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Democracy and governing in Moldova
II year, no. 28, 14 April 2004
Activity of public institutions
Studies, analyses, comments
I. Activity of public institutions
1.1. Easter eve
Throughout March 29 - April 11, Parliament gathered for only one plenary session. The second session scheduled last week was suspended in order to avoid any conflicts on the eve of Easter, after Christian-Democrats objected to Communists' initiative to exclude the traditional calling of the Government from agenda.
1.2. Legal acts
Law on approving Title VII "Local Taxes" of the Fiscal Code outlines the procedure and principles of setting, amending and cancelling local taxes, their maximal quotas, ways of payment, and procedure of granting exemptions.
Local taxes are defined as obligatory payments to the budget of administrative-territorial units. Local taxes shall include market taxes (20%); resort taxes (1%); parking taxes (10%); territory planning tax (40 Lei per year/ per employee); taxes for commercial units and service provision (3,600-9,000 per year); taxes for the right to carry passengers (500-1,700 Lei); taxes on housing (5%); taxes for applying local symbol (0.1%); taxes on holding auctions (0.1%); advertising taxes (5%); taxes on dogs (9-90 Lei).
Noteworthy, initially Government proposed reducing many more local taxes, however deputies excluded only those on shooting and those on sale in customs area. The Law shall enter in force as of January 2005, until then the current law shall be in force.
Law on procedure of publishing and republishing normative acts in the Official Monitor refers to the normative acts issued by Government or any other authority of the central public administration and amendments to them. Public authority that issued the act shall submit a copy thereof certified by the official seal on each page to "Moldpres" Agency. The act shall be submitted via official channels and shall be signed by the head of the issuing body or a special persons designated in this respect. The same procedure shall be applied upon the recall of a document. The law also provides sanctions to relevant persons for the delays to publish, republish, or correct the normative acts and failure to fulfil their duties.
In addition, the Law on ratifying Convention between Republic of Moldova and Bosnia and Herzegovina on eliminating double taxation on income and asset tax. Convention refers to the following taxes on: income; real estate; profit from economic, professional and agricultural activity; property; revenues from copyright, licenses and technical innovations. Convention follows several principles, namely non-discrimination, simplicity of payment and streamlining entrepreneurship.
Law on modifying the Privatisation Program excluded "Nistru-Tavria" Servicing Centre and Ceadir-Lungu Tobacco Processing Plant from the list of units subject to privatisation.
Aleksandr Bannikov, former Deputy Mayor of the Chisinau Municipality was appointed on March 31 as General Director of the Privatisation Department. Noteworthy, the position has been vacant for more than a year now, when Deputy Director Mihail Cibotaru served as interim. On March 31 Government accepted the latter's resignation.
- Government endorsed President Voronin's initiative to amend the Penal Code excluding thus, Article 170 that provided for a sentence of up to five years in jail for libel. The move came in response to calls coming from foreign and domestic media organisations alike that the provision ran counter to the European standards in the field. Once Moldovan authorities reiterated on numerous occasions their commitment towards European integration, indeed they would have to revise the legislation, thereby exclude provisions that infringe on freedom of speech. Likewise, it would be appropriate to establish in the Civil Code a ceiling of damages that might be demanded from media outlets, to provide support to independent and local media, to abolish censorship in press, to provide fiscal incentives, ensure access to information of public interest, etc.
- By making one step forward in terms of media, Government made two steps back by endorsing on April 7 another draft law prohibiting professors and pupils to take part in authorised or unauthorised protest rallies. If approved by the Parliament, the draft law would breach on one of the fundamental rights - freedom of reunions (provided in Article 40 of the Constitution, other international acts Moldova is part of, and political criteria for joining EU).
The law is a follow-up to the 2002 protest rallies so as to discourage professors and students from undertaking similar actions in future. Now, however, they have the more reasons to do so as Ministry of Education approved on April 8 the membership of a commission entrusted to develop curricula for a courses on integrated history.
- Government also adopted the National Programme to fight unemployment among youth in 2004-2006. The program envisages boosting enterprises that would hire young specialists, establishing favourable economic and other organisational conditions for youth employment, supporting young entrepreneurs, providing equal chances for employment, organising course for unskilled youth, etc.
- Government endorsed on March 31 a draft law on amending the Law on Privatisation thereby the state does not guarantee the right on property over assets in Transdnistria privatised without prior approval of Chisinau. Government pledged to develop within a month a privatisation procedure for Transdnistria. The annex to the draft law reads that Tiraspol sold 14 enterprises only in 2003, whereas another 75 are due to be privatised this year. Russian, Italian, and Liechtenstein companies privatised in 2003 Cuciurgan Power Station, fixed telephony operator, "Buket Moldavii" winery, "Moldavkabeli" plant, "Danastr" shoe factory, Grigoriopol poultry farm, Ribnita Metallurgic Plant. The revenues from privatisation amounted 71 million Transdnistrian Rubbles, i.e. 11.6 millions USD.
In the eyes of many experts, beginning the privatisation in Transdnistria would only help Russia grab a bigger share in the total of investments. Therefore, this would tie Moldova even further to Russia economically and financially. In a related note, Tiraspol leader Igor Smirnov told Tiraspol media that the privatisation process was quite successful and that he saluted the participation of foreign capital (especially from Russia) as well as domestic one in the privatisation process.
The decision of the Chisinau authorities was called by representatives of the Tiraspol administration as interference in the regional privatisation process and lacking any legal binding. Whatever legislative acts the Moldovan authorities pass, the foreign investors have worked and will continue to work according to Transnistrian laws, because a state cannot own assets over which it cannot ensure the rights of property or of disposal.
According to the Head of the Transnistrian Justice Department Victor Balala, the Transnistrian authorities have already received a number of bids for the privatisation of some of the 75 objects put up for privatisation this year.
- On its April 1 session Government approved a draft law on the single tax in agriculture, thereby income tax, VAT, land tax, road tax and local taxes are to be replaced by a single tax. This would represent 2.1 Lei for each hectare and 150 Lei for plots not having cadastral indicators. The draft is to be approved by the Parliament before being enforced.
3.1. Greek President's visit
Vladimir Voronin met with his Greek counterpart Constantinos Stephanopoulos on official visit in Moldova between March 29-30. The press-services reported that the Two Presidents considered among others Transdnistrian conflict, Cypriot problem and Cyprus accession to EU. In this respect, President Voronin endorsed the resolution of the Cypriot conflict based on UN plan, whereas his Greek counterpart pledged his support to Republic of Moldova in its EU accession.
As part of the official visit three documents were signed: Agreement on eliminating double taxation and fiscal evasion; Bilateral Agreement on air traffic; Intergovernmental Protocol on social security, social protection and labour market. The latter would pave the ground for a new agreement legalising Moldovan citizens working in Greece.
Vladimir Voronin and Constantinos Stephanopoulos were the guests of an Economic Forum that gathered 40 Greek businessmen and around 100 Moldovan ones. In his inauguration speech at the Forum, President Voronin made an overview of the state of Moldovan economy and outlined factors that make Moldovan economy attractive to investors, among others: economic growth, political and social stability, existence of "Corridor 9" which links Greece to Baltic states, access to different markets with whom Moldova has free trade agreements (great majority of the states members to the Stability Pact for South Eastern Europe), membership in WTO, legal framework and in particular the Law on Investments, skilled work force, etc. Another issue that grabbed businessmen's attention was the profitable niches in the Moldovan market and investment opportunities in Moldova.
II. Economic polies
1. Investment policies
Ministry of Economy presented to the foreign investors in Moldova the new Law on Investments and Entrepreneurship, approved in the final reading on March 18. "The new law sets clear and transparent rules for strategic investors, both foreign and domestic" said Minister of Economy Marian Lupu "and it is non-discriminatory". "It equals in rights local and foreign investors and provides for the elaboration of investment policies in a transparent manner".
In addition the law provides guarantees to investors against expropriation of investments or other similar actions and paying back damages in the currency in which investments were made. Ministry of Economy was designated to enforce the investment policy and co-ordinate the efforts of attracting investments to the Republic of Moldova. In this respect, Minister Lupu stated that Government was working out a draft law on amendments to the fiscal and customs legislation that would grant additional incentives to investors. He also called domestic and foreign investors to take an active part in the lawmaking process.
2. Foreign trade
Statistics and Sociology Department reported a trade balance deficit for the first two months of the year worth 55.2 million USD, i.e. a 29.8% surge over last year. According to official sources manufacturing for exports grew by 33.6%, whereas imports soared by 32.5%.
Soaring trade at the beginning of the year especially with Central and Western Europe was not able to considerably impact the trade balance evolution. According to the latest figures released by National Bank, in 2003 trade balance deficit has reached its highest ever 666 million USD(!) since the independence. In the eyes of many experts wage hike as well as the foreign currency transferred by Moldovans working abroad greatly boost domestic consumption, which eventually would result in price hike or inflation.
In 1999 Moldovans working legally or illegally abroad transferred around 90.2 million USD, whereas in 2003, according to sources in National Bank, the current transfers reached 375 million USD. A huge share of the private transfers come via non-banking channels, which of course are difficult to estimate. However, experts believe they account for 650 million USD. A recent press release by the National Bank reads that in the first month of the year foreign currency buying from the natural entities has double over the last year.
In the next three years trade balance deficit would steadily grow and account for 25% of the GDP, said Vasile Mamaliga Senior Deputy Minister of Economy. For year 2004 Government forecasts a 14% surge in exports, i.e. 1,020 million USD in nominal value and 9% growth in imports, i.e. 1,632 million USD.
1. Process of political talks
The Moldovan authorities have appealed to the OSCE Permanent Council to take additional measures towards the resumption of the process of political talks on the Transnistrian issue. The appeal was vociferated by the Moldovan Minister of Reintegration Vasile Sova on grounds that the provisions of the protocol signed in Belgrade this February, whereby a meeting in the five-sided format was to be convened by the end of March, were not fulfilled. At the same time, Minister Sova said that the Moldovan side followed the mediators' recommendations and submitted its proposals on the basic political document drafted under the OSCE aegis last autumn in due time. Earlier, the Head of the OSCE Mission in Moldova William Hill accused the Transnistrian side of refusing, under various excuses, to schedule a date for holding a five-sided meeting.
2. The Russian military patrimony in Transnistria
The new Russian Foreign Minister Serghei Lavrov reiterated during the informal meeting of foreign ministers of the Russia-NATO Council on 2 April Russia's position that the synchronisation of the ratification of the adapted Conventional Forces in Europe (CFE) Treaty with the finalisation of withdrawal of the Russian military patrimony from Georgia and Moldova is not justified. The transcript of the press conference held by the Russian Minister at the end of the meeting quotes the Minister as saying: "The CFE Treaty is a document with binding legal power. In parallel, Russia has assumed certain obligations with regard to the evacuation of our military patrimony from Transnistria and the coordination with Georgia of the problems related to the method and terms of withdrawal of our military bases. We are involved in negotiations over our patrimony. What is left there is just the guard of weapons deposits. If we were to eliminate the guard, then the deposits would be ravaged, and our weapons might get as far as Europe. If the evacuation of weapons would only depend on us, it would have been long gone from Transnistria. Unfortunately, this depends, among other things, on the position of Transnistrian authorities. And our colleagues from the OSCE know about this. There have been proposed solutions to unblock the situation, with the involvement of the Moldovan authorities. If these had functioned, then the problem would have been eliminated. Similar things happened before, when, with foreign hands, the possibility of reaching a political agreement between Moldova and Transnistria was dynamited".
At the same time, the US State Secretary Colin Powell said, quoted by the international press, that the main precondition for the joining of new states to the CFE Treaty is the evacuation of Russian troops and weapons from Georgia and the Republic of Moldova.
In its turn, the NATO Secretary General Jaap de Hoop Scheffer, on a visit to Moscow, refuted Moscow's attempts to dissociate the issue of CFE Treaty ratification from the Russian military presence in Georgia and Moldova. He expressed his hope that the treaty will be ratified soon, but mentioned that developments will depend of how the talks go between the Russian Federation and Georgia and the Republic of Moldova on its military presence in these two states.
IV. Foreign affairs
1. NATO Enlargement
On April 2, seven new European states (Bulgaria, Estonia, Latvia, Lithuania, Romania, Slovakia and Slovenia) joined NATO, the largest extension ever. Nowadays, NATO stretches to Prut river, thus making Republic of Moldova a close neighbour of the strongest military alliance.
On this occasion, Moldovan Ministry of Foreign Affairs issued a statement viewed as quite contradictory by political leaders and analysts alike. It teeters from a balanced and realist vocabulary to ungrounded or even hilarious rhetoric. The statement reads "NATO extension is the result of political, economic and security integration processes" then it goes "taking into account Alliance's objectives there are hopes that NATO extension would bring prosperity and stability to Europe" and that "given its neutrality our country would continue to co-operate with the Alliance in fields of mutual interest, especially by means of Partnership for Peace".
NATO extension was yet another occasion to raise once again the issue of giving up permanent neutrality by Moldova, being cited the example of EU accession candidates (except for Cyprus and Malta) that by pursuing accession to EU became NATO members first. Noteworthy, only three of the current EU members - Austria, Ireland and Norway are not NATO members, whereas Island is the only European state member of NATO not an EU member.
2. Moldova-Romania neighbourhood program
On April 1 a seminar entitled "Republic of Moldova - Romania neighbourhood Program" was held simultaneously in Iasi and Chisinau. At issue was the joint program document that represents the first step towards developing the Republic of Moldova - Romania neighbourhood Program. The former is a framework document that would outline the tasks, assess opportunities and risks of ongoing and future projects as part of Republic of Moldova - Romania neighbourhood Program. The program, launched as part of EU's "new neighbourhood" policy is aimed at fostering sustainable economic and social development in the neighbourhood regions, encouraging partnership building in responding mutual challenges, contributing to safe and secure borders, promoting cultural and social activities, etc.
V. Studies, analyses, comments
Competition of ideas for the public good
Igor Botan, 14 April 2004
Political life has been dominated lately by a competition of ideas among the leaders of the major political forces. So far, it's too early to say for sure whether the ideas voiced really clarify on political offers, or on the contrary complicate things even further
"Investment Boom": joining together banking capital and companies in real sector
Iurie Gotisan, 14 April 2004
Amidst recurring debates on economic issues in Moldova, a recently passed law has been unduly overlooked, namely the Law on Financial-Industrial Groups. At a first glance it seems to be a worthy piece of legislation once it seeks to boost investments in economy and establish competitive manufacturing branches