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Democracy and governing in Moldova
e-journal, II year, no. 29, 28 April 2004
Activity of public institutions
Studies, analyses, comments
I. Activity of public institutions
1.1. Incidents one after another
After Christian-Democrats were denied the right to address questions and inquiries to Government on the grounds confrontation was to be avoided on the eve of Easter, they were again denied this right the week that followed. As Parliament convened on Friday, it was possible to avoid the Government interpellation usually scheduled for Thursdays. Lack of Government interpellation for two weeks in a row determined Christian-Democrat leader to ask the floor right at the beginning of the plenary session. As he was denied, Iurie Rosca blocked the central tribune and one of the microphones in the hall. Therefore the session was held using the other microphones. At the end of the session, Iurie Rosca read a declaration accusing the Speaker of breaching oppositions' rights and concealing information requested by opposition.
During the next session on April 22 Christian-Democrats again blocked the tribune and called on Speaker Ostapciuc's resignation. In an altercation, Communists took deputy Vlad Cubreacov by force out of the plenary hall. The session continued despite the fact that the tribune had been blocked. At the end of the session, Eugenia Ostapciuc announced that during the next session Parliament regulation should be amended to include emergency procedures to allow police to intervene against deputies who obstruct Parliament activity.
1.2. Legal acts
Despite the rich harvest of criticism and objections, still, the Parliament passed the Law on Offshore Tax. The law perfected and clarified on quite contradictory provisions. The law defines offshore tax and offshore zone. The list of offshore zones is to be approved by the Government. The law also outlines the subjects of taxation, namely legal or natural entities, residents of the Republic of Moldova falling in the categories outlined in fiscal legislation, engaged in trade and financial transactions via offshore zones. The law also outlines which particular operations shall be subject of taxation.
Off-shore tax shall be paid to the state budget by the residents of the Republic of Moldova, subject to taxation, in MDL at the official National Bank exchange rate equal to 15%. Offshore tax shall be considered part of general and administrative expenses and shall be deducted from the income subject to taxation when calculating income tax. In case of delay to pay the offshore tax in due time a fine shall be calculated in line with the Fiscal Code provisions. Failure to comply with reporting regulations shall be also sanctioned.
It is worth mentioning that one of the major objections to the law was that it would propel fuel prices upwards, as well as prices on other imported goods; affect current and would-be investors; raise contradictions between national law and international treaties providing for elimination of double taxation, etc.
Resolution on approving Regulation on spending funds from the Agriculture Development Fund adopted by the Parliament regulates the method of spending the agriculture development fund worth 36 m MDL. Under the Regulation approved by the Parliament, 22 m MDL shall be administered by the Ministry of Agriculture and Food Industry and be used to subsidize and support crediting of enterprises producing agriculture products by commercial banks, savings and loan association and Rural Financing Corporation. Another 14 m shall be administered by "Moldresurse" State Enterprise and be used to build agricultural machinery centres. The regulation also provides that subsidies granted to one enterprise shall not exceed 85 thousand MDL per year.
(For further details on Parliament activity see http://www.e-democracy.md/en/comments/legislative/)
- Government developed a draft law on reorganising investment funds operating on the securities market into mutual investment funds due to their inefficiency on the investment market. Under the draft, shareholders would get substantial financial resources by redeeming their shares and would be able to decide whether to exchange the fund's shares for the shares of the joint stock ventures in the fund's portfolio. Non-mutual investment funds shall be able to redeem the shares by November 2004, at the prices set by the mutual funds. In addition, the minimal redemption price shall not be lower than 50% of the share nominal value.
- Government has recently established a Coordination Committee for abolishing barriers to international transportation, as well as its membership. Vasile Iovv, Senior Deputy Minister was appointed as Committee Chair, whereas Vasile Zgardan, Minister of Transportation and Communications as Deputy Chairperson. Grigore Baltag, Chief of Industry and Infrastructure Department of the State Chancellery was appointed as the Committee Secretary. The newly established Committee will form task forces to abolish cross-border barriers in line with the Convention TIR, to simplify customs procedures and visa issuance to drivers. In addition task forces would work out procedures for abolishing technical barriers and will look at correct and simplified enforcement of the requirements on the vehicle capacity and dimensions, will adjust domestic framework and normative requirements to international standards, and develop propositions on implementing the international weighting certificate. Other actions would include improving fiscal legislation and drafting amendments providing for gradual abolishment of local and special taxes, enforcing "Green Card" insurance, annulling or decreasing fees for transit and for the amount of fuel in the tank, etc.
- State Creditor Council will conclude a Memorandum with "Covoare-Ungheni" joint stock venture on restructuring its debt to the state budget. Accordingly, debts worth 15 m MDL shall be restructured for a five year period. A draft in this respect was endorsed by the Government last week. Noteworthy, "Covoare-Ungheni" activity is regulated by yet another Memorandum concluded with the State Creditor Council back in 1996. Back then the company incurred 33.8 m MDL.
So far, the company managed to pay back 56% of the total debt. Under the Memorandum, the entire debt is to be paid by June 30, 2005. A study of the economic and financial situation of the company found that it wouldn't manage to pay back the debt in due time. Noteworthy, "Covoare-Ungheni" is a private company. In 2003 its net sales reached 75 m MDL, a 3.7 m surge over the previous year. Last year the company had a 6.8 m MDL gross profit.
- Also last week, Government approved a draft law on modifying and completing the Law on Licensing several types of activities. It simplifies the procedures of issuing licences to businesses. Under the draft, second level local public administration shall be entitled to issue licenses for the retail sail of alcohol beverages and tobacco.
Another modification reduces and merges types of activity subject to the Law. Currently the law provides for 58 types of activity subject to licensing, whereas under the draft only 47. Such activities as judicial expertise, archaeological research, etc are excluded.
To de-bureaucratise licensing, it is proposed to exclude the obligation to submit a certificate to the effect that applicant has not outstanding debts to the state budget or social insurance fund. According to Zinaida Chistruga Chief of the Licensing Chamber, currently the law provides that if the applicant has such outstanding debts the license should be withdrawn. Also the move, would enable applicants to save money as authentication of relevant documents would no longer be needed.
3.1. Fighting corruption
President Vladimir Voronin met Holly Wiseman, American expert on fighting corruption that coaches the Centre for Fighting Economic Crime and Corruption (CFECC) in its restructuring efforts. Also present at the meeting was US Ambassador Heather M. Hodges. At issue were ways of making the Department's activity more efficient. President Voronin underlined that fighting corruption was topping authorities agenda and he asked for expertise of the National Strategy of Preventing and Fighting Corruption and Action Plan to enforce it. Noteworthy, the two documents were adopted during the recent session of the Supreme Security Council. Their aim is to put an end to corruption, which according to President Voronin "impedes social-economic development of our country, undermines any reform in the Republic of Moldova, and has become a real issue for state security".
President reiterated his harsh position towards CFECC on April 23. During the Centre's session President Voronin severely criticized CFECC for falling short of the very purpose it had been established for. To eliminate the flaws President recommended streamlining Centre's activity, its active participation in improving the legal framework so as to eliminate sources generating corruption, concentrating on analytical work and preventing corruption, and closer co-operation with law-enforcement forces.
3.2. Top priority of the Republic of Moldova's home and foreign policy
President Voronin took part in the graduation ceremony of the European integration courses by 35 public officers working in various ministries and state departments. On this occasion President once again reiterated European integration as a top priority of Moldova's home and foreign policy, which is quite opposite from what he stated on February 21 during a Government session called to prioritize tasks for 2004. Back then President outlined "social modernisation of the state" as a top priority. As for European integration, it ranked the second among the Government's priorities together with "modernizing economy" followed by "country reintegration and state security". At the end of that session President said "members of the Government should solve the problems outlined by being accountable and committed as a statesman should be, understanding that there are no insignificant details in exercising power" (Moldova suverana, #29 (20431), 24 February 2004).
II. Economic polies
1. Foreign economic relations
An official delegation of the Republic of Moldova headed by Minister of Economy Marian Lupu flew to London for the annual reunion of the ERBD Board of Governors on April 18-20. Marian Lupu made a presentation on the country's economic success throughout 2003. Afterwards he met businessmen - potential investors for Moldova.
As part of the ERBD reunion, Moldovan delegation had a number of important meetings, among others with ERBD President, Jean Lemierre; Director General of the UK International Development Department, Nicola Brewer; representatives of European Commission; as well as official delegations of Romania, Russia, Ukraine, Armenia, Netherlands and Japan.
Republic of Moldova was short listed for larger financial aid from ERBD. The bank is set to increase its investments from 90 m to 150 m Euro per year for the seven most poor former soviet republics, namely Armenia, Azerbaijan, Georgia, Kyrgyzstan, Republic of Moldova, Tajikistan and Uzbekistan, declared ERBD's President Jean Lemierre.
The initiative provides among others increasing investments in private sector, granting credit lines to local banks, easing trade, and investments into the public services. ERBD is ready to grant credits with no state guarantees. A recent ERBD report predict a 4.9% economic growth this year in Eastern Europe and former USSR. This would be the fifth year of economic growth in the region.
In the 11 since it granted the first loan project in the Republic of Moldova, ERBD's projects reached a total of 170 m USD. It is the only foreign investor that invested both in governmental and private sector. Moldova accounts for only 0.9% out of the total 29 projects credited by ERBD in transition countries both in Central and Eastern Europe and Central Asia. In Moldova the greatest bulk of investments worth 50 m USD went to financial and banking sector and infrastructure.
ERBD provides project financing for banks, industries and businesses, both new ventures and investments in existing companies. It also works with publicly owned companies to support privatisation, restructuring state-owned firms and improvement of municipal services. It was established in 1991 by 40 European states. It invests only in Central and East European countries with 60% of the funds going to the private sector and 40% to public sector, especially for infrastructure.
Parliamentary Commission on economy, industry, budget and finances announced discussions on the draft law on modifying the Law on Privatization for this week. According to the draft "state shall not guarantee property rights over units located to the east of Dniester and Bender town that were privatised without a prior consent of Chisinau governmental authorities".
Several opposition deputies, members of the Commission, stated the initiative is useless since Transdnistria is not subordinated to Chisinau. Nevertheless, Communist deputies endorsed the draft. According to the Commission Chair Nicolae Bondarciuc, the draft law was "a warning" to foreign investors willing to invest in Transdnistrian region. In response to Bondarciuc, another deputy Valeriu Cosarciuc rightly pointed that one of the functions of the Ministry of Foreign Affairs of Moldova was to inform foreign investors on the risk of loosing their properties in Transdnistria, unless it was agreed upon with Chisinau.
1. Transnistrian settlement talks
The OSCE Mission in Chisinau has announced the resumption of talks on the Transnistria settlement on Monday, 26 April, when representatives of the mediators from Russia, Ukraine and the OSCE are to meet. These will draft the agenda for a five-sided meeting including Moldovan and Transnistrian representatives that will take place on the next day in Chisinau. This will be the first meeting in the five-sided format after the interruption of talks five months ago following the failure of the Russian proposal on the future federal state also known as the Kozak Memorandum.
At the same time, during the period covered here we learned that the Russian Ambassador with Special Missions, Alecsandr Novojilov, who for many years led the Russian delegation within the negotiations, has been replaced by another Russian diplomat, Valeri Nesteruskin. The information has been only confirmed unofficially by the OSCE Mission and the Russian Embassy. The Russian Foreign Ministry has not given any explanation for this replacement.
It seems that due to this change of staff the negotiations did not resume on 21 April, as previously announced by the Transnistria leader Igor Smirnov. The latter, while on a visit to Moscow a week ago, had announced that the Transnistrian side was to present to the meeting its proposals on the political plan drafted by the mediators under the OSCE aegis last autumn. According to Smirnov, those proposals drew largely on the Kozak Memorandum.
During the same visit to Moscow, Smirnov attended a closed meeting of the Parliamentary Group "Rodina" in the Russian State Duma, to which he made a presentation on the political and economic situation in Transnistria. Also in Moscow, unofficial sources have reported, Smirnov was given the award "Slava Rosiyi", a Russian Federation civic award acknowledging outstanding achievements in the business, scientific research, civic, etc. fields. Although the fact that Smirnov got the award was not officially confirmed either by the Russians or by the Transnistrians, the event has irritated the Moldovan authorities, mostly due to the fact that reportedly the award was handed in to Smirnov by the Russian President Advisor Serghei Samoilov.
Local observers have noted that the visit of Igor Smirnov to Moscow just before the resumption of the political negotiations denotes Moscow's tacit support for the break away regime, but also Moscow's intention to further promote the Kozak Memorandum as the basis for future political talks between Chisinau and Tiraspol.
2. American diplomat specifies the US position on the Transnistria settlement
Stephen Pifer, Deputy Assistant to the US State Secretary, reaffirmed during a press conference held at the end of his visit to Moldova on 22-23 April that the US supports the current format of talks on Transnistria as the optimal one, but that at the same time the US and its partners from the EU are looking for ways to bolster the work of the format.
In reference to the Kozak Memorandum Pifer reminded that the US, as well as other OSCE Member States uphold their objections to the plan, in particular with regard to its provisions on the division of power between the central authorities and the federal subjects. Pifer appreciated Moscow's efforts at speeding up the resolution of the Transnistria conflict but said the US will make sure that all such efforts are being channelled through the OSCE.
3. Privatisation in Transnistria
Despite the fact that the Moldovan authorities do not recognise the privatisation process in Transnistria, the Tiraspol administration has announced that another 40 economic units will be added to the list of companies put up for privatisation this year, given the great interest that foreign companies have expressed in buying these.
IV. Foreign affairs
1. Chairmanship of the CIS Council of Government Heads
Prime-minister Vasile Tarlev has taken over the Chairmanship of the CIS Council of the Governmental Heads at its April 16 reunion at Ciolpon-At (Kyrgyzstan), after Iuri Iarov, Chairman of the CIS Executive Committee officially asked for President Voronin's endorsement in this respect.
A raft of agreements were signed during the reunion aimed at boosting co-operation within CIS, among others: Agreement on introducing international certification for weighting vehicles; Resolution on complying with financial pledges by CIS member states; Resolution on financial measures required for establishing a unified anti-aircraft defence system, etc.
2. Republic of Moldova - EU Action Plan
Republic of Moldova's top priority, i.e. to join EU, outlined by President Voronin during the graduation ceremony of European integration course, was once again reiterated by Minister of Foreign Affairs, Andrei Stratan in an interview to "Radio-Moldova" on April 24. "Individual action plan Republic of Moldova - European Union might be signed in June this year by diplomats in Brussels and Chisinau and later on adopted by the EU's Ministerial Political Committee [probably referring to General Affairs and External Relations Council - ADEPT comment] and Moldovan Government" said Stratan.
Noteworthy, the Action Plan was due to be approved in May this year. The delay was largely due to the adjournment of the third round of negotiations, which was initially scheduled for mid-March and was to be resumed at the end of March or early April.
V. Studies, analyses, comments
1000 and 100 days of the Government of V. Tarlev
Anatoli Gudim, 28 April 2004
On April 19, 2001 Parliament has quickly - in a half an hour - approved the Programme of activity of the next, the 9th beginning from 1990, Government of the Republic of Moldova. Contrary to expectations of skeptics (despite multiple changes to the team made during the "game") it is this government that turned out to be a long-liver
NATO is expanding, whereas Moldova ...shrinking?
Viorel Cibotaru, 28 April 2004
As it was to be expected, Moldova's reactions to seven new states (Romania, Bulgaria, Slovakia, Slovenia, Latvia, Estonia and Lithuania) joining on April 2 the North Atlantic Treaty were reserved and prudent (from authorities) and contemplative and imminent (from opposition and analysts alike)