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Liberalisation of economy: between myth and reality
Iurie Gotisan, September 30, 2006
The new minister of economy has told the investiture ceremony that the basic principle of his activity will be to implement the existing strategy and to continue the liberalisation of economy. The second desideratum was also named by chief of state at the last sitting of the Parliament, a requirement that many experts have described as the "most liberal message of the president." We consider that those interested in economy know that the private property or privatisation, a strong infrastructure, the market as a leading tool, a healthy competition, deregulation of economy in terms to reduce the laws and regulations, a fair judicial system, the presence of an optimum tax policy and the existence of a fair social system are the main ingredients of a free economy. Or, Moldova still lacks namely these elements, which would make the economy truly free.
Official statistics indicate a sector of active enough services. How to explain its still low share in the latest economic growth recipe? Services which create a high value-added are services that start from a simple vulcanisation and end with insurance, bank services, etc. But services in our country mean intermediations or what people call castor enterprises which do not produce and transfer values from the public sector to individuals. The concept of services has actually lost its meaning in our country. I will cite a known Romanian economist in this context who said that people have the talent to empty out the content as quickly as they drink a glass of wine. This happened with transition and privatisation in Moldova.
As regards the privatisation, what has happened in the past years was rather a sale of state assets at a counter because objectives of privatisation have rarely been achieved. I mean a much larger inflow of foreign investments, better living standards, more new jobs, etc. The transition from centralised socialist economy to a market economy is only a form for Moldovans. We have taken it over and empted it, discharging the capitalism. We think that we live in capitalism if we have beer boxes, foreign cigarettes, luxury automobiles, respectively all what we call capitalism, but we do not have it indeed. We did not take over the capitalist structures which mean a free market and a competition based on values. We are still attached to many private interests.
It seems that the unfair competition and corruption are the main obstacles on way of development of a business, followed by the judicial system and still weak tax system. These are the reasons why one forth of newly-created enterprises does not resist on market. On the other hand, we think that the lack of a large volume of foreign investments is linked to institutional and bureaucratic pressures rather than to exaggerated fiscal pressures, as the corporate income tax in Moldova is among the lowest ones in the region. Moldova does not suffer of a deficit of laws, and more than that, we may speak about a legislative inflation, but it rather suffers of a deficit of right interpretation of laws in the judicial system.
The Government should stop awarding concessions and tax vacations to economic agents, restructuring or freezing debts because they suffocate an economy which claims to develop on basis of liberal principles. We think that the elimination of firms with arrears would enhance the credibility and, therefore, investments would grow. The competition in real sector would grow and financial performances of viable firms would improve. Thus, banks would be able to reduce the margins of risk and would lower the interest rates. In turn, economic agents would have access to cheaper credits, which are so necessary for investments in production process.
Our social system swallows money, much money which is wasted. The effects of economic growth have been spent for social salaries rather than for elements of social policy. The Government has launched or updated tens of social measures. Despite of huge allocated amounts the effects are late. Because not much work is done in our country and, therefore, it is produced a little - the economic potential is devaluing while the public budget is impoverishing. It means that it will be incapable to meet vital needs of economy and the international commitments that we have assumed, obligations which also mean much money.
Finally, we may ascertain that not the contract but relations, which often have the aspects of a political clientele, function in our country as an economic tool. This kind of relations does not meet the requirements of a free market, so that those who have enriched themselves with their help are interested to temporise the reforms. The speed of economic reform in Moldova was truly accelerated in the past years, but it is hard to say that many things including business environment have improved. We face serious problems related to implementation of legislation, big problems in agriculture, budgetary planning, etc. We do not pretend to be the advocate of those who bitterly criticise the authorities, but we hope however that their statements will not have the marks of some sterile features, but will also have a real content.