
Although Cyprus has undertaken several measures to further align its legislation with
the
acquis,
there are some discrepancies in several essential areas between Cyprus’
legislation and the
acquis,
therefore further efforts are required.
Regarding
indirect taxation,
VAT was introduced in Cyprus in 1992. Two VAT rates
are applied, a zero rate and a standard rate of 10%. The main difficulties for Cyprus in
terms of the
acquis
relate to the application of rates. The substantive use of the zero
rate raises some concern, since full alignment in this area is most likely to have a
significant impact on consumer prices. The pursuit of VAT harmonisation by
dimishing the zero-rate extension was identified as a short-term priority. Although it
has recently been decided to increase the standard VAT rate from 8% to 10% the gap
between that and the EC standard rate of 15% remains very large. There are concerns
as to whether Cyprus will be able (both on political and economical grounds) to
introduce the necessary adjustments in a reasonable timeframe, especially if it has to
be accompanied by –politically- sensitive adjustments of rates also in other areas
(reduced rates VAT, excises, taxation of off-shore companies).
The VAT Service, with a separate structure within the Department of Customs and
Excise, administers VAT in Cyprus. Although it is a modern tax administration
further efforts are needed to ensure Cyprus’ capacity, including that of
computerisation, to implement, control and enforce the
acquis.
The administrative
system of control of VAT is based on central administration with local control.
Some substantial efforts have been made since the last regular report, however, the
excise legislation of Cyprus remains different in several essential areas from that of
the
acquis.
This is in particular the case regarding the taxable scope, the duty level and
the level of duty rates. The continued use of protective measures in the form of in
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particular the Temporary Refugee Levy, results in imported goods being taxed more
heavily than similar domestically produced products. Abolishing such discrimination
has been identified as short-term priority in the Accession Partnership. Although it is
fully recognised that efforts have been initiated to align the excise legislation, a more
complete assurance for the remaining parts should be pursued.
The Department of Customs and Excise of the Ministry of Finance is the authorised
government body for the administration of excise duties. Further efforts are required
with regard to the introduction of a tax warehouse system.
In the field of
direct taxation,
the special regime for offshore companies in Cyprus
needs to be addressed. (There are about 42,000 registered offshore companies in
Cyprus, which employ 3000 non-Cypriots and 2500 Cypriots. It is estimated that they
brought some 200 million CY Pounds in foreign currency to Cyprus in 1999, roughly
4.4% of the GDP.)
The Department of Inland Revenue is the competent authority for the administration
of direct taxation. Currently, the Department employs around 600 employees. Its
systems are computerised for the issuing of income tax returns, raising of assessments
and collection of taxes.
In the area of
administrative co-operation and mutual assistance,
Cyprus will have
to introduce harmonised legislation on the VAT Information Exchange System (VIES)
and develop the existing infrastructure to apply this system. Cyprus already has a
computerised system for the collection and processing of VAT returns. In order to be
able to meet the new demands concerning administrative co-operation and mutual
assistance, Cyprus will have to further reinforce its tax administrative structures and
control procedures. The establishment of a strategy for the modernisation of the tax
administration is an essential starting point.
Chapter 11: Economic and Monetary Union
A detailed assessment of Cyprus’ economic policy in its various aspects has been
given above, in the chapter discussing the economic criteria (B-2). Therefore, the
present section is limited to a discussion of those aspects of the Economic and
Monetary Union
acquis
– as defined by title VII of the EC treaty and the other
relevant texts – which candidate countries should implement by accession at the latest,
i.e. the prohibition of direct public sector financing by the central bank, the
prohibition of privileged access of the public sector to financial institutions, and
independence of the national central bank. As to the process of liberalisation of capital
movements, upon the completion of which compliance with the EMU
acquis
is
conditional, this aspect has been covered above, in the section on
Chapter 4
–
Free
movement of capital.
Since the last regular report, Cyprus has made some progress in the adoption of the
EMU
acquis.
Concerning the
direct public sector financing by the central bank,
no further
developments since last year have been recorded.
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In December 1999 Cyprus enacted a law liberalising interest rates. This law, which,
inter alia,
repeals provisions for an interest rate ceiling, will come into force in
January 2001. These provisions can be seen in the framework of
privileged access of
the public sector to financial institutions,
therefore their removal represents
progress in the adoption of this part of the EMU
acquis.
No concrete progress can be reported in ensuring the
independence of the Central
Bank.
Overall assessment
Cyprus will participate in EMU upon accession with the status of a country with a
derogation as
per
article 122 of the EC treaty. It will need to implement the necessary
changes to its institutional and legal framework by the date of accession.
Overall, Cyprus has yet to fully implement important parts of the EMU
acquis,
such
as the direct financing of the public sector and the independence of the Central Bank.
From June 1992 to December 1998 the Cyprus pound was pegged to the ecu within
the fluctuation margins of
±2.25%.
Since the beginning of 1999 it has been pegged to
the euro within the same fluctuation band.
Concerning
administrative capacity
in the field of EMU, the services responsible are
the Ministry of Finance, the Central Bank of Cyprus as well as the Planning Bureau.
The Central Bank of Cyprus has the overall responsibility for defining and conducting
monetary policy. For the efficient conduct of monetary policy, the Central Bank of
Cyprus will need to have full responsibility for setting the interest rate. Therefore
Cyprus still needs to amend the Law on the Central Bank as well as the relevant
provisions of the Constitution in order to establish statutory independence of the
central bank and to achieve compatibility in all material respects with the EMU
acquis,
a process which should be accelerated.
Chapter 12: Statistics
Since the last regular report Cyprus has made good progress in the field of statistics.
As regards
statistical infrastructure,
at the beginning of 2000 a new Statistics Law
was enacted. This forms the legal basis for the collection, production and
dissemination of statistical information and includes general provisions governing the
statistical system in Cyprus. It also specifies the tasks of the Statistical Service of
Cyprus (renamed in January 2000, former Department of Statistics and Research) and
redefines its role and function as the central agency responsible for the production of
official statistics. It contains provisions for the carrying out of statistical enquiries
required by the EC, access to administrative records, and the transmission of data
subject to statistical confidentiality to EUROSTAT, and the creation of an Advisory
Council. The fundamental principles of impartiality and reliability of data as well as
the transparency of statistics and confidentiality of personal data are safeguarded
under the Statistics Law.
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A census of enterprises was carried out in May 2000, which will form the basis for the
drawing up of a fully harmonised business register of local units and enterprises. As
regards
transport,
a pilot survey on transport of goods by road was completed in
November 1999, another survey was launched in the second quarter of 2000 to fulfil
the requirements for statistical returns in respect of transport of goods by road.
In addition, a unit within the Statistical Service for the co-ordination of the work of
various Government Departments dealing in the collection of environmental data,
with the aim of initiating the production of statistics on the state of the environment
on a systematic basis, was set up. Seven statistics assistants were recruited in October
1999 and the budget for 2000 contains provisions for another seven statistics officers.
The Statistical Service is computerised to a high level in terms of terminals, personal
computers, and connection to the LAN and access to the Internet.
Overall assessment
Although Cyprus possesses the main statistical infrastructure and fulfils the statistical
requirements of the international organisations to which it belongs, there are still a
number of areas in which Cyprus does not at present provide comparable data, which
in some cases is due to the small size of the country. Further efforts need to be made
to bring the statistical system into line with EC requirements.
As regards
demographic, social
and
regional statistics,
several important new data
collection systems are needed. A
labour force survey
was undertaken in 1999, while
labour cost and public health surveys still have to be introduced. The introduction of
NUTS classification is under discussion in order to allow the compiling of regional
community statistics.
In order to improve
macro-economic statistics,
the Statistical Service and other
statistic producers will have to strengthen the provision of basic statistics. Existing
production accounts have to be complemented by economic accounts at regional level.
Quarterly national accounts, accounts by institutional sector and financial accounts
which do not exist yet need to be compiled, while maintaining the principle of
independence of statistics production from policy-making instances. As far as debt
and deficit statistics are concerned, the delimitation of the government sector has to be
reviewed according to the ESA 95 requirements.
22
Cyprus has started to implement the
consumer price indices,
but no full compliance
has yet been reached. In the area of
business statistics,
a number of existing surveys
need to be adopted and extended. Statistics need to be established for money and
finance. In general, a good compliance level has already been reached in the field of
agriculture, forestry and fisheries. Some changes in
crop
and
livestock
surveys are
necessary.
22
European System of National and Regional Accounts in the Community
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Chapter 13: Social policy and employment
Since the last regular report Cyprus has achieved some progress in the field of social
policy and employment.
As regards
labour law,
in June 2000 two laws relating to the provision of information
to employees (employment contract) and the preservation and safeguarding of
employee’s rights in the event of transfer of business or undertakings were enacted. In
addition, in September 2000 Cyprus ratified the revised European Social Charter.
Concerning
equality of treatment,
although legislation is under preparation for
instance regarding parental leave, equal treatment for women and men in employment
and vocational training or indirect discrimination, no new legislation has been adopted
since the last regular report.
In the field of
health and safety,
in order to bring Cyprus’ legislation further in line
with the
acquis,
an amendment to the Asbestos Law relating to the protection of
workers from risks related to exposure to asbestos at work was enacted in April 2000.
In addition, in July 2000, legislation for further alignment in the field of provisions of
safety and health sign boarding at work was enacted. The Labour Inspectorate has
been upgraded to the level of a Government Department within the Ministry (as from
the beginning of this year) and reorganised, in order to exercise the new
responsibilities and functions emanating from the transposition of the
acquis.
The
strengthening of enforcement structures in the fields of health and safety at work, in
particular as regards the Labour Inspectorate, was identified as a short-term priority in
the 1999 Accession Partnership.
Regarding
social dialogue,
no further developments since the last regular report have
been recorded.
Employment is estimated to have grown by 1% in 1999, and unemployment remained
relatively low at just over 3%. Overall labour force participation and employment
rates remain relatively high – in 1998, for example, some 72% of the working-age
population was in the labour force, as compared with 68% in the EU-15.
The government has commenced work on a national
employment
action plan. An
assessment of employment policy priorities is also being prepared jointly by the
national authorities and the Commission.
In the field of
social protection,
as from the beginning of 2000 the pensionable age
for the social pension was decreased to sixty-five years, the same as the pensionable
age under the Social Insurance Scheme.
With regard to
discrimination,
in July 2000, a “Law Providing for Persons with
Disabilities” was enacted which, inter alia, provides for the introduction of the general
principle of non-discrimination against the disabled as well as for specific measures in
the field of employment, like provisions regarding recruitment, promotion in
employment, vocational rehabilitation and training as well as accessibility and
mobility.
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Overall assessment
Although Cyprus has achieved progress in this area, substantial parts of the
acquis
have not yet been fully transposed. Further progress in transposition thus is necessary,
in particular as regards labour law, equality of women and men and occupational
health and safety.
Cyprus has the essential enforcement structures, which the government plans to
strengthen further. This will in particular be needed with regard to labour inspection
services monitoring health and safety at work, Labour Law and equality treatment.
Concerning
equality of treatment
further adaptations to Cypriot legislation will be
needed to fully align with Community provisions.
In the field of
health and safety
at work, in order to reduce work accidents and
occupational injuries and diseases, the implementation of health and safety legislation,
entailing investment both in enforcement structures by the Government and in
technical and organisational measures by enterprises, has to be strengthened.
In the field of
public health,
steps have already been taken to upgrade the provisions
of health care services and to improve the quality of health, as for example through a
programme for training, computerisation or development of health prevention
programmes.
Cyprus needs to undertake further efforts to develop a health monitoring system in
order to obtain health data and indicators comparable with the Community health
monitoring system. It will also have to nominate an organisation that can fully
contribute to tasks at European level agreed in the framework of the Network as
regards a systematic surveillance of communicable diseases.
In the public health area some further adaptations to legislation will be needed to fully
align with the
acquis
in the area of labelling of tobacco products and on maximum tar
yields of cigarettes. Cyprus will have to establish a laboratory to measure tar yield.
Concerning
social dialogue,
Cyprus has a long-standing practice. Workers’ and
employers’ organisations are strong and play an active role in particular in various
existing tripartite bodies. However especially at sectoral level, bipartite social
dialogue, including the Government’s administrative capacity in this field, is relatively
less well developed. This could influence the implementation of the Community
acquis
at the local level, and also limit social partners’ future participation in the
sectoral social dialogue at European level. The support of social partners’ capacity-
building efforts to develop and implement the
acquis
was identified as a short-term
priority in the Accession Partnership.
Concerning
employment
and the
European Social Fund,
preparatory work has
started for developing a National Action Plan for Employment according to the EC
Employment Guidelines. It is planned that the management of the ESF will be under
the responsibility of the Labour Department and for this purpose, suitable training of
personnel should be organised.
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With regard to Eures (European Employment Service), the Ministry of Labour is the
national authority dealing with employment services. Cyprus is computerising the
existing system in order to be able to participate fully in the network. However, the
employment policy delivery systems and specifically the Public Employment Services
will need to be strengthened.
In the field of
social protection,
regarding the healthcare system, draft legislation,
which provides for the introduction of a National Insurance Health Scheme, has been
submitted to the House of Representatives. The new Health Scheme will provide
universal coverage and its financing will be based on contributions from the social
partners and the budget.
Legislation transposing the EC Directive based on Article 13 of the Treaty relative to
discrimination
on the grounds of race or ethnic origin will have to be introduced and
implemented.
Chapter 14: Energy
Since the last regular report, Cyprus has undertaken two assessment studies in the
energy sector, the results of which will assist in the development of a national energy
strategy as well as in the transposition of important areas of the energy
acquis
as yet to
be transposed. The studies are now reaching completion. Since further steps to align
with the
acquis
are dependent on these findings, progress with regard to legislation in
this area over the past year has been limited.
The first of these studies provides Cyprus with an assessment of the costs and
infrastructure required for the building up of its oil stocks to reach the requisite 90
days supply. The second, which addresses the current monopoly in the electricity
market, will allow Cyprus to put into place the measures needed to ensure the
liberalisation of the energy sector, including the appointment of an energy Regulator,
and the establishment of a regime for network access and for building of new capacity
in the electricity market.
Consequently, no concrete developments have taken place with regard to the
security
of supply
since last year and Cyprus does not yet have legislation in place regarding
oil stocks.
Similarly, there has been no progress with regard to aspects of
competitiveness and
the internal energy market.
In order to achieve further alignment with the
acquis
and to promote
energy
efficiency
in the industrial, commercial and agricultural sectors, a grant scheme for
investments in energy efficiency promotion, encouraging the use of energy from
renewable sources, became fully operational at the beginning of 2000.
Moreover, in 2000 Cyprus, has joined the Organisation for the Promotion of Energy
Technology (OPET), the main aim of which is the implementation of measures in the
fields of rational use of energy, renewable energy sources and fossil fuels. In June
2000, the Government of Cyprus established an Institute of Energy, which together
with the Applied Energy Centre, will implement the OPET-Cyprus Program.
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Cyprus has no
nuclear energy
production and no plans in this regard.
Overall assessment
There has been limited progress towards the adoption of the
acquis,
therefore further
efforts are needed.
With regard to the
security of supply,
due to the heavy dependency of Cyprus on
imported oil, the issue of oil stocks is of particular significance. Currently, stocks are
held by the petroleum refinery, the Electricity Authority and oil companies for their
own requirements, but additional storage capacity needs to be developed.
In the field of
competitiveness and the internal energy market,
concerning
electricity,
the Electricity Authority currently remains the sole producer and
distributor of electricity in Cyprus. It has the status of a semi-governmental
organisation with a legal monopoly. Under the present rules only when the Electricity
Authority lacks capacity can permission to generate electricity be granted to others.
This monopoly position will need to be altered in order to comply with the
acquis.
Cyprus being an island, there is physically no
transit
possible. As regards the rules of
transparency
of energy prices, efforts for the implementation of these are needed.
Although possibilities for the future development of a
gas
sector continue to be under
study, the current situation whereby there is no consumption of natural gas, no gas
network and no interconnections remains unchanged. Similarly, as Cyprus does not
have any coal mines the sector of
solid fuels
is of no significance, although a new oil
fired power plant is under construction, which also can be converted for coal. Cyprus
continues to have no plans for on-shore/off-shore oil exploration.
Concerning the oil related
acquis,
further adjustments are necessary for alignment.
Although Cyprus has already taken some steps with regard to energy efficiency,
further efforts are needed to achieve alignment with the
acquis
in this field. As most
electrical equipment/appliances are imported, particular emphasis will be needed with
regard to placing on the market as well as on market surveillance.
In the field of
nuclear energy
Cyprus has already ratified a number of IAEA
Conventions, is a member of the International Atomic Energy Agency and has ratified
a safeguards Agreement with the IAEA. It has also signed an Additional Protocol to
this Agreement. Due attention should be given to preparing the implementation of
Euratom safeguards.
As regards administrative capacity, the Energy Section of the Ministry of Commerce,
Industry and Tourism is the competent department for all energy matters and has the
overall responsibility for implementing the
acquis.
The Energy Section incorporates
an Inquiry Point to which any request for information about laws, regulations, and
administrative rulings may be addressed. No Energy Regulator has as yet been
established in Cyprus.
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Chapter 15: Industrial Policy
23
Since the 1999 regular report, Cyprus has made some progress in the field of
industrial policy, particularly with regard to investment promotion.
With respect to
industrial strategy,
in January 2000 Cyprus eliminated the controls
on Foreign Direct Investment (FDI) in companies for EU investors. The foreign
investment ceiling previously in force was never above 50%. Restrictions still exist
for investors from third countries. In the same period, control restrictions on share
capital of Cypriot companies for EU citizens were also abolished. These regulations
are a step towards the abolition of all capital controls.
A Foreign Investors Service Centre (“One-Stop-Shop”) has been set up in the Ministry
of Commerce, Industry and Tourism to provide guidance to international enterprises
searching for local partners. It will be gradually developed into a fully-fledged one-
stop-shop both for foreign investors and local enterprises providing detailed
information concerning the national administrative procedures.
As regards
privatisation and restructuring,
few developments such as the sale of the
shares in the Cyprus Tourist Development Company since the last regular report have
been recorded.
Overall assessment
The industrial policy of Cyprus is significantly in line with the concepts and principles
of EC industrial policy. It has always been based on the premise that productive and
commercial activity is the responsibility of the private sector, whereas the role of the
state is to foster an environment conducive to private initiative and to create the
necessary infrastructure. The degree of state intervention in the production process in
the manufacturing sector in Cyprus is limited, although the government participates in
some companies. However, special efforts have to be made to fight structural
problems such as high production costs or low productivity.
Cyprus’ industrial policy is laid down in the 1999-2003 Strategic Development Plan.
The five-year plan puts emphasis on structural reforms aimed at improving the
competitiveness of Cypriot industry. Main objectives of the industrial strategy are
support for the restructuring of traditional industrial sectors, assistance to existing
production units and the attraction and development of new high-tech industries as
well as better exploitation of the industrial potential of policies on innovation,
research and technological development. Progress to implement this strategy should
be further sustained. Many manufacturing sectors like textiles, clothing and leather
suffer from intensifying foreign competition. Special efforts have to be made to fight
structural problems like high production costs and low productivity.
23
Developments in Industrial policy should be seen in relation to developments in the context of SME
policy (see
chapter 16- Small and medium sized enterprises)
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Incentives were also introduced in June 1999 to promote exports of manufactured
products. Measures have been introduced to support co-operation between companies
such as mergers, joint ventures or subcontracting, the technological upgrading of
industrial units and the quality improvement of manufactured products. Planned
investments in infrastructure and tourism are expected to boost the construction
sector, which is still characterised by low productivity. In this respect, it should be
noted that an important element of any industrial policy is the control of state aid and
that the compatibility of support schemes with EC rules will have to be examined (see
Chapter 6: Competition policy).
No clear progress has been recorded on the creation of the Centre for Technology,
Research and Development mentioned in the previous regular report.
The execution and monitoring of the implementation of industrial policy is the
responsibility of the Ministry of Commerce, Industry and Tourism, which introduces
the appropriate policy and administrative measures and formulates policy or sets
objectives according to emerging needs.
Co-operation
with other Ministries and the
Planning Bureau is well established. Private sector institutions such as chambers,
business associations etc. participate, through the Advisory Committee on Commerce
and Industry, in both the formulation and the monitoring of implementation of
industrial policy. At local level, apart from the Cyprus chamber of Commerce, there
are regional Chambers of Commerce in the five major cities.
Industrial policy is developed in an integrated manner among the different Ministries
and private sector institutions. There is no need to establish new institutions or
administrative bodies for the implementation and the enforcement of the
acquis.
Chapter 16: Small and medium-sized enterprises
24
Since the last report, the main progress in the area of
SME policy
has been made in
improving the access of companies to finance.
Guarantees for loans to SMEs and interest rate subsidies and a special scheme for
start-up loans have been introduced. At the same time, a one-stop shop has been set
up within the Ministry of Commerce, Industry and Tourism to provide guidance to
international enterprises searching for local partners.
A national Euro Info Centre was established in Nicosia, nosted by the Chamber of
Commerce and Industry.
Overall assessment
In Cyprus
SME policy
is overall in line with the principles and objectives of EC
enterprise policy. A specific chapter on SMEs was included in the Five-Year Strategic
Development Plan (1999-2003). It sets, among others, the following objectives: the
24
Developments in SME policy should be seen in relation to developments in the context of Industrial
policy (see
chapter 15-Industrial policy)
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creation of a simplified legal and institutional framework for SMEs, the improvement
of the financial environment as well as the enhancement of the competitiveness of
SMEs through their internationalisation and their access to the information society.
As regards the implementation of SME policy in Cyprus, sufficient infrastructure
already exists. The Ministry of Commerce, Industry and Tourism is responsible for
SME policy. Its action is supported by other ministries and private bodies such as
Trade Associations or Chambers of Commerce. Private sector institutions participate
in both the formulation and the monitoring of the implementation of the policy.
The simplification of the
business environment,
within which SMEs operate, is an
important policy objective in Cyprus. For example a single number is given to each
company registered and all companies are listed in an easy to handle computerised
catalogue. In the registration procedure, there is no involvement of any other
government department apart from the Department of the Registrar of Companies and
Official Receiver. These efforts are welcomed and should be further sustained.
Concerning
SME definition,
Cyprus has adopted provisions that distinguish between
medium-sized, small and micro-enterprises. The definition is in line with the EC
definition with respect to the number of employees. Financial data (turnover, balance
sheet) are not available for all enterprises.
Chapter 17: Science and Research
Cyprus has undertaken further measures to strengthen its capacity to implement the
acquis
in the field of Science and Research since the previous report.
Since the agreement on association with the
Fifth Framework Programme
for
Science and Research, Technological Development and Demonstration Activities
(FP5) entered into force in May 1999, Cyprus has established a National Contact Point
(NCP) system in order to promote participation at national and at European levels, and
aiming at the effective utilisation of the Fifth Framework Programme. Cyprus also
participates in the FP5 Programme Committees.
One of the main characteristics of the agreement is that it is based on the principle of
reciprocity. Cyprus opened all research programmes launched at national level, to
institutions and researchers from EU member states.
In the field of European co-operation in science and technology (COST) Cyprus was
accepted as a full member in 1999.
The authority responsible for the formulation and implementation of the national
science and research policy is the Planning bureau, in co-operation with the Research
Promotion foundation. This Foundation has become the means through which the
planning bureau’s strategy and policies in Research and Development are
implemented.
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Overall assessment
In Cyprus, co-operation in the field of science and technology is well established and
participation in the FP5 should enable Cyprus’ authorities to become more familiar
with Community rules and proceedings.
For the further development of the sector it is important to have an increase in the
gross domestic expenditure in research and development as a percentage of GDP
which is relatively low (0.23% in 1998). Within the framework of the New Industrial
Policy for the Development of High Technology Industry in Cyprus, the concept of
incubators for high technology companies and centres for applied research and
development is promoted. However, as the research infrastructure in Cyprus is
relatively limited and the main research institutions are within the public sector,
further concrete measures are required in order to gradually increase the support of
this sector.
The human resources available to the Research Promotion Foundation increased in
September 1999. Apart from launching national research programmes the Foundation
is actively involved in the co-ordination and encouragement of the participation of
Cypriot institutions in the Fifth Framework programme for research and
Development. It has also included among its priorities the improvement of links
between academia and research institutions with the industry and SMEs.
Chapter 18: Education and training
Since the last regular report Cyprus has achieved progress in the alignment of its
legislation as well as capacity building measures with the
acquis
in the field of
education and training. Cyprus has continued to participate actively in a number of
Community programmes
(see
bilateral part A).
Once the necessary legal
arrangements have been completed by the end of this year, Cyprus should take part
from 2001 in the second phases of Socrates and Leonardo da Vinci programmes, as
well as in the new Youth programme, which incorporates European Voluntary Service
activities.
Concerning the issue of
non-discrimination towards EU citizens in the field of
education,
a Council of ministers decision, which provides for the recognition of the
European Baccalaureate as equivalent to the corresponding qualifications in Cyprus,
entered into force at the end of 1999.
Concerning
reforms in the field of education, training and youth,
in particular as
regards the establishment of a National System of Vocational Qualifications relevant
amendments/provisions have been included in the new law of the Human Resource
Development Authority (HRDA). This human resource development law published in
November 1999, foresees, amongst other things, the development of vocational
qualification standards, which will constitute a major step forward in the transparency
and mutual recognition of qualifications. Sustainable, coherent and comprehensive
development of a national system of vocational education and training (VET)
standards, from initial to continuing vocational education and training, remains a
priority.
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The newly established Cyprus Council on Academic Recognition and Equivalence of
Tertiary Education Diplomas has started its work and it is expected that by the end of
the year the council will be fully operational. This will further enhance the
transparency of the educational qualification structure. In addition, a proposal for the
reform of secondary vocational education and training by the Minister of Education
has been developed. The proposal addresses a number of issues such as the need to
upgrade curricula, the need to develop the capacities of secondary VET, retraining of
teachers etc.
Overall assessment
In general, appropriate legislation is in place and does not conflict with EC laws. In
addition, basic structures are already in place to enable participation in EC education,
vocational training and youth programmes. Cyprus has made good progress in the
field of education and training, however, further efforts in strategic policy making as
well as implementation are required especially in order to ensure the development of
high quality vocational education and training as part of an open, flexible and
transparent lifelong learning system. Besides, it will be necessary to set up institutions
and procedures for the future use of European Community financial instruments
relevant for the ongoing improvement of vocational education and training.
As regards
Community programmes,
the national Co-ordinating Committee is the
central body for setting the general policy in relation to the participation of Cyprus in
the said programmes. The Ministries of Labour and Social Insurance, Education and
Culture and Justice and Public Order, are the competent national authorities
responsible for their implementation.
As regards the
education of children of migrant workers,
the principles of the
existing legislation (which have to be implemented effectively), are in line with the
acquis.
In particular there are already provisions in public schools for facilitating the
reception of the children of migrants. Specifically, a number of teachers have been
trained especially for teaching the local language and facilitating the integration of
these children in the school system. The main EU languages are already taught in
public schools, the system for providing means for learning the local as well as
foreign languages is in place and could further be enhanced according to arising
needs. In addition, in order to increase the capacity for teaching these children a
special teacher-training programme is being developed. This programme, besides
enhancing the contents of the existing training, also provides for the training of
additional teachers.
As regards
non-discrimination toward EU citizens in the field of education,
free
circulation of persons and the principle of non-discrimination, in particular, on
grounds of nationality must be applied throughout the fields of education, training and
youth. Concerning the equal treatment for students in higher education, regarding fees
and admission procedures, further alignment with the
acquis
is needed in order to
avoid discrimination between Cypriots and EU nationals.
With respect to
reforms in the fields of education, training and youth,
the
competent authority is the Ministry of Education and Culture. Concerning vocational
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training, The Ministry of Labour and Social Insurance is the authority responsible
involved in the formulation of the national policy and the promotion of relevant
measures. The Youth Board of Cyprus is the competent authority for the formulation
and implementation of the national youth policy. Youth organisations are represented
in the Youth Board, a statutory public corporation operating under the auspices of the
Ministry of Justice and Public Order.
Chapter 19: Telecommunications and Information Technologies
Since the last regular report some progress has been achieved in the
telecommunications and information technologies sector.
For the
telecommunication market,
various harmonisation measures have been
undertaken by administrative acts, for example the
acquis
on technical requirements
on various telecommunications systems, the introduction of a single European
emergency call number, the international telephone access code as well as reserving
frequency bands for land-based mobile communications (GSM), land-based public
radio paging (ERMES) and digital European cordless telecommunications (DECT). In
addition, from August to November 1999 the Cyprus Telecommunications Authority
(CYTA) lowered international tariffs, in part up to 59%.
A new tariff rebalancing package has been under discussion in Parliament since July
2000. This new tariff rebalancing scheme includes new tariffs in three steps up to
April 2001 and increases relating to fixed local telephony (installation, rental and local
costs) and leased lines. It also includes reductions on international and long distance
calls in the fixed network, mobile telephony and ISDN.
As to the current
regulatory
system and the
postal market,
although legislation is
under preparation, no concrete developments since the last regular report have been
recorded.
Overall assessment
Whereas infrastructure and services are well advanced in Cyprus, considerable efforts
have to be made to adopt a regulatory framework in line with the
acquis,
in particular
in the field of gradual market opening and licensing.
Steps have been taken concerning the establishment of an independent National
Regulatory Authority covering the
telecommunications sector
as well as the postal
service. The establishment of an independent regulatory authority, identified as a
short-term priority by the Accession Partnership, has not been met yet. This authority
will have to be sufficiently staffed in order to carry out the essential tasks of drafting
regulations and ensuring market surveillance. In addition, a new law on
telecommunications to align with the
acquis
needs to be adopted in the short-term as
identified in the Accession Partnership in order to put in place the regulatory
framework required.
As the use of Very Small Aperture Terminal (VSAT) networks for providing non-
voice services is permitted, the Cyprus market has further been opened to competition.
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The main regulatory functions are currently exercised by the Directorate of
Telecommunications of the Ministry of Communications and Works. The
administrative capacity of the Directorate of Telecommunications was enhanced in the
last two years through the recruitment of additional personnel, training of staff and the
purchase of modern equipment, e.g. a sophisticated mobile radio frequency
monitoring station.
Concerning the
postal market,
there is not yet provision for a Universal Service
Provider, but in practice the Department of Postal Services offers the universal service
to 98% of the population. In addition, there is no licensing regime in the existing
postal field. The regulatory functions in the field of postal services are currently
exercised by the Ministry of Communication and Works. Although Cyprus Post is
still a civil service department there were improvements in its profitability last year.
Meanwhile, Cyprus Post has, in its capacity as a member of the European association
of postal public operators (USPs)-PostEurop, established a full-participation in a
cross-border QoS end-to-end measuring-UNEX.
Chapter 20: Culture and audio-visual policy
During the period covered by this report, Cyprus has made further substantial progress
in alignment with the culture and audio-visual policy
acquis.
In February 2000 Cyprus amended its legislation aiming at achieving full alignment
with the
audio-visual
acquis.
Cyprus, being a party to the Convention of the Council of Europe on trans-frontier
television, also ratified the Protocol amending the above Convention in February.
In January 2000, implementing regulations to the Radio and Televisions Stations Law
were approved.
The Radio-Television Authority completed its main recruitment phase, thus providing
the basis for an effective implementation of the legal framework concerning private
television and radio stations.
A set of Regulations was approved, as mentioned above, allowing the Cyprus Radio-
Television Authority to proceed with the issuing of permanent licences for all private
television and radio stations; furthermore this authority can impose fines and other
penalties on stations which violate the law. In addition, the Cyprus Broadcasting
Corporation set up a self regulating mechanism during 1999, which is headed by a
three member Committee.
Overall assessment
On the whole, Cyprus has made substantial progress and reached a high degree of
alignment with the Community
acquis.
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The new law has brought Cyprus audio-visual legislation closer to the
acquis.
However, further progress and clarification will be needed, in particular, concerning
certain definitions, public access to major events and right to reply.
Chapter 21: Regional policy and co-ordination of structural instruments
Over the reporting period, few new developments are to be reported in this area, given
that most of the elements required to participate in EC structural policies are already
in place. A decision was however taken in April 2000 by the Council of Ministers for
the further involvement of local authorities in the programming and implementation
of development programmes.
Overall assessment
Cyprus can be considered as being very close to having the full capacity to implement
structural policies.
As regards
territorial organisation,
Cyprus administration relies on the division of
the island into six districts and 33 self-governing municipalities, as well as 352 village
authorities. Cyprus still needs to submit to the Commission a proposal for a
provisional definition of NUTS Levels 2, 3 and 4 regions.
Concerning the
legislative framework,
no further legislative initiatives appear
necessary in order to implement the EC structural policy
acquis.
As regards
preparation of programming,
the Planning Bureau (comprising a staff of
57 persons) is the national planning and co-ordination authority, which is also
responsible for medium and long term macroeconomic planning. The administrative
capacity seems to be sufficient.
Since 1960, the Government of Cyprus has drawn up five year national Strategic
Development Plans (SDP). The current SDP covers the period 1999-2003. The SDP is
implemented annually through the budget category of development expenditure.
Programming of expenditure is established on an annual basis with a Memorandum,
which accompanies the budget document covering multi-annual issues. This
procedure is to a large extent in line to meet the pluri-annual commitment requirement
needed by the Structural Funds.
In the field of
administrative co-operation,
co-ordination of government’s policies
for regional development is performed by the Planning Bureau. Concerning
evaluation, although Cyprus has already been implementing an ex-post assessment of
the development projects within the planning mechanism, the system is not at the
level required by Structural Funds regulations.
The Ministry of the Interior co-ordinates consultations with all local authorities on
development programmes and other related issues, through the District Officers
(Community Councils) or the Directorate responsible for Town Planning and
Housing. However, the current system will have to be adjusted in order to meet EC
requirements.
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In the field of
financial and budgetary management,
the budgetary procedures
required for the implementation of the Structural Funds are generally in line with the
provisions of the relevant regulations. The Directorate for the Development
Expenditure of the budget, within the Planning Bureau, is responsible for the
formulation as well as the implementation of development expenditure.
Financial control
is carried out by the independent Internal Audit Directorate of the
Treasury, external auditing is carried out by the Office of the Auditor-General. The
institutional, legal and administrative framework for the financial control of structural
assistance is already to a large extent in place.
(See chapter 28-Financial control, and
Chapter 29- Financial and budgetary provisions)
Cyprus’ development objectives are generally in line with the objectives and policy
framework of the EC structural policy as stipulated in the regulations. No further legal
initiatives seem to be necessary in order to implement the EC structural policy
acquis.
With the exception of evaluation, and pending minor adaptations concerning financial
and budgetary management, Cyprus administrative and budgetary framework appears
to be already in line with the
acquis.
Chapter 22: Environment
Since the last regular report there has been concrete progress in the transposition of
the
acquis
and several laws and orders have been adopted. Administrative structures
need to be further strengthened.
A programme for legislative transposition and implementation to align Cyprus’
legislation, institutions, programmes and policies to the
acquis,
has been finalised.
As regards
horizontal legislation,
at the end of 1999 Cyprus signed a ratification law
on the United Nations Convention on Environmental Impact Assessment in a
Transboundary Context. This will assist Cyprus implement article 7 of the EIA
Directive (involvement of the neighbouring countries in case of projects having a
transboundary effect). Furthermore, in order to reduce greenhouse gas emissions, an
Action Plan for improving the efficiency of the energy sector and a Strategic Energy
Plan for the future accession of Cyprus to the EU have been completed. In July 2000
the Environmental Information Directive was fully brought in line through a Cypriot
Law on Freedom of Access to Environmental Information, providing,
inter alia,
for
the publication of a State of the Environment report every two years.
As regards
air quality,
there has been little change since the last report, although the
acceleration of transposition in this area was identified as a short-term priority. At the
beginning of this year, Cyprus enacted a new law on type approval of motor vehicles
that will enable it to request an EC certificate of conformity for all imported vehicles
upon accession.
In the field of
waste management,
in April 2000 a law was passed ratifying the
amendment to the Basel Convention concerning hazardous waste, Cyprus partially
fulfilled its short-term Accession Partnership priority.
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With respect to
water quality,
several legal orders adopting ambient quality standards
and measurement methods, were enacted at the beginning of 2000 for bathing water
and surface waters intended for the abstraction of drinking waters, Cyprus therefore
partially fulfilled its Accession Partnership short-term priorities. In the framework of
the LIFE programme a project for the monitoring of the quality of waters in reservoirs
was completed in April 2000.
In the field of
nature protection,
an interim Decision of the Council of Ministers
taken in March 2000 provided policy guidance for the Akamas Peninsula. The
government will make its final decision on the protection measures to be taken once it
has completed its dialogue with the various interested parties. With the designation of
NATURA 2000 sites not due for formal completion before the latter half of 2001 the
situation will need to be monitored in the interim period to ensure that Cyprus
complies with the spirit of the legislation.
At the end of 1999 a law ratifying the Desertification Convention was passed and the
Council of Ministers approved the ratification of the Convention for the Protection of
Migratory Species of Wild Animals. In July 2000 legislation in order to take full
account of the stricter protection requirements for CITES species was approved.
With regard to
industrial pollution control and risk management,
no major
developments have been recorded since last year.
In the field of
chemicals and genetically modified organisms,
in 2000 implementing
regulations under the Animals (Scientific Experiments) Law were passed, in addition,
the amended Protocol to the European Convention for the Protection of Vertebrate
Animals Used for Experimental and Other Purposes was ratified, which completed the
alignment with the
acquis.
Concerning
nuclear safety,
although legislation is under preparation no concrete
progress since the last regular report has been reported.
In the Environment Service, two additional posts have been approved by the
parliament. There are provisions in the Budget for 2000 for the enhancement of
monitoring operations through the purchase and installation of upgraded equipment.
Overall assessment
Cyprus continued with its harmonisation measures in terms of transposition of
legislation as well as strengthening administrative capacity, but given the importance
and scope of the environment
acquis
this sector should be given further priority
attention.
Concerning
horizontal legislation,
harmonisation has made good progress so far
although efforts are still needed to achieve alignment with the
acquis
as regards
environmental impact assessment, policies and measures aiming at the reduction of
greenhouse gas emissions and reporting requirements. It is expected that this will be
one of the first areas to achieve full alignment.
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With regard to
air quality,
further alignment with the
acquis
is needed in areas such
as air quality framework, air pollution by ozone or the control of volatile organic
compound (VOC) emissions resulting from the storage of petrol and its distribution
from terminals to service stations. On the latter point, Cyprus has issued a legal
notification under the Atmospheric Pollution Control Law, by which all existing
service stations are obliged to install the necessary equipment to comply with the
relevant
acquis
until the beginning of 2003. However, according to the Accession
Partnership the transposition in the field of air quality should be accelerated in the
short-term.
In the field of
waste management,
Cyprus rates of recycling are limited, partly
because the relevant legislation is missing. A Household Recycling Partnership
programme is under way, aiming to demonstrate the necessity for recycling, cultivate
awareness and establish a pilot-recycling network. Further alignment is needed
regarding,
inter alia,
hazardous waste, supervision and control of shipment of such
waste, packaging and packaging waste as well as batteries and accumulators
containing dangerous substances. The acceleration of transposition of the
acquis
in
this area should be treated as a short-term priority according to the Accession
Partnership.
Water is particularly scarce in Cyprus. Water protection therefore features highly in
Cyprus’ environmental policy. Strict provisions apply for discharges into any waters,
so that a basis for alignment with the
acquis
in the field of
water quality
exists. Much
of the
acquis
relating to drinking water is still to be transposed. The necessary
administrative and technical infrastructure is however largely in place.
Nature protection
has been subject to legislation since the early 60s (town and
country planning law, forest law, fisheries law, law on game and wild birds). Further
alignment is needed with regard to trade in endangered species, wild birds as well as
the habitats directive, although concerning the latter, Cyprus is party to the Bern
Convention on the protection of habitats. How Cyprus treats the Akamas issue will
need to be monitored closely in the coming months.
Parts of the
acquis
in the field of
industrial pollution control and risk management
still need to be transposed, for instance concerning integrated pollution prevention and
control, air pollution from industrial plants or the control of major accident hazards
(Seveso II). The application of the
acquis
on large combustion plants in Cyprus still
requires clarification. A project on Integrated Pollution Prevention and Control and
Chemical Substances is being implemented.
The basic institutional and administrative structures for effective control of industrial
pollution and risk management have been established. Within this context most of the
industrial plants have been licensed and are regularly inspected under the Atmospheric
Pollution Control Law and the Water Pollution Control Law.
In the field of
chemicals, genetically modified organisms,
the competent authority in
this field is the Director of Veterinary Services of the Ministry of Agriculture, Natural
Resources and Environment. There is only one laboratory in Cyprus carrying out
animal experiments. Further efforts are needed to complete transposition and
implementation of the legislation relating to chemicals.
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With respect to
nuclear safety and radiation protection,
under the present
arrangements five different ministries are involved in the area of radiation protection.
(See
also Chapter 14, Energy)
There are 3 monitoring stations used for an early
warning system. Further alignment with the
acquis
is needed in such areas as health
protection of individuals against ionising radiation in relation to medical exposure or
the supervision and control of shipments of radioactive waste. In the absence of the
legal framework Cyprus reports that there is still a high level of practical compliance.
As regards
administrative capacity,
at the national level, the Council of Ministers has
overall responsibility for the formulation of environmental policy. The Environment
Service of the Ministry of Agriculture, Natural Resources and Environment is
mandated to advise on environmental policy, ensure implementation and co-ordinate
the programmes for the protection of the environment. The enforcement of
environmental legislation is in the hands of the respective departments.
An important component in the environmental management mechanism is the Council
for the Environment, with a wide representation of NGOs, which advises the Minister
and on environmental problems.
The short-term priorities of the Accession Partnership need further attention,
especially the adoption of a strategy and detailed directive-specific programme for the
transposition, implementation and enforcement of the EC environmental
acquis
as
well as the development of a plan for financing investments (directive specific), based
on estimations of costs of alignment and realistic sources of public and private finance
year-by-year. However, the approximation policies and programmes have been
incorporated into the new Strategic Development Plan 1999-2003.
Chapter 23: Consumers and health protection
Since the last regular report Cyprus has achieved some progress in this field.
In the field of
safety related measures,
the Certain Aspects of the Sale of Consumer
Goods and Associated Guarantees Law entered into force in January 2000, thus
improving alignment with the
acquis
in the field of consumer protection in this area.
Through legislative amendments, adopted in July 2000, progress was also achieved in
the field of the liability of defective products.
With regard to
non-safety related measures,
the Consumer Contracts Away from
Business Premises Law, relating to the
acquis
in the field of doorstep sales, entered
into force in January 2000. Also, a new law incorporating the provisions of the
acquis
on the protection of consumers in respect of distance contracts entered into force in
March 2000.
Concerning a
functioning market surveillance mechanism
the Control of
Misleading and Comparative Advertising Law was adopted with immediate effect in
June 2000, bringing Cyprus’ legislation further in line. In addition, progress was made
in the field of product pricing through legislation adopted with immediate effect in
July 2000.
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Overall assessment
The present state of compliance with the
acquis
is already quite satisfactory.
Transposition is continuing in Cyprus, with no major difficulties with the adoption or
with the practical implementation.
Overall responsibility for the enforcement of legislation concerning general product
safety and dangerous imitation rests with the Minister of Commerce, Industry and
Tourism, and with its Competition and Consumer Protection Service which acts as the
national market surveillance authority. This Service is staffed with 30 people, 25 of
them dealing exclusively with consumer protection matters. The Minister can (by a
reasoned decision) prohibit any person from supplying products or require a warning
to consumers in the case of unsafe products. The Department of Veterinary Services
with 56 veterinarians of the Ministry of Agriculture, Natural resources and
Environment assumes the responsibility for veterinary matters related to consumer
protection.
The Cyprus law on unfair contract terms is not yet in conformity with the
acquis,
in
particular concerning the power of consumer associations to take actions before
courts. Cyprus does not yet have laws covering time-share and consumer credit;
however, new legislation in these fields is under preparation. In non-safety fields, the
Minister of Commerce, Industry and Tourism can delegate to the Competition and
Consumer Protection Division the control of the application of the national law
implementing the Package Travel Directive. The Division has, according to the Law
on Unfair Terms in Consumer Contracts, the authority to proceed to an injunction in
the case of unfair contract terms.
Education programmes for consumers have been held by the Cyprus Consumer
Association, which is a non-government organisation registered since 1973, and is a
full member of Consumers International since 1980.
In the field of the functioning market surveillance mechanism, concerning redress for
consumers; judicial measures are open to consumers on the basis of civil law and in
some cases, on the basis of the criminal law. The Director of the Competition and
Consumer Protection Division of the Ministry of Commerce, Industry and Tourism
may, either after a complaint made by a consumer, or
ex proprio motu,
intervene and
enforce compliance with the Law through a process of injunctions.
The Competition and Consumer Protection Division of the Ministry of Commerce,
Industry and Tourism will need to be reinforced to cope with implementation issues as
a result of compliance with new areas of consumer protection, and staff will need to
be trained accordingly. There are two testing laboratories, the Higher Technical
Institute and the Government General Laboratory.
Chapter 24: Co-operation in the fields of justice and home affairs
Since the last regular report, progress has been registered in Cyprus especially in the
fields of judicial co-operation in criminal and civil matters and concerning the fight
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against fraud and corruption as well as in the area of asylum through the setting up of
an institutional framework.
In the field of
data protection,
although legislation is under preparation, no concrete
developments can be reported since the last regular report.
As regards
visa policy,
Cyprus has been gradually aligning its visa policy since
October 1999. It has extended visa requirements to nationals of Commonwealth
countries, and has published an order revising the visa free list of countries. Cyprus
also harmonised in November 1999 its policy with regard to travel facilities for school
pupils from third countries resident in a Member State.
Concerning
border control,
some progress has been registered. The 1999 Accession
Partnership had identified as short-term priority to upgrade border control equipment
and to improve training of personnel to prevent illegal immigration as well as to
ensure further progress in the detection of forged documents. Border guards and other
police officers took part in 1999 and 2000 in training provided under the Odysseus
and the Oisin programmes. Cyprus has already adopted an upgrading programme for
acquiring border control equipment such as coastal radar, patrol boats and forgery
detection equipment at ports of entry.
In addition, Cyprus is upgrading its existing police computer network by purchasing
new equipment to install at all entry points and police stations. The installation of the
Automated Fingerprint Identification System (AFIS) is underway.
As far as
migration
is concerned, the Aliens and Immigration Law was enacted in
March 2000. The problems faced by the office of the Migration Officer (charges of
corruption and pending applications for visa, about 17 600) led the Council of
Ministers to decide in November 1999 to restructure the Office of the Migration
Officer, who is the main authority for migration policy, and to unify it with other
Ministry Services by creating a Public Registry Department with three separate
Divisions, i.e. the Aliens Division, the Citizenship and Passports Division and the
Registration Division.
In July 2000 an amendment to the “Aliens and Immigration Regulations” concerning
family reunification was enacted.
Cyprus has made further progress in aligning with the
acquis
relating to the
organisation and the development of the CIREFI (Centre for Information, Discussion
and Exchange on the crossing of frontiers and immigration) in May 2000. The contact
point for the CIREFI information system is the Police Aliens and Immigration
Department. In addition, the Aliens and Immigration (Carriers’ liability) Law on
combating illegal immigration was enacted in March 2000.
In the field of
asylum,
Cyprus has made progress since the previous Regular Report as
it adopted new legislation on asylum in January 2000 thus fulfilling partially one of
the short-term priorities in the Accession Partnership. Generally speaking, the
legislation is in line with the 1951 UN Convention (and its 1967 Protocol) relating to
the status of refugees and is aimed at aligning with the
acquis.
This law provides for
the setting up of a Refugees Authority composed of the Permanent Secretaries of the
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three key Ministries. Under this law an asylum seeker can appeal any decision to the
Ministry of the Interior and if the later decision is still negative, to the Court. There
are also provisions for legal and linguistic assistance.
Regarding
police co-operation and the fight against organised crime,
Cyprus
enacted in January 2000 the Combating of Trafficking of Persons and Sexual
Exploitation of Minors Law, aimed at bringing its legislation in line with the
acquis.
With a view to the
fight against fraud and corruption,
Cyprus signed the Council of
Europe Criminal Law Convention on Corruption in 1999 and in July 2000, the House
of Representatives adopted the act ratifying the Convention, thus fulfilling a short-
term priority in the Accession Partnership. Cyprus applied in March 2000 to accede to
the 1997 OECD Convention on Combating Bribery of Foreign Public Officials in
International Business Transactions, as required by the short-term priorities of the
Accession Partnership, Cyprus should sign this convention. Cyprus signed the Council
of Europe Civil Law Convention on Corruption in November 1999.
Cyprus is a member of the Group of States against Corruption (GRECO), and has
volunteered to be among the first ten participating States to be evaluated in the
GRECO framework before the end of 2000.
Concerning
drugs,
the Drugs and Pyschotropic Substances Law was amended in
January 2000 to criminalise the sale of cannabis seeds. In view of Cyprus’
participation in Reitox (information network on drugs and drug addiction)
preparations for the necessary legislative and administrative arrangements for the
appointment of a national focal point and representative for the European Monitoring
Centre for Drug Addiction are underway.
In July 2000 a bill establishing the Anti-Drug Board and Fund which will be the main
co-ordinating body for public and private initiatives in the field of drug demand and
drug supply reduction was enacted.
As regards
money laundering,
Cyprus has further intensified its preventive measures
necessary for ensuring protection against criminal activities, including money
laundering. Cyprus achieved further alignment with the
acquis
as it enacted in
October 1999 an amendment to the Prevention and Suppression of Money Laundering
Activities Law concerning the threshold amount of customer identification. The
special Unit for Combating Money Laundering (MOKAS) was reinforced in
November 1999 (from 9 to 14 people), thus fulfilling a short-term priority in the
Accession Partnership.
In the field of
customs co-operation,
a bilateral Memorandum of Understanding on
Mutual Administrative Co-operation on Customs Matters was signed in March 2000
between the Customs Administrations of the United Kingdom and the Republic of
Cyprus.
In an effort to reinforce the Department of Customs and Excise’s personnel, especially
at the Investigation Section of the Customs Headquarters and at the Preventive
Services of the Customs Stations, the procedure of filling about 85 vacant posts was
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initiated. Furthermore, seminars on risk analysis for customs officers were organised
in June 2000.
As regards
judicial co-operation in criminal and civil matters,
Cyprus ratified the
European Convention on Mutual Assistance in Criminal Matters and its additional
protocol, which entered into force in May 2000, thus fulfilling one of the short-term
priorities in the Accession Partnership. Also, Cyprus ratified in June 2000 the
European Convention on the Transfer of Proceedings in Criminal Matters. The
ratification law includes provisions facilitating the implementation of Protocols 6 and
7 of the European Convention for the Protection of Human Rights. In addition, Cyprus
ratified in January 2000 the Convention on Civil Procedure as well as the Convention
on International Access to Justice. In December 1999 an amendment to the
Ratification Law of the UN Convention on the Elimination of all forms of Racial
Discrimination was enacted.
The Department of Information Technology Services responsible for the
computerisation in the field of public services is currently developing an automated
court administration.
Overall assessment
Cyprus has undertaken considerable efforts to align its legislation and to reinforce its
administration in the field of justice and home affairs and has therefore achieved a
good base for further alignment and implementation efforts. Cyprus' infrastructure and
equipment have already reached a good level, and all the staffing of the administration
is in general sufficient, except for specific fields such as the Refugee Authority.
However further training is needed and co-ordination between the relevant authorities
has to be improved.
Concerning
data protection,
Cyprus signed the Council of Europe Convention for the
protection of individuals with regard to automatic processing of personal data in 1986,
but has not yet ratified it. However, the relevant harmonisation legislation is under
preparation and the adoption of legislation in this field as well as the ratification of the
Council of Europe Convention should be accelerated.
As regards
visa policy,
Cyprus should continue the process of aligning its visa
legislation and practice. It has several bilateral agreements for issuing visas at the
border with Lebanon, Syria and Israel as well as bilateral merchant shipping
agreements regarding seamen in transit, which are not aligned. Cyprus should also
provide an on-line system for issuing visas. Cyprus is undertaking efforts to prepare
for the issuing of a uniform visa as well as to participate in the Schengen Information
System.
With a view to
border control,
further efforts are needed as regards the infrastructure
in order to bring all points of entry in line with the
acquis,
for instance regarding the
instalment of equipment for the detection of forged documents or the establishment of
the Schengen Information System. As far as international airports are concerned
(Larnaca and Paphos), the architectural plans of the Larnaca airport will need to be
upgraded to be compatible with the Schengen requirements.
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As regards
migration,
due to its geographical situation, Cyprus is a target country and
a potential transit area for illegal immigration. As the majority of illegal residents have
entered legally, e.g. as visitors or under not-renewable work permits, the
implementation of the legislation on combating illegal migration has to be
strengthened. In 1999 1,966 non-nationals, who were not working, were arrested
because they had overstayed their visa term. Also 396 non-nationals were found to be
working illegally (without a proper visa). Implementation of the legislation on
combating illegal employment as well as on expulsion also has to be strengthened. In
addition, Cyprus should accelerate its efforts as regards adopting legislation in the
field marriages of convenience.
As regards
asylum,
Cyprus should make further progress in developing a fair,
effective and efficient set of procedures relating to the treatment of asylum
applications. To complement the Refugees Law enacted in January 2000, 6
implementing regulations have been drafted, which need to be adopted. The
implementation capacity should be strengthened, in particular through the creation of
a Refugee Authority as foreseen in the Refugee Law.
Regarding
police co-operation,
much of the necessary legislation is already in place
through ratification of major international conventions and the transposition of EU
decisions and joint actions.
Although Cyprus has no specific legislation dealing with terrorism and terrorism-
related offences, provisions are contained in different laws and regulations such as
regarding the Convention Against Taking of Hostages.
Organised crime is relatively rare in Cyprus, and the overall crime rate is one of the
lowest in Europe. The main criminal activities of local organised crime groups include
narcotic drugs trafficking, illegal gambling, extortion and prostitution. Cypriot
legislation does not contain a definition of a criminal organisation, therefore it will
have to align its legislation in this regard.
The Cyprus police co-operates closely with the police authorities of all Member States
concerning exchange of information, for example in the fields of suspected money-
laundering cases, illegal trafficking in human beings or terrorist activities. Finally, the
Cyprus Police has established an information network with Interpol as regards the
exchange of information on suspected money-laundering cases, unlawful drug
trafficking, trafficking of nuclear and radioactive substances, illegal immigration,
motor vehicle crime and terrorist activities. The administrative capacity of the police,
however, should be reinforced by additional training.
As regards the
fight against fraud and corruption,
there is a broad legislation
covering both active and passive corruption.
25
Still, Cyprus has to prepare for
accession to international instruments including European conventions and protocols
on the fight against fraud affecting the financial interests of the Communities and on
corruption. Cyprus should also continue to strengthen its efforts towards alignment
25
Criminal Code, Prevention of Corruption Law, Customs and Excise Law
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with the
acquis
on the fight against fraud affecting the financial interests of the
European Communities and on corruption.
As regards the administrative infrastructure, public expenditure and control is within
the sphere of competence of the Auditor-General, who is an independent officer of the
Republic. Investigation of corruption cases is assigned to expert police officers who
are members of a special team at the Criminal Investigation Department (CID)
Headquarters. Enforcement and co-ordination of antifraud work is carried out by the
Unit for Combating Money Laundering at the Law Office of the Republic, the
Financial Crime Unit of the Police and the Special Investigation Unit at the
Department of Customs and Excise. Furthermore, in the income Tax and VAT
Departments, investigation units were set up for the investigation of irregularities,
including fraud cases. The Attorney General co-ordinates all investigations concerning
fraud.
In the field of
drug
prevention, Cyprus is a party to the UN Vienna Convention on
narcotic drugs and psychotrophic substances. Following its ratification in 1990,
amendments to the existing legislation on drugs, together with new laws for its
implementation were adopted.
Currently, the co-ordination of public and private initiatives in the field of drug
demand reduction and drug supply reduction is performed by an inter-ministerial
committee. The Drug Law enforcement Unit of the Police and the Customs and
Excise Department co-operate with various foreign institutions and governmental
organisations through the drug liaison officers.
As adequate implementation of the
acquis
requires the preparation of a national drug
strategy and preparation for the participation in the European information network on
drugs and drug addiction (Reitox) of the European monitoring centre for drugs and
drug addiction (EMCDDA), Cyprus has to continue with its preparatory work for its
participation in Reitox.
As regards
money laundering,
a special unit for combating money laundering
(MOKAS), consisting of representatives of the Attorney General, the Police and the
Customs and Excise Department, is a recognised Financial Intelligence Unit and
member of the Egmont Group. (See
also Chapter 4, free movement of capital.)
Cyprus ratified the Council of Europe Convention on Laundering, Search, Seizure and
Confiscation of the Proceeds from Crime already in 1996. Cyprus’ legal structure
regarding money laundering is based on existing international anti-money laundering
standards and goes even further than the requirements. It does not matter whether or
not the offence was subject to the jurisdiction of the Cyprus courts. Cyprus has
criminalised laundering of proceeds from a broad range of enumerated predicate
offences. The law applies to both natural and legal persons. There is a system for the
confiscation of proceeds, which includes the reversal of the burden of proof when
assessing the benefit.
In the field of
customs co-operation,
the full computerisation of the Department of
Customs and Excise is a high priority, therefore Cyprus has decided to implement a
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fully integrated Customs Information System, which should be completed by
September 2001.
The Department of Customs and Excise is in close co-operation with the Customs
Administrations of other countries, including those of the EU.
Cyprus should further improve its customs computer network and the development of
risk analysis, using in particular information derived from Memoranda of
Understanding. Besides, Cyprus should reinforce its implementation capacity in
particular with regard to inter–agency co-operation; mutual assistance agreements; the
establishment of a special investigation service with sufficient resources, and adequate
methods for the fight against fraud (including the introduction of mobile surveillance
units).
As regards
judicial co-operation in criminal and civil matters,
Cyprus is already
party to most of the relevant conventions. It ratified in 1999/2000 Protocol No 7 to the
European Convention for the Protection of Human Rights and Fundamental
Freedoms, the European Convention on the transfer of sentenced persons as well as
the Hague Conventions on Civil Procedure and on International Access to Justice.
The Ministry of Justice and Public Order is designated under all Conventions as the
Central Authority or the Transmitting/Receiving Agency and acts as the co-ordinator
for the execution of requests. Other authorities involved in international judicial co-
operation are, among others, the Judicial Service and the police. A Unit for
International Legal Co-operation is in charge of improving and accelerating
International Co-Operation.
Chapter 25: Customs Union
Very limited progress was achieved by Cyprus during the period covered by this
regular report. The Department of Customs and Excise has prepared an action plan for
ensuring alignment and effective implementation of the
acquis
by 2003. The adoption
of a pre-accession strategy for the harmonisation of the Cypriot customs legislation
was identified as a short-term priority in the Accession Partnership.
Regarding alignment with the
EC customs code and its implementing provisions,
some preparatory work has been undertaken by Cyprus as regards customs value,
temporary importation and customs warehouses, but none of the legislative drafts that
have been prepared has been adopted to date. As regards the
customs
acquis
outside
the customs code,
preparatory work has been carried out in relation to the Common
Customs tariff, precursors and intellectual property rights protection. Also in this
case, no legislative draft has been adopted. No particular developments are to be
reported in the field of
mutual administrative assistance on customs matters.
As regards
administrative and operational capacity,
a Reform and Modernisation
Programme for the Department of Customs and Excise has been prepared, consisting
of a Business Change Management Plan elaborated through the process of “gap-and-
needs-analysis”, covering 2000-2002 and targeting at strengthening the legal,
administrative and operational capacity of the Department. Although an integrated
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computerised system and risk profiles modules need still to be developed, a National
Risk Assessment document has been prepared in order to assist in proper analysis of
the risk involved in all areas where customs control is exercised. Currently customs
controls are based on a manual risk analysis and selectivity system.
Overall assessment
Cyprus needs to accelerate the development of its administrative and operational
capacity in this area.
It should be noted that Cyprus appears to have some difficulties in meeting certain of
its own deadlines for alignment and tends to postpone them, therefore it should
undertake serious efforts to ensure a timely transposition of the
acquis.
Cyprus should
also take steps to achieve further alignment in the area of customs procedures with an
economic impact as soon as possible, with a view to ensuring sufficient experience for
its customs administration prior to accession. In addition, although the legislation is
already to some degree in line with the
acquis,
further alignment is needed as regards
simplified procedures, import and export of counterfeit and pirated goods as well as of
cultural goods and Customs Warehouses.
As for
administrative capacity,
the training of staff is taking place and the
computerisation of the Customs and Excise Department is proceeding. However, the
existing operational systems are limited and must be developed, as requested in the
framework of the 1999 Accession Partnership. The methodology used by the Customs
and Excise Department includes,
inter alia,
the use of informants, risk analysis,
profiling and targeting. An integrated computerised system and risk profiles modules
should also be developed.
Chapter 26: External relations
During the period covered by this report, Cyprus has continued with its harmonisation
measures.
Upon accession, Cyprus will need to apply the Common External Tariff. In the
framework of the Customs Union Agreement with the EC, Cyprus has already adopted
the Common Customs Tariff for industrial products and for a number of agricultural
products covered under the Cyprus–EC Protocol. Cyprus’ external trade regime is
already substantially aligned with that of the EC. In 1998 Cyprus’ applied tariffs
averaged 12.1% (EC 5.4 %) on all products, 4.8% (EC 4.2 %) on industrial products,
35.4% (EC 9.4 %) on agricultural products and 9,8% (EC 12.4%) on fishery products.
As regards the
Common Commercial Policy,
Cyprus has continued its alignment
with the Community
acquis.
Since the last regular report no major developments have occurred as regards
bilateral
agreements with third countries
as well as
development policy and humanitarian
aid.
The
acquis
for external relations consists mainly of Community legislation,
which is directly binding on Member States and therefore generally does not require
transposition into national law.
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Overall assessment
Cyprus has continued alignment with the Common Commercial Policy
acquis,
yet
further progress still needs to be achieved.
Cyprus is a member of the WTO and has an open trading economy, in line with the
agreements concluded under the Uruguay Round. The EU and Cyprus have
established a framework for co-operation regarding WTO issues both at ministerial
and at services level. Cyprus has been supportive of EU policies and positions within
the WTO framework. As regards the new round, Cyprus concurs with the EU on the
need to launch a comprehensive trade round as soon as possible and shares the view
that the results of work under the build-in-agenda would be less substantial in its
absence.
As regards
export credits,
the Cypriot system is in line with the OECD consensus.
Where medium and long term export credits are granted, further alignment to the
acquis
is necessary.
Concerning
textiles,
as regards the WTO Agreement on Trade in Textiles and
Clothing, Cyprus needs to use the third stage of integration under the ATC to align its
integration programmes with those of the EC, while notably avoiding the integration
of products not yet integrated by the EC.
Further co-ordination is also necessary in order to consolidate the adjustment of the
Cypriot list of commitments in GATS with the EC commitment and EC MFN
exemptions.
As regards dual-use goods, legislation is under preparation. Some progress has taken
place in this field, however further alignment with Community
acquis
is necessary.
Cyprus became recently a member of two international arrangements, a step which
contributes to further alignment to international commitments in this area.
As Cyprus will have to accede to the WTO plurilateral Agreements on Government
Procurement and on Civil Aircraft, it needs to set target accession dates to these
instruments. Cyprus is already a signatory to the Information Technology Agreement.
As regards
administrative capacity,
responsibility for commercial policy lies with the
Ministry of Commerce, Industry and Tourism, which co-operates closely with other
Ministries especially the Department of Customs and Excise. The administrative
infrastructure which needs to be in place as regards customs services is dealt with
under the chapter relating to the Customs Union (Chapter
25 – Customs Union).
Concerning
development policy and humanitarian aid,
recently, regarding
humanitarian aid,
there has also been growing co-operation with international non-
governmental organisations. This facilitates the provision of humanitarian assistance
in the form of medicines, clothing and food aid.
Although there is not as yet a Ministry or Department dedicated to
development
issues,
development aid and technical assistance are promoted through the Bilateral
Political Affairs Division of the Ministry of Foreign Affairs. Internally, such
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assistance is coordinated and managed by the Planning Bureau, in cooperation with
the ministries and services involved in each case.
The Ministry of Foreign Affairs is responsible for the formulation of national policy in
other fields, such as the sanctions imposed by the UN Security Council, the control
and transit of dual-use goods and the Law of the Sea. For the implementation of these
policies, the Ministry is jointly responsible with the Law Office of the Republic and
other relevant Ministries.
Chapter 27: Common foreign and security policy
Cyprus continues to participate actively in the multilateral political dialogue within
the framework of the Common Foreign and Security Policy (CFSP), including the
regular meetings of Political Directors, European Correspondents and at the Working
Group level.
Cyprus has shown a keen interest in the development of the European Security and
Defence Policy (ESDP) as part of CFSP and has actively participated in exchanges in
this context with the EU, in EU + 15 format (i.e. non-EU European NATO members
and candidates for accession to the EU).
As regards
alignment with EU statements and declarations,
Cyprus has regularly
aligned its positions with those of the Union and when invited to do so has associated
itself with the Union’s joint actions and common positions. In addition, Cyprus has
co-operated with the European Union in international fora such as the United Nations
and the OSCE.
Since January 2000 the Associated Correspondents’ Network Mail System is in
operation at the Ministry of Foreign Affairs, ensuring direct communication with the
Secretariat of the Council and the other Associated States. The main purpose of the
system is the association of Cyprus with the Common Foreign and Security Policy,
e.g. alignment with declarations, common positions etc., and the exchange of
information between the aforesaid parties.
Overall assessment
Cyprus’ national policy is in line with the Common Positions regarding sanctions.
Cyprus applies equally the mandatory sanctions of the United Nations, of the Security
Council and the autonomous measures of the European Union. In both cases,
decisions of the Council of Ministers apply existing legislation such as the Law on
Transportation, the Customs and Excise Law and the Law on Defence. Decisions of
the Council of Ministers are implemented by Decrees, Circulars and other
administrative measures issued by the competent Ministries and Departments. Such
decisions, implementing EU Common Positions attach, as a point of reference, the
implementing regulations issued by the European Union. With respect to the sanctions
applied by the EU against the Federal Republic of Yugoslavia, Cyprus applies an
embargo of arms, an oil embargo, an entry ban on officials and others, as well as
financial sanctions in so far as the existing legislation allows.
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Following the adoption by the European Council of Feira of the Common Strategy of
the European Union on the Mediterranean Region, Cyprus has declared its readiness
to co-operate with the Union alongside other Mediterranean Partners in strengthening
security in the region.
Concerning the implementation capacity, the structures required to participate in the
formulation and implementation of the CFSP are in place, including the posts of
European Correspondent and Political Director.
At the Ministry of Foreign Affairs there are two divisions, the Multilateral Political
Affairs Division and the Bilateral Political Affairs Division. Overall responsibility in
this area rests with the Director of the Multilateral Political Affairs Division, who is
also the Political Director. The post of the European Correspondent is situated within
this Division.
Chapter 28: Financial Control
The 1999 regular report on the Financial Control Chapter concluded that the public
financial control system in Cyprus is sound and consistent with European standards.
Although no substantial progress in the field of financial control for the period
covered by this report can be mentioned, emphasis was placed on the training of staff
in the Unit on Financial Intelligence and Financial Crime Investigation.
Overall Assessment
Although Cyprus is already far advanced in the area of financial control, further
efforts are needed on such issues as the implementation of risk analysis methods;
strengthening the internal control of revenues; the proper management of pre-
accession funding and future structural funds, as well as alignment in the area of the
protection of financial interests of the EC.
Public Internal Financial Control
is carried out by the Internal Audit Directorate
(IAD) of the Treasury. The IAD comprises 23 persons, they are supported by a team
of 18 auditors. The Cypriot Ministries/Departments have internal accounting
departments, the heads of which are appointed by the Accountant General. At the
moment the
ex ante
control of individual transactions is not carried out on the basis of
risk analysis. Cyprus needs therefore to take the necessary steps to ensure that risk
analysis methods are implemented as soon as possible.
External financial control
is carried out by the Auditor General as head of the Audit
Office which is independent from the executive, legislative and juridical powers of
government. The Office of the External Auditor has a staff of about 100 auditors and
10 administrative staff.
Regarding
control measures relating to Own Resources,
the VAT administration at
the Ministry of Finance is in charge of controlling revenues resulting from VAT.
Customs duties are collected (and controlled) by the Customs and Excise Department
of Cyprus. However, Cyprus needs to take measures to further strengthen the internal
control of revenues.
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In the field on
structural action expenditure,
Cyprus should take the necessary steps
to ensure the proper management of pre-accession funding and future structural funds,
in particular through the development of adequate financial management and control
systems for receiving EC funds. Cyprus should also develop an audit trail tool for the
control of EC funds as identified as a short-term priority in the Accession Partnership.
Although preparatory work is underway, Cyprus will have to have all necessary
instruments in place to assist the EC bodies in charge of on-the-spot checks.
Concerning the
protection of financial interests of the EC,
the Attorney General, as
head of the Law Office of the Republic, co-ordinates all investigations concerning
fraud and is the "single contact point ", responsible for co-operation with the relevant
EC bodies in the field of the protection of financial interests of the Community, in
particular the European Anti-Fraud Office (OLAF). Cyprus should pay attention to
ensure full legislative alignment in this area.
Most of the Accession Partnership short-term priorities are fulfilled. The Cypriot
government has in place a fully-fledged system of public external and internal
financial control for the entire national budget. As regards reinforcement of
administrative and judicial capacity to manage and control EC funds, further efforts
are being made to ensure sound financial management and transparency in the use of
these funds. Further efforts are, however, needed regarding the introduction of
‘functional independence’ for national, internal controllers/auditors at both central and
decentralised levels.
Chapter 29: Financial and budgetary provisions
During the period covered by this report Cyprus has made progress in the area of
financial and budgetary provisions.
As regards
the national budget and EC co-financed measures,
as from the year
2000, the three Budgets of the Central government were amalgamated into a single
unified budget. The new comprehensive Budget is divided into three categories of
expenditure, i.e. direct charges on the Consolidated Fund (e.g. pensions and
gratuities), ordinary (current) expenditure and development expenditure. The latter
category covers all capital expenditure, which is of a non-recurrent development
nature and reflects the public investment programme for that year.
In the field of
own resources and administrative infrastructure,
a technical
committee chaired by the Statistical Service and involving representatives from all
relevant Government Departments has been established. In March 2000 this technical
committee started to study in detail the issue of the calculation of VAT own resources.
In 1999 the VAT Service was strengthened by the recruitment of 53 officers.
Overall assessment
Overall Cyprus has established the necessary rules and procedures concerning its
Development Budget for medium term programming of expenditure as well as for
evaluation and follow-up. However, these procedures need to be strengthened.
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The competent administrative authorities in the field of the national budget and EC
co-financed measures are the Directorate of Budget and Fiscal Control of the Ministry
of Finance and the Directorate for Development Expenditure of the Planning Bureau.
Both administrative bodies are supported by qualified and experienced staff as well as
by the latest computerised systems. However, further strengthening of their
administrative capabilities is needed.
Traditional Own Resources
fall under the responsibility of the Customs and Excise
Department of the Ministry of Finance. The Treasury Department (through the
Internal Audit Directorate) is responsible for conducting all checks and enquiries
concerning the establishment and the making available of Traditional Own Resources.
In the field of
VAT,
for estimating the weighted average rate for the VAT resource
(which is basically an estimate of the average rate applicable to the various categories
of taxable goods) Cyprus will have to adopt the Classification of Individual
Consumption by Purpose (COICOP) and other classifications used in the European
System of Accounts (ESA 95), as well as the institutional sectors breakdown. VAT is
administered by the VAT Service within the Department of Customs and Excise. The
VAT Service, a well-organised and computerised independent structure, is responsible
for the collection of VAT in Cyprus. The Cypriot administrative system of VAT
control is based on a central administration with local control. The Treasury and the
VAT service will have to be able to ensure that VAT resources and all required
information is made available to the Commission.
As regards
GNP,
the Department of Statistics and Research is responsible for
implementing the European System of Accounts. The making available of GDP/capita
data in accordance with EC methodology was identified as a short-term priority in the
1999 Accession Partnership.
The Directorate of Budget and Fiscal Control of the Ministry of Finance will have to
ensure the co-ordination of the proper collection, monitoring and payment of funds to
and from the EC budget. The Directorate is making efforts to enhance its capacity
through the continuous training of its staff and the upgrading of its technological
infrastructure (equipment and software).
3.2.
General evaluation
During the period covered by this regular report, Cyprus has achieved substantive
progress in various areas of the
acquis
and continued with further harmonisation
measures. As regards administrative capacity, it continued with the upgrading of the
existing infrastructure, including staff recruitment.
Over the last year, there has been progress in adopting legislation in key areas of the
internal market. Although new legislation has been adopted in some areas of free
movement of goods, further efforts are still needed in respect of standardisation and
certification as well as of the framework for the New Approach Directives. In
financial services further progress has been achieved in the adoption of appropriate
national legislation and enhancing administrative capacity. The steps taken towards
liberalisation of capital movements are positive; however, further efforts are still
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needed for a timely and orderly removal of remaining restrictions on capital
movements before accession. Moreover, the already quite high degree of alignment on
anti-trust has been further improved by amending legislation on public undertakings
and undertakings with special and exclusive rights in respect of the rules of
competition. However, as regards State aid, the situation remains unsatisfactory, as
there still exists no proper State aid control and no legal basis for it. Cyprus has
achieved progress in the field of indirect taxation, as the standard rate of Value Added
Tax (VAT) has been increased from 8% to 10% and legislation for further alignment
with the VAT
acquis
has been adopted.
During the last year Cyprus has enacted some harmonisation legislation in the field of
agriculture, however, what has been done is mainly preparatory work, therefore
harmonisation with the
acquis
in the veterinary and phytosanitary fields continues to
be partial. Further efforts are still needed regarding veterinary controls at border posts.
In the fields of transport and fisheries, Cyprus has undertaken serious efforts to
achieve further alignment with the
acquis
by adopting legislation as well as
strengthening its administrative capacity.
As regards alignment with the environment
acquis,
several laws and orders have been
adopted, but the emphasis lay on preparatory work. Although more attention has been
paid to the allocation of sufficient budgetary and administrative resources to the
environmental sector to ensure the implementation of the
acquis,
given the size of the
alignment task in this area, this sector still remains a high priority.
In the area of justice and home affairs, Cyprus has made progress with the adoption of
legislation on asylum and also with a view to judicial co-operation in criminal and
civil matters. However, attention should be paid to the enforcement of border control,
with special regard to the fact that Cyprus will be an external border of the EU, as well
as to efficient implementation of the existing legislation on money laundering,
although in this area considerable efforts have already been undertaken.
Cyprus has further strengthened its
administrative capacity.
Several institutions have
already gained experience in several areas of the
acquis,
such as for instance the
Department of Social Insurance in the case of the co-ordination of social security. In
the fields of regional policy and financial control the required structures are already to
a large extent in place. Various measures are being taken to further strengthen the
capacity to implement the
acquis
and to upgrade the existing equipment; this applies
for example to the area of free movement of goods, company law, fisheries and justice
and home affairs. In some of these sectors, and as regards employment and social
policy, this also involves administrative restructuring and reorganisation. A concrete
example is the efforts undertaken for maritime transport, where in order to improve
the safety record of the Cyprus fleet, the last year has seen the number of ships
inspected more than double and an increase in the world-wide network of inspectors
of Cyprus’ ships. Furthermore, additional staff have been recruited/trained, or this is
foreseen in the budget, for areas such as taxation and combating money laundering.
However, despite the strong basis of its administrative capacity, the country still has to
set up regulatory authorities, and build institutions in the field of free movement of
goods, agriculture, energy, telecommunication and justice and home affairs. Further
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recruitment of staff in several areas such as company law, transport, taxation,
environment and justice and home affairs is needed.
During the last year Cyprus has met the short-term priorities of its Accession
Partnership with regard to fisheries and transport. In most other areas the priorities
were partially fulfilled. However, in some areas of the
acquis
such as the State aid
sector in the field of competition and the transposition and enforcement of the
environmental
acquis
further harmonisation measures are needed.
Cyprus has made progress in addressing the medium-term Accession Partnership
priorities, and has partially fulfilled a number of them, including in such areas as the
internal market, energy, and justice and home affairs.
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C. Conclusion
Cyprus continues to fulfil the Copenhagen political criteria. The predominant political
problem is the continued division of the island, but over the last year important efforts
have been made in the search for a political settlement in line with the Accession
Partnership. From the fourth round of proximity talks held in September there were
encouraging signs that the two sides were engaging in substantive discussion.
Cyprus is a functioning market economy and should be able to cope with competitive
pressure and market forces within the Union.
The Cypriot economy continues to grow strongly and is operating at full employment.
Some progress is being made in the areas of liberalisation and structural reforms.
After many years of delay, Parliament passed legislation providing a timetable for the
abolition of the interest ceiling by January 2001. The Cypriot Authorities have started
major health sector reform.
However, macroeconomic stability has weakened recently, and the current level and
stance of fiscal policy are not sustainable over the medium term. Supervision must be
improved in the co-operative banking sector. The completion of price liberalisation is
also required. Competitiveness is hampered by a number of structural rigidities and
significant state involvement in the economy.
There is a need to develop a credible and coherent approach to fiscal consolidation.
With a view to progressive capital liberalisation, monetary policy must be made more
efficient and market-oriented by the use of indirect instruments rather than direct
interventions. Cyprus must prepare its private sector to operate in the open
environment that integration into the EU requires. Greater political consensus is
needed to develop a comprehensive structural reform agenda which should limit the
extent of state involvement in economic activities, open up key sectors to foreign
competition, and resolve important environmental constraints.
During the period covered by this regular report, Cyprus has achieved substantive
progress in various areas of the
acquis
and continued with further harmonisation
measures. As regards administrative capacity, it continued with the upgrading of the
existing infrastructure, including staff recruitment.
Over the last year, there has been progress in adopting legislation in key areas of the
internal market. Although new legislation has been adopted in some areas of free
movement of goods, further efforts are still needed in respect of standardisation and
certification as well as of the framework for the New Approach Directives. In
financial services further progress has been achieved in the adoption of appropriate
national legislation and enhancing administrative capacity. The steps taken towards
liberalisation of capital movements are positive; however, further efforts are still
needed for a timely and orderly removal of remaining restrictions on capital
movements before accession. Moreover, the already quite high degree of alignment on
anti-trust has been further improved by amending legislation on public undertakings
and undertakings with special and exclusive rights in respect of the rules of
competition. However, as regards State aid, the situation remains unsatisfactory, as
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there still exists no proper State aid control and no legal basis for it. Cyprus has
achieved progress in the field of indirect taxation, as the standard rate of Value Added
Tax (VAT) has been increased from 8% to 10% and legislation for further alignment
with the VAT
acquis
has been adopted.
During the last year Cyprus has enacted some harmonisation legislation in the field of
agriculture, however, what has been done is mainly preparatory work, therefore
harmonisation with the
acquis
in the veterinary and phytosanitary fields continues to
be partial. Further efforts are still needed regarding veterinary controls at border posts.
In the fields of transport and fisheries, Cyprus has undertaken serious efforts to
achieve further alignment with the
acquis
by adopting legislation as well as
strengthening its administrative capacity.
As regards alignment with the environment
acquis,
several laws and orders have been
adopted, but the emphasis lay on preparatory work. Although more attention has been
paid to the allocation of sufficient budgetary and administrative resources to the
environmental sector to ensure the implementation of the
acquis,
given the size of the
alignment task in this area, this sector still remains a high priority.
In the area of justice and home affairs, Cyprus has made progress with the adoption of
legislation on asylum and also with a view to judicial co-operation in criminal and
civil matters. However, attention should be paid to the enforcement of border control,
with special regard to the fact that Cyprus will be an external border of the EU, as well
as to efficient implementation of the existing legislation on money laundering,
although in this area considerable efforts have already been undertaken.
Cyprus has further strengthened its
administrative capacity.
Several institutions have
already gained experience in several areas of the
acquis,
such as for instance the
Department of Social Insurance in the case of the co-ordination of social security. In
the fields of regional policy and financial control the required structures are already to
a large extent in place. Various measures are being taken to further strengthen the
capacity to implement the
acquis
and to upgrade the existing equipment; this applies
for example to the area of free movement of goods, company law, fisheries and justice
and home affairs. In some of these sectors, and as regards employment and social
policy, this also involves administrative restructuring and reorganisation. A concrete
example is the efforts undertaken for maritime transport, where in order to improve
the safety record of the Cyprus fleet, the last year has seen the number of ships
inspected more than double and an increase in the world-wide network of inspectors
of Cyprus’ ships. Furthermore, additional staff have been recruited/trained, or this is
foreseen in the budget, for areas such as taxation and combating money laundering.
However, despite the strong basis of its administrative capacity, the country still has to
set up regulatory authorities, and build institutions in the field of free movement of
goods, agriculture, energy, telecommunication and justice and home affairs. Further
recruitment of staff in several areas such as company law, transport, taxation,
environment and justice and home affairs is needed.
During the last year Cyprus has met the short-term priorities of its Accession
Partnership with regard to fisheries and transport. In most other areas the priorities
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were partially fulfilled. However, in some areas of the
acquis
such as the State aid
sector in the field of competition and the transposition and enforcement of the
environmental
acquis
further harmonisation measures are needed.
Cyprus has made progress in addressing the medium-term Accession Partnership
priorities, and has partially fulfilled a number of them, including in such areas as the
internal market, energy, and justice and home affairs.
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1464296_0096.png
D. Accession Partnership and National Programme for the
Adoption of the
Acquis:
Global assessment
The purpose of the Accession Partnership is to set out in a single framework:
•
•
•
the priority areas for further work identified in the Commission’s regular report;
the financial means available to help candidate countries implement these
priorities;
the conditions which will apply to this assistance.
Each candidate has been invited to adopt a National Programme for the Adoption of
the
Acquis.
This sets out how the country in question envisages to deal with the
Accession Partnership, the timetable for implementing the Partnership’s priorities, and
implications in terms of human and financial resources. Both the Accession
Partnerships and the National Programmes for the Adoption of the
Acquis
are revised
on a regular basis, to take account of progress made, and to allow for new priorities to
be set.
1. Accession Partnership
In the following assessments the main sub-headings are indicated in bold type and
further key concepts taken from the Accession Partnership highlighted in italics
26
.
Short-term priorities
Political criteria:
As an important step towards achieving a political settlement the
first round of proximity talks started in New York on 3 December 1999 and was
subsequently followed by three further rounds. This process is ongoing and Cyprus
therefore continues to
maximise its efforts to support a settlement
under the
auspices of the UN.
Economic criteria:
In 1999, the
current account deficit
was estimated to be around
2.6 percent of GDP. More recently, strong domestic demand has led to higher imports
and a deterioration of the trade balance. Little progress has been achieved in
correcting the widening of the fiscal and current account deficits.
The interest rate
ceiling has limited the capacity of the central bank to undertake an
effective monetary
policy
stance. However, a law which will remove the nine percent interest rate ceiling
has been adopted. Apart from this, Cyprus has introduced a number of measures
which will further
liberalise capital movements,
such as the relaxation of control on
inward foreign direct investment for European Union residents. As regards the
co-
For the detailed text on the short and medium term priorities established in the 1999 Accession
Partnership please refer to Council Decision 2000/248/EC (OJ L 78, 29.03.2000).
26
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operative credit and saving societies,
no further developments concerning the
alignment with the acquis
and
international accounting standards
have been reported.
Therefore, this priority has been addressed to a limited extent.
Internal Market:
•
As regards
public procurement,
a centralised statistical system has been set up for
recording public contracts. To this end a database has been developed for keeping
the necessary statistical information according to the requirements of the relevant
provisions of the
acquis
on public procurement. The law still needs to be
extended
to local authorities
and bodies governed by public law.
In the field of
industrial and intellectual property rights,
the law ratifying the
International Convention for the Protection of Performers, Producers of
Phonograms and Broadcasting Organisation entered into force. In addition further
efforts to strengthen the administrative capacity have been undertaken as regards
computerisation and the creation of a special unit to
enforce effective border
control.
However, further efforts are needed as regards the alignment and
enforcement of industrial and intellectual property rights.
In the area of
free movement of goods,
Cyprus has adopted new legislation in
various fields such as fertilisers, foodstuffs and motor vehicles. In addition the
government decided to speed up the adoption of harmonised standards relating to
the New Approach Directives. However further efforts are still needed in the field
of
standardisation and certification
and the adoption of a framework law
regarding the New Approach Directives.
As regards
capital movements,
the Central Bank of Cyprus
lifted some of the
restrictions
on outward and inward investments to and from the island. A new law
for the abolition of the existing 9%
interest ceiling
was adopted. This legislation
will allow the Central Bank to proceed with the gradual abolition of remaining
exchange controls on capital flows, in accordance with the
liberalisation
programme.
In the field of
competition,
further legislative alignment with the anti-trust
acquis
has been achieved and a decision has been taken to reform the existing
infrastructure, however this will need further reinforcement. Attention should be
also paid to the
State aid sector,
where no proper legislation currently exists.
Several harmonisation measures have been undertaken in the
telecommunications
sector
and a new law on telecommunications to align with the
acquis
has been
drafted, however the establishment of an independent regulatory authority is
further awaited.
The
VAT standard rate
has been increased and further legislation has been
adopted in order to abolish the special VAT provisions in favour of
international
business enterprises.
In addition, the
excise duties
on several products such as
home produced spirits, petrol and cigarettes have been increased. Cyprus decided
not to introduce any tax measures which are considered harmful under the terms of
•
•
•
•
•
•
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the
Code of Conduct on Business Taxation.
Further efforts are needed in the field
of a
tax warehouse system
and the
movement procedures of excisable goods.
•
As regards
customs matters,
the Department of Customs and Excise prepared an
action plan
for ensuring alignment and effective implementation of the
acquis.
The computerisation of the Department is proceeding and the adoption of the
ASYCUDA software is already at an advanced stage.
Overall, although not all issues have been effectively addressed,
this priority has
been partially met.
Agriculture:
Although preparatory work has started, the procedure for the
establishment of the integrated administration and control system (IACS) should be
accelerated and a Paying Agency to handle the
Common Agricultural expenditure
should be established. Administrative structures should also be established for
rural
development policies.
Some legislation has been adopted in the
veterinary and
phytosanitary area,
and a Programme for the upgrading of the offices, equipment and
other facilities at the
border inspection posts
is currently under implementation.
Therefore, this priority has been partially met.
Fisheries:
Cyprus adopted, in June 2000, amendments to the existing legislation on
licensing.
Among other things, the amendments foresee the obligation of a fishing
licence for all
fishing vessels,
licence fees and the installation of a blue box for
satellite monitoring. A
Fishing Vessel Register
has been established and the
administrative capacity
has been reinforced.
Therefore this priority has been met.
Environment:
The transposition and enforcement of the Environmental
Impact
Assessment directive
should be completed. A
programme
for legislative transposition
and implementation to align Cyprus’ legislation, institutions, programmes and policies
to the
acquis
has been finalised. However, further efforts are still needed in this
regard. Some laws and orders have been adopted in the area of
air and water quality
as well as waste management,
in particular relating to type approval of motor
vehicles, legislation in the field of quality standards and measurement methods and
the law ratifying the amendment to the Basle Convention concerning hazardous waste.
Further acceleration of the transposition in this area is still needed. In addition,
following a study, estimates of the costs of approximation have been established.
However, a
plan for financing investments
(directive specific) based on these cost
estimates and realistic sources of public and private finance year-by-year is still to be
developed.
Therefore this priority has been partially met.
Employment and Social Affairs:
Social dialogue is a long standing practice and in
addition to the various existing tripartite bodies, bipartite social dialogue, although not
formalised, is important and developing.
Capacity-building efforts
of
social partners
should be further supported. Cyprus continued its legislative alignment process with
the
acquis
in some areas such as labour law, health and safety at work and
discrimination. The country has undertaken efforts to strengthen its administrative
capacity. The
Labour Inspectorate
especially has been upgraded and reorganised.
Therefore this priority has been partially met.
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Transport:
Cyprus has adopted several laws and regulations in this area and has
strengthened its administrative capacity. To
enhance the quality of the Cypriot flagged
fleet and to improve its overall safety record,
the government introduced a new, more
restrictive policy for the registration of Cypriot ships. Regarding
detentions,
although
the steady decline in their number is welcomed and reflects the increased efforts of the
Cypriot authorities in this domain, further efforts are still needed for the whole Cyprus
fleet to achieve a safety record corresponding to the current EU average of 6%. An
action plan
on Merchant Shipping, including monitoring of classification societies
and the improvement of the Cyprus flag, has been prepared.
Therefore this priority
has been met.
Justice and Home Affairs:
Cyprus adopted new legislation on
asylum.
This law
provides for the setting up of a Refugee Authority, which has yet to be established.
Further efforts are needed to ensure regular and complete reporting by the
offshore
banking sector.
Cyprus has already adopted an upgrading programme for acquiring
border control
equipment such as coastal radar, patrol boats and
forgery detection
equipment at ports of entry. In addition, the existing police computer network is
upgraded. Cyprus ratified several conventions in this area, however, as regards the
Council of Europe
Criminal Law Convention on Corruption,
only the act ratifying this
convention has been adopted yet. Cyprus applied to accede to the
1997 OECD
Convention
on Combating Bribery of Foreign Public Officials in International
Business Transactions. In addition, the country has further
intensified its preventive
measures necessary for ensuring protection against criminal activities, including
money laundering.
The special Unit for Combating Money Laundering has been
reinforced, however the actual implementation of the money laundering legislation
should be further enhanced.
Therefore this priority has been partially met.
Reinforcement of administrative and judicial capacity including capacity to
manage and control EC funds:
The preparatory work undertaken has laid the
groundwork for further harmonisation measures. A
liaison officer
from the tax
authorities was appointed by the Director of the Inland Revenue Department to co-
operate with the Unit for Combating Money Laundering (MOKAS) on tax issues. A
new consolidated
Budget
divided into three categories of expenditure has been
introduced. The Cypriot government has in place a fully-fledged system of public
external and internal financial control for the entire national budget. As regards
reinforcement of administrative and judicial capacity to manage and control EC funds,
further efforts are being made to ensure sound financial management and transparency
in the use of these funds. This covers the priorities as regards the completion of the
legislative framework for
internal and external financial control
and the
setting up of
internal audit/control units in spending centres
and ex-ante financial control as well
as the issuing of an audit manual and the development of audit trails for the control of
EC funds. Further efforts are needed as regards the introduction of
‘functional
independence’
for national, internal controllers/auditors at both central and
decentralised levels. On the other hand, the capacity of the VAT service has been
strengthened by the recruitment of new staff and a central
co-ordination
point has
been created. Cyprus needs to undertake further efforts to
make available GDP/per
capita data
in accordance with EC methodology.
Therefore, this priority has been
largely met.
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Medium-term priorities
Only those medium-term priorities of the 1999 Accession Partnership that have been
met or where a degree of progress has been made are mentioned below.
Internal market:
As regards
free movement of goods,
new legislation in the field of
legal metrology
and pre-packaging has been adopted. In accordance with a provision
already incorporated in the existing Public Procurement Law, the national
preferential
clause
will be automatically eliminated upon accession. In the field of
free movement
of persons,
the Council of Ministers issued a Decision that provides for a distinct
separation between
recognition of academic qualifications and professional
qualifications.
A new law amending the existing
Company Law
in order to cover the
provisions of the Twelfth Council Company Law Directive on single-member private
liability companies was enacted and preparatory work has been undertaken as regards
the other directives mentioned in the Accession Partnership. As regards
free
movement of capital,
at the beginning of this year the Central Bank of Cyprus (CBC)
lifted some of the
restrictions
on outward and inward
investments
from and to the
island. In addition, since the beginning of this year, residents of Cyprus have been
allowed to undertake direct investment abroad without restrictions as to the amount of
foreign exchange involved or the sector of the investment. The transfer of capital will
be effected as soon as the CBC is satisfied that it concerns a genuine direct
investment. Furthermore, the CBC has abolished all restrictions on the use of credit
cards for current payments abroad. As regards
competition,
in February the Council of
Ministers took a decision for reforming the
Commission for Protection of
Competition.
The reforms provide also for a permanent specialised staff to be
recruited. Its investigative powers are also being reinforced. Several measures have
been undertaken for further alignment with the
acquis
on
taxation.
In the field of
consumer and health protection,
concerning
functioning market surveillance
mechanisms
the Control of Misleading and Comparative Advertising Law was
adopted, bringing the Cypriot legislation further in line with the
acquis
in this area. In
addition, progress was made in the field of product pricing by adopting legislation.
Agriculture:
Cyprus has begun with preparations for the implementation of the
common agricultural policy and rural development policies.
Energy:
In order to achieve further alignment with the
acquis
and to promote
energy
efficiency
in the industrial, commercial and agricultural sectors, a grant scheme for
investments in energy efficiency promotion encouraging the use of energy from
renewable sources became fully operational. Moreover, Cyprus joined the
Organisation for the Promotion of Energy Technology (OPET), the main aim of which
is the implementation of measures in the fields of rational use of energy, renewable
energy sources and fossil fuels. The Government of Cyprus established an Institute of
Energy, which together with the Applied Energy Centre will implement the OPET-
Cyprus Programme.
Employment and Social Affairs:
The process of
employment review
in Cyprus has
been initiated and a background study on the labour market in Cyprus has been
completed. Preparatory work has started for developing a
National Action Plan for
Employment
in accordance with the EC Employment Guidelines. The management of
100
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the
European Social Fund
will be under the responsibility of the Labour Department
and for this purpose, suitable training of personnel will be organised.
Transport:
Regulations amending
the Motor Vehicles and Road Traffic Regulations
were
approved in order to achieve further alignment with the
acquis.
In addition, the latest
amendments and the revised Convention of
Eurocontrol
were ratified by Cyprus.
Furthermore, five new bills were approved under the
Merchant Shipping Law
which
implement the Convention on Standards of Training, Certification and Watchkeeping
(STCW Convention). Apart from this, further legislation in the maritime sector has
been adopted and further efforts have been undertaken to strengthen administrative
capacity, especially as regards the Department of Merchant Shipping.
Justice and Home Affairs:
Several measures have been undertaken to
upgrade law
enforcement bodies and the judiciary,
such as an increase in the number of judges, the
extension of competencies or the setting-up of an additional court. In addition the
number of staff of the Unit for Combating Money Laundering has been increased.
Furthermore, the position of a Patron of Human Rights has been approved by the
Council of Ministers under the provisions of the legislation on Combating Trafficking
of Persons.
2. National Programme for the Adoption of the
Acquis
A full first NPAA for Cyprus has been submitted to the Commission for evaluation in
the first half of September 2000.
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Annexes
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1464296_0103.png
Human Rights Conventions ratified by the Candidate Countries,
September 2000
Parties to following conventions
and protocols
BG
CY
CZ
EE
HU
LV
LT
MT
PL
RO
SK
SV
TK
ECHR
(European Convention
on Human Rights)
Protocol 1 (right of property et
al.)
Protocol 4 (freedom movement et
al.)
Protocol 6 (death penalty)
Protocol 7 (ne bis in idem)
E
uropean
X
X
O
X
O
X
O
X
O
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
O
O
X
X
X
O
X
X
X
X
X
X
X
X
X
X
X
O
X
O
X
X
X
O
X
X
X
X
X
X
X
X
X
X
X
X
O
O
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
O
O
O
O
X
X
O
X
X
X
X
X
X
X
X
X
X
X
O
O
O
X
X
X
O
X
X
X
X
X
X
X
O
X
O
X
X
O
O
X
X
X
X
X
X
X
X
X
X
X
X
O
O
X
X
O
O
O
X
X
O
X
X
X
X
X
X
X
X
X
X
X
O
X
O
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
O
O
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
O
X
O
X
X
X
X
X
X
X
X
X
X
X
O
O
O
X
X
O
O
O
O
O
O
O
X
O
X
X
Convention for
the Prevention of Torture
European Social Charter
Revised European Social
Charter
Additional Protocol to the ESC
(system of collective complaints)
Framework Convention
for National Minorities
ICCPR
(International Covenant
on Civil and Political Rights)
Optional Protocol to the ICCPR
(right of individual
communication)
Second Optional Protocol to
ICCPR (abolition death penalty)
ICESCR
(International
Covenant on Economic, Social
and Cultural Rights)
CAT
(Convention against
Torture)
CERD
(Convention on the
Elimination of All Forms of
Racial Discrimination)
CEDAW
(Convention on the
Elimination of All Forms of
Discrimination against Women)
CRC
(Convention on the Right
of the Child)
X = Convention ratified
O = Convention NOT ratified
BG = Bulgaria; CY = Cyprus; CZ = Czech Republic; EE = Estonia; HU = Hungary; LV =
Latvia; LIT = Lithuania; MT = Malta; PL = Poland; RO = Romania; SK = Slovakia; SV =
Slovenia; T = Turkey
103
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1464296_0104.png
Statistical data
27
1995
Basic data
Population (end of the year)
Total area
National accounts
Gross domestic product at current prices
Gross domestic product at current prices
28
1996
652
9.251
1997
in 1000
658
in km²
9.251
1998
663
9.251
1999
667
9.251
645
9.251
Mio Cyprus Pound
4.004
6,8
10.500
6,1
13.829
4.157
7,0
10.800
1,9
14.524
4.366
7,5
ECU/euro
11.400
2,4
15.259
4.680
8,1
12.300
5,0
16.033
4.943
8,5
12.800
4,5
17.082
1000 Mio ECU/euro
Gross domestic product per capita at current prices
Gross domestic product at constant prices (nat. currency)
Gross domestic product per capita at current prices
Structure of production
- Agriculture
- Industry (excluding construction)
- Construction
- Services
Structure of expenditure
- Final consumption expenditure
- household and NPISH
- general government
- Gross fixed capital formation
- Stock variation
- Exports of goods and services
- Imports of goods and services
Inflation rate
Consumer price index
29
% change over the previous year
in Purchasing Power Standards
in % of Total Gross Value Added
5,3
15,0
8,9
70,8
4,8
14,7
8,9
71,6
4,3
14,2
8,4
73,1
4,4
13,8
8,1
73,7
4,2
13,4
7,7
74,7
as % of Gross Domestic Product
79,8
63,7
16,1
19,2
4,3
46,6
49,9
83,1
65,1
18,0
19,9
3,3
46,8
53,1
84,9
66,1
18,8
19,0
1,2
47,0
52,1
87,8
68,5
19,3
17,3
2,6
43,6
51,3
84,9
66,9
18,0
17,8
2,0
44,6
49,3
% change over the previous year
2,6
3,0
3,6
1,9
1,3
27
Data provided refer to the Republic of Cyprus only, with the exception of data on area which refer to the whole
of the island.
28
Figures have been calculated using the population figures from National Accounts, which may differ from those
used in demographic statistics.
29
Changes in Methodology: Data upto 1997 refer to the national CPI, while data as from 1998 onwards are
calculated in accordance to the Harmonised Indices of Consumer Prices (HICP).
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1464296_0105.png
Balance of payments
-Current account
-Trade balance
-131
-1.595
939
2.534
1.398
-23
90
15
:
:
-375
-1.720
1.097
2.817
1.352
-100
93
14
in Mio ECU
-299
-1.827
1.099
2.926
1.509
-73
91
15
335
-537
-2.175
955
3.130
1.632
-94
101
23
336
:
:
:
:
:
:
:
268
-219
Exports of goods
Imports of goods
-Net services
-Net income
-Net current transfers
-of
which:
government transfers
- FDI (net) inflows
Public finance
General government deficit/surplus
Financial indicators
Gross foreign debt of the whole economy
Gross foreign debt of the whole economy
Monetary aggregates
- M1
- M2
Total credit
Average short-term interest rates
- Lending rate
- Deposit rate
ECU exchange rates
- Average of period
- End of period
- Effective exchange rate index
Reserve assets
-Reserve assets (including gold)
-Reserve assets (excluding gold)
31
30
in % of Gross Domestic Product
-0,9
-3,4
-5,3
-5,5
:
in % of Gross Domestic Product
60,4
129,6
1,0
6,3
6,8
8,5
5,8
0,592
0,599
100,0
985
850
64,3
137,3
1,1
7,0
7,8
8,5
5,8
0,592
0,589
102,0
1.360
1.231
:
0,583
0,580
1995=100
102,8
1.382
1.260
108,3
1.315
1.183
106,0
1.825
1.824
Mio ECU/euro
96,3
204,7
1,2
8,0
8,8
8,0
:
0,577
0,582
128,0
293,4
1,3
8,3
9,9
8,0
:
:
0,579
0,577
155.4 E
348.6 E
1,8
9,9
11,2
as % of exports
32
in 1000 Mio ECU/euro
% per annum
(1ECU/euro=…Cyprus Pound)
30
31
Excludes local authorities.
Series break in 1998: more complete definition.
32
Series break in 1998: more complete definition.
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1464296_0106.png
External trade
Trade balance
Exports
Imports
Terms of trade
Exports with EC-15
Imports with EC-15
Demography
Natural growth rate
Net migration rate (including corrections)
Infant mortality rate
Life expectancy :
Males:
Females:
Labour market (ILO methodology)
Economic activity rate
Unemployment rate, total
Unemployment rate of persons < 25 years
Unemployment rate of persons >= 25 years
Average employment by NACE branches
- Agriculture and forestry
- Industry (excluding construction)
- Construction
- Services
Infrastructure
Railway network
Length of motorways
Industry and agriculture
Industrial production volume indices
Gross agricultural production volume indices
101,5
116,0
0
168
10,8
16,3
9,1
63,8
62,0
2,6
2,3
2,7
75,3
79,8
:
:
33
Mio ECU/euro
-1.865
403
2.268
:
59,0
59,0
-2.089
386
2.475
:
55,4
57,2
-2.168
377
2.545
:
as % of total
48,0
56,3
50,4
61,9
50,7
57,3
-2.354
383
2.737
:
-2.443
372
2.815
:
previous year=100
per 1000 of population
7,7
3,1
8,5
7,2
2,8
8,3
6,3
3,1
8,0
at birth
75,0
80,0
% of labour force
62,0
3,1
2,7
3,1
10,5
15,5
8,9
65,1
61,3
3,4
3,2
3,5
in % of total
9,5
15
8,8
66,7
9,6
14,5
8,4
67,5
9.3 P
14.0 P
8.3 P
68.4 P
61,2
3,4
3,1
3,4
61.5 P
3.6 P
2.9 P
3.8 P
:
:
:
:
5,2
3,0
7,0
5,1
0,0
6,0
per 1000 live-births
in km per 1000 km²
0
km
194
199
204
216
0
0
0
previous year=100
96,9
99,6
99,8
88,8
102,8
109,1
101,7
108.4 P
33
Net migration for the Republic of Cyprus, excluding the northern part of the island.
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1464296_0107.png
Standard of living
Number of cars
Telephone subscribers
Number of Internet connections
P=provisional figures E= estimates
:
342
541
per 1000 inhabitants
350
565
10
359
590
24
377
613
44
387
638
56
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Methodological Notes
Finance
Note on sources:
General government deficit / surplus:
Candidate Countries are presently unable to
provide reliable data on a national accounts basis. Eurostat is working closely with
these countries with the aim of improving these statistics. Given the lack of reliable
data, an approximation for general government deficit / surplus is derived from the
IMF’s Government Finance Statistics Yearbook (see explanation below).
Gross foreign debt:
the OECD External Debt Statistics publication has been used as
the source. Data for 1999 are estimates.
Foreign official reserves, monetary aggregates, interest rates, and effective exchange
rates:
where possible, Eurostat’s reporting form for Candidate Countries is used for
the data on. Failing this, the IMF’s ‘International Financial Statistics’ publication has
been used as the source.
Exchange rates against the ECU (euro):
European Commission data is used for ECU
rates, European Central Bank data for euro rates.
Note on methodology:
General government deficit / surplus:
approximation of the national accounts
definition, derived from data based on the IMF’s GFS (government finance statistics)
methodology. The general government deficit / surplus is obtained by adding the
consolidated central government deficit / surplus (normally including certain extra-
budgetary funds) to the local government deficit / surplus. The total is adjusted for net
lending / borrowing for specific policy purposes, which is a financing item in the
national accounts. GFS data are on a cash basis. For Cyprus, the data exclude local
government.
Gross foreign debt:
of the whole economy; includes both short- and long-term debt.
According to the convention, the stock of outstanding debt is converted from US
dollars into ECU at end-year exchange rates, whereas GDP is converted into ECU
using annual average exchange rates. For the ratio of gross foreign debt to exports, the
national accounts definition of exports of goods and services is used.
Monetary aggregates:
end-year stock data. M1 refers to notes and coin in circulation
plus bank sight deposits. M2 refers to M1 plus savings deposits plus other short-term
claims on banks. Total credit generally means domestic credit to the government (net
of deposits, including non-financial public enterprises), plus the private non-financial
sector, plus other non-monetary financial institutions.
Interest rates:
annual average rates. Lending rates consist of the average rate charged
on loans granted by reporting banks. Deposit rates refer to average demand and time
deposit rates.
Exchange rates:
ECU exchange rates are those that were officially notified to the
Commission until 1 January 1999, when the ECU was replaced by the euro. Euro
exchange rates are reference rates of the European Central Bank, where available.
108
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The effective exchange rate index (nominal) is weighted by major trading partners,
and calculated on a base period of 1995 (annual average).
Reserve assets:
end-year stock data. They are defined as the sum of central bank
holdings of gold, foreign exchange, and other (gross) claims on non-residents. Gold is
valued at end-year market price.
External trade
Imports and exports (current prices):
data is based upon the special trade system,
according to which external trade comprises goods crossing the customs border of the
country. Trade data excludes direct re-exports, trade in services and trade with
customs free zones as well as licences, know-how and patents. Value of external trade
turnover includes the market value of the goods and the additional costs (freight,
insurance etc.).
Trade Classification:
trade in goods is recorded using the commodity classification
according to the Combined Nomenclature (CN).
The term FOB means that all costs incurred in transport up to the customs frontier are
charged to the seller. The term CIF means that the purchaser pays the additional costs.
Imports are recorded on CIF basis, exports on FOB basis.
Imports and exports with EC-15:
data declared by the Republic of Cyprus.
Demography
Net migration rate:
crude rate of net migration for year X is:
{population as at 31 December (X) - population as at 1 January (X) + Deaths (X) -
Births (X)} / average population (X). This assumes that any change in population not
attributable to births and deaths is attributable to migration.
Labour force
Economic activity rate (ILO Methodology):
percentage of labour force in the total
population aged 15+. This rate is derived from an Establishments Survey observing the
following ILO definitions and recommendations:
- Labour force: employed and unemployed persons according to the ILO definitions
stated below.
- The employed: all persons aged 15+, who during the reference period worked at least
one hour for wage or salary or other remuneration as employees, entrepreneurs,
members of co-operatives or contributing family workers. Members of armed forces and
women on child-care leave are included.
- The unemployed: all persons aged 15+, who concurrently meet all three conditions of
the ILO definition for being classified as the unemployed:
have no work,
are actively seeking a job
are ready to take up a job within a fortnight.
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Unemployment rate (by ILO methodology):
percentage of the unemployed in labour
force. This rate is derived from the number of registered unemployed observing the ILO
definitions and recommendations (see ILO definitions above).
Average employment: by NACE branches.
This indicator is derived observing the ILO
definitions and recommendations.
Infrastructure
Railway network:
all railways in a given area. This does not include stretches of road
or water even if rolling stock should be conveyed over such routes; e.g. by wagon-
carrying trailers or ferries. Lines solely used for tourist purposes during the season are
excluded as are railways constructed solely to serve mines; forests or other industrial
or agricultural undertakings and which are not open to public traffic. The data
considers the construction length of railways.
Length of motorway:
road, specially designed and built for motor traffic, which does
not serve properties bordering on it, and which:
(a) is provided, except at special points or temporarily, with separate carriageways for
the two directions of traffic, separated from each other, either by a dividing strip not
intended for traffic, or exceptionally by other means;
(b) does not cross at level with any road, railway or tramway track, or footpath;
(c) is specially sign-posted as a motorway and is reserved for specific categories of
road motor vehicles.
Entry and exit lanes of motorways are included irrespectively of the location of the
signposts. Urban motorways are also included.
Industry and agriculture
Industrial production volume indices:
industrial production covers mining and
quarrying, manufacturing and electricity, gas, steam and water supply (according to
the NACE Rev.1 Classification, Sections C, D and E).
Gross agricultural production volume indices:
gross agricultural production volume
indices are calculated in constant prices of 1995.
Standard of living
Number of cars:
passenger car: road motor vehicle, other than a motor cycle, intended
for the carriage of passengers and designed to seat no more than nine persons
(including the driver).
The term "passenger car" therefore covers microcars (need no permit to be driven),
taxis and hired passenger cars, provided that they have less than ten seats. This
category may also include pick-ups.
Telephone subscribers:
the number of telephone subscribers per 1000 inhabitants
refers to the number of direct exchange lines (fixed telephone only) and does not
include mobile phone subscribers.
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Internet connections:
the number of internet connections per 1000 inhabitants refers to
the number of internet subscribers of the four internet access service providers in
Cyprus.
Sources
Total area, external trade, labour market, infrastructure, demography, industry and
agriculture, standard of living (except Internet connections): National sources.
National accounts, inflation rate, balance of payment, public finance, finance
: Eurostat.
111