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Democracy and governing in Moldova
e-journal, III year, no. 44, January 3-January 16, 2005
Activity of public institutions
Studies, analyses, comments
Activity of public institutions
During January 12 session of the Government, ex-Defence Minister, Victor Gaiciuc, was appointed as Republic of Moldova Ambassador to Belgium and representative at NATO. During the same session, Government decided to recall Nicolae Cernomaz as Republic of Moldova Ambassador to Ukraine and concurrently to Azerbaijan and Georgia. He will be replaced by Mihai Laur, who prior to that served as Republic of Moldova Ambassador to Hungary. Valeriu Bobutac was designated to head Moldovan Mission in Hungary. Yet another reshuffle envisaged Eugen Carpov appointed as Republic of Moldova Ambassador to EU, who previously served as Ambassador to Poland.
These are the largest and strangest reshuffles ever among Moldovan diplomatic corps. However the oddest of all is the appointment of Victor Gaiciuc - recently ousted as Defence Minister following disappearance of munitions from the National Army warehouse and major deficiencies within the army discovered by the Supreme Security Council - who despite lacking experience in diplomatic service was entrusted to head one of the most important Moldovan missions abroad. The other reshuffles are hard to explain as well. The reasons for such a move remain unclear, however it is all-too-clear what would be the impact of the reshuffles on the Republic of Moldova's foreign policy.
- At the January 5 session Government decided to complete the Penal Code with a new article - 309 - on punishment for torture. Under the new article, deliberate infliction of severe physical pain as a means of coercion shall be punished by 2 to 5 years in prison, while staging or instigating torture by 3 to 8 years in prison and prohibition to hold certain positions or to undertake certain activities for a period of up to 5 years.
If the aforesaid actions are inflicted on a pregnant woman or a minor by two or more persons who take advantage of the victim's weakness and use torture devices, or the said actions are undertaken by an official, they shall be punished by 5 to 10 years in prison.
- The same day, Government endorsed the draft law on preventing and fighting traffic of drugs and psychotropic substances. Under the draft, the circulation of drugs and psychotropic substances is prohibited or limited on the soil of the Republic of Moldova. If traded those substances will be confiscated, while the perpetrators shall be punished according to the law.
- One week later Government decided to raise by 20% the wages to the staff working in village and city mayoralties, apparatus of the rayon chairpersons and apparatus of the Gagauz-Yeri Executive Committee as of February 1. Out of those, rayon chairpersons are the only ones who would not enjoy a wage raise.
- At the request of the Central Electoral Commission Government accepted to extend until July 1, 2005 the term allowed for the use soviet type internal passports, given that 18% of the citizens of the Republic of Moldova haven't yet received a new type ID. Those documents were supposed to be out of use as of January 1, 2005. The move is supposed to prevent disenfranchisement of the aforesaid voters in the March 6 parliamentary elections.
2.1. 2005 parliamentary elections
Given the upcoming parliamentary elections scheduled for March 6, President Voronin addressed a message to OSCE Secretary General Jan Kubis, EU High Representative for Foreign Policy and Security Affairs Javier Solana, and Council of Europe Secretary General Terry Davis, inviting them to encourage a wider monitoring of the electoral process by ensuring "impressive presence of international observers" on e-day.
2.2. Supreme Security Council session
President Vladimir Voronin chaired the latest session of the Supreme Security Council. High on the agenda were abuses committed by employees of the Ministry of Interior. After reviewing the deficiencies in the Ministry, President asked the leadership of the Ministry of Interior and Prosecution to take all the steps to stop such abuses. He also recommended finalizing investigation against employees of the Ministry of Interior who committed abuses or exceeded their functions and applying appropriate sanctions.
Another issue considered during the meeting was child adoptions. In this respect SSC decided to establish a republican commission entrusted to develop until April 1 a draft law on legal framework regulating adoptions, establish a National Committee on Adoptions within the Government and develop and keep a national record of adopted children.
In 2004 cumulative inflation rate in Republic Moldova reached 12.5%, 2.5% above the Government forecasts. In December a 1.6% inflation was registered.
Initially state budget for 2004 provided for a 4.5% inflation, however later once data on the evolution of Moldovan economy in 2003 were released, Ministry of Economy adjusted the figure to 10%.
Over 2004 prices on food rose by 13.1% as compared to December 2003. Prices on non-food goods rose on average by 11.9%.
Consumer price index on services surged by 11.8% over December 2003. Tariffs on telecommunications went up by 29.4%, medical services by 23.9%, and fuel by 23.2%.
In 2003 inflation rate reached 15.7%, as compared to 4.4% in 2002, and 6.3% in 2001. National Bank of Moldova and Government forecast inflation rate below 9% for this year.
Year 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Average 104,6 23,8 15,1 11,2 18,1 43,7 18,4 6,3 4,4 15,7 12,5
Revenues to the consolidated budget of the Republic of Moldova amounted to 7 billion 521 million Lei in 2004, 1 billion over 2003. 101% revenues were levied to the state budget, while 99.9% expenditures. The 125 million surplus was used for servicing foreign debt. Also in 2004 1 billion 253.8 million Lei, i.e. 103.5 million USD, were spent on foreign debt - 22.7% of the total revenues to the state budget.
Taxes accounted for almost 53% of the budget revenues, while the rest came from customs. Last year State Fiscal Department levied 825 million more taxes than in 2003, while Customs Department 638 million more than in 2003. Income tax levied from businesses surged by 35%, while from natural entities by 28%.
Administrative-territorial units accrued revenues at 108.5%, 226.2 million over what was planned, while expenditures at 97,1%. According to preliminary estimates as of December 31, 2004 territorial units had 323.9 million Lei unspent on their accounts.
Banking and Insurance
In the 11 months of 2004 banking sector showed positive signs, tier 1 capital registered 2 billion 403.8 million Lei, i.e. 18.5% over early that year. Tier 1 capital is formed in order to minimize any eventual banking fluctuations. Currently, National Bank set the minimal quota of the said capital at 40 million Lei for A-licence banks, 80 million for B-license and 120 for C-license respectively.
In the 11 months of the year commercial banks' assets increased by 25%, to 12,849.3 million Lei, while the shareholder's capital by 17.1%, to 2,526.3 million Lei. Banks' liquidity surged by 25.7%, to 688.4 million Lei. Nevertheless the share of foreign investments in the registered capital of the commercial banks dropped to 52.6%. At the end of 2003 the index was 60.2%.
The net revenues of the banks amounted to 407.5 million Lei, while profitability of assets and that of shareholders' capital reached 3.97% and 18.85% respectively. National Bank reported that the banking system liquidity was high, reflecting banks' ability to meet current and long-term obligations.
Deposits that had surged by 30.5%, to 8,959.3 million Lei in 11 months, including growing deposits by natural entities by 36.1%, to 4,578 million Lei, are yet another evidence of the growing confidence in the banking system.
In the 11 months of the year trade balance deficit was estimated at 690 million USD, outstripping Government forecasts of a 625 million USD deficit for the entire year.
In November the record high deficit during the yea was registered, i.e. 92 million USD, getting close to the highest ever 106.8 million USD deficit registered in December 2003.
Official statistics reports that in the 11 months of the year Republic of Moldova registered a positive trade balance only with Russian Federation amounting to 135 million USD, whereas the highest deficit was registered with Ukraine, i.e. 330.3 million USD. Similarly Moldova registered soaring trade balance deficit with Poland, France, Germany, Romania and Turkey.
In the last two years the trade balance deficit swelled by 30%. Economy watchers say no upturn is to be expected this year. Previously, Minister of Economy Marian Lupu stated that despite the 9% growth of exports expected this year the trade balance deficit was set to soar to 770 million USD?!
Moldova in the world
Republic of Moldova ranks 77 out of 161 countries in the 2005 Index of Economic Freedom produced by the Heritage Foundation.
The 2005 Index of Economic Freedom measures 161 countries against a list of 50 independent variables divided into 10 broad factors of economic freedom: Trade policy, Fiscal burden of government, Government intervention in the economy, Monetary policy, Capital flows and foreign investment, Banking and finance, Wages and prices, Property rights, Regulation, and Informal market activity.
Moldova scored 2 points for trade policy, 2.6 for monetary policy, 2.0 for Government intervention in the economy, 4.0 on capital flows and foreign investment. The scores range from 1 to 5, the higher the score on a factor, the greater the level of government interference in the economy and the less economic freedom a country enjoys.
- At the first 2005 meeting of the Permanent Council of the OSCE taking place on 13 January in Vienna, Dimitrij Ruple, Minister of Foreign Affairs of Slovenia and Chairman in Office of the OSCE, declared that Slovenia will do its best to facilitate the dialogue between the parties involved in the Transnistrian conflict resolution process, settling regional conflicts being the key priority of the Slovene Chairmanship of the OSCE. According to a Moldovan Foreign Ministry press release, the Moldovan delegation called upon the US and the European Union to get involved more actively in the conflict resolution process and outlined the need for changing the current negotiations mechanism given the worsening of the situation on the left bank of Nistru River. Furthermore, the delegation from Chisinau reminded that the Republic of Moldova never agreed or requested foreign military presence on its territory. Slovenia took over from Bulgaria the Chairmanship of the OSCE at the end of 2004.
- On 1 January entered into effect the Law on the Privatisation of Enterprises from the Transnistrian Region, adopted by the Moldovan Parliament last October. The law cancels the results of the privatisation process carried out by the break away authorities without the consent of the Moldovan Government and provides for passing all Transnistrian enterprises into the ownership of their employees. Despite this, the Transnistrian administration announced that in 2005 it expects to raise from the privatisation of state enterprises about 38.4 million USD, according to Basa-press with reference to Russian media. According to the same sources, 39 companies are to be privatised in 2005, including such well-known ones as the textile factory "Tirotex" and the spirits making factory "Kvint".
Thus, on 3 January the Transnistrian official news agency Olvia-press published a press communique whereby the economic department from Tiraspol had announced the privatisation of the Transnistrian railways on grounds that only a private owner could rehabilitate them. The control of the railways was taken over by the Transnistrian authorities last August after the director of the Tighina station signed the necessary documents. The ownership rights over the consequently created enterprise Transnistrian Railways have not been recognised by the Moldovan authorities.
According to Basa-press, in 2004 the income from the privatisation of enterprises from Transnistria reached 35.1 million USD, of which 29 million USD were obtained from the sale of the electrical Power Plant in Cuciurgan. Observers in Chisinau have indicated that the legislation adopted by the Moldovan Parliament on privatisation in Transnistria will not be possible to apply because the Moldovan authorities do not hold the de facto control of the region.
- The actions of intimidation against people and groups in opposition to the Smirnov regime have continued. After attempts to put on fire the houses of the Transnistria Communist Party leader and of the member of the Tiraspol town council, Nicolai Buceatki, on 9 January a referendum was organised to recall the deputy in the so-called Transnistrian supreme soviet Alexandr Radcenko, who is also Director of the opposition newspaper "Celovek i ego prava" (Person and her rights). The referendum was declared invalid however due to the fact that turnout was lower than the required 25%.
Earlier the OSCE Mission to Moldova called upon the Transnistrian administration to refrain from pressure on Alexandr Radcenko and declared its concern in relation to the actions of some radical groups and those of the official news agency Olvia-press, which harness public hatred against people that do not share the official views of the Tiraspol administration.
Studies, analyses, comments
Economic retrospectives & perspectives
Iurie Gotisan, 18 January 2004
Economic growth, which according to the preliminary data might reach 7%, made this year quite special, fact acknowledged by economy-watchers, even the most sceptical ones
Withdrawal of Russian Troops in the Context of CFE Adapted Treaty: Perceptions, Interests, and the Changing Nature of European Security
Iulian Fruntasu, PhD in Political Sciences, 18 January 2004
"Defense Monitor's" assertion has a high chance to become reality without serious diplomatic initiatives regarding complete withdrawal of Russian army and that of Russian separatists