CUPRINS - Universitatea George Bacovia

EU-Accession Of Cyprus: Implications And Challenges For Enterprisesresearch and innovation are nowhere near the extent to which they exist the rest ofEurope, and far behind the US, and the transition from the stage of the conceptionof an innovation to the stage of commercial exploitation is extremely difficult.Many of the costs that will be born by Cypriot enterprises and society ingeneral will perhaps not arise from adopting the EU regulations, which necessarilyimpose new or different standards. For Cyprus, many of these elements of theacquis are embodied in existing national laws and regulations (product-specifictrading regulations, labour laws, anti-trust, social policy, etc). The costs wouldmostly be “market-determined” from the need of companies to upgrade andmodernize their production facilities (plant, machinery and equipment) andproduction processes in order to remain competitive in a liberalizing marketenvironment, both on a European and global scale. On the institutional level, thenew perspective for the Cypriot authorities is not their commitment to harmonizethe laws, but more importantly to enforce these laws, namely to adopt the specifiedminimum standards. The state is responsible for setting the necessary institutionsand mechanisms to ensure compliance by reinforcing existing inspectorates orchanging the way they monitor compliance.The table below shows crude estimates of the additional costs of accessionin terms of percentage of GDP.Table 2Additional Costs Incurred due to Accession (% of Current GDP/annum)19997-2002 2002 – 2012 2012 -EnvironmentCapital Costs 2 – 2.5 2 – 2.5 2 – 2.5Operating Costs 1.0 2.0 2.5Social PolicyHealth and Safety 0.25 0.5 0.5TransportInfrastructure 2.0 2.5 2.5Acquis and Restructuring 0.25 0.5 0.5Source: Witold Orlowski and Alan Mayhew, “The Impact of EU Accession on EnterpriseAdaptation and Institutional Development in the Countries of Central and Eastern Europe,”Sussex European Institute, Working Paper No. 44, 2001, p. 45As mentioned before, the most controversial and politically sensitive areaof harmonization, not only for Cyprus but perhaps for all new members, has beenand continues to be the issue of state aids and subsidies, which may take a numberof forms (overt or covert): agricultural subsidies, subsidization of energy costs,grants for capital investments, grants to subsidize business set up costs and thehiring of targeted segments of the labor force, uncollected taxes and pensioncontributions, subsidization of financing costs from state-owned financial217