Democracy and governing in Moldova
e-journal, II year, no. 36, September 3 2004
Activity of public institutions
Studies, analyses, comments
Activity of public institutions
1.1. End of 2004 spring - summer session of the Parliament
The last plenary sitting in the spring-summer session brought tensions between majority faction and opposition. Leader of the Braghis Alliance came with the proposition Parliament not to leave for a vacation, until the conflict around the Romanian schools in Transdnistria was settled, as well as the conflict surrounding Teleradio-Moldova, where protest rallies of the former employees against re-hiring continued.
Parliament majority faction refused including Braghis' proposition in the agenda, consequently his faction left the session stating they left for Transdnistria and Teleradio-Moldova to study and get involved in the conflict settlement. Christian-Democrat faction only observed the session, however at the end it did release a declaration outlining their own vision on the conflicts and how they should be settled.
In response, Communist faction leader stated that situation surrounding Teleradio-Moldova was normal and actions undertaken by company leadership were in line with the law on which Council of Europe provided its expertise. He went on saying that certain political forces wanted to exploit the situation of laid-off workers to their own benefit so as to get political dividends.
Under given circumstances, President, Parliament Speaker and Prime-Minister delivered their speeches only in front of the majority faction and a few independents, as the other two factions left the room.
As for the Speaker, during the last session she made a summary of the current session, namely a special attention was given to agricultural and social sectors and local government. As usual, the Speaker pointed to the "unconstructive" attitude displayed by the opposition. Further, deputies were reminded that they were on peoples' service and great many of them had acknowledge that by being close to their voters, in contrast to the rest.
1.2. Legal acts
Under the Law on Granting Information and Security Service the Right to Baking Information, besides National Bank, its inspectors, accounting experts and authorized accountants, legal bodies, Court of Accounts, Centre for Combating Crime and Corruption, fiscal bodies, commercial banks are obliged to submit information on accounts considered doubtful to Information and Security Service as well. The reason behind this decision is to track suspicious transactions, fight money laundering and undercut funding of terrorist organization so as to ensure state security.
Law on the Amendment of Legal Acts on Privatization of Enterprises in Energy Sector reduced from 75% + 1 to 50%+1 the shares that may be auctioned. This enables the state to hold the enterprise under control. The move was inspired by the on-going conflict between authorities and "Union-Fenosa", owner of RED-Centre and Red-South Distribution Networks.
Noteworthy, several tenders have been held already for the privatization of distribution networks in state property, however all of them unsuccessful because of the low bids. Given that investors are offered a even lower share package, it is very unlikely that many of them would be interested in biding, which in the long run would allow monopolists such as RAO ES of Russia to buy assets at low prices.
Law on the Amendment of the Law on Acquisition of Goods, Works and Services for the State Needs is aimed at decentralizing the mechanism of public acquisitions. Under the law, National Agency for Public Acquisitions, which currently approves all the transactions, shall from now on only call the bids, examine acquisitions from a single source and examine complaints and litigations in the field. As for the rest of responsibilities, they shall be delegated to the organizations engaged in the acquisitions.
Under the Law on Non-enforcement of Sanctions for the Failure to Pay Land Tax, notwithstanding the legal provisions of the Fiscal Code, the deadline for taxpayers to pay in full the land fund tax for agricultural plots was extended to November 1, 2004. The move was inspired by the late harvest this year (tobacco, grapes, and vegetables, sunflower), etc. In 2004, 165 million Lei worth land tax were forecasted, out of which 42 million were already collected.
Law on the Modification of Legal Acts on Implementing Code on Science and Innovation amends legal acts so as to bring them in accordance with the recently passed Code on Science and Innovation. The following were amended:
Labour Code - so as to establish the terms of vacation for scientific personnel (30-42 de days); include additional conditions for the termination of the work contract (in cases of failure to pass attestation or hiring competitions).
Law on Public Service - so as to include the leadership of the Academy of Science and Supreme Accreditation Council in the list of public servants.
Law on Wages - so at to raise the wage category for the Academy leadership;
Fiscal Code - so as to avoid taxation of revenues incurred by enterprises, institutions and organizations from science and innovation activities. In addition, import and rendering science and innovation services within the country were exempted from VAT.
Law on Government - so as to allow delegating to Academy of Science responsibilities in the field of science and innovation, as well as include the Chair of the Academy in the Government.
At the proposition of the President of the Republic of Moldova a new decoration - Order "Faith to the Motherland" I, II and III degrees was introduced via the Law on Amending the Law on State Decoration. The decoration shall be awarded for: excellent military service; achievements in heading military forces; courage and sacrifice; excellent military service, work and public service, for acts of courage and initiative in combating crime, extremism and terrorism; The decoration represents a star having eight radiating points bearing the image of two spades on a golden shield.
And yet another important piece of legislation adopted by the Parliament is the Law on Amendment and Completion of Legal Acts on Securities. Under the law, securities issued by National Bank of Moldova deposit certificates (deposit certificates, bills, etc) shall not fall under the provisions of the Law on Securities Market. The reason behind the amendments is to help banks attract additional funds from the market and channel them into national economy. Specifically, it is expected to attract money wired home by Moldovans working abroad.
(For further details on Parliament activity see http://www.e-democracy.md/en/comments/legislative/)
- Given threat posed by corruption to political and economic stability of the country and Parliament's delay to pass a National Strategy on Preventing and Fighting Corruption and a relevant Action Plan, on August 3 Government passed an Action Plan to make the cooperation between law enforcement forces in combating corruption more efficient. The document provides for a series of measures already provided in the aforesaid strategy, but that can no longer be adjourned.
- Government endorsed on August 25 a draft law on penal liability for infringing copyright. The document envisages a string of amendments to the Penal Code so as to introduce a 800 to 1000 conventional units fine for plagiarism, total or partial reproduction, broadcast, exhibit, use in commercial purposes of art works by infringing copyright. Furthermore, repeated offences by criminal groups shall be sanctioned by three to five years in jail, or a fine from 4,000 to 5,000 conventional units.
- Also on August 25 Government endorsed a draft on Republic of Moldova joining the Convention on Prohibiting and Limiting Certain Types of Classic Weapons considered to produce excessive damages, passed by UN in October 1980.
During the closing of the spring-summer session of the Parliament, Prime-Minister Tarlev reported on Government's activity. As reported, during the first quarter of the year GDP grew by 6.1%, gross added value by 7.1% over last year, whereas gross fixed capital formation by 14.4%. Vasile Tarlev pointed that in the last six months of the year, revenues to the consolidated state budget reached 3 billion 231 million Lei, i.e. a 13.8% growth on last year, whereas allocations from state budget amounted to 3 billion 395.8 million Lei, a 22.5% growth over last year. Hence, in the first half of the year an increase was registered in: revenues to the social insurance fund (by 23%, reaching 1 billion 245.9 million Lei); industrial and agricultural output by 113.1% and 100.9% respectively over 2003. Similar growth was registered in retail by 13.1% and services by 7.3% over last year. Another indicator of economic growth cited was the 36% boost of exports.
At the end of July, President Vladimir Voronin addressed a letter to Parliament calling for the revision of the Constitution of the Republic of Moldova so as to establish nationwide a new mechanism entrusted to settle domestically any human rights litigations. The goal of that institution would be to issue final judgement on the human rights violations. In his letter to the Parliament, President pointed that Constitutional Court should be delegated the responsibility to rule on any complaints or applications submitted by legal or natural entities as regards violations of human rights and freedoms provided for in Title II of the Constitution or any other international treaty Moldova was part to, as a result of a law, administrative act, court judgement, or any omission of public authorities.
President's initiative is in line with the recommendations repeatedly made by international and domestic organizations working in the field to amend the law so as to allow natural entities to appeal in Constitutional Court.
Nevertheless, many voiced their lingering concerns with regard to the success of the initiative citing many more reforms that failed recently, inefficiency of court rulings' enforcement, as well as deficiencies in appointing judges.
1. Debt burden pressures on state budget
As of August 1, economic agents' debt to state consolidated budget amounted 1,059 million Lei (88.2 million USD) a 9% increase (87.5 million Lei), reads a press release issued by the State Fiscal Inspectorate.
"Bad debts" represent 72% (761 million Lei) out of the total debts. Among the debtors are economic agents who failed paying for three years in a row accounting for 226 million Lei, those who are in litigation accounting for 102 million Lei, and those declared bankrupt accounting for 97.5 million Lei, as well as enterprises without any patrimony 100,7 million Lei. Thermo-energetic companies owe another 228 million Lei.
On the one hand Fiscal bodies indicated that they managed to drop the debt to the state consolidated budget in 24 of the rayons. On the other, in Chisinau municipality alone the debt surged by 96 million Lei, especially to "Moldova-Gaz" 45 million Lei.
Hence, last week Government together with State Creditors Council decided to freeze historic debts of tobacco companies and several companies in the energy sector, worth 200 million Lei. The move involves high risks for three main reasons. To begin with it sets a negative example. Big debtors, state-owned enterprises, might be encouraged to believe that sooner or later they would again enjoy such big favours from the state. Therefore they would hold paying debts to the state budget expecting that the state would forgive them once again. However, small enterprises would even dream of such favours. They know that fiscal bodies are not as merciful when it comes to small enterprises. This brings us to the second risk: such moves undermine on the very principle of competition. It's all about discrimination of those who enjoy favours against those who don't. Finally, unless freezing debts is not accompanied by payment of current debts, in a year or so Moldova would be on the verge of collapse. Financial blockage would be so huge that it would suffocate the state budget and private sector. This "ticking bomb" would explode one day and bring about a major financial collapse. The aftermath of that explosion would hit us no matter how hard we try to hide behind balanced budget. In the given circumstances one should consider all the implications of such moves, so as not to trade the bird in the hand for the two in the bush.
2. Republic of Moldova - a high inflation rate country
According to Central Information Agency, Moldova ranks 192 with a 11.7% inflation rate in 2003 among other 221 nations. Moldova follows Serbia and Montenegro, Turkmenistan, Burundi and is ahead of Nigeria, Russia and Romania. The highest inflation rate was registered in Angola and Zimbabwe.
In 2003, 150 countries registered an inflation rate below 5%, while 100 registered a price hike of up to 3%. In July, annualized inflation rate for Euro zone reached 2.4%, i.e. 0.4% higher than the 2% recommended by European Central Bank.
According to official statistics, consumer price index in Moldova for 2003 amounted to 15.7%, while average index per year 11.6%. State budget for 2004 was based on a 4.5% inflation rate. However, after the release of official data on the evolution of Moldovan economy in 2003, Ministry of Economy adjusted its forecasts to a 10% inflation rate. In its turn, National Bank of Moldova and IMF forecast an inflation rate ranging from 8% to 10%. In the first quarter of the year the inflation rate reached 4.5%. With a 10% annualized inflation rate, Republic of Moldova would have ranked 184-185, if the other countries were to stick to 2003 inflation rate. For 2005 Moldovan Government predicts a 8.9% inflation, whereas for 2006 just 6.0%.
3. Moldova's reserves are better-off
National Bank of Moldova has increased its foreign currency reserves in July by another 23 million USD to a total of 319 million USD, reads a press release issued in late August. For the second month in a row now a significant increase in reserves is being registered (in July by 25 million USD), after a decrease in May by 39.7 million USD. Central Bank bought on the domestic interbank marked that in July traded 36 million USD and 145 thousand Euro.
Long term deposits account for the greatest part of the reserves, 241.21 million USD, including in other central banks - 79.80 million USD and in foreign commercial banks - 161.41 million USD. Securities account for 77.38 million USD. National Bank also holds special drawing rights (SDR) worth 119.26 thousand USD and a reserve position at IMF worth 7.28 thousand USD. National Bank's goal for 2004 is to keep the reserves at an acceptable level so as to cover the imports for at least three months.
Experts forecast that in 2004 National Bank would purchase foreign currency to swell its reserve to 335-350 million USD.
The unresolved issue of Moldovan Latin script schools from the Transnistrian region in due time determined the Moldovan authorities to introduce on 1 August the following measures against the Transnistrian economic agents who do not fulfil their fiscal obligations towards the Moldovan state budget: suspension of the issue of customs papers, denial of transportation services to Transnistrian companies, and suspension of all regulations on the activity of Transnistrian companies.
According to a number of statements by Moldovan officials, these measures are not economic sanctions but rather aim to legalise the Transnistrian economy and level down the conditions of activity of the economic agents from the two sides of Nistru River. Both the Transnistrian side and the Russian Federation though called the measures "total economic blockade" against the "people of Transnistria".
In reaction to these measures, the Transnistrian administration blocked on 2 August the railways connecting Chisinau with the southern part of Moldova and with Russia and took over by force the administration of the offices of the Moldovan railways situated in the region. In addition, the Transnistrian power plant in Cuciurgan, which provides 70% of electricity for the central and southern parts of Moldova, cut off supply to the distributor Union Fenosa.
Several days after the measures imposed by the Moldovan Government entered into force, Ukraine expressed concern with the limitation of railway traffic across the customs points at the Transnistrian sector of its border with Moldova. Reportedly, the Ukrainian customs authorities have been allowing trains to enter Transnistria from its territory in disrespect of the measures imposed by Moldova. This determined the Moldovan authorities to stop from 20 August all export-import operations over the Transnistrian segment of its border and to threaten that from September it would also stop the circulation of transit and passenger trains. Earlier, the Moldovan Prime Minister Vasile Tarlev sent his Ukrainian counterpart a letter whereby he explained the reasons behind the measures imposed by the Moldovan Government and urged Ukraine to abide by the customs agreements between the two states and the regime of state frontier.
The ever more alarming situation from the east of the republic was the motive for the visit on 9-12 August to Chisinau, Tiraspol and Kiev of an European Union delegation headed by Robert Cooper, Director General of the Department for External and Politico-Military Relations of the European Council. During the same days, Chisinau and Tiraspol was visited by a special envoy of the Russian Ministry of Foreign Affairs Igor Savolski. Both the EU delegation and the Russian envoy called upon the two parties to resume negotiations in the five-sided format and to solve the schools issue through talks.
Despite the "good will" and the openness for dialogue of the Transnistrian authorities noted by the members of the EU delegation, a few days after these left the Transnistrians toughened their actions against the orphanage in Tighina (Bender), where for several weeks children and teachers blocked themselves inside to prevent the school from being taken by force by the Transnistrian militia. Following a number of altercations between the militia and the representatives of the OSCE Mission to Moldova who were trying to get food and water to those inside the school, the Transnistrian administration on 17 August denied to the OSCE access into the region, accusing it of deliberately trying to destabilise the situation and of interfering in the internal affairs of the "state of accreditation".
In parallel with the campaign against the schools, armed Transnistrian militia blocked the roads that connect the villages Pohrebea and Cosnita - both villages are situated on the left side of Nistru but are under the jurisdiction of Chisinau - to the agricultural fields belonging to the farmers of these two villages across the Camenca - Tiraspol motorway on ground that these do not have lease contracts with the Transnistrian authorities. After a brief intervention by the peacekeeping forces, and despite a JCC decision, the Transnistrians installed a permanent check point at the exit from Pohrebea village.
On the background of this chain of actions of mutual sabotage and threatening, President Voronin told a Cabinet meeting convoked upon his return from holiday that the Chisinau authorities would treat the Transnistrian administration as a "totalitarian regime of fascist nature" and that the negotiations with Tiraspol "will be resumed only when the Transnistrian region democratises and the Transnistrian population is liberated from the junta who has usurped the right to talk on behalf of an entire region". President Voronin also criticised the mediators who, according to him, have become some "advocates of the Transnistrian regime" and accused the Ukrainian customs of sabotaging the custom agreements with Moldova.
Local commentators have saluted the categorical tone of President Voronin and his criticism of the mediators, who are perceived by an important part of the Moldovan public opinion as biased and hence unhelpful in resolving the Transnistrian problem. This has been the first time too when the President characterised in such tough terms a factual state that has become so much evident in light of the latest event i.e. the inefficiency of the mechanisms of conflict resolution instituted after the 1992 ceasefire. Thus, the five-sided negotiations format has proved totally inefficient in helping parties overcome their divergences and sustaining dialogue between them, the JCC decisions are being ostentatiously neglected by the Transnistrian administration, and the peacekeeping forces have proved unable to maintain stability in the security zone and ensure the implementation of the JCC decisions. It is not surprising that a few days after the President made these statements, Russia and Ukraine, both mediator states, issued a common statement in which they expressed their concern with regard to the stalemate to which the process of the Transnistrian conflict settlement has come.
At the same time, western observers have shown concern with the recalcitrant tone of President Voronin, which is far from helpful under the current situation and will worsen further the already tense relations between Moldova and Transnistria. President Voronin's statements are all the more so out of place given that at the moment there are no real possibilities of implementing alternative mechanisms for the resolution of the Transnistrian conflict.
Studies, analyses, comments
Iurie Gotisan, 3 September 2004
For a while now the energetic sector that is of vital importance for the economy has become a battle field where political and economic interest collide. On the one hand, there is a struggle between domestic players in the field, and on the other there is an increasing pressure from several Russian companies seeking to extend their spheres of economic influence in Moldova
Education - where is it heading?
Ion Basiul, 3 September 2004
Drifting towards market economy, Republic of Moldova is confronted with numerous political, economic and social problems. Far from being encouraging, especially given the worsening situation in education, which after all is the main pylon of the human development in Moldova