Democracy and governing in Moldova
No. 21, 17 December 2003
Activity of public institutions
Studies, analyses, comments
I. Activity of public institutions
In the week of December 1-14 Parliament sessions were marked by tensions between the ruling party and opposition. These tensions have become an ordinary thing lately, this time however they arose when the ruling party called on revoking the head of Commission on Social Protection and Healthcare, Lidia Gutu. The faction headed by Dumitru Braghis holds this position as decided based on the representation criteria when the XVth legislature Parliament commenced its activity. One of the reasons cited for recalling Mrs Gutu was her participation in the unauthorised protest rallies and involving teenagers in political actions, as well as a number of flaws in running the Parliament commission. In particular the latter refers to absence from the plenary sessions, withholding from fulfilling the responsibilities of chairperson, etc.
Under the Parliament regulation, only the Parliament Speaker is entitled to make a proposition to recall the Commission Chairperson, after prior consultation with all parliamentary factions. Although scheduled, the consultation of the factions never really took place, as opposition did not show up for the meetings with the Parliament Speaker. This fact did not stop the ruling party from passing the decision on revoking Mrs. Lidia Gutu and asking the Moldova Noastra faction to designate another deputy to the relevant position.
The Parliament also accepted the resignation of Vasile Rusu, who left the position of Prosecutor General. He was replaced by Valeriu Balaban, who in the last ten years has been working at the Information and Security Service. Experts believe that those reshuffles may have some negative implications due to the long time rivalry between Prosecution and Information Service.
During the December 5 session Communists Andrei Neguta and Mihail Russu handed over their MP mandates. The former resigned due to his recent appointment as Republic of Moldova's Ambassador to France. The latter did not disclose his reasons for leaving the Parliament.
Dialog with civil society
On December 8-9 Moldovan Parliament hosted a seminar entitled "Co-operation between the state and civil society: a path to consolidation" organised jointly by the Council of Europe and Biotica NGO. European experts were invited to share their experience and mechanisms used in making the voice of an ordinary citizen heard, such as the consultative and most recently participative status NGOs have with the Council of Europe, which judging by the Communists reactions would do them no good. As this seminar was one of the first occasions for dialog between decision-makers and civil society, the event saw both parties engaging in harsh debates on such issues as social pact and consultation of NGOs in developing and implementing public policies. In the end NGOs came up with a set of recommendations and propositions, among others public debates on important legislation, establishing consultative commissions within each of the Parliament Commissions as well as draft legislation like the 1% law.
Given the escalation of the international terrorism, soaring migration and cross-border crime Parliament decided to revise the Conception of State Frontier Security. Adopted via a Resolution, it includes general provisions, which refer to: objectives of frontier security; major state interests at the border area; major factors infringing national interests at the border; basic principles for frontier security.
Conception does not include provisions on: delimitation and security of the Eastern frontier (out of the Moldovan authorities control); tasks of the border guard given its future immediate vicinity with EU; tasks of the border guard in making the country more accessible and attractive to the tourists, investors and other foreigners visiting the country.
Via the Law on changing the deadline for installing fiscal memory cash registries at the petrol stations Parliament extended the deadline for installing cash registers having fiscal memory to April 1, 2004. Thus, it endorsed Government's initiative to extend the deadline, however reduced it by one month.
Law on cancelling the penalties and sanctions not paid by consumer co-operative societies exempts consumer co-operative societies from paying the penalties and fines calculated for the failure to transfer to the state budget income tax and social fund. The cost thereof is estimated at 10 million Lei. Commencing 2001 the parliament majority constantly criticised the leadership of the consumer co-operative societies for poor administration and illegal privatisation of the assets, and unwillingness to revive the co-operative movement. In response the former leadership cited the debts, which they believed hindered their activity and lead to the seizure of any revenues they had. At that time the proposition to exempt them from paying penalties and fines was seen as an attempt to conceal the embezzlement and avoid responsibility. Currently, after the consumer co-operative leadership was replaced with a new one, which is supported by the ruling party, the attitude towards consumer co-operatives has also changed, even the President attended its recent Congress and promised to cancel their historic debts.
Modifications of the Law on the Status of Elected Official brought it in accordance with the provisions of the new Law on Local Public Administration. In particular amendments refer to: termination of the mandate of the rayon Chair and Deputy Chairperson, Deputy Mayor upon incompatibility of functions; impossibility to exercise the functions for more than 4 months in a row; indictment; ousting from a position via a Council ruling; resignation or decease. The other amendment refers to the incompatibility of the election official's mandate with the positions of: MP; member of the Government; public official in the apparatus of rayon Chairperson, departments or other units in the subordination of the relevant council, mayoralty, or preture; officer in the territorial office of the State Chancellery; and with the position of councillor in a council of the same level or with the position of a councillor in a council of a different level in second level administrative-territorial units.
Via the Law on amending the Law on State Budget for Year 2003 certain adjustments in the redistribution of revenues and expenses in the state budget were made. Noteworthy, the total amount thereof was not changed, this year budget provides for a profit of 300 million, neither was the 600 million loan from the National Bank.
Law on modification of the Law on Public Service stipulates that the Councillor of the Supreme Court of Justice Chairperson shall hold a I degree in the public service hierarchy, whereas the consultants, experts of the Court apparatus shall hold a II degree. Therefore, the status of Court officers was equalled to that of Government, Parliament and Presidency.
Under the Law on the modification of the Law on Local Public Administration issues on local council agenda shall be examined only if endorsed by the specialised commission, or the mayoralty and decentralised public service. In certain cases, at the initiative of 1/3 of the councillors, the council shall examine the aforesaid issues without the appropriate endorsements. This amendment was made in order to allow the council to pass decisions in cases when specialised commissions would not be able or be willing to do so for political or economic reasons.
Parliament also passed the Law on the ratification of the status of the Nuclear Research Institution, an international intergovernmental research organisation based in Dubna, Russian Federation, established in 1956. Republic of Moldova applied for membership in 1992.
On December 3 Government accepted Vitalie Slipenchi's resignation from the position of Deputy Director of the Customs Department. It appointed Radu Gheorghe as Senior State Councillor, Chief of Prime Minister Cabinet. It also confirmed Igor Corman to the position of the Republic of Moldova Ambassador to Germany. On December 11 the Government made further reshuffles, namely it appointed Igor Esanu to the position of Deputy Minister of Justice, it ousted Mihai Stirvan from the position of Senior Deputy Minister of Industry and recalled Gheorghe Hioara from the position of Republic of Moldova's Ambassador to Macedonia.
On December 3 Government decided to initiate talks with Ukraine in view of signing an agreement, thereby extending to January 1, 2005 the term in which citizens of both countries could travel with soviet type passports or IDs.
Under a draft law on modifying the Law on Public Service approved by the Government, public officers, beneficiaries of pensions, would be able to hold their positions or get a public position for up to two years (with the possibility of extending the contract).
Government accepted a program on improving road traffic safety for the years 2004 - 2008. It provides for developing a draft law on training vehicle drivers; establishing at the border checking points with Romania and Ukraine two centres to confirm technical and environmental conformity of the vehicles; providing road police squads with first aid kits; introducing in the secondary school curricula a module on road safety rules.
After the enforcement of obligatory medical insurance throughout the country was postponed twice, and after it was tested in Hincesti rayon, Government decide that as of January 1 the Programme of Obligatory Medical Insurance would be enforced in the Republic of Moldova. The programme outlines the list of diseases and illnesses subject to medical assistance to be covered from the Obligatory Insurance Fund; types of medical assistance to be provided and their amount. In its decision Government obliged the National Company on Obligatory Medical Insurance to conclude by December 31, 2003 contracts on medical assistance with all the beneficiaries.
Government preserved the same immigration quota for year 2004, which is 2,114 people (around 0.05% of the Republic of Moldova's population). As the immigration quotas are set based on the financial possibilities of the host-countries, the one established for Moldova is the lowest in Europe.
In order to ease the tensions between Chisinau and Tiraspol, the Government complied with the President's initiative to pardon the persons who during the 1992 war "committed crimes against the fighters for the independence and territorial integrity of the Republic of Moldova and against civilians". However the resolution specifies the crimes which do not fall within its scope.
As the shut down in August this year of Moldovan Trade and Commerce Representation in Poland has led to an unfavourable trade balance for Moldova, it was decided to add a new position in the Embassy, namely Economic Councillor. The goal of this position is to boost trade between the two countries, to promote our countries' economic interests, and to attract investments into Moldovan economy.
Another decision adopted by the Government refers to the beneficiaries of compensations. It obliges them to reconfirm their eligibility to receive nominal compensations once in two years in September-December.
Law on the State Budget for Year 2004
President Vladimir Voronin promulgated the Law on the State Budget for Year 2004. It provides for revenues worth 5 billion 647 million Lei (371 million USD), a 20.1% increase as compared to 2003, and expenditures worth 5 billion 307 million Lei (349 million USD), a 20.5% growth as compared to 2003. The 340 million Lei profit (22 million USD) will be used to pay back a portion of the foreign debt worth 76,9 million USD due in 2004. Another portion of the foreign debt is to be repaid, from the revenues expected from the sale of state securities, 180 million Lei, and privatisation.
State budget for 2004 provides for a 5% GDP growth; an inflation rate of 4.5% and an average exchange rate of 15.2 Lei/ 1 USD. It also lowers the income tax from 25% to 22% for natural entities; and to 20% for legal entities.
Assessment of political situation
During a press conference on December 3 President Voronin assessed the current political situation in the country. Voronin reiterated the strategic objectives of the Republic of Moldova, i.e. accession to EU and reintegration of the country. Referring to Transdnistria, President indicated that he would accept any federation model leading to a richer and stronger state. President believes the Memorandum proposed by Russian Federation in November "was based on a real compromise" between the parties to the conflict, and was the first document ever providing for an asymmetric federation. Explaining the reasons why he had not signed the Memorandum, President Voronin stated that it was based on the "spot compromise, which may not lay the grounds for a new Constitution of the future Moldovan state". Having said that, we could only wonder how "real" a compromise is, if "under no circumstances" may it be used as a starting point?
During the press conference the President also stated that in the near future Chisinau would come up with its own proposition on settling Transdnistrian conflict. Vladimir Voronin pointed that Moldova would insist on such provisions as federal legislative body, delimitation of responsibilities, democratisation of Transdnistria, format of military guarantees under international auspices. This new document would be presented within the pentagonal negotiation format, it also would be handed over to EU. In fact Voronin insisted on "opening an EU office in Chisinau and on inviting Brussels to the negotiation table", however without changing the current negotiation format.
Vladimir Voronin also indicated that "those who oppose federalisation today, in fact oppose the reunification of the country, they militate for preserving a centre of tension in the region, for a foreign military presence, and are therefore thwarting our accession to EU". The President also pointed that November 30 protest rallies, which "gathered all opposition forces around Christian Democrats' flag, around the idea of joining Romania and most importantly against federalisation, which means, giving up the reunification of the country", was illustrative to the fact that the political centre had disappeared in Moldova, therefore there were only two political forces left Christian Democrats and Communist Party. At the end of his speech President Voronin expressed lingering concerns that the next Parliament might have only one party represented as it happened in Gagauz Yeri, and called for a civilised co-operation with opposition parties and giving them air time during a weekly TV show "Opposition Hour".
Meeting with Gunter Verheugen
Probably the most important political event in the last two weeks was the official visit paid by the EU Commissioner for Enlargement and Wider Europe, Gunter Verheugen. During his meeting with President Voronin, the Two discussed various aspects of the new EU initiative on its future neighbours. Verheugen stated that EU "regards Republic of Moldova separately from Ukraine, Russia or Belarus".
Also Verhaugen informed about the European Union's readiness to work out, jointly with the Moldovan Government, an action plan that would outline measures to be taken in order to bring the Republic of Moldova closer to this prestigious European organisation. In his words, the drafting of such plan, which would incorporate Moldova's specifics, possibilities and problems, should be completed so as to submit the document to the EU Board before May 2004.
Gunter Verhaugen also indicated that "it's clear the EU strategy on neighbours opens a clear perspective for eastern European countries taking no part in the enlargement, gives them new hopes and stimuli for a brisker promotion of economic and political reforms".
Needless to say, Verhaugen's message was slightly different at his meeting with politicians, public officers, civil society and media representatives. He stated "quite clearly" a slightly different thing "EU new neighbourhood policy is different from the issue of possible accession. /…/ It refers to the countries for which EU membership is not yet on the agenda. However it does not shut the door to the European aspirations any of those countries might have". We may say this policy is a "window of opportunities" open for an indefinite time, however not for ever, that is why Chisinau would have to hurry up to seize this opportunity.
At the end of the meeting Gunter Verhaugen raised a few eyebrows when stating that it was not in the Republic of Moldova's best interest to insist on joining the Stabilisation and Association Process, as the policies were initially conceived for Balkan states and did not reflect Moldovan realities. Verhaugen's message was that new neighbourhood policy provides more efficient mechanisms of co-operation than the Stability Pact for South-Eastern Europe. If that was his personal opinion and not an official position of the European Commission, then we may conclude that one of the reserves European Commission might have with regard to the Conception of EU integration of the Republic of Moldova is its strategic objective, namely obtaining the status of EU associated member by signing the Stabilisation and Association Agreement.
After his meeting with Gunter Verhaugen, President Voronin gathered the chiefs of Moldovan missions abroad and other decision-makers responsible for co-ordinating the efforts of Moldovan public institutions in view of accession to EU. The President briefed them on the objections of the Action Plan and outlined the main task to be carried out, such as: complying with Copenhagen criteria, gradual connection to European policies in various fields; adjusting national law and standards to the European ones. President stated that in order Moldova to become an associated member it is necessary to "involve EU in settling Transdnistrian conflict, implement Poverty Reduction Strategy /…/, boost trade with EU, as well as foreign and domestic investments in Moldovan economy, study and take over Central and Eastern Europe and South-Eastern Europe's experience in joining EU, complete central government reform by having in mind European integration".
President Voronin visit to Bosnia and Herzegovina
On December 8-9 President Voronin paid an official visit to Bosnia and Herzegovina. President Voronin met with members of Bosnia and Herzegovina Presidency, Sulejman Tihic, Borislav Paravac and its incumbent President in office Dragan Covic; with the Chair of the Ministerial Council, Adnan Terzic; members of Parliamentary Assembly and Mayor of Sarajevo.
The meeting between the Two Presidents was followed by a plenary session of the two delegations and official signing of Moldovan-Bosnian bilateral agreements.
The OSCE Ministerial Council in Maastricht
On 1-2 December in Maastricht was held the 11th Ministerial Council of the OSCE. Among the major issues expected to feature on the summit agenda were the Transnistrian conflict and the situation that had created around it after the failure by the Moldovan authorities to sign the Russian proposed draft Memorandum on the principles of federalisation of Moldova, as well as the withdrawal of the Russian weaponry from the region. These issues were raised in statements by such top officials as the US State Secretary Colin Powell, the OSCE Chairman in Office Jaap de Hoop Scheffer and the Russian Foreign Minister Igor Ivanov, as well as in a final statement by the EU delegation. The sides, save for the Russian Federation, showed a consensus with regard to the Transnistrian issue. Thus, the US, the EU and the OSCE urged for a sustainable political resolution of the conflict and securing it with multinational peacekeeping forces under the OSCE aegis. Notably, this position was supported by the Moldovan Foreign Minister Nicolae Dudau. Despite the general consensus, the Summit failed to adopt either a final decision or a regional statement on Moldova, as it planned. The reason for this has been the opposition of Russia to the provisions on Moldova and Georgia included in the draft of the final statement, as well as Russia's refusal to agree to the conditioning of the ratification of the Conventional Forces in Europe (CFE) Treaty by the withdrawal of its armies from Moldova and Georgia.
The Transnistrian issue was resumed at the NATO Ministerial Council meeting in Brussels on 4 December. Thus, in the Final Communique of the meeting the NATO Member States reiterated that the fulfilment by Russia of its Istanbul commitments regarding Moldova and Georgia are the preconditions for the ratification of the CFE Treaty and expressed their regret at the failure by the Russian Federation to observe the end of 2003 deadline for the complete withdrawal of its weaponry from Transnistria.
The reactions towards the fact that the OSCE Ministerial Council did not adopt a final paper on Moldova, which, among other things, would have also included a new deadline for the withdrawal of Russian weaponry from Transnistria, have varied. Many western analysts have spoken of a failure and a sign of weakness of the OSCE, which is an intergovernmental organisation that takes all decision by unanimity, a failure equally regretted by the Moldovan President. On the other hand, most of the Moldovan opposition parties have hailed the unanimity of positions expressed by the western states and institutions present at the Summit with regard to the principles of solving the Transnistrian conflict. They have called a big success for Moldova the fact that the Summit did not determine a new deadline for the withdrawal of Russian military patrimony, which would have given Russia a free hand not to observe the current deadline.
At the same time, the Head of the OSCE Mission in Chisinau William Hill, on his return from Maastricht expressed uncertainty with regard to the ways of functioning of the five-sided negotiation mechanism from now on given the failure of the OSCE to adopt a decision by consensus. Hill said several more months would be necessary for Russia to complete the process of withdrawal of its weapons from Transnistria, provided there are no political obstacles to the process.
In this context, the Transnistrian Charge D'Affaires to Ukraine Boris Akulov, declared last week that Tiraspol is going to change its position regarding the evacuation of the Russian military patrimony from the region, which the Transnistrian side sees closely linked with the signature of the Russian draft memorandum. Akulov also said that from now on Tiraspol is going to "toughen" its stand within the negotiation process and will demand more powers and certain, both internal and external guarantees. "After everything that has happened, we cannot take the statements of Vladimir Voronin seriously any more, because we do not regard him as a serious negotiating partner", stated Akulov as quoted by Basa-press, and stressed that by refusing to sign the Russian proposed memorandum, President Voronin missed a unique chance to create a "real Moldovan statehood".
Russian Military Patrimony
Three more trainloads of Russian weaponry estimated at about 950 tons were transported from Transnistria on 1, 5 and 14 December. According to Russian military experts, if the current pace is kept, Russia will need another six to seven months to evacuate all its weaponry from Transnistria.
In the meantime, on 7 December, "The Washington Post" reported that 38 rocket launchers Alazan, "dirty bomb" warheads or conventional rockets modified to carry radioactive material that could contaminate a territory of up to 12 km, had vanished from the military deposits in Transnistria and could have ended in the hands of international terrorists, including Al- Quaeda.
The newspaper noted that Transnistria is currently one of the largest illegal markets of weapons in the Former Soviet Union, the main source of smuggled weapons being the military deposits left behind by the Soviet army and which are now poorly guarded.
Public Views on Federalisation
An opinion poll conducted by the Institute for Public Policies in November 2003 on a representative sample revealed that 37.8% respondents do not support federalisation, 21.2% consider it acceptable as an idea, 13.1% said the subject does not concern them, 25.5% did not know what to say and 2.4% refused to respond.
III. Foreign affairs
Stability Pact for South-Eastern Europe
On December 8 Republic of Moldova became a full-rights member of the regional electricity market in South-Eastern Europe, after being an observer member for over an year. The Memorandum on regional electricity market in South-Eastern Europe outlines the rules for establishing a regional market of electricity and gas.
The newly acquired status will enable Moldova to take part in regional investment projects in the field, to adopt European standards and practices, to increase the viability of its own energy system, including via electricity export into the Balkans.
IV. Studies, analyses, comments
1. 2003 political year
by Igor Botan
The following events have had a major impact on the political scenery of the Republic of Moldova: May general local elections, efforts to federalise Republic of Moldova; joining EU campaign; governing's campaign promoting Moldovan nationalism, etc. A snapshot of 2003 events and processes would indicated that this year was full of curiosities and political confusions.
a) Local elections
Indeed, local elections were by far the most important event of the year. As a result of the elections the "vertical of power" was built. OSCE final report released in August reviews the practices employed by the ruling party in elections. The report was accompanied by a note, entitled "Negative trend observed during Moldova's local elections must be reversed". This negative trend observed in the electoral process has been a source of lingering concern for OSCE Observation Mission, especially given the considerable progress made in the previous elections. Deputy Director of OSCE's Office for Democratic Institutions and Human Rights called on Moldovan authorities to undertake every effort to correct the negative trend. Moldovan authorities have damaged the image Republic of Moldova projects abroad in one of the most sensible fields, i.e. promoting democracy. The curiosity is that it happened in the context of a campaign "to improve the image of the Republic of Moldova", launched by the President and Prime Minister in the state controlled media. It seems that the image of the country is of little significance when it comes to controlling local government via the "vertical of power". It is all-to-clear that it might become one of the most efficient mechanisms in employing "administrative levers" in view of parliamentary elections of 2005.
We have seen in the Russian parliamentary elections how might administrative resource in the stock of "power vertical" be used. OSCE short-term mission observed quite a few irregularities in the polling stations on the election day. However, OSCE preliminary report drawn on the findings of the long-term observers stated quite clearly that the violations which had the greatest impact included administrative pressure and manipulation of state controlled media. For this reason Russia failed to meet OSCE standards on free and fair elections. That this is so, proved also the observers delegated by the Communist Party of the Russian Federation - the most important partner of the Republic of Moldova's ruling party.
The same thing holds true in the case of the recent elections to the Gagauz-Yeri People's Assembly, where again the "power vertical" was put to a test. The thing is, that the ruling party did not fully trusted the "power vertical", and to secure its victory in the Gagauz elections it promised to grant the region the status of federation subject in the eventual Moldovan federation, which obviously does not fall in any kind of "power vertical".
b) Joining EU campaign
Degrading electoral process in the Republic of Moldova has run counter to the joining EU campaign launched by the President. In February President Voronin convened the diplomats accredited in Chisinau to inform them that joining EU was a strategic goal of the Republic of Moldova. First and foremost, the evolution of the "strategy" of EU accession is quite curious in itself, as it ended being a simple "conception". Secondly, public debates on the conception were postponed at least three times. In the end it was submitted to Brussels for consultation before Moldovan citizens had a chance to read the document. This in itself is an evidence to the fact that EU accession is nothing but a propaganda move. For instance, during the recent campaign for local elections, National TV permanently informed its audience that "Republic of Moldova has only to fill in the application". On the other hand, so far the major state institution, the Parliament, has not adopted a single official document confirming that EU accession was a strategic goal for the Republic of Moldova. Moreover, the latest trends in economy and democratisation point to the fact that Moldova is distancing itself rather than approaching to EU standards.
c) Efforts to federalise Republic of Moldova
"Kozak plan" envisaging Republic of Moldova's federalisation that was made public in mid-November has rightly raised eyebrows. Authors claim the federation formula they came up with, provides the framework for settling Transdnistrian conflict. Indeed, the fact that it was chosen for Chisinau and Tiraspol to jointly develop and sign the Memorandum, based on which a common Constitution was to be developed later on, indicates that Tiraspol's desire to establish a "contractual federation" was fully fulfilled. On the other hand, the would-be federation has an outstanding asymmetric character, as President Voronin insisted on. At a first glance it may seem that a compromise was reached, however it proved to be that the asymmetry was in Tiraspol's favour, as it had its statehood recognised and gained the right to absolute veto on legislation, promotion of governmental figures to the federal level, as well as on foreign policy of the Republic of Moldova.
President Voronin informed public opinion at home and abroad that he would sign the Memorandum, he even gathered diplomatic corps in this respect. During their meeting with President Voronin, foreign diplomats found that the Memorandum was worked out "behind the back of Europe", which Republic Moldova hopes to join. Probably, after this meeting it was made clear to Voronin that the West would not accept a "Moldovan Pristina" variant, i.e. being confronted with a fait accompli without being able to interfere in due course. The thing is that by accepting the "Kozak plan", Republic of Moldova would have had to give up any hopes of joining EU. We could only imagine the reactions foreign diplomats would have had in this case, considering that over the year they kept informing their governments about the EU accession intentions of the Moldovan authorities.
Under those circumstances, the President had to back off and announce that he adjourned Memorandum signing until after Maastricht Summit. Now he claims another document is being drafted. Such a behaviour does no good to Republic of Moldova, especially in its relations with the West and Russia for that matter, fact confirmed by the Maastricht Ministerial Meeting. As for the domestic environment, his behaviour led to wide-scale opposition protest rallies and radicalisation of Transdnistrian position.
d) Economic growth
We should not forget about the achievements on the economy front in 2003. Official statistics reports a considerable economic growth (around 7%) for three years in a row. Indeed, ruling party assumes all the merits for such a performance. Sceptics, however point that the existing economic growth is mainly due to the regional growth and soaring consumer spending that is sustained by the money wired into the country by Moldovan citizens working abroad. One way or another, economic growth does not lead to better living standards. Firstly, during the three years of Communist ruling Moldova has been the poorest country in Europe. It may be well said that it is poorly governed. UNDP's "2003 Human Development Index Reveals Development Crisis" reads that "the decline of human development index was quite severe in the Republic of Moldova…". Although several parameters and methods are employed in assessing the country index, the report clearly states that in the case of the Republic of Moldova the index decline is mainly due to a decrease in income per capita. Ordinary people are aware of this without any statistics, as they experience the effects of skyrocketed prices on their pockets day by day. Moreover, how could living standards improve if the governors undermine the country's investment climate as they lack their own resources? Threatening foreign investors has become a common thing in the Republic of Moldova. An illustration in this respect is the recent nationalisation of the "Dacia" hotel, which is to be listed for another privatisation round. Given the lack of investments, skilled labour cannot be capitalised at home, therefore it flees the country in the search of a job.
e) Human rights
In 2003 human rights violations had their own peculiarities, especially in as far as elections are concerned. Topping curiosities is probably President Voronin's address to the electorate - "as the President of the Republic of Moldova I call you not to vote for …" There are no words to describe the interference of the most prestigious state institution in a political campaign against its main political rival. Not to speak of the arrest of electoral contestants and their representatives, and their release immediately after elections, facts confirmed by OSCE report.
Another violation - journalists were intimidated and persecuted and on top of that their materials censored. Citizens' right to information was simply ignored, information being replaced with propaganda. We have already mentioned above how were citizens informed on the conception of European integration, on the elaboration of "Kozak plan" etc. On the other hand, in its intention to portray the President as invincible, state-controlled media put him in rather comic situations. For instance, President was praised for his courage and wisdom when undertaking an action. The funny thing is, that the very same adjectives were attributed to the President when he had to back off from the initiative he was praised for. The same thing happened with "Kozak plan" and "telephonic war" with Transdnistria.
And on this background Republic of Moldova intends to join EU.
2. Macroeconomic impact of the money sent from abroad
by Lucia Hadarca
The money wired by the guest workers home have become an important factor influencing macroeconomic environment of the Republic of Moldova. For the great majority of families deprived of sufficient income to cover their daily needs those money help them stay afloat. Therefore, when considering this issue we should take into account two implications: macroeconomic and social one.
According to some prudent estimates this income amounts to 250 million USD. In this case, "prudent" stands for "money wired from abroad to resident natural entities via banking system alone". In reality though, considering the amount of dollars and Euros that "get" to Moldova in cash, the amount of guest workers' income might be double. To put it differently Moldova gets a cash flow of around half a billion USD.
Due to their nature these money are primarily intended for spending (which is quite logical if we take into account the reasons that determined those people to leave their country in the first place, namely difficulty to find a decent job at home). From now on, the revenues start influencing the consumption and to a lesser degree macroeconomy. In macroeconomic terms, we may say that the generating demand curve has veered to the right. Under "other" factors we might mention GDP growth or soaring imports.
GDP growth in the last 2-3 years was quite satisfactory. However if compared to the soaring demand in products, domestic producers do not cover the existing demand. As a result a growing number of imported products are shipped to meet the demand. The scheme attached perfectly illustrates this tendency. In fact the guest workers savings have a twofold impact: on the one hand, they boost consumption, on the other, they increase the supply of foreign currency on the exchange market, thereby leading to the appreciation of national currency. In its turn the "strong" Lei affects exporters while helping importers. Therefore, importers get a double incentive (soaring demand plus "cheap" foreign currency), while exporters a double weakness (their profit from exports is "devoured" by the strong Lei).
On the other hand, a close look at the structure of imports would highlight soaring imports of equipment, computers, etc., which is not exactly a bad thing. Technologies, which are almost non existent in Moldova, boost productivity. Neither are exporters evenly affected. The most affected were the exporters who were contracted in USD. Exporters to European market, who were contracted in Euro, did not incur any loses. Consequently, another positive outcome might be considered the geographical re-orientation of the exports.
One of the secondary outcomes of this phenomenon is the fact that bank deposits are mainly in dollars. Free from the influence of the National Bank policy, the savings of a considerable part of the population are in Euros. When wired home those money are mainly converted into Moldovan Lei so as to purchase goods and services. The remaining money, irrespective of how insignificant, are deposited in banks. Hoarding a portion of the savings does not involve exchange system, however when deposited in bank accounts contribute to the growing number of dollar accounts.
In general, the macroeconomic impact of the guest workers' income might be viewed as a marginal benefit (national currency stability, boosting domestic production due to soaring demand), whereas the negative impact might be viewed as a fundamental one (inflation, trade balance deficit, dollarisation).
Continual heavy reliance on the guest workers' income might prove to be a fatal one for Moldova. Economy's vulnerability might come to light in case EU or other countries where Moldovans work, mainly illegally, impose some restrictions on labour force migration. The over-appreciated currency, coupled with trade balance deficit are just two of the factors that might lead to a crisis. The considerable inflow of foreign currency, which for one reason or another might drop, would indeed trigger such a process.
Moldova is not the only country facing such problems. This is a quite common phenomenon in quite small and insufficiently big transition economies. It is characteristic to countries that are "not exactly doing well" in economic terms and have both a small population and GDP, so that the impact of the income wired to the country is considerable. In Europe Albania, Armenia and to a lesser extent Bosnia share the same fate with Moldova, while it is also common in the Caribbean islands.
It is all-too-clear that such a phenomenon could not be extinguished by means of administrative measures. The social aspect of the problem (let us not forget that a considerable percentage of Moldovans live below the poverty line) excludes any decisions establishing bureaucratic obstacles to the population migration. Decision-makers in international monetary institutions recommend adopting some economic policies favouring those incomes to be channelled towards investment rather than consumption. For this to happen, I believe, a favourable business environment is a must. In my opinion, it would firstly boost economic growth, so that labour market in Moldova provides enough opportunities to Moldovans, before they try their chance abroad. At this stage it is difficult to imagine other solutions.