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The Association Council Agreement signed between the Turkish Republic and the Turkish Republic of Northern Cyprus on 6^th August 1997 in Lefkoşa envisages the deepening and the diversification of the existing cooperation and solidarity between Turkey and TRNC in the fields of foreign policy, security, defense, economics and finance.

In line with this goal, as its 6^th meeting has been held on 8^th August 2003 in Girne, the Association Council has reviewed the current phase of the implementation of the decisions taken at the 5th Association Council in Ankara on 30^th of September 2002.

On part of The Republic of Turkey:

1. Associated Prof. Dr Abdüllatif SENER Minister of State and Deputy Prime Minister (Co-President)

2. Ali BABACAN Minister of State

3. Kürşad TÜZMEN Minister of State

4. Kemal UNAKITAN Minister of Finance

On part of The Turkish Republic of Northern Cyprus:

1- Serdar DENKTAŞ Minister of State Responsible for Tourism and

Deputy Prime Minister (Co-President)

2. Mehmet BAYRAM Minister of Finance

3. Tahsin ERTUĞRULOĞLU Minister of Foreign Affairs and Defense

4. Salih COŞAR Minister of Economy

5. Mehmet ALBAYRAK Minister of Interior, Rural Affairs and Housing

At its meeting, the Association Council discussed the latest developments pertaining to the Cyprus issue; determined common policies to be followed in the coming period; resolved to deepen the economic and trade relations between the two countries and reconfirmed its commitment to promote the flow and diversification of investments towards the Turkish Republic of Northern Cyprus within the framework of the Joint Economic Area that is being established between the parties.

Within this framework, the following resolutions have been adopted following deliberations at the Council Meeting.

The Turkish side seeks a comprehensive reconciliation and a just, lasting and viable political solution in Cyprus where the inalienable rights of the Turkish Cypriot people will be protected. Recent steps taken by the Turkish Cypriot side under the leadership of the TRNC President Rauf R Denktaş and the apertures and proposals made towards the normalization of relations on the Island constitutue a clear manifestation of this intention. Steps taken and proposals put forward by the Turkish Cypriot side merit carefully assessment by all parties concerned.

The Turkish Republic of Northern Cyprus is an important contributor to the maintenance of peace, tranquility and stability in the Region. With its institutions, independent judiciary, established democracy and contemporary education system, it has an evolving and developing state structure. A just and a viable solution in Cyprus are only possible when existing realities on the Island and the equal status of the two sides is acknowledged and accepted by all concerned.Reconciliation must be based on sovereign equality of the two parties, bi-zonality, the continuation of Turkey’s active and effective guarantee and the maintainance of the Greco-Turkish balance in Cyprus.

Notwithstanding the policy of obstruction of the Greek Cypriot Administration the initiative of the Turkish Cypriot side have created a a new and positive atmosphere on the Island. The necessary ground for a comprehensive reconciliation and for solution will be prepared by taking advantage of the positive atmosphere created in Cyprus following the steps taken by the Turkish Cypriot side, and by implementing the confidence building measures proposed by it. In this regard, the Turkish side is determined to continue with its initiatives towards the normalization of relations between the two sides and the promotion of an atmposhere of mutual trust on the Island. Furthermore, it is the sincere desire of the Turkish side that a just and viable settlement of the Cyprus question be reached through negotiations taking into account the present realities on the Island. However, positive steps taken only by one of the parties are not sufficient taking into account the present realitiy of the Island. To arrive at a solution, it is necessary that both should show the same determination and make the same effort.

For the last 40 years, the Turkish Cypriot people have been facing unprecedented and unfair embargoes and restrictions in transportation, communication, trade, economy, science, culture and sports. Turkey and the Turkish Republic of Northern Cyprus firmly believe that all embargoes imposed on the island of Cyprus must immediately be lifted. In any event, even if all the present embargoes and obstacles were continue, both countries are determined to take all the necessary measures for the further development of the Turkish Republic of Northern Cyprus to raise the welfare of the Turkish Cypriot people to the level it merits. Within this framework and as envisaged in the Joint Declarations signed between the Presidents of the two countries on 28^th of December 1995 and on 20^th of January 1997 and approved by the Turkish Grand National Assembly on 21^st of January 1997; and in the Joint Statement dated 20^th of July 1997 and other joint declarations as well as agreements signed between the two countries in accordance with the Association Agreement dated 6^th of August 1997; the two parties reconfirm their total agreement on deepening existing bilateral cooperation on a broader scale in line with the objective of establishing political, economic and financial integration as well as partial integration in the field of security, defense and foreign policy based on the partnership principle between the two countries and reconfirm their commitment to the completion of the joint work aimed at establishing a Joint Economic Area.

Bearing in mind the developments regarding the unlawful and unilateral acceptance of the Greek Cypriot Administration of Southern Cyprus to European Union membership, the two parties have agreed to take all necessary measures to strengthened the economy of the Turkish Republic of Northern Cyprus, to develop the investment climate in Northern Cyprus, to increase the competitive power of the Turkish Cypriot economy and to provide sustainable economic development and in order to raise the welfare of the people. In this connection:

(i) Efforts of the government of the Turkish Republic of Northern Cyprus to strengthened the public administration and the financial sector are noted with satisfaction. Nothing that significant improvements have been achieved in providing stability to the Turkish Cypriot economy, strategy and policies geared to the development of real economy and to the strengthening of social balances will be implemented in the following period. Towards this end, existing cooperation will be enhanced to help the Turkish Republic of Northern Cyprus adopt the necessary legal and administrative regulations necessary to overcome structural problems. In this context, the Republic of Turkey will continue its financial, economic and technical support to the Turkish Republic of Northern Cyprus.

(ii) With regard to efforts furthering the advancement toward the Joint Economic Area between the Republic of Turkey and the Turkish Republic of Northern Cyprus, the parties have agreed to continue the implementation of the existing economic and commercial cooperation agreements and to continue to adopt the necessary regulations facilitating this process. Within this framework, it has been decided to rapidly finalize the technical protocols of the Customs Union Framework Agreement signed between the Turkish Republic and the Turkish Republic of Northern Cyprus aimed at the harmonization of the legislation of the Turkish Republic and the TRNC with the norms and principles of the European Union in order to provide for the integration of the economy of the Turkish Republic of Northern Cyprus with the international economic system.

(iii) The Council notes with satisfaction that investments in Northern Cyprus funded by the "Special Incentives System" implemented under the "Agreement for the Provision of State Support for Investments" signed by the two sides for the purpose of encouraging investments in the Turkish Republic of Northern Cyprus have began receiving funds and that some investments have reached the stage of commencement of construction.

(iv) It has been resolved that the necessary financial and technical support will be provided to the Turkish Republic of Northern Cyprus for increasing agricultural and industrial production, especially export oriented production, for removing the obstacles in foreign trade, improving the transportation vehicles, equipment and services at all ports and for the development of the free zone.

5. The programmes of structural change put into effect, by the government of the Turkish Republic of Northern Cyprus and the implementation of "The Urgent Economic Measures" adopted on April 2003 will be continued. To this end, The Republic of Turkey will continue to provide financial and technical support. In this framework, the following have been determined as areas of priority:

i) Implementation of measures aimed at attracting foreign investors to Northern Cyprus;

ii) Encouraging Turkish TRNC investors to participate in joint investments and to establish partnerships;

iii) Continuing to provide incentives to tourism, higher education and industrial investment with high export potential as sectors of priority;

iv) Decisive and full implementation of measures taken to encourage the strengthening of the financial sector in Northern Cyprus;

v) Measures to lower the share of the state in the economy and measures to improve productivity in the public sector;

vi) Supporting the real sector and the implementation of measures to promote investment, production and employment in the real sector.

6. All necessary legal and administrative measures shall urgently be taken to enable the speedy realization of the large investment projects approved by the Development Bank of Turkey within the context of the Special Incentives Model put into effect at the Turkish Republic of Northern Cyprus.

7. Infrastructure investments by the Republic of Turkey aimed at strengthening the Turkish Republic of Northern Cyprus shall continue with the increasing impetus. In this connection:

(i) The rapid construction of the Turkish Republic of Northern Cyprus campus of the Middle East Technical University and that educational activity is to commence on this campus in the 2004-2005 educational year has been noted with satisfaction;

(ii) Financial assistance to Lefke European University will continue in order to facilitate the development of the Lefke area;

(iii) The North Coast Road and the Girne Highway projects will be completed within a short period and the Güzelyurt-Lefkoşa Highway project will be included in the same investment program;

(iv) II.nd Stage projects carried out within the context of strengthening the electrical power infrastructure will urgently be completed and the III. Stage projects will be opened for bidding within the 2003 financial year to complete the continuing construction of the power station in the year 2003;

(v) Work on establishing a Faculty of Medicine at the Eastern Mediterranean University will be continue;

(vi) The study of the inventory of the water resources of the TRNC will be completed by the end of the year 2003;

(vii) Implementation of the project of transporting drinking water to the TRNC with tankers or alternative ways of transporting shall begin in the shortest period of time; at the same time, the projects of providing water via a pipeline will be completed in the medium term.

8. The positive results of the practice of direct income support for farmers have been noted with satisfaction and it has been agreed to decisively continue this application.

9. The provision of credit to small businesses and artisans at favorable conditions from the Interest Difference Fund and the establishment of a Credit Guarantee Company for those who face difficulties in providing collateral for loans taken have been noted as a positive development.

10. It has been mutually agreed that the biggest problem in the way of the tourism sector is the difficulty in transportation and, in this respect, it has been decided to finalize the ongoing efforts aimed at supporting the cooperation between Turkish Airlines and the Cyprus Turkish Airlines; to provide transportation support to carriers lower airline ticket prices and to mutually lower taxes and fees at all ports to the lowest possible level.

11. Full support has been given to the ongoing policies and the measures taken to help overcome the difficulties that arose as a result of the decision to lower "funds" levied at the customs in order to provide for the strengthening of the competitive power of the industrial sector. The necessary financial support will be provided to meet the demands of industrial establishments which have been adversely influenced by the lowering of the "funds".

12. The goods manufactured in the Turkish Republic of Northern Cyprus and the goods that are registered, licensed or granted permission in Turkey are being provided with a "Health and Free Circulation Certificate" by the relevant Turkish authorities has been noted as a positive development and it has been mutually agreed to continue this procedure with the same sensitivity.

13. Concerning the import of Turkey originating goods into the Turkish Republic of Northern Cyprus and the import of TRNC goods into Turkey, it is agreed that no new analyses shall be required at the points of import, provided that the necessary analyses have been fully and satisfactorily conducted in accordance with the regulations of the importing country at the laboratories of the exporting country.

Particulars of this matter will be determined in a protocol, to be signed between the two countries by 31^st August 2003.