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Democracy and governing in Moldova
e-journal, III year, no. 46, January 31 - February 13, 2005
Activity of public institutions
Studies, analyses, comments
Activity of public institutions
Parliament resumes activity
The first plenary of the Parliament in the spring session is scheduled for February 17. High on the agenda of the Parliament are the draft laws on amending and completing the Laws of Temporary Safeguards Measures, Law on Single Agricultural Tax, Law on Citizenship, Law on Amending and Completing Legal Acts (Title II of the Fiscal Code etc).
During the first session the following acts are due to be examined: Law on Ratifying Loan Agreement (Project Reviving Agriculture) between RM and International Agriculture Development Fund, as well as regulation on spending funds for supporting agricultural sector.
- As of February 1 Government raised salaries to state employees who did not enjoy a salary raise in 2003 or 2004. Salaries would be raised by 15 to 20%. According to Minister of Labour and Social Security, Valerian Revenco, it would take 52.4 million Lei (about 4.2 million USD) to cover for the salary raise. This is the third salary raise in the last three months. As of December 1, teacher wages rose by 30%, while as of January 1 minimal wage per economy surged from 100 Lei (about 8 USD) to 200 Lei as did wages of teachers in extra school institutions, social assistants, medical staff by 30%, 20% and 15% respectively. On January 13 Government approved yet another salary raise for staff of mayoralties and central executive committees of rayons. On November 1, Government raised pensions by 25%.
- Government endorsed the initiative of Ministry of Education on raising the minimal quota of state scholarships from 40% to 70%. There are three types of scholarships depending on the average grade, i.e. 1st 216 for university students and 168 for college students; 2nd 182 Lei for university students and 139 for college; 3rd 168 Lei and 125 Lei respectively. According to the Minister of Education, about 21.1 million Lei (1.7 million USD) would be needed in order to increase the number of scholarships. This initiative enters in force as of February 1, 2005.
- Government set a special commission to enforce the Law on revising and optimising normative acts regulating entrepreneurial activity, the so-called "guillotine" law. The Commission headed by the Senior Deputy Prime-Minister Vasile Iovv includes 39 members representing business, employers, investors and regulating bodies. Valeriu Lazar, Deputy Minister of Economy stated that the law was intended to abolish all forms of bureaucracy, which was strangling private sector, as well as optimising normative acts. As of February 6, regulating bodies shall be guided in their activity only by the acts published in the Official Monitor. A hotline would be set within the Ministry of Economy to register all the complaints from the businessmen on the enforcement of the "guillotine" law.
- Government endorsed the draft Law on Preventing and Fighting Human Trafficking. The draft sets the legal framework for preventing and fighting human trafficking as well as assistance provided to the victims. Every two years Government would develop National Plan on Fighting Human Trafficking, while local government would in their turn draw action plans for its enforcement.
Currently neither Government nor NGOs possess exact figures on the victims of human trafficking. According to International Organisation for Migration office in Moldova, in the last four years 1,400 victims were repatriated to RM, out of which 11% were minors. Last year alone 236 girls were repatriated from Russia, Turkey, Arab Emirates.
- Government approved Action Plan on celebrating 60th anniversary of the victory over fascism. Among others the plan provides for "lesson of peace" to be held in schools with the participation of war veterans; shows or special programs on the event; exhibits of historic documents and materials; theatre plays dedicated to the WWII; and scientific conferences.
- Government endorsed amendment of the Law on Convicts Released from Detention, entitling them to a single indemnity for social integration, i.e. 75% of the average salary per economy in the previous year. Indemnities shall be paid on the day of release by the relevant penitentiary institution. Noteworthy, there are around 11 thousand convicts in Moldovan prisons.
- Government established a Steering Committee responsible for the celebration of the 16th anniversary of Soviet troops withdrawal from Afghanistan. On February 19 - 20 The Committee of the Internationalist Soldiers will convene in Chisinau, a commemoration of the soldiers killed in Afghanistan will he held, while relevant families would receive a financial aid. In this respect, Ministry of Finance would allot 230 thousand Lei (about 18 thousand USD) from the Government reserve fund.
- Government approved the amendment of programs of economic and social development, as well as the action plans related to Economic Growth and Poverty Reduction Strategy. Prime Minister Vasile Tarlev asked Ministry of Economy to consult WB experts and design a mechanism for implementing and monitoring EGPRSP within 10 days.
- Government approved a draft law on RM adhering to Amendment to Montreal Protocol on substances that deplete the ozon layer, passed in 1997.
- Finally, Government approved the Agreement between the Government of the RM and Belarus on visa-free travel, signed on December 24, 2004.
In January 2005 consumer price index rose over December 2004, i.e. 101.1%. According to Statistics and Sociology Department, the greatest price hike in January was registered on food, while price on non-food products registered a slight change. Consumer price index on food amounted 102.6%, non-food - 100,4 %, and services 99.3%.
According to a report of the Department of Statistics and Sociology (DSS), the average monthly salary in the economy made up MDL 1,496 in December 2004, by MDL 287 more than in November. The average salary increased in December of last year, as compared to November, at the expense of the increases paid to employees at the end of the year.
In the budgetary sector, the average salary made up MDL 961 in December 2004, and in real economy sector, the average work remuneration index constituted MDL 1,774. The highest salaries were received by bank employees, on average MDL 4,620, by MDL 1,830 higher than in the previous month. In education, the average salary constituted MDL 855 in December 2004, and in health and social assistance sectors - MDL 1,011.
Nonetheless, DSS shows in its latest report, from the beginning of January, that, as at 1 December, salary arrears made up MDL 158 million, which is by MDL 10 million more than at the beginning of 2004.
Government sources say that the plan of collections to the state budget for January 2005 was fulfilled in advance with an outrun of 11.3 percent, as compared to the forecasts. According to the data provided by the Ministry of Finance, the income collected in the state budget amounted to MDL 428 million, which is by MDL 43.4 million more than planned. The increase in budgetary income was by MDL 151.6 million or 54.9 percent higher than in the similar period of 2004.
The 2005 state budget law approved income of MDL 7.47 billion and expenses of MDL 7.72 billion. The income section of 2004 state budget law was executed at the rate of 101 percent, and the expense section - at the rate of 99.9 percent, with a budgetary surplus of MDL 125 million, which was directed towards external debt payment.
Banking and insurance
Eventual consequences of the reduction in bank interest rates. The National Bank of Moldova (NBM) recommended to the commercial banks, in a press release made public last week, to revise their liability (deposit) interest policy, which would allow for "a revision of the asset (loan) interest policy and a more efficient placement of excess reserves".
The Central Bank requires, in fact, commercial banks to reduce their deposit interest rates in order to decrease the rate of interest on loans granted. At the same time, the release says that NBM is concerned about the high financial liquidity in the system (this being a factor that could stimulate inflation), which increased in the first month of the year by 2.2 times (from MDL 508.6 million at 31 December 2004 to MDL 1,095.2 million at 31 January 2005), and thinks that such liquidities must be placed in the economy at lower interest rates.
Many financial experts say that, if the National Bank's recommendations are implemented, they will affect the depositors' pockets, forcing them into withdrawing some of their savings from banks. On the other hand, too low interest rates on the loans granted to economic agents will stimulate internal demand, thus making it more complex to attain the inflation target.
For a central bank, which mainly aims at controlling inflation, and taking into account the effects of tax reduction (as well as of the increase in prices of public utilities), the fast fall of interest rates is an incongruity. And here comes the need for a low budget deficit to support the reduction in inflation. We think that overburdening the budget as an instrument of economic policy could cause major collateral damages.
In 2004, the average interest rate on loans granted in national currency was maintained at the level of 21 percent, and on loans granted in foreign currency - at the level of 11.3-11.6 percent, and interest rates on deposits increased on average from 14.8 percent at the beginning of the year to 15.5 percent in December 2004.
According to the Department of Statistics and Sociology (DSS), the trade deficit of the Republic of Moldova constituted about USD 788 million in 2004 and exceeded by 28.5 percent the figure registered in 2003. In 2004, the amount of exports was estimated at USD 986.2 million, and imports - at MDL 1,774.2 million.
The Government had forecast for 2004 exports of USD 900 million and imports of USD 1,525 million, with a deficit of USD 625 million. The Republic of Moldova had a positive balance, amounting to USD 137.1 million, with Russia, and the highest foreign trade deficit with the main partner countries was registered with Ukraine, of USD 211.1 million. Moldova registered a high level of the trade balance deficit with France, Germany, Romania and Turkey.
The trade deficit has grown by circa 30 percent in the past two years. In the middle of January, the Government approved an action plan to lower the trade balance deficit, which specifically provides for the institution of a tougher control over the preferential import of goods, especially in free economic zones, as well as for the simplification of export procedures.
Moldova and the world
According to the data of the CIS Statistics Committee, the Republic of Moldova registered in 2004 one of the most modest economic growth among the Community's countries, with an increase in the Gross Domestic Product of 7.3 percent, under the average economic growth of 8 percent, achieved in the post-Soviet space.
The trend of the Moldovan economic growth outran only those of Kyrgyzstan and Russia, which registered a growth of 7.1 percent. On the other hand, the Republic of Moldova was outrun by Ukraine, with a GDP increase of 12 percent, Belarus - 11 percent, Tajikistan - 10.6 percent, Azerbaijan - 10.2 percent, Armenia - 10.1 percent, Kazakhstan - 9.4 percent and Georgia - 8.4 percent.
In 2004, the Gross Domestic Product comprised, according to the preliminary estimations, MDL 31,992 billion in current prices. The registered progress is under the level forecast by the Ministry of Economy, which anticipated an economic growth of 8 percent.
Industry has registered an increase of 6.4 percent, while agricultural production increased by 20.4 percent. The increase in the industrial production was much lower than the 2003 level, which constituted 13.6 percent. The production from the industrial sector is mainly generated by processing industry enterprises, which accounted last year for 89 percent of the total amount of the industrial production.
Sourse: Department of Statistics and Sociology
Dangerous developments in the security zone, including military mobilisation, concentration of troops and weapons, and propaganda against an alleged military threat from Moldova, were reported by a number of Moldovan media outlets and denounced by Moldovan authorities within public statements and addresses to various international fora during the period covered here. These developments would be indicative of 'a methodical and well thought preparation by the break away Transnistrian authorities of a large scale military destabilisation at the Nistru River' and would be meant to influence the electoral process in Moldova to the advantage of the 'political and economic partners' of the breakaway authorities, have further argued officials in Chisinau calling upon the international community to help stabilise the situation in the security zone.
On the eve of the parliamentary elections scheduled for 6 March, the Transnistrian theme has become an especially handy one for the ruling Communist Party to build the 'enemy' and associate with it its opponents. The most important question though at the moment seems to be the one whether Transnistria will be able to vote in the March elections, and if yes, then who the several thousands Transnistrian inhabitants, de jure citizens of Moldova, will cast their votes for.
Unlike in previous campaigns, when Transnistrians were vehemently opposed to Moldovan elections being conducted in the region and obstructed the access of the Transnistrian voters to the polling stations opened for them on the right bank of Nistru River, this time they have called upon the Moldovan authorities to ensure all conditions for the Transnistrians to vote in the March elections. According to Transnistrian media, the break away authorities have even pledged to mobilise the voters and ensure their transportation to the polling stations on the Moldovan side. At the same time, voters have been encouraged to support opposition contestants, such as the Electoral Bloc "Democratic Moldova" (BMD), the People's Christian Democratic Party or the "Patria-Rodina" Bloc. This, they say, is to prevent the ruling Communist Party from gaining a straightforward majority in the new Moldovan Parliament and thereby render the future legislative body weak and prone to instability.
Earlier, a key opposition contestant, the BMD, called upon the Central Electoral Commission (CEC) to open polling stations in Transnistria. A CEC address to the Transnistrian authorities followed, in which the CEC conditioned the opening of polling stations in the region through a number of measures to ensure a free and fair electoral process and the full respect of Moldovan laws and constitution in the region. As the CEC address remained unanswered by the Transnistrian authorities, the CEC will most probably open special polling stations along the right bank of Nistru River at which Transnistrians will be able to vote.
In the Ukrainian presidential elections, the Transnistrian authorities openely supported the Moscow backed candidate Victor Yanukovich who harnessed as a result more than 90% of the votes of the Ukrainian citizens residing in Transnistria. As there seems to be no clear Moscow favourite in this election, observers in Chisinau have indicated to "Patria-Rodina" Bloc and the BMD as the two contestants most appealing to the Transnistrians. The "Patria-Rodina" Bloc has proposed closer ties with Russia, recognition of Transnistrian population's right to self-determination and the adoption of so-called Kozak Memorandum as the basis for the future legal status for the region. BMD is the Communists' key opponent and one that many say Moscow would prefer to the current rulers, despite its claims for full integration of Moldova into the Euro-Atlantic structures.
Whatever Transnistria's electoral option will be, it seems that unlike in previous campaigns, this time the Transnistrian authorities seem determined not to let go of the chance they have to influence the electoral outcome in Moldova, not so much in favour of some specific contestant as against the ruling party. And it seems thez plan to do it only through the voters that reside in Transnistria, but also through the many Soviet-minded, pro-Russian voters residing in the rest of Moldova, who got disappointed with the Communist Party's sudden turn towards the west during its rule.
Studies, analyses, comments
Final stage of the electoral campaign
by Igor Botan
Overview of the final stage of electoral campaign