CUPRINS - Universitatea George Bacovia

EU-Accession Of Cyprus: Implications And Challenges For Enterprisesscreening was completed in June 1999 and at the same time substantivenegotiations had begun on the 29 chapters.The challenge facing Cyprus, and any other candidate country, at the timeof application for full membership to the EU was how to prepare its economy toface the competitive pressures emanating from a liberalized environment byintroducing the necessary economic and social reforms and by adopting on a timelyfashion the acqui communautaire (the legal and institutional framework of theEU—the body of directives, policies, rules and regulations). The long termobjective of all new member countries is for a speedy convergence of theireconomies to the EU average. 5The real challenge is how to implement these measures so that the changesin the new way of doing things, the new culture, trickles down to each and everyeconomic agent. The State needs to actively involve all social partners (thebureaucratic machinery, the businesses, the workers, the consumers, etc) to informeverybody of the implications of harmonization to the EU laws and the potentialimpact that these changes will have on their daily operations and daily lives. Suchmeasures are a sine qua non in order to minimize the potential resistance that isexpected from such dramatic institutional, economic and social changes.Resistance would be expected from a number of affected groups in differentcapacities: from firms as productive units having to change production processes;from firms as economic agents producing externalities having to respect theenvironment; from firms as employers having to ensure the health and safety ofworkers; from business and professional associations as promoters of specialinterest groups, from consumers as individual purchasing agents needing to beinformed of their consumer rights; from labor unions as defenders of workers’telecommunications, and air transport, as well as the restrictive provisions based onnationality for the practise/exercise of a number of professions have all been removed by 1May 2004.5 The growth literature suggests that countries that have similar “socioeconomic andinstitutional environments” converge faster in incomes per capita. According to theabsolute convergence hypothesis of the neoclassical growth school, a country’s per capitagrowth rate is inversely related to the starting level of per capita income (Solow, 1956).However, this is not borne out by cross-country empirical investigation (Barro, 1991;Barbone & Zalduendo, 1996). The so-called “new growth literature” (Romer, 1986; Lucas,1988) has concentrated in providing an interpretation for long-run growth that deviatesfrom the erogeneity treatment of technological progress. Rather, environmental factors(such as resource endowments, geographical location, savings rates, human capital skills,population growth rates, consumer preferences, government economic and business policy,and other growth determinants) impact on the per capita growth and convergence track ofcountries (Sachs and Warner, 1995). This is known as the conditional convergencehypothesis. It suggests, for example, that countries with higher savings ratios (and byextension, higher investment ratios) will grow faster than otherwise. If these environmentsare similar, then convergence occurs (Barro & Sala-i-Martin, 1995).191