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Democracy and governing in Moldova
e-journal, II year, no. 37, August 30 - September 12, 2004
Activity of public institutions
Studies, analyses, comments
I. Activity of public institutions
On September 2, Government appointed Elena Mocanu, Nicolae Esanu and Ion Dron as Deputy Ministers of Justice and ousted Nicolae Taran from his position as General Director of the State Agency for the Protection of Industrial Property as the agency was liquidated.
At the initiative of the Supreme Security Council that found deficiencies in the security of flights from the Chisinau International Airport, on September 3 Government ousted several officials in the Security Department of the State Civil Aviation Administration (SCAA) and police. For the same reasons, Government decided on disciplinary sanctions for Ion Crohin, Director of SCAA and Vladimir Botnari, Senior Deputy Prime Minister.
Also, Government replaced Valeriu Starenco with Boris Cojuhari as plenipotentiary representative of the Republic of Moldova to the General Shareholder Assembly of CIS Mir TV station.
- One of the most important decisions Government passed recently was opening a permanent mission of the Republic of Moldova at the European Commission. According to the Government press service, "opening a permanent missions at the European Commission is justified by the impact it would have on Moldova's image, reconfirming seriousness of our country's aspirations to join European Union". According to the same source, Mission's short term objectives would include European integration and implementing Republic of Moldova - EU Action Plan, and mid-term ones - furthering the status of contractual relations between Moldova and European Union.
The move is worthwhile especially since from 1999 on European integration was declared as Moldova's top interest, however there was no Moldovan Mission to further this goals. Recent developments of the European continent - EU enlargement, EU becoming a world player, new cooperation mechanisms within "new neighbourhood" - further support the need to open the mission. Hopefully, EU would follow the initiative and open a similar Mission in Chisinau to strengthen the ties with the Republic of Moldova.
- While risking to drop the budget revenues forecasted for 2004, Government proposed excluding 78 economic entities from the list of units due to be privatized, where the state is the majority stakeholder. The decision was taken amidst falling revenues, as of July 1 only 8.4 million Lei out of the 323 forecasted were levied.
The move is quite opportunist considering that the Government is responsible for drawing annual budgets, based on the previous revenues from privatization.
Under the Government motion, the two central thermo stations CET-1 and CET-2, Telenesti Diary Factory, Auto company of the Chisinau Industrial Zone, Factory for fast freezing based in Chisinau, Bottling Factory of the "Dacia-Fenix" Winery from Ialoveni, Wine warehouse in Suruceni, two brick factories in Chisinau and Cahul, and other social companies are to be excluded from the privatization process.
- In line with the recommendations of the UN Centre for Trade Facilitation and Electronic Businesses, Government established MOLDPRO Committee to facilitate the national foreign trade and international transportation regulations. Furthermore, Government approved Committee's regulation and the list of ministries, departments and professional associations that are to delegate their representatives to the Committee. According to the Regulation, MOLDPRO is a consultative body, not-for-profit, not a legal entity. Committee's decisions are consultative and are issued as recommendations to the governmental institutions. MOLDPRO has the following responsibilities: identify and notify on any inconsistencies in the domestic law and EU laws; come up with propositions on adjusting national legal framework on foreign trade and international transportation to EU standards; disseminate information on the best practices in international trade; conduct trainings, seminars and conferences on the techniques facilitating the adjustment of trade proceedings, etc.
- Another Government motion refers to setting a moratorium on changing the routes and building new edifices in the historic centre of the city and green areas of Chisinau Municipality, thereby decreeing the latter as an area of national importance under the state protection.
- On September 3 Government approved the membership and regulation of a Governmental commission entrusted to look at negotiations, contracting and spending of state foreign loans and state guarantees on that loans. Commission members are entrusted to take part in the negotiations and providing guarantees, examining Government rulings on accepting state foreign loans, reviewing documentation submitted by businesses applying for funds, i.e. state loans. Furthermore, Commission would examine amendments to the credit and guarantees agreements, oversee implementation of projects funded from state foreign loans, and shall be entitled to ask relevant bodies to submit data and propositions on negotiating guarantees for foreign credits and contracting such credits.
- Government also endorsed the draft law on Republic of Moldova joining Rotterdam Convention on procedure of preliminary agreement subject to certain dangerous chemical products and pesticides traded on international market.
- Another international instrument endorsed by the Government is the draft law on Republic of Moldova joining Amendment 1 of the Convention on Prohibiting or Limiting the Use of Certain Conventional Weapons Causing Excessive Harm.
2.1. State Budget for 2005
During a meeting with decision makers, President Voronin outlined the requirements state budget should meet. President believes "State budget of the Republic of Moldova should be objective and should seek to further the strategic goals of the country. Budget priorities should follow the objectives included in the Poverty Reduction Strategy". According to the press service, President also pointed to the need of consolidating mechanisms of economic growth and supporting profitable branches of the national economy, i.e. winery, tobacco, sugar beat and farming. Further, the need of social orientation of the state budget was mentioned, namely healthcare, education, science, gas supply, water supply, road infrastructure.
II. Economic policies
1. Republic of Moldova's economic security
In a recent report by International Labour Office (ILO) "Economic Security for a Better World" Republic of Moldova ranks 43rd with a 0.495 point rating, i.e. low economic security level. Seven different criteria were used in developing the report, in particular job market, social security, etc. In the context of the Central and Eastern Europe and CIS, the report reads that the situation in Republic of Moldova, Azerbaijan, Russia and Ukraine is worse-off than the official statistics data. Eastern Europe is viewed as a region having a lower economic security recently.
According to the ILO's estimates, Republic of Moldova follows Russian Federation and Belarus but outruns Romania. Sweden has the highest rating (0.977 points) followed by Finland (0.947 points) and Norway (0.926). The report includes estimates for countries representing more than 85 per cent of the world's population, and says such economic security -coupled with democracy and government spending on social security - not only benefits growth but can also promote social stability.
According to another ILO report released in 2003, workers in the Republic of Moldova work 500 hours more than their EU colleagues. Under Moldovan Labour Code total work hours per year amount to 2,000 hours, while in Germany and France no more than 1400-1500 hours. Finally, according to a study by European Employers Federation Moldova has the lowest average salary, i.e. 0.32 Euro per hour, only 1.14% of the maximal European salary; and the lowest GDP per capita of only 230 Euro.
2. Deficiencies in the foreign trade
According to the latest report of the Statistics and Sociology Department, trade deficit is growing and has reached 380 million USD in the seven months of the year. In January - July exports grew by 33.4% and have outran imports that increased by 31.5%. Albeit exports grew faster than imports, trade deficit swelled by 28.9%, whereas the ratio of exports covering imports has reached 58.8% in the seven months of the year.
In the same period Republic of Moldova registered a trade deficit with EU countries - 135.1 million USD, with CIS - 129.3 million USD, Central and Eastern Europe - 37.1 million USD and with other countries - 77.6 million USD. Moldova has the highest negative balance with Ukraine, worth 189 million USD. Experts explain this trend by the growing imports of energy, raw materials and other goods. In January - July 2004, Moldova's foreign trade reached 1461.7 million USD. Moldova's exports of goods and services amounted to 541.3 million USD, whereas imports 920.4 million USD.
Government forecasted for this year exports worth 900 million USD and imports worth 1,525 million USD, and a 625 million USD deficit. Independent experts have their own takes on the subject. According to their forecasts, imports would continue to grow at a faster pace (26.3%) than exports (22.8%) and therefore the trade balance deficit would reach 810 million USD by the end of the year.
3. Macroeconomic forecasts
Government counts on a 5% economic growth throughout 2005-2007, according to Mid-term expense estimate for 2005-2007 (MEE), published in September "Official Monitor". A tentative forecast for 2005-2007 developed by the Ministry of Economy reads that in case of the moderate scenario a 5% annualized economic growth is to be expected, as well as a 5% inflation drop by 2007 and slow depreciation of the exchange rate to 15.8 Lei per USD by the end of 2007.
According to the same document in 2005 GDP would reach 34.9 billion Lei, in 2006 - 38.8 billion, and 42.8 billion Lei in 2007 (currently 1 USD~12.12 Lei). A 8.9% inflation rate is forecasted for 2005, 6.9% for 2006 and 5.5% for 2007.
Exports would surge to 1.02 billion USD in 2005, 1.14 billion USD in 2006 and 1.265 billion USD in 2007. Imports of goods worth 1.632 billion USD is forecasted for 2005, 1.73 billion USD for 2006 and 1.825 billion USD in 2007.
Ministry of Economy says this is a tentative forecast, which might be adjusted later on, as was the case with the 2004 forecasts. While developing the budget for this year a 5% economic growth and a 4.5% inflation rate have been used, later on however the figures were adjusted to 8%, and 10% respectively. Draft budget for 2005 is based on a 6% economic growth, one percent above the MEE's tentative forecasts.
GDP estimated for the first half of the year surged by 6.1% in real terms over same period in 2003, more than one point above Government predictions. Given the record high cereal harvest and high expectations over the overall harvest, no one doubts that Moldova would indeed register a 6% growth this year. At the same time, despite this growth inflation rate for the first half of the year was 13.3%, Moldova ranking the second among CIS countries, closely following Belarus with 20.3%. Anyway, data on the GDP evolution in the six months of the year handily outstrip all the forecasts, be it domestic or foreign, on the evolution of Moldovan economy this year and this largely due to the boom registered in the second quarter. Noteworthy, great many international financial institutions forecasted a 5% growth for Moldova this year.
III. Transdnistrian Conflict
Despite statements made earlier by the break away leader Igor Smirnov that all the schools from the Transnistrian region will start the new academic year under normal conditions, two of the eight Moldovan Latin script school - the lyceum "Evrica" from Ribnita and the school no. 20 from Tiraspol, where about 1200 children are taught, continue to be sealed, and the orphanage in Tighina (Bender) is still disconnected from the water supply.
This has determined the Moldovan authorities to call upon the international community and the mediators in the Transnistrian conflict resolution to step up efforts to influence the Transnistrian authorities to solve the schools issue, whereas the OSCE Mission in Moldova called once more upon the two parties to resume negotiations in the five-sided format and said that the schools issue that has served as a trigger in stalling the negotiations process is far from being settled.
Meanwhile, the Tiraspol authorities celebrated on 3 September the 14th anniversary of the "independence" of the self-proclaimed "moldovan transnistrian republic" and organised a military parade to assert once more their self-sufficiency and show its honourable guests from Russia, Ukraine, South Ossetia and Abkhasia, as Smirnov himself put it, that at present Transnistria is able to resist any military aggression with its own means.
A few days later, the forces with special destination and the Transnistrian militia engaged in another demonstration of force, this time in a real life situation, and took by siege the railway station and the railway depots in Tighina (Bender), whereby they aggressed physically several employees of the Moldovan railways and arrested the chief engineer of the Tighina (Bender) station and a journalist from the Moldova 1 TV Channel. The sentence of the two arrested to 15 days of detention was condemned by the Moldovan authorities, and the Moldovan General Prosecutor's office opened a criminal investigation in the case of the siege of the railway station and depots in Tighina (Bender) and the arrest of the Moldovan journalist.
The tensioned situation in the Transnistrian region was discussed on 9 September within the meeting of the OSCE Permanent Council in Vienna, which, according to a communique by the Moldovan Foreign Affairs Ministry, "vehemently condemned the actions of destabilisation" by the Transnistrian administration and called for the unconditioned reopening of the schools in Tiraspol and Ribnita, the resumption of the normal activity of the railways in the eastern areas of Moldova and the stabilisation of the situation in the security zone.
Also on 9 September Petar Stoyanov, special envoy of the Bulgarian Chairmanship of the OSCE, arrived in Chisinau for a two-day visit. The visit is part of the OSCE efforts to encourage negotiations on the Transnistrian problem and included meetings with the Moldovan President Voronin, Ministry of Reintegration Sova, other Moldovan officials and members of the Transnistrian administration. At the end of the visit, Stoyanov said he was deeply concerned about the continuing deterioration of relations between Chisinau and Tiraspol and called upon the two parties to overcome their divergences at the negotiations table.
The repeated calls by the OSCE and other European organisations to resume negotiations seem though to reach only Tiraspol, where recently the breakaway leader Igor Smirnov has declared that he is ready to carry talks with Chisinau within the five-sided format, because "there is no other perspective to settle the Moldovan-Transnistrian conflict than dialogue". On the other hand, the official Chisinau preserves its intransigent position as expressed by President Voronin on 27 August and according to which the Moldovan officials will no longer talk to the Transnistrian leaders, but "just with those who Tiraspol obeys to in the most direct way." In Chisinau's view, thus, there is no other way of overcoming the current critical situation but through the "concerted and sustained" efforts of the international community, including the organisation of an international conference on Moldova and the signature of the Pact of Stability and Security for Moldova as proposed by President Voronin to the mediator states, the US, EU and Romania.
IV. Foreign affairs
1. Reunion of the CIS member states Interstate Council for state of emergency
On September 7 and 8 Chisinau hosted the reunion of the CIS member states Interstate Council for states of emergency. Representatives from 10 countries flew to Chisinau to sign a string of agreements and protocols, such as: Agreement on establishing CIS reserve fund to help countries affected by the state of emergency, Conception of cooperation in monitoring and predicting states of emergency, Normative and legal Convention in preventing and eliminating state of emergency aftermath, and Joint Action Plan on scientific research to prevent states of emergency.
2. Stability Pact for South-Eastern Europe
Once Moldova signed Free Trade Agreements with all countries members of the Stability Pact for South-eastern Europe and ratified all of them (except for the one with Bulgaria), it designated its representatives to the Joint Intergovernmental Commission entrusted to oversee the implementation of agreements. Commission is responsible for analyzing and overseeing the enforcement of bilateral agreements, considering cooperation projects in various fields among the countries members of the Stability Pact and providing assistance in their implementation.
V. Studies, analyses, comments
Recent State Initiative on Land Consolidation
Felicia Izman, 15 September 2004
Since its coming to power in February 2001 the new Moldovan communist leadership has often expressed its nostalgia for the old times of collective-type agriculture and criticized the National Land Program (NLP) that dismantled this system by creating a private-based agriculture sector with hundreds of thousands of new individual land owners and thus a highly fragmented one
Concerns on the eve of elections
Igor Botan, 15 September 2004
With the launch of the fall political season analysts and media alike engaged in assessing preparations for parliamentary elections. According to their estimates, elections might be held late May or even June next year