CUPRINS - Universitatea George Bacovia

Savvas C. Savvidesrights; from various social groups wanting to safeguard and/or enhance theirestablished privileges; and many other interest groups.The purpose of this paper is to examine the case of Cyprus as it preparedfor accession and to take stock of its readiness to face the competitive pressuresfrom full membership in a borderless, fully liberalized, and fiercely competitiveEU economic environment. The focus of the analysis is from the perspective ofharmonization issues that impact on competitiveness and the business environmentthat enterprises have to operate. We discuss the macroeconomic policy framework,without sectoral analysis, and then within this context we discuss issues that arerelevant for enterprises. It should be noted that the analysis is selective rather thancomprehensive. In addition, it should be noted that the absence of detailedcoverage of, for example, the environment, public finances and the financial sector,and of broader social cohesion issues, in no way reduce the significance of thesesectors and issues. From this experience of Cyprus, lessons can be drawn forcandidate countries for accession to the EU (such as Romania and Bulgaria). Itshould also be noted that though the political motives of Cyprus for pursuing fullaccession to the EU were and continue to be significant, the study focuses only oneconomic aspects.2. CYPRUS: FROM INDEPENDENCE TO EU ACCESSION 6Cyprus is a small, open, free enterprise market economy. Given its smallsize (under 800,000 people) the economy is dependent on imports of raw materials,capital equipment, and consumer goods, while it relies on foreign markets for itsexport (the percentage of imports and exports exceeded 102% of GDP in 2003). Itis a free enterprise market economy because the private sector holds thepredominant role in the production and investment process, while the public sectorin principle is involved in the production of goods and services in areas where theprivate sector is reluctant to do so, or where the nature of projects and activities issuch that they come under the traditional domain of the Government, i.e.infrastructural projects and social services. 7 Table 1 provides a snapshot of theeconomy of Cyprus in recent years.6 Data for this section are from the Statistical Service of the Republic of Cyprus, StatisticalAbstract (various issues), and Eurostat, the Statistical Office of the EuropeanCommunities.7 According to the 2004 Index of Economic Freedom compiled by the Heritage Foundationand the Wall Street Journal for 161 countries, Cyprus is grouped in the highest “free”countries, having been ranked as 14 th in its degree of economic freedom, surpassing themajority of EU-25 countries.192