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Democracy and governing in Moldova
No. 18, 5 November 2003
Activity of public institutions
Studies, analyses, comments
I. Activity of public institutions
Speech of Polish President Aleksander Kwasniewski
On October 23, Polish President, Aleksander Kwasniewski delivered a speech in the Moldovan Parliament on the multiple aspects of Moldovan-Polish bilateral relations. Among others the Polish President focussed on the friendship and close ties between Poland and Moldova, similarities in the fate of Polish and Moldovan people, namely its ups and downs. Also Kwasniewski dwelled on the success achieved by his country in building a democratic and pluralistic country, as well as in accession to EU and NATO.
As for Transdnistrian conflict, Polish President stated its resolution "is a very important task from the European accession perspective" and that is why his country would support EU involvement in the peacekeeping operations under the auspices of OSCE.
While talking about top priorities of the Poland's foreign policy, i.e. bridging the ties between members-to-be of the EU and other countries, President Kwasniewski indicated that his country endorsed EU initiative towards its future neighbors as well as elaboration of an action plan for Moldova and Ukraine, which eventually could become "Partnership for Association". Kwasniewski also expressed his support for extending such assistance programs as TACIS, PHARE and INTERREG; as well as suggested new mechanisms - European Neighborhood Fund for Civil Society, European Neighborhood Investment Fund, European Internship and Scholarship Fund for South--Eastern Europe.
During October 13 - November 2 Parliament passed a string of important pieces of legislation, one of them being the Law on Canceling Penalties accrued for delays in paying state social security. The law cancels the penalties accrued as of January 1, 2002 by the companies which do not have arrears on wage payment to its employees or state social insurance payments. The penalties are estimated at 4 million MDL. The law refers in particular to state owned companies, municipal or cooperative enterprises.
Law on Publishing International Treaties provides that all international treaties Republic of Moldova is part of shall be published in special publications of the Ministry of Foreign Affairs within one month of their enforcement. Legislative and normative acts enforcing those international acts shall continue to be published in the Official Monitor of the Republic of Moldova.
The law may be never enforced because of the high cost of translation services, which may not be covered all from the state budget. One solution would be to resort to official acts translated into Romanian. However, this solution per se is questionable too, as authorities refuse to acknowledge that Moldovan and Romanian are in fact one and the same language. Unfortunately, at the end of the day it will be the ordinary citizen who would have to suffer being unaware of the international provisions, especially those providing for rights and guarantees.
Law on Modification of the Code of Civil Procedure excludes the provisions prohibiting local councilors to practice as lawyers in the precincts they were elected. Noteworthy, opposition tried to lobby another amendment, thereby allowing MPs to practice as lawyers. The amendment was rejected on the grounds that deputies in Parliament are paid for their activity, moreover under the Constitution deputy position is incompatible with any other paid job, except for scientific or didactic activity.
Law on Completing the Law on Energy stipulates that the activity of the energy overseeing body is to be funded out of the energy tariffs. Great many deputies opposed the initiative on the grounds that it would increase the current tariffs, which would eventually affect consumers. Government representatives argued that at the moment state energy overseeing body was also funded out of the energy tariff, however this procedure was not provided for in the legislation.
Resolution on the results of parliamentary commission's control over the IT Department calls on Government to: negotiate the annulment of the contract on printing an excessive number of ID forms; assess feasibility of continuing the leasing agreement on technological support, given that the IT Department already has the capacity to perform it itself; assess the possibility of granting, from Department internal resources, some discounts to certain citizens applying for ID. The Resolution also calls on the Prosecutor General to investigated on missing ID forms as well as on the legality of the contract on printing an excessive number of forms.
Draft law on Modifying the Law on "Teleradio-Moldova" audiovisual public institution, developed by a group of Communist deputies garnered rich criticism. Opposition accused majority factions of subduing the newly established institution and concealing embezzlements made by the previous leadership of the company, which was appointed by the Communist faction.
Under the modifications: the company shall have a bank account in commercial banks to administer extra-budget funds; the two deputy chairpersons, one - General Director of the Radio and another of the TV, would stay just as executive director of radio and TV respectively; the Company will have only one deputy chairperson, i.e. general producer.
The draft also provides for the liquidation of the "Teleradio-Moldova" company and firing its entire staff. The spin-off institution will take over only the assets but not the liabilities. The debts are to be recovered based on a special mechanism to be established by the Government.
Opposition, backed up by the "Teleradio-Moldova" employees protested against the lay-offs and annulling the company's debts. Majority faction, though, claimed that those modifications would allow the company to operate under new conditions. The draft was passed in the first reading, the next reading being postponed until the expertise and recommendations of the Council of Europe are received.
Noteworthy, CE expert, Karol Jakubovicz was the first to provide expertise on the draft. In his opinion the liquidation of the company was not the best option, instead he recommended reforming it based on the existing law. CE expert also pointed that it was not clear "what was liquidation aimed at" and that " it is not clear whether the incumbent leadership will stay, and if so, then it wouldn't be a liquidation, but rather a lay off of the entire personnel on the liquidation pretext". "Lawyers for the Human Rights" NGO has reached the same conclusion in a report produced at the request of Media Group of the Stability Pact for South-Eastern Europe.
Law on Completing the Law on Notary entitles registrars of the State Registration Chamber to provide several notary services free of charge, namely: certifying founding acts of the enterprises, modifications and completions to the state registry of enterprises; legalizing copies of the founding acts of the enterprises, excerpts thereof, and state registration certificate kept in the Chamber archive. Citizens requesting the said services would have to pay just the state tax, and will be exempted from the notary fee.
Finally the Parliament passed the Resolution on approving the National Action Plan on Human Rights. The Action Plan developed with the financial support of UNDP office in Moldova is intended to improve human rights in Moldova. It includes: general provisions (legal framework, current state of affairs, goals and objectives, implementation, etc); actions to be taken (adhering to relevant international structures; actions in the main fields (labor, education, environment, minorities' and detainees' rights, equal opportunities, etc)); perfecting national legislation in the field; monitoring the implementation of the plan.
Last week Parliament ratified Penal Convention on Corruption, adopted by Council of Europe on Junde 24, 1999. In addition a declaration was adopted stating that Convention shall not have legal effect to the left of Dniester river until a complete resolution of the conflict. Together with Civil Convention on Corruption the said document are very important pieces of legislation for the member-states as they provide practices to be employed in fighting corruption. The 40 articles of the Convention refer to: notions; actions to taken by each member-state; monitoring Convention enforcement; mechanisms of international cooperation, etc.
Under the Law on Modifying Legal Acts regulating state fiscal and budgetary policy more than 20 articles of various legal acts are to be amended. In particular, the following acts will be amended: Law on Privatization, Law on entrepreneurship and enterprises, Law on Local Taxes, Law on Copyright, Law on Road Fund and Fiscal Code.
Amendments to the Fiscal Code reduce the quota on income tax, as follows: 10% for annual income below 16,200 MDL; 15% for income ranging between 16,200-21,000 MDL, and 22% for income exceeding 21,000 MDL. A quota of 20% was established for the income tax payable by legal entities.
Deputies rejected Government initiative to cancel the reductions on VAT payment on imports, as well as raising by 0.3 MDL per hectare the land tax, on the grounds that they would boost prices on agricultural and pharmacy products, which would have an immediate negative impact on the farmers.
At the recommendation of the Government, Parliament excluded one provision from the Law on modifying the deadline for enforcing the inspection before expedition. In particular the said provision stipulated that within a month of the adoption of the Law on Inspection before Expedition the Government was to select a company to provide those services.
On October 23 Government approved the appointment of Iurie Tabirta, Director of the National Regulatory Agency in the field of telecommunications and IT and former director of the National TV as a member of the Observing Council to "Teleradio-Moldova" Company. Iurie Tabirta will replace Victor Kostetki, Dean of the Slavic University who resigned after only two weeks of being appointed.
At the same session, Nicolae Gumionii, former Director of the Privatization Department, was appointed to the position of Deputy Director of the Customs Department, while Anatol Burlacov was appointed as Director of the National Agency for Regulations in Energetics sector.
The Government decided to transfer the responsibility of calculating energy and water tariffs, currently done by local public administration, into the competence of National Agency for Regulations in Energetics. By November 10 the Agency will have to start calculating and then approve the energy and water tariffs. Moreover, the Agency is obliged to change calculation methodology in cooperation with the Ministry of Environment, Construction and Territory Planning and develop draft laws on modifying the legislation in force.
Follow-up to the President's speech
Following President Voronin address to Parliament (see e-journal, no. 17) denouncing judiciary system, Association of Judges of the Republic of Moldova uniting 250 out of the total 300 judges refuted those allegations. The press release reads "association endorses the efforts to fight corruption, however it is inadmissible to blame all the judges of undue commitment to their obligations, as well as corruption and abuses of power. The fact that citizens resort to other institutions than judiciary is not a ground for considering judicial rulings as illegal and for blaming judges of corruption, bias or incompetence. Judges have continuously condemned any abuses displayed by certain judges while doing justice. Annual statistics indicate that there is a fair trial of the great majority of civil, penal and administrative hearings (almost 90%), which is an indicator of justice done in a democratic society".
Official visit of Polish President to Moldova
On October 22, President Voronin met Polish President Aleksander Kwasniewski on official visit to the Republic of Moldova. During the meeting, Voronin asked for Polish assistance in settling the Transdnistrian conflict, as well as in preparing Moldovan public institutions in view of accession to EU. In this respect, it was agreed to open an office in Chisinau, which would coordinate such activities. Moreover, President Voronin suggested changing the current visa agreement, thereby Poland would issue visas to Moldovan citizens free of charge, whereas Polish citizens would not need visa to travel to Chisinau.
After the meeting the Two attended a joint session of the Polish and Moldova delegations. Two bilateral agreements were signed, one on fighting organized crime and another on cooperating in environment protection and natural resources.
Also the same day, the Two Presidents attended the Congress of Businessmen from Moldova and Poland. In his inaugural speech President Voronin made an overview of the social-economic development of the Republic of Moldova in the recent years. Among the greatest achievements in economy, the President cited: economic recession stopped, stable economic growth and macroeconomic stability, servicing of external debt, inflation and exchange rate kept within admissible limits, growing revenues to the state budget, dwindling social problems, etc. President Voronin also referred to the efforts of his administration in attracting foreign investments, reducing fiscal burden on businesses, boosting small-to-middling business, and fostering trade among the countries members of Stability Pact for South-Eastern Europe. In the end President Voronin referred to potential areas of cooperation between Moldova and Poland.
Meeting with William Hill
At a meeting Vladimir Voronin had with the Head of OSCE Mission to Moldova, William Hil,l on October 27 the Two exchanged views on the current state of negotiations on settling Transdnistrian conflict and evacuation of Russian ammunitions from the region. According to a press-release issued by the Presidency, the meeting that "centered around Moldova's position on economic relations with Transdnistria", was held in preparation for OSCE Ministerial Council meeting due in Maastricht on December 1-2, 2003.
The EU encourages Russia to observe its commitments
In the Conclusions of the Brussels European Council of 16-17 October, the EU reiterated its support for the OSCE efforts for a comprehensive political settlement of the Transnistrian issue and urged the Russian Federation to take all the necessary steps to comply with the Istanbul/Porto commitment to withdraw its military patrimony from Transnistria by the end of this year. At the same time, the EU stressed the need for a constructive approach to the Transnistrian issue and urged the Russian Federation and Ukraine to discharge, together with the OSCE, their role as mediators.
Basic political agreement
During a new round of negotiations that took place in Chisinau and Tiraspol on 29-30 October 2003, the representatives of the mediators - Russia, Ukraine and the OSCE, finalised the draft of the basic political agreement on which they had worked during the previous two rounds of talks in Zagreb and Kiev. The mediators agreed to submit the draft to the two sides in conflict at the highest political level: the Moldovan President Voronin and the Transnistrian leader Igor Smirnov.
According to Basa-press, the spokesperson of the OSCE Mission to Moldova Klaus Neukirch told the press that the document would be published after having been submitted to the two sides in conflict first.
Earlier, Iurie Rosca, the leader of the People's Christian Democratic Party (PCDP), referred to the draft as a secret plan of undermining and destroying the constitutional regime of the Republic of Moldova plotted by forces that are hostile to the independence and sovereignty of the state. Rosca made these statements following a meeting with the Head of the OSCE Mission to Moldova William Hill, during which he was denied access to the said draft.
At a press conference held on 30 October in Chisinau, William Hill declared that the draft was elaborated upon the request of the Moldovan and Transnistrian negotiators and contained a series of compromise proposals regarding the organisation of the future federal state, the delimitation of competencies and the system of guarantees of the future Moldovan federation. According to Hill, the draft is different from the Kiev proposal in that it details a number of issues contained in the latter and builds upon the experience of the mediators over the past year and a half since the federalisation initiative has been launched.
The Joint Control Commission and the Joint Constitutional Commission
The members of the Joint Control Commission met in Bender (Tighina) to discuss the request of the Bender (Tighina) town administration to evacuate the Moldovan police unit based there and the issue of the transparency of the security zone along the banks of river Nistru. While a compromise solution was not reached on either of these two issues, the members of the Commissions decided to delay discussions for the next meeting due to their divergent views and the tensioned atmosphere.
Neither the members of the Joint Constitutional Commission, which resumed activity after several weeks break, managed to reach a compromise position on any article of Title 1 of the future federal Constitution, which is to refer to the constitutional foundations of the would be Moldovan federation. The debates on the most litigious aspects - the structure of state bodies, the division of competencies, the official languages and even the name of the federation will be resumed at the next meeting.
Withdrawal of Russian military equipment
The Russian Federation resumed the process of withdrawing its military patrimony from the Transnistrian region after the Russian Government granted Moldova a non-reimbursable grant worth US$ 105 million, of which US$ 100 million would be used to pay off the debts of Moldova Gaz towards the Russian Company Gazprom for the gas supplied to the Transnistrian region, and thus met the pre-condition of the Transnistrians for unblocking the process of the Russian military equipment from the region. According to the Decision of the Russian Government, the funds will be allotted in several instalments during 2003 - 2004 proportionally with the terms of evacuation of the Russian military equipment from Transnistria. At the same time, the Moldovan side was called upon to ensure all the necessary conditions for complete evacuation by 31 December 2003.
The Head of the OSCE Mission to Moldova William Hill told a press conference that even if the Russians keep transporting their military patrimony in a sustained rhythm and according to a tight schedule, they would need at least five months to complete the process, which could be in the first half of 2004.
Earlier, a number of Moldovan opposition parties had organised a series of actions of protest against the failure of the Russian Federation to abide by the deadline for the withdrawal of its military equipment. Thus, the PCDP proposed to the Moldovan Parliament to adopt a decision whereby to request from the Russian Federation the unconditional withdrawal of its army from the eastern region of Moldova. The proposal was rejected by the communist parliamentary majority on grounds that it would destabilise the situation and tension the bilateral relations between Moldova and the Russian Federation. The PCDP reiterated its position of protest within a street meeting on 26 October in Chisinau, while the Social Liberal Party issued on the same day a statement expressing concern in relation to the delay in the withdrawal of the Russian military equipment from Transnistria and bewilderment at the lack of an appropriate reaction from the Moldovan authorities.
"The telephone war"
The employer organisations in the telecommunications field requested an extraordinary meeting of the Executive Board of the National Agency for Regulations in Telecommunications to examine and solve the telephone crisis between the two sides of river Nistru. Since early September the fixed and mobile telephone connections between the two sides have been blocked and the Transnistrians constantly jam the Moldovan mobile networks.
Meanwhile, starting 1 November 2003, the Republic of Moldova introduced a new telephone numbering scheme, within which three million telephone numbers are to be allocated to the Transnistrian region both for fixed and mobile telephony, provided that the Transnistrian operators register with the Moldovan State Registration Chamber and are issued corresponding licences. The Transnistrians said they would not apply the Moldovan telephone numbering scheme because they found it discriminatory towards the Transnistrian telecommunications networks. Instead, they would apply their own scheme starting 7 November 2003. The International Telecommunications Union published in its operational bulleting on 1 November 2003 a note warning international telecommunication agencies about the illegal and non-recognised nature of the Transnistrian scheme.
III. Foreign affairs
Allegations made by Moldovan representative to CE, Alexei Tulbure, with regard to Romania have had the first impact. Romanian Cabinet of Ministers responded to the accusations of not consulting with their Moldovan counterparts on assistance projects conducted on its soil by shutting down the Fund responsible for liaison with Republic of Moldova. Suspension shall not refer to funds allotted prior to October 27, which shall be spent by the end of the year in compliance with the contracts signed. Under those circumstances, Moldovan authorities demanded Romania to provide them with a list of non-governmental organizations, natural entities beneficiaries of the said fund.
IV Reunion of Republic of Moldova - EU Cooperation Committee
The EU euphoria brought up by the presentation of Conception on European Integration in Brussels and backed up by the optimistic declarations of Polish President, has rapidly cooled down when Gherhard Lohan, representative of the General Directorate for Foreign Relations of the European Commission and co-chair of the Republic of Moldova - EU Cooperation Committee clearly stated that "at the moment Brussels does not envisage Republic of Moldova joining the Stabilisation and Association Process". He added that the issue was not on Brussels agenda as "at the moment Republic of Moldova is not viewed as a candidate for EU membership", a necessary step in accession process. Gherhard Lohan claimed there were plenty opportunities for cooperation between EU and its future neighbor Republic of Moldova.
Once several Moldovan officials, among others Prime Minister Vasile Tarlev and Minister of Foreign Affairs Andrei Stratan reiterated Republic of Moldova commitment to join EU, Mr. Lohan indicated that EU might sign a new agreement with Moldova. This provided Partnership and Cooperation Agreement would be enforced, supposedly by 2007. Until then Chisinau would have to make concrete steps towards EU accession, enforce the said agreement and fully exploit the opportunities it would have as a future EU neighbor.
As Gherhard Lohan represents the European Commission, most likely EU's Enlargement Commissioner Gunter Verheugen due to visit Moldova on December 5 would once again reiterate the same reserved but realistic message - for now we don't deserve anything better.
IV. Studies, analyses, comments
1. Causes of corruption in judiciary
by Iustina Cibotari
Several days prior to the professional day of the jurisprudence, President Voronin addressed the Parliament and was rather critical on the judiciary system in the Republic of Moldova. According to the President "judiciary is undergoing a severe crisis…, it is not rare that courts disappoint us by delaying hearings, by their illegalities, abuses of power, and corruption".
Unfortunately we have to agree that the aforesaid is true. Moldovan justice has gone astray from the intangible ideal of justice that would have entitled us to claim that in Republic of Moldova judiciary is the highest expression of justice. Therefore, let us consider the causes of such a state of affairs.
First and foremost, we have to acknowledge that the quality of the judiciary depends on the people doing justice. In fact, neither the selection nor the appointment of judges is able to prevent unworthy or incompetent people from becoming judges. For instance selection procedure does not include a psychological test. To achieve their mission judges have to have a moral conduct. There is no doubt that once entering the judiciary, a magistrate accepts all the obligations coming with his mission, and not only the tasks to be performed but also generally acceptable morale principles to be observed both in public life as well as in social interaction. Therefore, a judge owes not only time, energy, knowledge and experience to his position, but also independence granted by law, which should be not only a source of pride but of strength as well. At the same time, a judge has to be a man of duty because in his activity he is called to decide whether those summoned in front of him have done wrong or good. Moreover, in his private and public life a judge should be guided not only by generally accepted principles, but also have a moral conduct, refraining from anything that might undermine his authority 1.
Secondly, at the moment Moldova lacks a system of startup training of the judges, whereas the existing system of professional development is out-fashioned already. Moreover, by excluding internships, the recently operated amendments to the Law on the Judge Status have produced a gap in the training of judges. Establishing a National Magistrate Institution might solve the problem. The lack of such an institution dealing with professional development of the judges on a permanent basis, is a major obstacle in the judges' full comprehension of their mission. This refers in particular to passing rulings in compliance with the law and then correctly enforcing them. Unfortunately, lately I came across rulings stemming from lack of knowledge and research, or even superficiality.
Supreme Council of Magistracy, supposedly a guarantor of judiciary independence, is to be partly blamed for this state of affairs. Unfortunately though, in the recent years Supreme Council of Magistracy has paradoxically turned into an institution serving the governing. An illustration to this effect is the current procedure of appointing judges, thereby the Council role has been reduced to a mere advisor the President, not having the right to interfere and defend a judge, thus sheltering him from the arbitrary decisions made by the President.
Another sensitive issue is the membership in the Supreme Council of Magistracy. If Supreme Council of Magistracy is a body supposed to secure independence of the judges, then logically the judges should represent a majority in the Council whereas its members should be elected at the general meeting of the judges from among themselves. Another principle of the Council activity - its ex officio members (Chair of the Supreme Court of Justice, Prosecutor General, and Minister of Justice) should be prohibited from holding the presidency of the Supreme Council of Magistracy. In other respect, lately Supreme Council of Magistracy has been identified with Supreme Court of Justice due to the fact that both institution, although having a different status, are headed by one and the same person. Furthermore, this mixture of competencies has a negative impact on the way justice is done by the Supreme Court of Justice.
It is known for a fact, that the poor efficiency and credibility of the judiciary in Moldova is mainly due to delay in hearing the cases.
Sadly, statistics indicate that year by year the principle of "hearings in due time" is violated. There are piles of cases in the court awaiting trial for years.
The failure to conduct hearings in due time has brought on another deficiency, which seems to be inherent to our judiciary system, namely failure to edit in due time court rulings. In its turn, this leads to delays in submitting the cases to court of appeal. This is due to a "chronic" lack of discipline of certain judges, who have a rather flexible work schedule tailored to their personal interests.
Another vital problem - court's financial and technical endowment. Indeed, this issue may not be considered separately from the economic state of affairs in the country, however the wages and pensions judges get should correspond to the status, dignity and responsibility this position involves, or at least aspire at it. This issue is not new. There is no doubt judges should get far better wages than the ones they get today and this for various reasons.
Firstly, a number of incompatibilities have been set for the judges. If society imposes so many restrictions to the judges, which is not the case for other public officers, then it should pay for it, thus compensating for what a judge could have rightly earned.
Secondly, it is a tough job because of the requirements imposed by the way society perceives a judge. What society tolerates in other people, it does not when it comes to judges. The latter could easily be accused and get a tarnished reputation. Thirdly, when talking about judges one should consider the quantity and quality of their work. Needless to say, the lower the reward - decent wage, honors, and distinctions - the higher the risk of corruption. This is the more important as lobbying of group interests in the judiciary stems out of strong individual interests 2.
Only via decent wage one may get to an elite and independent judiciary.
1 Viorel Mihai Ciobanu, Theoretic and practical treaty on civil procedure, National Publishing House, Bucharest, 1996, pag.26
2 Idem, pag.25
2. Economic reflections on corruption
by Valeriu Prohnitchi
The release of the Corruption Perception Index 2003 1 by Transparency International is a good opportunity to talk about corruption. According to the report findings, corruption has reached exorbitant levels in Moldova. The way authorities reacted to the report, in an undue fashion to say at least 2, determined us to take a closer look at corruption from an economic perspective. By doing so, we hope to spur some pro-active social and political reactions to the corruption phenomenon, which the press alleges penetrated the highest ranks of power in Chisinau.
II. How does corruption affect economy?
There are a number of publications on the impact corruption has on the economic system. Albeit the variety, or sometimes even paradox 3 of opinions, a great many of them perceive corruption as a factor undermining economic development. It is known for a fact that the most corrupted countries are also the poorest. On the other hand, corruption is boosted by low level of economic freedom, as well as by such factors as political regime, culture, legal framework, etc.
Let me cite the findings of the most recent researches on the impact corruption has on economy, through various channels 4:
1. Macroeconomic effects:
2. Structural effects:
- Widening gap between real and potential economic growth;
- Drop in internal and direct foreign investments;
- Higher risk of financial crisis or financial chaos;
- Higher inflation risk;
- Decrease of fiscal revenues.
3. Economic efficiency of the production means:
- Prevalent shadow economy;
- Negative impact on public investments such as:
- Wide-scale, though, ineffective investment projects;
- Insufficient funds allotted for operational expenses;
- Exaggerated funds allotted for purchasing new equipment;
- The previous two have lead to the decay of existing infrastructure;
- Insufficient social funding and wide-scale spending in the fields allowing for embezzlement, as a rule these are sophisticated technical projects.
- Increasing cost of capital;
- Growth of transaction costs and the costs of market entry;
- Inefficient tendering on public procurement contracts;
- Inefficient award of ownership rights (see privatization in transition countries);
- Distorted competition.
- Boosting income inequality;
- Boosting fiscal inequalities;
- Redistribution of property from the public sector to corrupted individuals;
- Insufficient supply of services or public goods (fresh air, drinking water, etc).
III. Corruption impact on Moldovan economy
No doubt all of the above consequences persist in Moldova, so we would not dwell on them too much. Apart from the negative impact on the economic welfare, corruption in Moldova has developed a rather dangerous trait. Namely, as easy as corruption has spread in the last decade, as hard it would be to combat it.
In a survey of 99 countries, the correlation between the corruption perception index (based on TI assessment in 2000) and two explicit factors, i.e. GDP per capita and economic liberalization (assessed by Heritage Foundation) 5. Survey findings are not very encouraging for Moldova. Let's assume that the goal is to improve the corruption index from 2.1 to let's say Estonia's index - 5.6, and that the Government is ready to rapidly improve via its policies the level of economic freedom from the current 3.35 rating to 2. According to our estimations, to reach such a rating the GDP per capita would have to increase from the current 2,400 USD (according to purchasing power parity) to 18,500 USD. At an average annual growth of 7% it would take us 34 years to reach this goal! Therefore, we could expect corruption in our country to flourish for quite a while.
In Moldova, corruption is twice damaging. Firstly, it has undermined the effectiveness and dynamics of an emerging economy at its inception stage. Secondly, corruption has distorted public perception of how a true market economy functions when all the institutional conditions are in place. It needs to be pointed out that corruption of the newly emerged democratic governments was cited by numerous experts as one of the main causes that brought left-wing parties to power in post-Communist countries 6.
IV. Factors specific to corruption in Moldova
Corruption is correlated to the economic welfare. Although corruption stems out of poverty, it should be noted that there are other factors directly affecting the probity of public officers. In the case of Moldova, non-economic factors that boost corruption may be classified into three categories: related to rent-seeking, related to political system and to institutional climate.
A big role in rent-seeking is played by the confusing and complex legal framework in Moldova, leaving it to the discretion of bureaucrats to interpret and enforce the rules. The second factor is the influence bureaucratic elite has over political elite. In Moldova, prevalence of bureaucratic interests on the political ones is striking especially in the customs system and Department of Information Technologies.
As for the political system, first and foremost we should be mention the authoritarian political control over control agencies (including the Center for Fighting Economic Crime and Corruption) as well as judiciary. Under those circumstances, corruption gradually evolves from disorganized to organized and "centralized". The second factor is the political and social indifference of the civil society. In Moldova corruption has become almost a cultural norm, widely accepted by the society. Impeding press access to the decision-making process, especially at the intermediary bureaucratic levels, is another factor boosting corruption. It is worth mentioning the lack of effective checks and balances mechanism over the excessive political power exercised by some central government institutions (such as Presidency), which generate corruption and abuses of power. International pressure is very important too. As was the case of Moldova, the absence of international monitoring over a couple of years, has spurred corruption among public officers responsible for adequate spending of the foreign financial aid.
The third category is represented by institutional variables. To mention just the business culture widely spread in Moldova, characterized by a high public tolerance of corruption, which in the long run directly boosts corruption. In contrast to the West, where there is a long tradition of settling economic disputes and of legal contract enforcement, in Moldova what counts the most are the personal contacts and the position occupied in the social hierarchy. In the West, any allegations of fraud brought to the Prime Minister or to a presidential councilor would immediately result in a public investigation. Also, under the same category stand the meager wages of the public officers. This brings out in them a kind of "predator" instinct when interacting with ordinary citizens, but most importantly with businessmen. The lack of a true organizational culture also plays its role. This refers in particular to nepotism, the main criterion employed in personnel recruitment and promotion through the hierarchic chain of public institutions.
V. What needs to be done first?
The answer to this far from being rhetoric question resides in the famous corruption formula of Robert Klitgaard 7: CORRUPTION = MONOPOLY + DISCRETION - RESPONSIBILITY.
The wisest thing Government and Parliament can do to stop the proliferation of corruption is not to provide it opportunities to flourish through their own actions. For one thing, they should refrain from passing legal acts granting separate institutions a too higher monopoly over certain aspects of economy or society. For instance, it's far more appropriate for the technical inspection of the vehicles to be provided by private companies selected in open tender, rather than by road police and transport department, which currently hold monopoly thereof.
Although the establishment of control agencies is justifiable, still three things are to be ensured: their independence from government, institutional stability, and transparency of their activity. Whenever at least one of those conditions is missing, problems emerge similar to the one in the energy sector (ongoing conflict between Ministry of Energy and National Agency for Regulations in Energetics) or the one likely to happen in telecommunications (industry of IT services).
Another illustration in this respect is the inspection before expedition. Both Government and business community openly opposed the inspection. One of the reasons is that once SGS entered the market the monopoly has been significantly limited, which in its turn reduced the opportunities to solicit bribes, especially for customs officers. SGS operation in Moldova on a long-term basis threatened to break up the corrupted networks that penetrated customs, which according to domestic media collects considerable illicit revenues.
Limiting the discretion of bureaucrats requires a simple and exhaustive legal framework regulating the activity of public institutions and state bodies. For instance, we believe road police has the highest degree of discretion in this country. Given the huge proportions corruption has reached in the said institution, it might well be that the only way to combat corruption there, is to liquidate the entire institution. As in the West, cameras, which by the way do not solicit bribes, may be used to oversee road traffic safety.
Higher responsibility may be educated and motivated. Education should come from the educational institutions as such, but also from the family. It was already mentioned above that our society suffers a syndrome of indifference to corruption. Indeed, motivation may be achieved firstly through financial incentives - raising the wages of public officers to compensate for their responsibilities and efforts. However, raising wages should not be viewed as the only tool in fighting corruption. If not backed up by other measures, it would only bring out financial costs that would be higher than the economic consequences produced by corruption itself.
1 Transparency International Corruption Perception Index 2003, October 2003,
2 See Radio Free Europe "Reaction of the Tarlev Government to the Transparency International Report on Corruption", by Ilona Spataru, 08/10/03,
3 Several authors such as Samuel Huntington (in Political Order in Changing Societies, New Haven, CT, Yale University Press, 1968) and Nathaniel Leff (in Economic Development Through Bureaucratic Corruption, The American Behavioural Scientists, 1968) claim that in the societies undergoing major changes corruption may serve as a "lubricator" for the bureaucratic wheels of the economic mechanism.
4 For a more detailed analysis see Gaviria, Alejandro, Assessing the effects of corruption and crime on firm performance: evidence from Latin America, in Emerging Markets Review, 3, 2002.
5 Valeriu Prohnitchi, Political Economy of Corruption, Oxford University, 2003, unpublished manuscript.
6 Ledeneva, Aliona, Commonwealth of Independent States, in Global Corruption Report, 2003, p.165-176; Global Corruption Report, 2003, issued by Transparency International, www.transparency.org.
7 Kimberly, Ann Elliot, ed., Corruption and the Global Economy, Institute for International Economy, Washington DC, June, 1997.