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Democracy and governing in Moldova
e-journal, IV year, no. 70, 15-28 March 2006
Activity of Public Institutions
Studies, Analyses, Comments
Activity of Public Institutions
The Parliament has declared two vacant mandates of lawmaker, one of the faction representing the Communist Party of Moldova (PCRM) faction, while the second of the electoral bloc Democratic Moldova (BMD). Accordingly to the order, Efim Agachi, representative of the Democratic Party of Moldova, will be validated from the list of BMD for the vacancy.
1.2. Legislative acts
Law for the modification and completion of the Law # 1569-XV from December 20, 2002 concerning the introduction and withdrawal of goods from the Republic of Moldova by individuals. The adopted law introduces a series of amendments aimed to liberalise the border crossing regime for individuals and goods that they introduce or withdraw from the country. In particular, it allows individuals to introduce unlimited currency and to withdraw up to 10,000 euros from Moldova without showing bank certifications.
Draft law for the modification of Article 5 of the Law # 633-XV from November 15, 2001 regarding the prevention and combat of money laundering and financing of terrorism. The document adopted in the first reading stipulates that data on any limited or suspect financial deals are delivered to the Centre for the Struggle Against Economic Crimes and Corruption1. Also, the minimal limit of these operations carried out by individuals was reduced down to 200,000 lei (15,000 dollars).
Draft law for the completion of some legislative acts concerning the customs activity. The draft adopted in the first reading stipulates the transfer of origin certification competences from the Chamber of Commerce and Industry to the Customs Service. It empowers customs bodies to demand any necessary documents from economic agent for certification of exports, which would justify and demonstrate the origin of goods and would make an expertise of origin of commodities if needed be.
1.3. Parliamentary control. Declarations
The special commission for monitoring of the process of restitution of deposits to depositors of the Guineia bank and Intercapital concern has held a sitting and heard reports and information of the Justice Ministry, Prosecutor-General's Office and ex-officio administrators. According to unveiled information, prosecutors have examined pretensions of former depositors of the Guinea Bank, while execution bodies organised auctions to sale of a real estate that belonged to Intercapital and taken over by state. Under the Law# 197 from July 28, 2005, the Execution Department of the Justice Ministry will emergently sell the building from the town of Vatra of the Chisinau municipality and will ensure the enforcement of execution documents of Intercapital depositors, while the Government will have to take measures needed for its implementation within two months after enforcement of this law (by October 12, 2005) should take the necessary measures needed for its implementation. According to information tabled at the sitting of the special commission, the auctions for sale of real estate have failed and, therefore, the restitution of deposits is impossible.
Questions and interpellations
The Justice Ministry has replied to an interpellation regarding the activity of pioneer organisations, mentioning the principles that served as basis for creation and activity of these public youth organisations in Moldova. At the same time, a representative of the ministry affirmed that the number of these organisations and number of their members are unknown because the legislation does not stipulate the mandatory information over such an obligation.
PPCD parliamentarian Gheorghe Susarenco has asked the Prosecutor-General's Office to study the possibility to file penal cases against heads of the Centru and Buiucani district courts of the Chisinau municipality. The Superior Council of Magistracy said that these courts violate the principle of aleatory distribution (under Art. 344 of the Code of Penal Procedure: in the mode established at the beginning of the year, in alphabetic order) of penal cases, with chairmen of courts making decisions either on basis "of complexity or resonance of the case," or "of the task of judges." Deputy Susarenco considers that these actions are elements of the offence "Excess of authority or exceeded service competences." It should be noted in this context that the chairman of the Centru district court has examined the case of former defence minister Valeriu Pasat, whom he sentenced for an offence stipulated by Art. 185 of the 1961 Penal Code - "Excess of authority or exceeded service competences." The examination of cases by the Buiucani court district often captures the attention of public opinion because central institutions of the state administration (Parliament, Presidency, Government) are based in its area, as well as headquarters of CCCEC, SIS, and cases filed against these institutions have a special resonance.
Susarenco also reiterated his previous interpellation in which he demanded the Municipal Council to sack the deputy mayors of Chisinau because they illegally run these posts. Lawmaker Dumitru Braghis has asked the Government to report on indexation of social insurance pensions, which will be indexed starting April 1, 2006. According to the lawmaker, the uniform indexation of pensions is unfair because persons who earn small pensions will receive a minor indexation, while those who earn high pensions will receive high rises comparable to the size of social pensions of first level2. The need to reform the pension system is being discussed for quite a long time and the Government has earlier planned to take some measures for differentiated rises and indexation, but no final result was obtained so far."
The AMN faction launched a declaration on March 23 regarding the failure to respect the commitments towards the Council of Europe, saying that the Republic of Moldova "does not comply with commitments assumed while joining the Council of Europe" and the Parliamentary Assembly of the Council of Europe (PACE) monitors the functioning of democratic institutions in Moldova for such a long time from this reason. AMN accused the ruling party of "not fulfilling its commitments on reformation of political system, public sector, local administration and autonomy, audiovisual, justice and prosecutor's office." It accused the parliamentary majority of delaying the implementation of the schedule for adjustment of legislation to the Resolutions and Recommendations of PACE, violation of the moratorium recommended by PACE on sensitive problems such as history and language, "mimicking the implementation of democratic reforms." The declaration calls for organisation of a special sitting of the Parliament to discuss the progress of reforms and respect for commitments toward CoE.
In parallel with the AMN declaration, a statement of the Communist Party faction was read, and it envisaged the cited statements and replied to accusations taken by AMN in a previous declaration regarding the situation of agriculture. It said that PCRM "aims first of all to ensure the welfare of population" and to promote the legislative reforms aimed to remedy the situation in agriculture. PCRM mentioned the annual rise of state subsidies for agriculture, creation of a network of technological machine stations, agricultural land consolidation, etc.
The Government has appointed Ion Mihailuta as chief state adviser for local public administration. Mihailuta had earlier worked in subdivisions of the Government's Apparatus (State Chancellery).
- Decision on indexation of social insurance contributions and some state social contributions. The document establishes the indexation of contributions in 2006 in the amount of 15.7 percent, by taking into account the 11.9 percent annual rise of consumer price index and the 19.5 percent annual growth of medium salary on country in 2005. All types of pensions established and calculated on basis of the law on social insurance pensions, as well as pensions of lawmakers, Government members, pubic functionaries, local councillors and customs officers will be indexed.
- Decision on approval of the size of amounts paid to individuals summoned by court, penal investigators, bodies in charge with examination of administrative materials and implementation of execution documents. The March 15 decision establishes the sizes of amounts paid to summoned individuals by court, penal investigators, bodies in charge with examination of administrative materials and implementation of execution documents (4-6 lei/hour for their work; maximum 36 lei a day as compensation for not doing their basic work).
- Decision on approval of the draft law on the National Institution of Justice. The draft law presented to the Parliament for examination aims to constitute and establish the legal status of the National Institute of Justice, its principles of organisation and functioning, initial and further training of judges and prosecutors, as well as other persons who contribute to the justice making process. The creation of the Institute is insistently recommended by international institutions, being an important stage for fulfilment of commitments on reformation and insurance of efficiency of justice, a point of the Moldova-E.U. Action Plan. Some obstacles may appear during examination of the document by Parliament, especially because representatives of justice have already disapproved some provisions of the draft, in particular, on autonomous status and lack of necessary finances to start a normal working of the Institute. Under the legislative programme for 2005-2009 (approved through the Government Decision # 300 from November 24, 2005), the Law on National Institute of Justice should be approved by the end of the first trimester of 2006.
- Decision on allocation of financial means of the Central Election Commission (CEC). The executive has allocated 210,000 lei from its reserve fund for preparation and conduct of a sociological research of absenteeism at the 2005 elections for the Chisinau mayor-general post and conduct of an international organisation on this issue; coverage of costs of participation of CEC members as international observers in the parliamentary elections in Ukraine and Hungary; partial coverage of expenses for purchase of a service car.
- Order of the prime minister on execution of the Government Decision # 1031 from October 3, 2005 on implementation of national programmes. Under the order, ministries and other central administrative authorities will present reports twice a year within established terms and under personal responsibility of heads of these authorities, which will be examined at Government sittings, and draft laws containing an objective assessment of the implementation of national programmes and strategies (including accomplishments and deficiencies registered during their accomplishment). Senior state advisers will carry out a qualified analysis of these reports and will deliver these analytic notes to the Government administration.
2.3. Sittings. Decisions. Declarations
Report on implementation of EGPRSP
The Government unveiled the annual report on implementation of the Economic Growth and Poverty Reduction Strategy Paper (EGPRSP) at a national forum on March 23. According to estimates, the poverty rates have declined by 14.5 percentage points in 2002-2004 and 26.5 percent of Moldova's population was poor in 2004 (compared with 40 percent in 2002). The social-economic evolution is characterised through progress, while the rise of GDP in 2005 (7.1 percent) exceeded the estimates from EGPRSP (5 percent). These collections of budgetary resources, fiscal administration have progressed, the healthcare factors have improved (maternal death rate, infantile death and morality rate of children under 5 have declined).
However, the economic growth is due to the rise of consumption fuelled mostly by imports and financed by remittances. According to the report, "the high flow of remittances (39 percent of GDP), growth of import (77.5 percent of GDP), trade deficit (39 percent of GDP) and current account deficit (7.3 percent of GDP) are elements of the rise of dependence of economic growth and economic situation in general on foreign factors. Under these conditions and due to the insufficient restructuring of economy and low investments, external vulnerability of the country is growing, while the perspective of a sustained economic growth and poverty reduction may become uncertain, if no immediate actions are take to remedy the situation."
The category of problems also includes:
- low commitment of different central and local public institutions in implementing the regulatory reform;
- worsening of some quality features of banking activity, low crediting of economy, reduction of profitability of assets and efficient of banking activity;
- low performance of domestic enterprises (faulty corporate management, inadequate productive structures, old production capacities, limited access to finances, etc.);
- modest rise and low level of productivity in agriculture sector;
- delayed rehabilitation of infrastructure, rise of fuels prices;
- slow reformation of pension system, delayed implementation of the personified record system and lack of a successful system to motivate employers and employees;
- stagnation of regional development policies, etc.
Support to agricultural producers
Prime Minister Vasile Tarlevhas told the General Assembly of the republican union of associations of agricultural producers Uniagroprotect that the authorities are expected in 2006 and in perspective to revise all national and structural programmes on agri-food sector; to promote model projects on development of capacities of ecological agri-food production; utility of two district laboratories for testing of animal food products; to open local offices to provide livestock services and technological stations of machines; to subsidise indirectly by allocating some credits for special purposes for development of some key branches of the country's economy, etc.
The prime minister assured that the proce of Diesel oil acquired by farmers will not grow by July 2006, and the moratorium was agreed ar a sitting with the participation of biggest importers of oil products on market. The executive hopes that oil products could be imported for lower prices after the opening of the Giurgiulesti oil terminal.
Annulment of entrepreneur's patent
The Government will propose the gradual withdrawal of retail trade, passenger transportation by cars, taxi and cargo carriage practiced on basis of entrepreneur's patent. These amendments to legislation will be enforced by late 2008. The executive motivates its intentions through the need "to legalise the commercial activity and to protect the rights of consumers," by starting from the fact that the volume of retail sale on basis of entrepreneur's patent is valued at over 8 billion lei (more than 600 million dollars). The Ministry of Economy and Trade proposes to admit the free registration of holders of patent as individual enterprises or other legal form of activity. We note that the law on entrepreneur's patent was adopted in 1998 and it allows now about 50 types of activities with payment of some fix monthly or annual taxes, which include: income tax, taxes for natural resources; tax for location of commercial facilities, tax for territorial arrangement, tax for the right to provide passenger carriage services, as well as taxes to the state social insurance budget. Other fees, taxes and duties are paid by patent holder after general principles.
Declaration on property in Transnistria
The Moldovan Government has adopted a declaration saying that "the entire patrimony of residents of the Transnistrian region, production potential of economic agents based in the region, are not and cannot be an object of pretension of Moldova's official authorities." The executive declared that it "guarantees the right to property of individuals and businesses from the Trasnsnistrian region registered with relevant bodies of Moldova, rules for conduct of foreign trade operations, as well as rules for registration of economic agents in the Transnistrian region approved through the Government decision # 815 from August 2, 2005, # 1001 from September 19, 2001 and # 299 from March 22, 2006, will action until elaboration of a mechanism to regulate these relations within the definitive political settlement of the Transnistrian conflict."
The declaration was adopted at a large sitting of the Government dedicated on developments in the eastern region of the country, with the participation of Moldova's President.
The Moldovan President has awarded the Civil Merit medal to Iurie Bucinschi, adviser for social development issues for the Moldovan Prime Minister.
The chief of state has signed two decrees on appointment of two ambassadors through plurality of offices:
- Natalia Gherman, Moldovan Ambassador to Sweden, was named Moldovan Ambassador to Norway;
- Victor Postolachi, Moldova's Ambassador to Austria, was appointed as Vienna-based Moldovan Ambassador to Slovakia, the news agency MOLDPRES has learned from the presidential press service.
3.2. Meetings. Sittings. Declarations
Sitting on relations with the Russian Federation
Vladimir Voronin has convoked a sitting with decision makers of the Parliament, Government, Foreign and European Integration Ministry and Presidency and discussed ways to settle the Moldovan-Russian relations. Taking part in the meeting was also Moldova's Ambassador in Moscow Vasile Surza, who has said meanwhile that the sitting discussed the development of situation in the Transnistrian region, misunderstandings that appeared in this context between Moldova and the Russian Federation and preparations for a visit of Moldova's President to Moscow.
Meeting with the U.S. ambassador
Vladimir Voronin has highly appreciated the contribution of the United States to internationalisation of the Transnistrian conflict, rise of interest of European and international structures for the conflict resolution, at a meeting with Mrs. Heather Hodges, U.S. Ambassador to Moldova. Mrs. Hodges said that developments registered in Moldova last year have been increasingly gaining space in agenda of the U.S., which is supporting the latest actions of the Chisinau authorities aimed at a final political settlement of the Transnistrian conflict, combat of corruption and fulfilment of high standards of democratic, economic and social development.
Collaboration with Estonia
At a Moldovan-Estonian economic forum that Chisinau hosted during a visit of the Estonian president, Vladimir Voronin has called for a plenary development of the bilateral commercial-economic relations, intensification of activity of Moldovan economic agents on the Estonian market. Arnold Ruutel said that Estonia supports the reformation process in the Republic of Moldova and its bids for European integration, while Estonian businessmen and investors are open for cooperation with Moldovan partners.
Meeting with Russian businessmen
The Moldovan President has received the chairman of the Russian holding Vinny Mir and the chairman of the Union of Participants in the Spirits Market of the Russian Federation. The presidential press service said that the meeting examined problems regarding simplification of the procedure of certification of alcohol production from Moldova and its preparation for exportation to the Russian Federation. The sides noted that the export of Moldovan wines and cognacs did not suffer in the first two months of this year despite some difficulties.
Participation in conference of the United Left Group of the European Parliament
Vladimir Voronin has attended the conference themed "The European Union and New Neighbours" that Chisinau hosted at the initiative of the United Left Group of the European Parliament. The chief of state told the forum that the pro-European integration policy of Moldova is not characterised to leftwing forces in the former Soviet area, but there are some moments that determined the Moldovan Communists to make an aware choice - the path to Europe. The main causes are the lack of viable alternatives, as only "the development of the corrupt capitalism, with a nominal democracy, aggressive xenophobe nationalism" and maintenance of country's division, persistence of the Transnistrian conflict and tries to settle this conflict by imposing a military or other presence to Moldova," are proposed instead of the European integration.
Improvement of sick leave granting mechanism
A sitting hosted by Presidency has discussed the granting of sick leaves and payment of indemnities for temporary incapacity of work. According to unveiled date, the budgetary expenses for his sector rose by more than 230 million lei in 2005 and by 40 percent compared with 2004. It was mentioned that the situation is due to imperfection of legislation in the field and fact that these regulations do not encourage employers and employees to reduce the sick-related costs. Vladimir Voronin has asked the Ministry of Health and Social Protection to establish a strict control on the process of granting of sick leaves, while decision makers of the Government and Parliament we told to draft amendments to legislation in the area.
Concerns over privatisation and management of public patrimony
The Moldovan president has chaired a sitting on privatisation and management of the state patrimony, analysing the situation in the area, perspective to privatise the objects included in the state privatisation programme for 1997-1998, which was extended until late April 20063. Speaking about privatisation programme for the next stage, Voronin highlighted the need to diversify methods and principles of sale of patrimony, creation of conditions for an efficient use of public economic assets.
Agricultural cooperatives - optimum forms of organisation of activity in agriculture
The Moldovan President has reiterated the state's interest for support to agricultural producers at a meeting with heads of Moldovan agricultural cooperatives organised by the Ministry of Agriculture and Food Industry, noting that production cooperatives are an optimum form of organisation of activity in agriculture. Cooperatives will be developed on a new basis, in line with principles of the market economy and economic realities, but they shall contribute to consolidation of agricultural land, which allows the implementation of modern technologies and growing of highly productive sorts.
Declaration on participation in the Millennium Challenge Account
According to the declaration, the Moldovan authorities have asked that the potential resources that the country will benefit within this programme be directed to prevention and combat of corruption, a phenomenon that undermines the sustained development and democratic values, discourages the process of attraction of foreign investments, increases costs of transactions, distorts the mechanisms of market economy, etc. A working group made up by representatives of public authorities, business environment, civil society has drafted an action plan including both concrete measures aimed to enhance the institutional capacity of public bodies participating in prevention and combat of corruption, and a wide set of actions requiring the active participation of civil society, business environment, journalists in this process, a plan that the American side has described as very ambitious and its successful implementation is a joint notorious responsibility of bodies of the power and entire community. The chief of state calls on the entire society, representatives of public administration bodies, opposition, and business environment to participate actively in fulfilment of anti-corruption commitments assumed within the Millennium Challenge Account.
1 Art.5 (3) of the Law # 633 from November 15, 2001 concerning prevention and combat of money laundering and financing of terrorism stipulates that CCCEC is not unconditionally told the operations undertaken by non-residents in financial institutions from the Republic of Moldova or in branches and offices of foreign banks authorised in the Republic of Moldova.
2 As for example, the law on state social insurance pensions, the pension of lawmakers and Government members must be calculated in the amount of 75 percent of the sum of all monthly payments established in the new law on salary system for budgetary sector and it would exceed 5,000 lei. The indexation of 15.7 percent of this amount will exceed 750 lei, while the average pensions for retirement does not exceed 500 lei (the minimal indexed pension for retirement will be only 336 lei starting April 1, 2006).
3 State property worth 65 million lei was sold in 2005, though 127 million lei was foreseen in the budget. The budget raised only 61 million lei from privatisation in 2004. Only 28 million lei is expected to be raised to the budget in 2006, though the privatisation programme for the entire year includes enterprises such as S.A. Tutun - CTC (nominal of shares (n.s.) worth 101,539,640 lei), S.A.Franzeluta (n.s. - 19,655,120 lei), S.A. Viorica-Cosmetic (n.s. - 17,013,620 lei), S.A.RED Nord (n.s. - 90,794,620 lei), etc.
1. Prices and inflation
Gas price and agricultural crop will mainly influence inflation this year...
Inflation in March did not exceed 1% in the past 4-5 years. However, March 2006 threatens to be a sad exception in this regard. The rise of gas tariffs will develop into higher prices for almost all goods. Therefore, expenses of households will also grow, especially because of higher gas tariffs. In addition, it is easy to forecast higher prices for most of agricultural products after unfavourable climatic conditions last spring for many crops.
Many cereals were compromised, generating higher prices...
The government could intervene again with administrative measures on the cereal market after the cereal crop in 2003 exceeded 100,000 tons and it had to use different methods in order to ensure the internal needs, necessities which did not always satisfy economic agents and consumers. The cause is simple - the frosts last winter compromised most of autumn cereals. Data of the Ministry of Agriculture and Food Industry show that more than 90 percent of cereal fields and up to 45 percent of wheat fields have been compromised. Domestic farmers need 14,600 tons of barley seeds and 1,036 tons of wheat seeds in order to reseed the fields.
According to the Commodity Exchange of Moldova, prices of cereals rose by over 10 percent on average on March 1-24. The price of soy grew the most in the period concerned - by 25 dollars, up to 225.5 dollars a ton; price of fodder wheat rose by 14 dollars (110 dollars), fodder barley by 9 dollars (113 dollars), while price of corn rose by 8 dollars, up to 91 dollars a ton. Prices of sunflower seeds only have declined by 7 dollars a ton, down to 215 dollars in the period concerned.
2. Labour market
Average salary on economy rose by about 26% in January-February 2006...
The medium salary in national economy rose by 26% in January-February 2006, compared with the same period of 2005, up to 1,417 lei (109 dollars). Employees of finance sector earned the most in continuation - 3,220 lei, while workers in transportation and communication earned 2,118 lei on average a month, industry - 1,812 lei and construction - 1,751 lei.
At the same time, agriculture and forestry sectors paid the least - 608 lei, followed by healthcare and social assistance - 1,137 lei, and education - 1,156 lei. A new quantum of tariff salary for the first qualification category in the real sector of economy will be negotiated and established in 2006, and this wage accounts for 550 lei at present.
Source: NBS and our estimates
3. Real sector
Industrial sector rose by 1.3% in the first two months of this year...
According to data of the National Bureau for Statistics (NBS) industrial enterprises in Moldova made production worth about 3.16 billion lei (more than 200 million euros), with industry growing by 1.3% compared with the first two months of 2005. The growth was mainly due to food and drink industry, which registered a larger production volume for processing and canning of fruits and vegetables, processing and canning of meat and meat products, bread and pastry products, dairy.
...while Moldovan strategists draft projects aimed to enhance the importance of this sector
Scientists of the Academy of Sciences of Moldova (ASM) jointly with functionaries of the Ministry of Industry and Infrastructure and Ministry of Economy and Trade have drafted a project on Industrial Policy of Moldova for 2006-2016. The project was published on the website of ASM and it will be discussed soon at a national seminar. This is a strategic planning document and it includes basic principles, objectives and priorities of state policy on industry. The strategic goal of the Industrial Policy of the state stipulated by project is to create a technologically developed, efficient and competitive industrial sector of economy readjusted to European standards.
At the same time, the annual growth of agricultural production is estimated at 5-7% the next 10 years...
At the same time, the agri-food development strategy for 2006-2015 stipulates an annual rise of agricultural production by 5-7%, a growth of processed agricultural production up to 20% and of ecological production up to 10%. According to the strategy, these rises shall correlate with the growth of real revenues of farmers up to 85%, compared with the average on economy, by 2015. The strategy proposes some primary branches such as sugar beet growing, livestock sector, etc., which will benefit of state subsidies. The decapitalisation of agri-food sector has a negative influence on developments in this branch in the latest period. Assets of owners of agricultural fields rose 5-fold, but they represent only 4.9% of overall investments in fixed capital which contributed to the formation of GDP for 2006.
On the other hand, profitableness of agricultural enterprises is only 2.7%...
Profitableness of agriculture has significantly declined: only 8-9 out of 15 groups of commodities analysed within the statistics system are profitable, while only 50% out of 11,800 enterprises of agricultural exploitations working in Moldova are profitable. The medium profitableness of agricultural units is only 2.7%. This situation is motivated including through unreasonable use of fields.
IMF forecasts a record world economic growth for this year...
Experts of the International Monetary Fund (IMF) forecast a 4.8% overall economic growth for 2006. It will exceed the level of 4.3% that IMF has earlier forecasted due to a better economic situation in Europe and Japan. According to IMF experts, the economic conjuncture in the world is very profitable, so that the negative impact of oil price on production growth and its influence on inflation will be counterbalanced by low interest rates and positive effect of globalisation. The Chisinau government estimates a 6.5% economic growth for this year, compared with 7.1% in 2005 and 7.3% in 2004. On the other hand, independent experts forecast a 6% percent economic growth, while international institutions predict 5.0-5.5%. The internal demand could grow in 2006, too, while exports will influence the GDP in general in a smaller measure due to the rise of national consumption.
4. Financial-banking sector
Rise of banking sector slowed down...
According to data of the National Bank of Moldova (NBM), evolution of banking sector was slower in January-February 2006 than in the same period of 2005. Total assets of banks rose slower in the first two months of this year than in the similar period of 2005, while deposits and credits grew insignificantly. They rose by 1.42% in January-February up to 18.2 billion lei (over 1.4 billion dollars). Both the share of granted credits and of deposits has declined. The reduction of deposits is probably generated by decline of interest rates on deposits of population.
One of basic indicators, the 1st-degree capital, which aims to cover eventual financial losses, rose much faster than assets, respectively by 4.6%, up to over 3 billion lei (230.7 million dollars). The rise of this indicator serves indeed to strengthen the stability of banks in general and protection of depositors' interests. The share of assets in foreign currency in the total of assets is 43.3% and it dropped by 0.35% in January-February.
The difference between interest rate applied by commercial banks on deposits and interest rate on credits is still high both in lei and in foreign currency: about 8 percentage points for individuals and approximately 6.5 percentage points for businesses. Situation developed favourable enough for businesses in February, as interest rates rose much enough, by 3.28 percentage points for deposits in lei and 0.68 percentage points for deposits in foreign currency. At the same time, the interest on credits rose insignificantly. The interest rate for individuals declined both for credits in lei and for deposits in lei by 0.36 percentage points and, respectively, 0.26 percentage points. The interest rate on credits in foreign currency rose by 0.03 percentage points, while on deposits in foreign currency dropped by 0.16 percentage points.
Source: NBM and our estimates
Moldovan leu depreciated by about 1% verso dollar and euro in the 1st trimester of 2006…
The official exchange rate of Moldovan leu depreciated by about 1% verso American dollar in the first trimester of this year, from 12.8320 lei per dollar in late December 2005, down to 13.0015 lei per dollar in late March 2006. At the same time, the average official exchange rate of leu/euro has depreciated by about 1%, from 15.4251 lei per euro in late December 2005 down to 15.6468 lei per euro in late March 2006.
According to NBM data, the turnover of transactions in lei on domestic currency market was valued at about 450 million dollars in February, by 0.3% more than in January 2006. Purchases of foreign currency on domestic currency market accounted for 222 million dollars in February; whole sales amounted to 230 million dollars. Operations in dollars accounted for 70% out of the total of transactions, deals in euros - 25.5%, in Russian roubles - 4%, and in Ukrainian hryvna and Romanian lei - by 0.3% each.
Source: NBM and our estimates
5. Business climate
Foreign direct investments represented about 9% of GDP in 2005...
Moldova attracted foreign direct investments (FDI) worth 260.3 million dollars last year or about 9% of GDP, these being the largest FDI in the past 15 years. In comparison with 2004, FDI have grown by 7.7%. FDI amounted to about 240 million dollars in 2004, to 102 million dollars in 2003, to 166 million dollars in 2002, and to 114 million dollars in 2001. According to statistics, 721 foreign capital enterprises were registered in Moldova in 2005, by 65% more than in 2004, while the total number of foreign capital firms count for 4,324 businesses early this year.
...while FDI in Baltic Countries hold about 30% of GDP
On the other hand, the average share of FDI in the Baltic Countries is about 30% of GDP. Russia is the main investor in Moldova, as it has invested about 147 million dollars in 1994-2005, followed by Spain - 81 million dollars and the United States - 61 million dollars. The Top-15 investors also includes the Netherlands (59 million dollars), Germany (31 million dollars), France (30 million dollars), Romania (27 million dollars), Switzerland (17 million dollars), the United Kingdom (15 million dollars), Ireland (15 million dollars), Greece (14 million dollars), Liechtenstein (13 million dollars), Malta (12 million dollars), Turkey (12 million dollars), and Cyprus (11 million dollars).
Source: NBS and our estimates
The US, OSCE, EU support Moldovan-Ukrainian border regime
The Republic of Moldova and Ukraine have continued to apply the unified customs regime instituted on 3 March at the Moldovan-Ukrainian border, including the Transnistrian segment, according to which only goods accompanied by Moldovan official customs documents are allowed through the border. The US, OSCE and EU have supported the implementation of the Moldovan-Ukrainian border and have deplored the attempts of the Transnistrian authorities to simulate an economic blockade by obstructing the region's foreign trade activities. In particular the new customs regime has been supported by a series of UE Member States (Great Britain, Portugal, Latvia etc.), as well as by the most important EU institutions, which have issued a series of statements of support. Earlier, Javier Solana, EU Common Foreign and Security Policy High Representative, qualified the measures taken by Ukraine as "very important for the establishment of an orderly regime at the Ukrainian-Moldovan border, which for the EU is very important".
The Russian Federation asks for the suspension of the Moldovan-Ukrainian border regime
The Transnistrian and Russian authorities have continued to call the actions of Moldova and Ukraine "economic blockade". The range of statements made by Russian Foreign Ministry and State Duma condemning Moldovan-Ukrainian customs measures has been continued by the Russian Ambassador to Moldova, Nicolai Reabov, who held a press conference on 20 March in Chisinau. Reabov qualified the Moldovan-Ukrainian regime as "political action", aimed at changing the political power in Tiraspol with one that would be more "receptive". According to Reabov, to accomplish this, Chisinau first wants to establish the control over the entire foreign economic activity of Transnistria, undermine its budget and induce a social crisis. "The increase in the tension around Transnistria, caused by Ukraine's joining Moldova's attempts to include the region in its economic space outside of the negotiations format raises serious concerns in Russia", said Reabov. He has warned of the destructive political and economic consequences and the possible destabilisation of the situation both in Transnistria and beyond and has called for suspending the recently implemented regime and organise talks between the parties.
These and other statements by Ambassador Reabov have triggered a tough reaction on behalf both of Moldovan officialdom and in particular the public opinion. The Moldovan Ministry of Foreign Affairs called "unacceptable" the behaviour of the Russian Ambassador and sent a message to the Russian Foreign Ministry stating that Reabov's statements have "an overtly biased character and do not fit into the diplomatic dialogue between two sovereign states". The Moldovan Ambassador in Moscow, Vasile Sturza, was convoked to Chisinau for consultations.
Asked to comment the statements of the Russian Ambassador, Ukraine's Ambassador, Piotr Cialii, told a press conference in Chisinau that Reabov's proposal to include the issues related to the registration of Transnistrian economic agents in Chisinau on the agenda of negotiations in the "5+2" format is unfounded because the problems related to the order at the border concern the domestic laws of a given country, but also the responsibility of each state. Within the same press conference, Cialii refuted the roomers whereby after the parliamentary elections Ukraine will revise its decision on the customs regime at its border with Moldova. "The guarantor of our position, as well as the guarantor of Ukraine's Constitution is the President of the country", the Ukrainian Ambassador said.
The "humanitarian crisis" in Transnistria - propaganda action
The Transnistrian authorities have continued to self-isolate the region to create the impression of an "economic blockade" on behalf of Ukraine and Moldova and to show its negative "humanitarian" effects on the region. Thus, the Transnistrian authorities allow intermittently the entry of Ukrainian good into Transnistria, intimidate the Transnistrian businessmen registered or intending to register in Moldova, increase artificially the prices on consumption goods etc. The late payments of wages of "state" employees and of pensions, as well as other social problems that the region has encountered for some time now, are now blamed on the so-called blockade. According to newspaper Novaia Gazeta (New Newspaper), it is suspicious that even the enterprises that are registered in Moldova, such as the cement factory in Ribnita, are stationing, while the workers and the pensioners are ordered to participate in the street protests against the "blockade" in exchange of financial rewards. The speculations of the Tiraspol authorities regarding the so-called "humanitarian crisis" in the region are supported by the Russian Federation, which sent to Transnistria 23 lorries with humanitarian aid in form of medicines and food stuff. The transit of the Russian "humanitarian" caravan through the Ukrainian territory has sparked a real diplomatic quarrel between Ukraine and Russia, after Ukraine asked that the caravan drives only at night time and all inscriptions are removed from the lorries.
At the same time, on 23 March, the Moldovan Foreign Ministry published a statement in which it condemns the attempts of the Transnistrian authorities to self-isolate the region and deny the existence of a "humanitarian crisis" in the region, calling the actions of Tiraspol as "propagandistic" and aimed to mislead the local population and tension artificially the situation. "It is all the more regrettable that these pseudo arguments of Tiraspol are accepted by some influential Russian circles. The interpretations by these circles regarding the Transnistrian region of Moldova are biased and to the detriment of the population on the left side of Nistru," the Moldovan Foreign Ministry statement said.
The EU Border Assistance Mission supports Ukraine
General Ferenc Bamfi, Head of the EU Border Assistance Mission at the Moldovan-Ukrainian border, has denied the existence of a humanitarian crisis in Transnistria within the 4th coordination meeting what took place on 23 March in Chisinau. General Bamfi declared that the situation in Transnistria is peaceful and that the region has enough food supplies for all inhabitants. One can import to Transnistria food stuffs, the passenger traffic is fluent, only transports intended for transit are blocked. The companies registered in Moldova do not have the possibility to export goods because of the situation in the region, however, the employees of these enterprises continue to receive their wages, General Bamfi said. According to him, Ukraine's decision to implement the new customs regime is a correct one, and the new regime corresponds to international standards and ensures the legality at the border. Dropping this regime would be a step backwards and would be in breach of legal order.
Summing up the results of the four months of activity of the EU Border Assistance Mission, General Bamfi stated that the cases of smuggling registered at the Moldovan-Ukrainian border to date have been insignificant and that the situation is under control. Bamfi also said that in the near future the Moldovan and Ukrainian customs services will receive equipment and technical assistance to monitor the Transnistrian segment of the Moldovan-Ukrainian border.
Republic of Moldova - Council of Europe
PACE rapporteurs for Moldova Josette Durrieu and Egidijus Vareikis had a summarising meeting with the Moldovan president on March 16, mentioning the maintenance of political stability in the Republic of Moldova, a factor that essentially increases the chances of a successful implementation of the Moldova - E.U. Action Plan. The CoE representatives highlighted the need to speed up and intensify the activities of promotion and implementation of democratic reforms, which would allow Moldova to get rid of the CoE monitoring and to hold a higher level of cooperation within CoE's structures. President Voronin has expressed gratitude to the PACE rapporteurs for their interest towards Moldova and assured them of the clear interest of authorities to meet the exigencies of the Council of Europe. The PACE rapporteurs told a conference held to summarise their monitoring visit that the drafting and implementation of a series of reforms by late July 2006 would allow Moldova to fulfil its commitments towards CoE.
The European Court of Human Rights (ECHR) has urged the Moldovan Government to present its observations over the case of the chairman of the Victoriabank Commercial Bank Board within maximum two months. The sides will be invited to comment their statements after the Government presents its arguments and the Court will decide on admissibility of this application.
The ECHR sentenced Moldova1 in two more cases on March 21:
- the Court established pecuniary and non-pecuniary damages of over 11,000 euros for the case of Lupacescu and others vs. Moldova;
- the Court established pecuniary and non-pecuniary damages of 18,000 euros for the case
- of Josan vs. Moldova.
Representatives of the Metropolitan Church of Bessarabia have sued the Moldovan Government at ECHR for non-execution of a final judgment of the Moldovan Supreme Court of Justice which ruled that the Church Acoperamintul Maicii Domnului in Floresti is subordinated to the Metropolitan Church of Bessarabia. According to the secretary of the Metropolitan Church of Bessarabia, the Floresti public administration authorities ignore the ruling of the Supreme Court of Justice and try to pass the church concerned under subordination of the Metropolitan Church of Moldova. Representatives of the Floresti district administration say that they do not participate in this conflict, while the police interventions aim to ensure the public order and security of parishioners regardless of their religion.
Republic of Moldova - European Union
The European Parliament (EP) adopted a declaration on human rights in Moldova and, in particular in Transnistria, on March 16. The document says that the European Neighbourhood Policy recognises the European aspirations of Moldova and the E.U. has made important steps forward intensification of commitment towards the Republic of Moldova and identification of solutions to the Transnistrian conflict. The EP Resolution2:
- strongly condemns the repression, harassment and intimidation of representatives of the independent media, citizens criticising the self-proclaimed Transnistrian authorities, and members of NGOs and of the opposition by the Transnistrian regime;
- calls on the Moldovan authorities to continue their efforts towards putting an end to the unlawful and arbitrary detention of Mr. Andrei Ivantoc and Mr. Tudor Petrov-Popa and securing their immediate release; strongly urges the Russian authorities to pursue actively all effective avenues capable of putting an end to the unlawful and arbitrary detention of both prisoners and of securing their immediate release;
- asks the Moldovan authorities to ensure a transparent appeal procedure and in line with international legal norms while examining the case of former defence minister Valeriu Pasat;
- expresses strong and continued support for Moldovan authorities' efforts to implement the Action Plan as part of the E.U. Neighbourhood Policy, asks the European Commission and the Council of Europe to sustain the Moldovan authorities in the democratisation process and to use diplomatic means in order to weaken the illegal and authoritarian regime in Transnistria;
- calls on the Moldovan Government to continue the process of reforms for progress of the state based on the rule of law and combat of corruption in state institutions, accordingly to commitments resulted from the Action Plan, and to increase the efforts against any manifestation of trafficking in human beings;
- welcomes the cooperation between different political parties represented in the Moldovan Parliament; recognises the importance of reforms concerning independence of judiciary, security services, election legislation and Chamber of Auditors; calls for strengthening of the judicial system, stresses the importance of carrying out these and other reforms without delay;
- welcomes the implementation of the Joint declaration of the Moldovan and Ukrainian prime ministers, calls on Transnistrian economic agents to register with the relevant authorities in Chisinau;
- calls on Russia to immediately stop its support for the Transnistrian regime, to reaffirm its commitment to Moldova's territorial integrity as defined by the Moldovan Constitution and to withdraw its troops, including their heavy weaponry and munitions, unconditionally, in line with the decisions of the 1999 OSCE Summit in Istanbul, etc.
The Foreign and European Integration Ministry released a declaration on March 20, appreciating the stance of the E.U., U.S. and OSCE concerning the implementation of the December 30 Joint Declaration of the Moldovan and Ukrainian premiers, welcoming the adopted standpoint and expressing deep gratitude for their support for Moldova's efforts to settle the Transnistrian conflict on a peaceful way. The Moldovan Foreign and European Integration Ministry highlights the role of the Border Assistance Mission in the process of monitoring of the implementation of the Joint Declaration and development of an efficient and transparent border regime. The ministry reiterates that the joint actions of Moldova and Ukraine are part of the wish of both states to use the European standards in all fields, outlining their common aspirations for entry in the European community.
The fourth meeting of coordination of the E.U. Border Assistance Mission to Moldova and Ukraine took place on March 23. The Mission head said that many attempts to smuggle cigarettes, drugs, frozen meat were disclosed in February, but these cases were insignificant and the situation is under control. It was announced that the customs services of Moldova and Ukraine will receive equipment and technical assistance for monitoring of the Trasnistrian section of the Moldovan-Ukrainian border.
Republic of Moldova - Romania
Radu de Hohenzollern-Veringen, special representative of the Romanian Government for Integration, Cooperation and Sustained Development, was on an official visit to Chisinau on March 14-17. Meetings of the envoy of the Romanian Government and a forum of businessmen that took place within the visit focussed, in particular, on bilateral commercial-economic cooperation, with Romanian businessmen expressing a special interest to collaborate with Moldovan partners, especially after the integration of the neighbouring states in the E.U. and appearance of new opportunities for development of economic relations. Prince Radu de Hohenzollern-Veringen has met with chairman and deputy chairman of the Parliament, prime minister, minister of economy and trade, defence minister while visiting Chisinau.
Vasile Blaga, Romanian minister of administration and interior, said that Moldovan citizens will be able to enter Romania with visas starting November 1, 2006. He delivered this statement at the ceremony of signing of the Protocol on Agreement of Readmission in the Republic of Moldova and Romania, with the Romanian minister saying that Romania has to introduce these measures "without any joy, on basis of commitments that it has assumed for entry in the E.U." Blaga reiterated that the Romanian authorities put efforts to offer a preferential treatment for Moldovan citizens regarding visa issuing problem, so that not to restrict the freedom of move, noting that holders of diplomatic and service passports will not need visas. Representatives of the Moldovan Foreign and European Integration Ministry said meanwhile that the visa regime for Moldovans willing to travel to Romania will not be introduced earlier than on January 1, 2007. The head of the Directorate for Consular Affairs in the Foreign and European Integration Ministry said that a draft agreement on visa regime tabled by the Romanian side is being examined and approved.
The Protocol on implementation of the Readmission Agreement between Romania and the Republic of Moldova, which the interior ministers of the two countries signed on March 23, 2006, obliges Moldova to accept the readmission of its citizens and clandestine migrants if they were identified in Romania. The procedures may have a special significance after Romania's integration in the E.U., this country becoming a destination for potential illegal migrants.
The Interior Minister of Moldova has asked his Romanian counterpart "to set up an efficient mechanism capable to prevent the awarding of Romanian citizenship on basis of fake acts." Gheorghe Papuc envisaged applications of Moldovan-born crime leaders who aim to get rid of penal responsibility in Moldova. The two ministers agreed to work out an information exchange mechanism with the purpose to establish the truth of acts of Moldovan citizens.
Romanian Foreign Minister Mihai Razvan Ungureanu said that the apparent crisis in the Transnistrian region is a consequence of a false policy of the separatist regime. Ungureanu noted that the agreement between Ukraine and Moldova regarding control on commodity transit in the Transnistrian section of the state border brings light to a very difficult issue. He reiterated Romania's dissatisfaction with the pace of the five-plus-two negotiations and noted that the E.U. shares this dissatisfaction.
Romanian President Traian Basescu said in Brussels, where he attended a meeting of the European People's Party, that the integration of the Western Balkan countries and Moldova in the Central European Free Trade Agreement (CEFTA) "is a solution that the European People's Party regards as a means to speed up the preparation of these countries for integration in the E.U."
Republic of Moldova - Russian Federation
Statements of the Russian Ambassador to Moldova
The Russian Ambassador to Moldova delivered some statements at a March 20 news conference which raised serious reactions from the Moldovan authorities and political forces. Nicolay Ryabov said among others that:
- the Republic of Moldova is to blame for the start and the failure to settle the Transnistrian conflict;
- the latest measures of Moldova have an impact on political and social situation in the separatist region, and security and stability in the entire region;
- "The new customs regime implemented at the Moldovan-Ukrainian border affects directly the legitimate interests of Russia," with this country following "recognised legitimate interests in the post-Soviet area and in the virtue of its status of great power."
- the measures taken by Moldovan authorities to regulate the external economic activity should "respect the previous understandings on Transnistria," which was a "condition for Moldova's admission in the World Trade Organisation";
- the Russian Federation proposes the suspension of the measures taken by Moldova and Ukraine to regulate the import-export operations of the Transnistria-based economic agents, elaboration of a system of guarantees "which could not be modified through unilateral actions";
- meeting between Moldovan and Russian presidents would be possible "after settlement of some problems laid on a common table, including on Transnistrian settlement";
- the problem of new natural gas prices "has nothing in common with implementation of new regulations on crossing of the Moldovan-Ukrainian border because it has appeared much before introduction of these regulations.
Reacting to statements of the Russian ambassador, the PPCD parliamentary faction has proposed the Parliament to draft a declaration on attitude of Russia and its representative over relations with Moldova. Representatives of AMN and PCRM consider that the executive and the Foreign Ministry shall react to Ryabov's statements. The Liberal Party has proposed to declare Ryabov as "persona non-grata" in the Republic of Moldovan and to change the Russian Federation's status in the negotiation process into "side of the conflict".
The Foreign and European Integration Ministry of Moldova has sent a letter to the Russian Foreign Ministry saying what it thinks about the statements of the Russian ambassador in Chisinau and asking its Russian counterpart if what Ryabov said is his personal vision or the stance of the Russian authorities. At the same time, Moldova's Ambassador to Moscow Vasile Sturza was invited in Chisinau for consultations, discussing the Moldovan-Russian relations, including the statements of the Russian ambassador in Chisinau.
Blocking actions of the Russian Federation
The Russian State Duma has asked the committee for CIS affairs to ask information from the Russian Government and Foreign Ministry regarding the "possibility to introduce restrictions for migrants from Moldova and west of Ukraine."
The chief state sanitary doctor of the Russian Federation has announced that Russia will take drastic measures against Moldovan and Georgian wine imports because "of some questions regarding the food security indexes." Officials in charge with wine making sector and control on spirits, as well as Moldovan wine makers say that the statements of the Russian veterinary doctor are irresponsible because Moldova respects the standards, exigencies and norms for heavy metals, pesticides and other substances contained in spirits and Moldovan wines can claim the category of ecologically clean drinks, in compliance with European standards.
According to the Russian mass media, the Russian Union of Wine Makers and Vine Growers has asked the Russian Government to launch an anti-dumping investigation against Moldovan wines, while a request in this regard was delivered to the Russian premier and minister of economic development and trade. This NGO claims that the wines made in Moldova are unfairly competing on the Russian market and Moscow should increase the customs duties for these imports. According to officials of the Moldova-Vin Agency, the anti-dumping investigation would be "welcome because it would confirm the higher quality of Moldovan wines."
Starting March 27, 2006, the Russian Federation restricted the importation of wines from Moldova and Georgia. The Moldovan authorities said that the interdiction has a political nature and noted that Moldova will not accept Russia's entry in WTO as long as the restriction on importation of some products made in Moldova is in effect. A delegation from Moldova-Vin will negotiate the unblocking of Moldovan exports with the Russian authorities.
A delegation of the Moldovan Government including the chairmen of the joint stock society Moldova-Gaz is negotiating in Moscow the price for the natural gas that will be delivered to our country starting April 1.
Moldova in the world
The chairman of the Moldovan Socialist Party, former parliamentarian Victor Morev has been declared internationally wanted, being suspected of some corruption-related actions. According to a March 27 a communication of the Centre for the Struggle Against Economic Crimes and Corruption (CCCEC), Morev has brought a pecuniary damage of over 2 million lei to the state. CCCEC invokes the illicit sale of state property (land fields) by Morev through excess of authority while running the Balti City Hall. CCCEC noted that Morev has left the municipality immediately after the anti-corruption officers discovered his illegal actions and he was declared as internationally wanted.
Victor Morev was elected lawmaker in 1990-1995 (electoral bloc Socialist Party and Unitate-Yedinstvo Movement) and in 2001-2005 (electoral bloc Braghis Alliance), when he has left the parliamentary faction and became independent lawmaker, supporting however all initiatives and decisions of the parliamentary majority of PCRM.
1 The overall amount of pecuniary and non-pecuniary damages established by ECHR for cases vs Moldovan Government exceeds 360,000 euros plus more than 30,000 euros in costs and expenses (see the Summary of ECHR judgments)
2 Published by the March 21 issue of the newspaper Moldova Suverana and the EP's website
Studies, Analyses, Comments
Summary of ECHR judgments and decisions on appeals vs Moldova
Vladislav Gribincea, 28 March 2006
The summary of judgments and decisions of the European Court of Human Rights on appeals vs Moldova was worked out by Vladislav GRIBINCEA, jurist in the public organisation Lawyers for Human Rights