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Democracy and governing in Moldova
e-journal, II year, no. 39, 27 September - 17 October, 2004
Activity of public institutions
Studies, analyses, comments
I. Activity of public institutions
During the period covered Parliament convened on two sessions.
During the September 30 session a new Chair of the Central Electoral Commission was approved. Eugen Clim was replaced by Petru Railean as Chair of the CEC. The latter previously hold the position of Chair of the Economic Court; served in the CEC during 1995 local elections, and headed the Commission in 1996 during presidential elections. There are many reasons why a more experienced person was elected to head CEC parliamentary majority seeks to avoid any problems in elections, especially since many international organisations and civil society organisations would closely watch it.
During the same session Parliament accepted the resignation of the Vasile Pentelei Chair of the Court of Accounts, who headed the organisation since 2000. Albeit Mr. Pentelei resigned on his own will, many say he was ousted following the publication of a list of Court's officials who had received plots for construction from Chisinau Mayoralty.
Due to the same scandal, deputy Alexandru Ciugureanu was excluded from the communist faction for "inadequate behaviour and deeds inconsistent with the status of elected official". Mr. Ciugureanu was also in the list of those who got a plot from the Chisinau Municipality for a meagre price.
While busy cleaning the party of "unworthy elements", ruling party did not forgot about opposition. It decided to establish a commission to investigate the legality of the assets in possession of Iurie Rosca, leader of the Christian-Democratic Peoples' Party. In response to Mr. Rosca' explanation that his assets were legal and that he paid taxes on them, new accusations were brought to the effect that he was involved in a money laundry scheme, as reported by Ukraine secret service.
A week later, Parliament heard Minister of Energetics, Iacob Timciuc. He assured the legislature that the heating system was ready for the cold season and that once it got cold it would start operating. Nevertheless, the Minister remained tight lipped on the fate of the indebted apartment blocks whether they would be connected to the heating system or not, and on the eventuality of Russia reducing gas supply and the risks such a move might bring given Moldova's dependence on Gazprom.
1.2. Legal acts
Law on Cancelling Penalties to the State Social Security Budget exempts a number of enterprises that do not have arrears on wage payments and social security fund, from the penalties accrued in the past. The amount of penalties cancelled is worth 1.7 million Lei. As was the case in the past, financial and economic considerations were the reasons for writing-off the debts.
Via the Law on Ratification of International Postal Union's Acts Parliament ratified the Universal Postal Convention, General Regulation of the International Postal Union and Agreement on postal payments. Those acts are aimed at perfecting and bolstering international cooperation in postal communication. Republic of Moldova would enjoy technical assistance to promote and implement new postal technologies in various fields.
According to the Law on Recalculating Pensions, as of November 1, 2004 pensions for age limit, disability, and heir shall be recalculated. The first two will be recalculated by changing the formula. The surplus brought by recalculation should be no less than 25% of the established pension.
Under the law, as of November 1 total pension shall not be less than:
- 219,00 Lei - pension for age limit for former agricultural employees;
- 246,00 Lei - pension for age limit for other categories of pensioners;
- 175,00 Lei - pension for I degree disability;
- 169,00 Lei - pension for II degree disability;
- 119,00 Lei - pension for III degree disability.
It is estimated that the move would require 490 million Lei.
On the eve of National Wine Holiday celebrated the third year now, deputies passed the Law on Wine Sale during Wine Festival. It enables companies taking part in the exhibit organized as part of the Wine Festival to sell en detail their products without any license being needed.
The Law on Ratification of Memorandum of Understanding between Republic of Moldova and Denmark on Cooperation in view of Enforcing the Depolluted Development Mechanism provided for in the Kyoto Protocol to the United Nations Framework Convention on Climate Change. Under the Memorandum, Republic of Moldova would cooperate with Denmark by trading its emission quotas in exchange for technologies and projects reducing greenhouse gas emissions. In particular, the parties examine the possibility of undertaking projects using gas from waste and gas methane from "Apa-Canal" enterprise to produce electricity. Republic of Moldova joined Kyoto protocol on February 13, 2003.
Law on Privatization of Enterprises to the Left of Dniester and Bender Municipality was initiated by the President of the country. It seeks to prevent illegal alienation of state property in favour of Tiraspol secessionist authorities. Under the law, former and current employees of the enterprises would be entitled to take part in the privation of that particular enterprise. All privatization agreements of enterprises concluded by infringing this law as well as other normative acts of the Republic of Moldova shall be declared null and void. Therefore, the state would be able to guarantee property right on enterprises provided privatization was carried out in line with this law.
Via the Law on Liquidation of the Legislative Centre provisions from the Law on Government were excluded as regards Legislative Centre. The latter was entrusted to draft and endorse legal acts of the Government and Presidency. The Centre was established in 2001. Under the law, its responsibilities were delegated to Ministry of Justice that would be responsible in the future for developing draft laws and draft resolutions of the Government as regards judiciary; provide legal expertise and endorse draft laws and other normative acts; perfect legislation; improve the quality of draft laws, etc.
(For further details on Parliament activity see http://www.e-democracy.md/en/comments/legislative/)
- Following the appeal of the Centre for Consumer Rights' Protection regarding distribution of plots for construction in Chisinau Municipality, on September 28 Government passed a motion on controlling the legality of allotting the aforesaid plots, thereby obliging a number of local and central government bodies to check the plots listed in the annex, find out any irregularities in allotting the plots and issuing construction authorizations, start the procedure of cancelling previous decisions in cases when plots had been allotted illegally, suspend construction works on those plots, and ensure that the plots are brought to the initial state, plus submit a report on enforcing those measures provided for in the Action Plan for enforcing the Law no.835-XIII of May 17, 1996 on Principles of Urbanism and Territory Planning and other normative acts.
In the same resolution Government recommends Chisinau Municipal Council to turn Architecture and Urbanism Department into an autonomous service in the subordination of the State Construction Inspection.
Experts say disputes around land allotment and the arrest of three municipality dignitaries seek to intimidate opposition. In a press release issued on September 28, National Coordinating Council of Democratic Moldova Bloc condemned the "abusive" arrest "fabricated at the order of central government". A number of media outlets have similar opinion quoting in this respect an order issued by the President on July 30 to the Prosecutor General, Head of the Centre for Fighting Economic Crime and Corruption, and other state dignitaries obliging them to "punish persons found guilty of irregularities in the Chisinau Municipality finances over 2003".
- One of the most important Governmental motions passed during the aforesaid period was the endorsement of the Conception of Cross-border Cooperation of the Republic of Moldova for years 2004-2006 and National Action Plan.
Conception outlines the following cross-border cooperation opportunities among Moldova-Romania-Ukraine Euro-regions: establishing a joint informational space on economic potential and business opportunities at the border region; establishing joint structures to facilitate economic cooperation, recognition of goods certification procedures; developing infrastructure in the border area that would facilitate auto, railway, river and maritime transportation; developing a joint strategy to boost tourism in border areas; fostering cooperation between educational institutions in the region; coordinating environmental programs; transfer of know-how and information technology, etc.
According to the Conception, the main goals set for 2004-2006 are: coordinating and adjusting instruments for cross-border cooperation; for the relevant state structures of the Republic of Moldova to prepare and co-ordinate together with partners in euro-regions and international organisations concrete projects in education, infrastructure, research, and investment.
Conception's top priorities are taken from such documents as: Madrid European Convention on Transfrontier Co-operation between Territorial Communities or Authorities, Partnership and Co-operation Agreements, European Commission statements of March and July 2003, Republic of Moldova - EU Action Plan, etc.
As for the Action Plan for enforcing the Conception it includes a raft of measures at the central level as well as for each of the Euro-regions in particular: 1) "Upper Prut", 2) "Low Danube" si 3) "Siret-Prut-Dniester".
- As a follow-up to the decision of the Interdepartmental Commission on co-ordinating actions in view of reforming state regulation of entrepreneurial activity, Government approved the timetable of fiscal controls for the second quarter of 2004. It comes as a surprise why the timetable was approved only now when we are somewhere between the third and forth quarter.
Fiscal controls of the economic agents should be conducted in line with the provisions of the Government motion on regulating controls. The latter provides that economic and financial activity of a businesses may be controlled at most once in two years; whereas its technical, technological, sanitary, environmental and labour conditions once a year.
The annex approved via Governmental motion includes 4,449 businesses throughout the country due to be controlled by fiscal bodies (the full list was published in Official Monitor, XI, no. 182-185 (1536-1539) October 8, 2004).
- On October 4, Government raised by 30% wages to teachers and high-rank officials in preschool institutions, primary schools, secondary schools, professional schools and sports schools, as of December 1, 2004. Thereby Government seeks to improve the situation in education amidst surging exodus of teachers from schools. Albeit the recent raise, teachers are still in quite a difficult situation, therefore one should not put much hopes that the exodus would shot down.
- And last but not least, Government endorsed the draft law on ratification of the Agreement between Republic of Moldova and Ministerial Council of Albania on protecting investments.
- On October 13, Government approved a draft law on modification and completion of Article 4 of the Title III of the Fiscal Code. According to Minister of Economy, Marian Lupu the move is intended to eliminate any inconsistencies in applying VAT to sugar processing industry. Currently a 5% VAT is applied in agriculture, while in sugar processing a 20% tax. Eliminating the discrepancy according to the Minister will allow sugar factories to set a higher price on purchased sugar beet, and as a result bolster sugar industry. In 2003 sugar factories purchased sugar beet at 330 Lei per tone.
President Voronin issued a decree recalling H.E. Mihai Popov from his position as Republic of Moldova Ambassador to Belgium, Luxemburg, United Kingdom and Northern Ireland and Republic of Moldova's representative to NATO and European Commission. The reasons for recall were not disclosed.
3.2. Meeting with Bulgarian President
A Bulgarian delegation headed by President Gheorghi Pirvanov was on official two-day visit to Moldova commencing September 30. During their meeting the two Presidents talked about visa regime, Moldovan-Bulgarian bilateral relations, Transdnistrian conflict and Stability Pact for Moldova. Referring to visa regime, Bulgarian President opted for liberalizing visa regime for Moldovan citizens, and indicated he would urge Bulgarian Government to take actions in this respect. As Bulgaria currently holds OSCE chairmanship and given the deadlock reached in the negotiations on Transdnistrian conflict, Vladimir Voronin talked about revising the negotiation format and replacing current peacekeeping deployment with international stability forces. As for the Stability Pact, President Pirvanov agreed with the document provisions.
3.3. Supreme Security Council session
Last week President Vladimir Voronin attended the session of the Supreme Security Council (SSC). Toping the agenda were safeguarding military patrimony, munitions and arms; preventing and fighting crime among military; as well as intensifying measures aimed at ensuring the legality and security o crossing Republic of Moldova air space.
Taking note of the existing deficiencies, President severely criticized Ministry of Defence and Information and Security Service (ISS). He also demanded a concrete action plan to be developed to prevent abuses and violations of the law among Defence Ministry and National Army and to increase control and security over Republic of Moldova air space. At the end of the session, SSC passed a decision to oust Defence Minister, Victor Gaiciuc, and ISS Deputy Director, Simion Rusu.
II. Economic polies
1. Foreign investments shun Republic of Moldova
Recently United Nations Conference on Trade and Development released its world investment report on 187 countries. The report made use of new indicators to better reflect on various nations ability to attract and "digest" foreign investments. Republic of Moldova ranks 110th following Ecuador, Mozambique, and Guinea, but has a much better position than Ghana, Sri Lanka and Mali. Last year Moldova ranked 109th out of the 140 countries included in the report.
Foreign direct investments (FDI) in Moldova amounted to 790 million USD at the end of 2003. In 2003 FDI dropped by 50% over 2002, i.e. 58 million USD. One of the most important findings of the report is that total global FDI shot down by 50% in 2003. Republic of Moldova ranks 25th on inward FDI performance indicator, as compared to 18th last year. Nevertheless, Moldova has the best rating for this indicator among CIS countries.
Studies conducted by various international agencies paint a less robust picture than UNCTAD report. According to ERBD, business environment together with relations between state and business, push Moldova to the last position among the 26 countries in transition to market economy. As for business environment, in Moldova it is characterized by institutional sub-development and inappropriate legal framework. That is why the FDI inflow in Moldova is very low, worryingly illegal capital outflow is gaining grounds, even if it is quite difficult to assess the total outflow. Independent experts say total FDI in the last decade are much lower than money laundered through Moldova.
2. Foreign currency reserves swell together with foreign debt
As of September National Bank's foreign reserves were estimated at 347 million USD. Increase of reserves was made possible by National Bank's purchase of foreign currency on the interbank market. In the second quarter National Bank purchased 52.1 million USD on the domestic market to fill the foreign currency reserves. Reserves consist of liquidity and deposits - 268.7 million USD, including in other Central Banks - 111.99 million USD and foreign banks - 156.7 million USD. The Bank holds 77.6 million USD in securities. It also holds special drawing rights worth 79.6 thousand USD and reserves worth 7.3 thousand USD.
On August 31, foreign debt (guaranteed by the state, excluding the debt on imported natural gas) amounted 855.5 million USD, it dropped over the month by 1.86 million USD. And that because debt worth 5.82 million USD was reimbursed. On the other hand, 1.25 million USD were spent from the previously contracted foreign credits. While the appreciation of USD against other currencies has further swelled the foreign debt by 2.72 million USD. Total arrears, including those in the previous years, amount to 34 million USD. According to National Bank, private foreign non-guaranteed debt is worth 447 million USD.
3. Transfers from abroad and competitiveness
For some years now the transfers from abroad (money sent by Moldovans working abroad) have been constantly growing. According to some unofficial sources in 2003 they reached 800 million USD, while others say even 1 billion USD. Those money fuel domestic consumption and ensure social stability for many families by keeping them afloat.
Foreign currency market has been over flooded since the beginning of the year, while trade deficit has neared 800 million USD (in the first months of the year, trade deficit registered 440 million USD), i.e. 30% of GDP, while current account deficit is well over last year, i.e. 5.6%. Currently, capital inflow exceeds by far the amount needed to finance current account and capital account, which enables National Bank to fill its foreign currency reserves. Capital inflow includes transfers from abroad, direct foreign investments, and speculative capital lured by high interest rates.
The well-paid jobs Moldovans have abroad are similar to boosting domestic productivity. In the eyes of many experts if Moldovans were to stay home they would wield a heavy pressure on wage payment and would definitely enlarge the number of unemployed. It is possible that some exports have indeed surged, being bolstered by low labour cost, however it is very unlikely that they exceed the millions of dollars transferred by Moldovans working abroad. Noteworthy, money transferred from abroad equal half of the trade deficit.
4. Trade deficit surging
In the eight months of the year, Republic of Moldova's trade deficit reached 447 million USD, a 34.3% increase over 2003, reports Statistics and Sociology Department in its latest study on the evolution of foreign trade over January - August. Albeit, deficit has surged in 2003 at a slower pace than in 2003 (36.2% growth), experts say the gap between imports and exports is still too high. The gap has widened even further in August by yet another 67.2 million USD. In August goods and services worth 140 million USD were imported into the country, a 5.3% drop as compared to July; while exports reached only 72 million USD, a drop by 11.3% over previous month.
According to official statistics, ratio of exports covering imports in the eight months of the year reached 57.5% over 58.5% in the same period 2003. Moldova's trade deficit with EU countries reached 163.5 million USD, CIS - 153.7 million USD, Central and Eastern Europe - 45.4 million USD, and other countries - 83.7 million USD. Moldova has registered the highest trade deficit with Ukraine 222 million USD, largely due to the imports of energy and raw materials.
In January - August 2004, Moldovan foreign trade amounted to 1672.7 million USD. Moldova's export of goods and services reached 613.2 million USD, a 30.5% growth over the same time last year; whereas imports 1059.5 million USD, 32.3% over the same time last year. Government forecasts exports worth 900 million USD this year and imports worth 1,525 million USD, with a 625 million USD deficit. Experts have their own takes on the subject, they predict that imports would grow at a faster pace (26.3%) than exports (22.8%), therefore in the end trade deficit would reach 810 million USD.
III. Transdnistrian Conflict
On 29 September, the Transnistrian authorities registered the two Moldovan Latin script lyceums from Tiraspol and Ribnita as foreign educational institutions. The lyceums were registered for one year at their old addresses. Because the premises of both schools are not functional - those of Tiraspol lyceum have been devastated when taken by force by the Transnistrian militia in mid July, and those of the lyceum in Ribnita are still under construction - their pupils have been transferred temporarily to other Moldovan schools in Tiraspol and Bender.
In spite of the resolution of the schools problem and a follow up call by the Transnistrian administration to restart negotiations, President Voronin reaffirmed within a press conference on 29 September the refusal of the Moldovan Government to ever negotiate with the Transnistrian administration and reiterated the desire of the official Chisinau to change the five-sided negotiations format, which has proven inefficient. Moreover, President Voronin declared that the idea of solving the Transnistrian issue through federalisation was obsolete. He said there were "other ways and means" of resolving the conflict, but failed to name any.
A few days later, the official Tiraspol announced its intention to organise a referendum to decide whether to continue the dialogue with Chisinau on setting up a federation or concentrate its efforts on the international recognition of Transnistria. According to Olvia-press, the foreign policy committee within the Transnistrian Supreme Soviet is to develop within one month the mechanisms of holding the referendum. Last July, the head of the Transnistrian 'foreign ministry' Valeri Litkai, declared that if negotiations with Chisinau would fail, Transnistria might call a referendum to determine its 'political orientation'.
On 11 and 12 October, upon the initiative of the OSCE CiO, Solomon Passy, a meeting of the mediators in the Transnistrian problem - Russia, Ukraine and the OSCE, took place in Sofia, which discussed the current situation around Transnistria. According to a communique from the Russian Foreign Ministry, the mediators adopted a joint statement in which they expressed their deep concern with the interruption of the negotiations process last summer and called for the resumption of talks that would work out solutions according to the principle of preservation of sovereignty of Moldova and the provision of a special status to the Transnistrian region.
Later in the week, President Voronin met with Steven Mann, Special Negotiator of the US State Department for conflicts in Eurasia, who, according to a release by the presidential press department, reaffirmed US support for the resolution of the Transnistrian problem according to the principle of territorial integrity and sovereignty of Moldova. The release, however, did not mention any specific solutions that the US would support. On the same day, Mann met with the head of the Transnistrian ‚foreign ministry' Valeri Litcai. According to the official Transnistrian press-agency Olvia-press, Mann declared that the US plead for the preservation of the current negotiations format and for the resolution of the Transnistrian problem on the basis of the federalisation principle.
Meanwhile, in Tiraspol took place a series of manifestations on the occasion of the 80th anniversary of the first statehood in the Transnistrian region - the Autonomous Soviet Socialist Republic of Moldova. The Transnistrian leaders have used the occasion to celebrate the 14th anniversary of statehood of the so-called "transnistrian moldovan republic". During a "historico-scientific" conference on this topic, the Transnistrian leader Igor Smirnov reiterated Transnistria's intention to organise a referendum on the future status of the region. "The official Chisinau has intensified economic and political pressures upon us. Offences against the Transnistrian people and its leaders have multiplied. Under these circumstances, it is obvious that reunification with Moldova is out of question", told Smirnov the conference, quoted by Infotag. Earlier, the Centre for Social and Political Investigations "Perspectiva" published the results of a sociological poll conducted in Transnistria, according to which more than half of the respondents were against reintegration, 35% would accept it under certain circumstances, and only 8% supported reintegration without any conditions. At the same time, 71% pleaded for the independence of Transnistria, 60% agreed to Transnistria becoming a Russian protectorate, and 27% - to a Ukrainian one.
IV. Foreign affairs
59th session of the UN General Assembly
Foreign Minister Andrei Stratan headed Moldovan delegation to the 59th UN General Assembly. In his speech Moldovan diplomat referred to several key points. Firstly he called on greater UN involvement in bringing the stability and democracy to Iraq. Talking about terrorist attacks in Spain, Turkey, and Russia Minister Stratan pointed that Moldova condemns those actions, which should be viewed as crimes against humanity in all the countries and be treated as such. "Republic of Moldova fully supports UN reformation" and Security Council in particular, that should become more efficient in pursuing its statutory goal. According to Stratan, this might be done by "improving its representation, legality, transparency and responsibility, as well as by making use of the right to veto in cases provided by the UN Charter". Andrei Stratan also talked reforming General Assembly and consolidating the coordination within Social and Economic Council.
Hence, according to Moldovan diplomat UN should maintain its peacekeeping operations. In this respect Moldova pledged to consolidate United Nations Stand-by Arrangement System.
Referring to the risks of international terrorism, Stratan pointed "more and more terrorism mergers with secessionism" and called on Security Council to suppress any manifestation of secessionism and defend sovereignty, territorial integrity and inviolability of the internationally recognized frontiers of the member states. In this respect Moldovan Minister draw the attention to the difficulties Republic of Moldova was facing in fighting secessionism on its soil. Speaking on the lack of control over Moldavian-Ukrainian border (in the part controlled by Transdniestria), Stratan pointed that an international monitoring mission under the auspices of EU and OSCE of the Moldovan-Ukrainian border would address those risks and help find a solution to the Transdnistrian problem. He also invoked the need to revise the structure of peacekeeping deployment by replacing them with a new format under international mandate.
During his official visit to UN General Assembly, Minister Stratan met with UN Under-secretary-general Kieran Prendergast and Jean Marie Guehenno. The latter signed Agreement on Republic of Moldova participation in the United Nations Stand-by Arrangement System.
V. Studies, analyses, comments
To friends - everything, to enemies - the law
Igor Botan, 20 October 2004
Relations between main political players have morphed into a full-fledged information war. With the elections coming, this information war is set to escalate
Anatolii Gudym, 20 October 2004
In the mid of 2004 only 6.2% of total household income volume fell to the share of 20% less secured families and 44.2% - to the share of 20% the most well-to-do families. Recent years revival of the dynamics has reduced a poverty zone in Moldova but it has not removed contrasts of inequality