CUPRINS - Universitatea George Bacovia

EU-Accession Of Cyprus: Implications And Challenges For Enterprisesdevelopments facing the EU today require the reorganization of productiveprocesses and general economic life in new ways that facilitate an economicenvironment where producers and consumers are able to capitalize, exploit andbenefit from emerging opportunities.A key determinant of Europe’s recent under–performance in productivitygrowth, and by extension the relative underperformance of the EU versus the US,is insufficient innovative activity as well as under–investment and weak diffusionof information and communication technologies (ICT) 20 , in such areas as economicand commercial exploitation of innovations and in innovation drive, as measured,for instance, by the number of new patents. The sustained gains in productivity inthe United States, even in the midst of the recent economic slowdown 21 , arecredited to investments made in that nation’s technological and innovation assets,where the ICT revolution has stimulated enterprise re–organization and has alteredthe terms of competition 22 .4.2.3 The Productivity Scorecard for CyprusCompared with the average of the EU-15 member countries, productivity in Cyprusis low, especially in manufacturing and more broadly the industrial sectors. Thelevel of productivity is higher in the services sector. Table 4 below provides somecompetitiveness indicators.Table 4Competitiveness IndicatorsAnnual % change1998 1999 2000 2001 2002 2003 2004 1998-2002(est) (5-year ave)Labour productivity 3.8 2.6 2.5 1.9 0.8 1.0 2.0 2.3Nominal earnings 5.0 4.8 7.0 4.8 5.3 5.4Real earnings 2.7 3.0 2.8 2.7 2.4 2.7Unit labour costs 1.1 2.1 4.4 2.8 4.4 4.5 1.5 3.0Source: Statistical Service of the Republic of Cyprus.20 The performance of the EU in innovation is reviewed in the European InnovationScoreboard 2001, SEC (2001) 1414, 14.09.2001.21 Productivity growth patterns have historically been pro-cyclical, tending to declineduring recessions and to grow during recoveries, reflecting perhaps the fact that enterpriseshoard labor.22 In the period 1992-99 ICT expenditures in the EU amounted to 5.6% of GDP, whereas inthe US the figure was 8.1%. Empirical estimates suggest that ICT contributes around 0.5percentage points to GDP growth in the EU, but close to 1 percentage point in the US. SeeEuropean Competitiveness Report 2001, Commission Staff Working Paper. SEC(2001),1705, 29.10.2001207