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Activity of Public Institutions

Government
Presidency

Moscow-related hopes of Chisinau and Tiraspol or "Moscow never sleeps"? by Maxim Kuzovlev

Activity of Public Institutions

Government

1.1. Appointments. Dismissals

Pavel Untura was relieved from the office of deputy minister of transport and road management, ministry dissolved in July 2008.

1.2. Decisions

Decision approving the regulation concerning state grain reserves. The Government will approve the volume of reserves proposed by the Agency for Material Reserves, Public Procurements and Humanitarian Aid, which administrates, coordinates and controls their use. The regulation sets the conditions for supplying food wheat from state grain reserves. The state grain reserves may be used when the average price of food wheat grows by at least 20 percent within 30 days.

Decision increasing the quantum of maintenance for patients from medical institutions. As much as 41.30 lei will be spent a day to nourish a person from placement and rehabilitation centres for children and 8.4 lei will be allocated to buy drugs and consumables. New norms were introduced for the nutrition and compensation of blood donors (the price of a litre of blood will be 249 lei).

1.3. Sittings. Decisions. Statements

Launching of the Electronic Information System of the Licensing Chamber

Prime minister has participated in the launching the information system aimed to introduce the "one-stop-shop", to make the processing of information more technological and exclude as much as possible the human factor from this process. The collected and saved information will provide economic agents with adequate opportunities for planning, starting up or extending business. The Government and the U.S. Embassy in Chisinau provided the technical and financial assistance for developing the system. According to officials, the average number of documents needed to get a licence has decreased much and competent public authorities provide most of them to the Licensing Chamber, so that businesses do not have to interact to Licensing Chamber directly. At present, economic agents have to apply to other public authorities but the Licensing Chamber to get only 25 out of the number of documents affiliated to the 37 licensed economic activities.

Presidency

Note by ADEPT: During January 1–9, 2009, Moldova’s President was on holidays abroad.

2.1. Decrees

Moldovan President has signed a decree declaring the 20^th of January the national mourning day and establishing the state commission in charge with organising the funerals of late poet Grigore Vieru. Parliament head Marian Lupu is the Chairman of the commission.

2.2. Sittings. Decisions. Statements

Execution of 2008 budget

Moldovan President has chaired a meeting on execution of the 2008 state budget, with reports saying that incomes worth 16 billion lei overall were collected to the state budget in 2008 on all components, which is 100.9 percent of the planned amount. State budget incomes in 2008 have grown by 1.9 billion lei or 13.6 percent compared with 2007, and medium daily collections amounted to 54.5 million lei. In 2008, 16.5 billion lei was spent from the state budget or 99 percent of the planned indicator, which is by 15.5 percent more than in 2007. The state honoured all commitments on internal and external debts in 2008. Incomes worth 6.1 billion lei were collected to budgets of administrative-territorial units in 2008, which is 100.3 percent of the planned amount or by 8.5 percent more than in 2007. However, concerns were raised with a deficit of 303.2 million lei in executing budgets of administrative-territorial units, inclusively 150.2 million lei of the budget of Chisinau municipality. It was stressed at the meeting that the stability of the Moldovan banking sector was maintained in 2008, average rates on credits and deposits have grown, and the liquidity was maintained at a high level. The chief of state outlined the need to improve the situation in carrying out investment projects, particularly stressing the importance to introduce a stricter governmental control on investment projects in road infrastructure. He invited responsible governmental officials to mobilise their efforts to ensure the execution of the 2009 budget in terms of incomes, insisting on a firm respect for commitments on salaries and social payments.

Discontentment with condition of border-crossing electronic communication networks

The meeting convoked by chief of state has discussed the development of telecommunications in Moldova, installation and exploitation of electronic communication networks at the state border of Moldova. It was signalled the underdeveloped telecommunication infrastructure, including the lack of a number of information services and technological solutions such as data transit, organisation of data transfer networks via electronic lines, which partly isolates our country from the single global information area. The lack of a developed network of high-speed data delivery channels fuelled the price of Internet services on domestic market. Vladimir Voronin demanded actions aimed at improving the current situation in the area of installation and exploitation of electronic communications at the state border, signalling the lack of a prospect vision by the Ministry of Information Development regarding information and communication technologies. As well, Mr. Voronin stressed the imperfect legislative-normative framework regulating the data transit at the state border of Moldova, warning that this does not strengthen the sovereignty of the country. Therefore, the Government was instructed to speed up actions aimed to remedy this situation. The Ministry of Information Development and Ministry of Foreign Affairs and European Integration will ensure the development and updating of normative base on border-crossing data inflow and set up a mechanism for inventory and development of administrative standards.

Reconstruction of Curchi Monastery

The meeting convoked by Moldovan President has reviewed actions to be taken within the reconstruction process of the Curchi Monastery and considered ways to settle problems related to the rebuilding process, specified issues relating to the timetable of restoration woks at the monastery complex in 2009: opening of the seminary building, abbey, social block, painting inside the Nasterea Maicii Domnului Cathedral, St. Dumitru Church, church of the cemetery, continuing works at refectory and hotel, mill, etc. The chief of state reconfirmed the necessity to mobilise efforts in order to respect the timetable and ensure a high quality.

Economic Policies

1. Inflation and prices

Inflation for 2008 is lower than updated forecast…

According to the NBS data, average consumer prices decreased by 0.2 percent in December 2008, compared with November as a result of the decline in prices for manufactured goods by 1.3 percent and rise of tariffs for public services by 1.2 percent, while average retail food prices remained at the November level.

Prices for main food products have decreased in the period concerned, in particular, rice and vegetal oil by 6.1 percent, sugar by 2.2 percent, eggs by 1.1 percent, fruits by 0.5 percent (citric by 9.1 percent, apples by 3.3 percent), potatoes, meat and meat products by 0.3 percent each (inclusively beef by 2.1 percent, pork by 0.8 percent). According to estimates by specialists, the fall of food prices in the period concerned was particularly due to products from the new crop. Prices for manufactured goods have decreased as follows: fuels by 14.5 percent, bottled natural gas by 12.8 percent, coal by 3.9 percent, drugs by 0.6 percent, and building materials, TV sets, telephony and audiovisual appliances by 0.4 percent.

On the other hand, tariffs for public service have grown in December 2008, as follows: centralised heating supply for households by 32.2 percent, services by hotels and sanatoria by 2.4 percent. Prices for some food products have grown as follows: vegetables by 3.8 percent (tomatoes by 15.2 percent and cucumbers by 11.3 percent), honey by 2.2 percent and milk by 1.6 percent and cheese by 1.2 percent. Prices for fur coats and caps for children have grown by 4.4 percent in the heating season and winter footwear by 1.6 percent.

The cumulated inflation rate for 2008 (December 2008 compared with December 2007) was 7.3 percent (the inflation rate in December 2007 compared with December 2006 was 13.1 percent), which is lower than the updated forecast by authorities. However, many economists fear that the real rate is not the one given by official statistics. As regards the consumer basket, the inflation rate "is cheating" (without interpreting ad literam), given its seemingly faulty and incomplete structure. In particular, its structure determines an underrating of inflation – the share of bread products, for example, is almost equivalent to the share of costs for communal services, rent expenditures are underrated, while education-related expenditures (education, admission fees, etc.) are not covered, the rural inflation is not taken into account and many other methodological aspects may be raised.

2. External trade

Trade deficit keeps being on the rise…

Moldova’s trade deficit for January-November 2008 exceeded 3 billion dollars and rose by about 1 billion dollars (more than 46 percent), compared with the same period of 2007. In particular, exports turned over 1.4 billion dollars in January-November 2008, which is by 21.6 percent more than in the similar period of 2007. On the other hand, imports turned over about 4.5 billion dollars and rose by more than 37 percent compared with January-November 2007.

Exports of goods to EU member states were worth about 759 million dollars (+23.8 percent). Imports from EU accounted for nearly 1.96 billion dollars (by over 31 percent more than in January-November 2007). Moldova’s trade deficit with EU has reached about 1.2 billion dollars. Exports to CIS accounted for about 582 million dollars and increased by more than 16 percent. Imports of goods from CIS were worth about 1.57 billion dollars (by over 32 percent more than in January-November 2007). Moldova’s trade balance deficit with CIS has grown by 44.4 percent, up to about 988 million dollars.

Romania – key destination for Moldovan products…

Moldova recorded the highest trade balance deficit with Ukraine in January-November 2008 (more than 641 million dollars), followed by China – 290 million dollars, Germany about 279 million dollars, Russia more than 280 million dollars, Romania 251 million dollars etc. In this context, exports to Romania have grown by about 66 percent, compared with January-November 2007, up to 315 million dollars. Thus, Romania’s share in Moldovan exports has increased from 15.7 percent in 11 months of 2007 up to 21.2 percent in January-November 2008. At the same time, imports from Romania have increased by 43 percent in the period concerned, up to 566 million dollars. Following Romania among Moldova’s export partners is Russia with 20.1 percent of all exports (by over 297 million dollars or about 41 percent more than in January-November 2007).

3. Labour market

Salary rises at the end of the year…

According to official statistics, the average monthly salary in national economy was about 2,490 lei in January-November 2008, which is by 24 percent more than in the similar period of 2007. The real salary in the same period has increased by 9 percent. The average salary in budgetary sector was 1,940 lei and rose by 21 percent, while the average salary in real sector of economy exceeded 2,775 lei and increased by 25 percent, compared with the same period of 2007.

An employee earned about 2,638 lei on average in November. In comparison with November 2007, the average wage has increased by 18 percent and the real salary by 9 percent. The average salary in budgetary sector amounted to 2,166 lei and rose by 21 percent, compared with the similar period of 2007. The average salary in real sector accounted for 2,883 lei and increased by 17 percent compared with the same period of 2007.

Minimum existence…

The minimum existence in the 3^rd quarter of 2008 was about 1,246 lei per person. The value of the minimum existence is determined by both prices for food products covered by consumer basket and share of expenditures for the manufactured basket (cost of manufactured goods and services), which is established on the basis of the real structure of consumer expenses accordingly to data of the Household Budgets Research. The evolution of the minimum existence in the first three quarters of 2008 has registered trends similar to last year, with maximum values being recorded in the 2^nd trimester (1,341.9 lei) and minimum in the 3^rd quarter (1,245.8 lei). This decrease of the minimum existence in the 3^rd quarter was particularly due to the fall of prices for seasonal products in the period concerned. Therefore, the minimum existence in the 3^rd quarter has decreased by 7.2 percent compared with the 2^nd trimester and 5.3 percent compared with the 1^st quarter.

The minimum existence in urban areas was over 1,352 lei, compared with 1,171 lei in rural areas, which is a difference of over 181 lei (15.5 percent) due to the different structure of consumer expenditures for people from cities and villages. Thus, the manufactured basket in urban areas covered 47 percent on average of the value of minimum existence, while in rural areas it was over 37 percent (this indicator on country is more than 42 percent). The dearest minimum existence on categories of population was recorded for employable people, especially men – about 1,394 lei. Maintaining a child costs about 1,163 lei a month and this indicator depends on the child’s age, from 460.7 lei for a baby up to 1,291.3 lei for a child between 7–16 years old. The minimum existence for retirees was 1,061.1 lei, which is 85.2 percent of the average value for total population.

Value of minimum of existence on categories of population in the 3rd quarter of 2008
(monthly average per person, lei)

Overall Urban Rural Total population 1245,8 1352,2 1171,1 Employable people 1315,6 1407,3 1239,0 Employable men 1393,8 1484,4 1319,4 Employable women 1234,7 1333,3 1151,0 Retirees 1061,1 1139,3 1016,4 Children 1163,0 1289,5 1094,6 Inclusively: Below 1 year old 460,7 511,4 431,9 1–6 years old 998,3 1108,5 936,1 7–16 years old 1291,3 1437,6 1214,0

According to findings of the Household Budgets Research, available average monthly incomes per person accounted for 1,221.4 lei in the 3^rd quarter of 2008, which is by 14.5 percent more than in the 3^rd trimester of 2007. At the same time, this indicator has grown by 2.3 percent in real terms (adjusted to inflation rate). Available revenues of people in the 3^rd quarter of 2008 covered 98 percent the average value of the minimum existence. The average medium pension established on October 1, 2008 was 644.4 lei or by 19.5 percent more compared with the same period of 2007, covering only 60 percent of the minimum of existence of retirees.

Correlation between people’s incomes and minimum existence in the 3rd quarter, 2006–2008, %

2006 2007 2008 Correlation between average monthly incomes per person and average value of the minimum existence, in percent 93,1 104,0 98,0 Correlation between average monthly pension and minimum existence for retirees, in percent 63,5 61,1 60,7 Correlation between average monthly wage and minimum existence for employable population 2,1 2,0 2,0

The average employee salary in the economy was about 2,602 lei in the 3^rd quarter of 2008, which is by nearly 22 percent more than in the similar period of 2007, covering about twice the minimum existence for employable people.

Transdnistrian Problem

Impact of Voronin-Smirnov meeting on Chisinau-Tiraspol relations

Following the December 24, 2008 Voronin-Smirnov meeting, Transnistrian dignitaries have taken actions to undermine the agreements of the two. On that occasion, the Reintegration Ministry has released a communication saying that "… starting January 1, 2009, Moldovan citizens are asked again to pay taxes, but this time 22 lei per person (compared with 8 lei previously), in order to be allowed to enter and stay in the secessionist region. Given the fact that these actions contravene to agreements reached during the recent meeting between Moldovan President and Transnistrian leader concerning the abolition of any taxes starting January 1, 2009, a decision made public, the Reintegration Ministry has invited all structures concerned from Tiraspol and representatives of mediators and observers in the negotiation process to take emergent actions in order to ensure respect for the agreements concerned." The rhetoric by Transnistrian officials matched these actions as well. In this regard, while addressing residents on the New Year’s Eve, Transnistrian leader Igor Smirnov balanced by the "victory of great Russia" in the Russian-Georgian conflict and the "double policy of Moldova – a member of GUAM, a friend of Georgia"; Russia’s efforts to settle conflicts and those of the West in Kosovo, reiterating that the Transnistrian conflict may be settled within a dialogue between two equal parties – Moldova and Transnistria; efforts of economic development of Transnistria and world financial crisis generated by the U.S.

Prospects to resume the "5+2" negotiations

Transnistrian foreign minister Vladimir Yastrebceak stated on January 8, 2009 that speaking about an eventual restart of the "5+2" negotiation is early. According to Yastrebceak, the lack of guarantees for the external commercial activity of Transnsitria is the No.1 obstacle on the negotiations way. He recalled that the negotiations were ceased in March 2006 after Moldova and Ukraine have introduced new customs regulations for the export of goods from Transnistria without consulting the latter. He also accused Moldova of constantly taking actions to harden the export by Transnistrian enterprises. According to the Transnistrian Chamber of Commerce, expenses by Transnistria-based economic agents recorded by Moldovan customs services have increased by 90 percent in 2008 compared with 2007, while expenses recorded by the Chamber of Commerce have grown tenfold. More than that, Moldova has introduced collections for ecological and phytosanitary controls, applying fines for direct import of raw material from Ukraine in Transnistria. In conditions of economic crisis, these regulations raise new barriers and introduce additional pressures on Transnitrian economic agents. Yastrebceak says that Moldovan authorities are aware of their actions aimed at increasing the number of Transnistria-based enterprises with a permanent registration on the right bank of the Dniester.

Speaking about Chisinau’s demilitarisation initiative, Yastrebceak described this proposal as doubtful. He recalled that President Voronin is not the author and it was initially proposed by guarantors and mediators in 2004. The demilitarisation is impossible as long as the conflict is unsettled, since clear further guarantees are unavailable. In addition, the demilitarisation would not be accepted as long as the Interior Ministry of Moldova is a militarised structure. As well, Transnistria does not like the insistence of Moldovan authorities to see the Russian troops outside of Transnistria in the demilitarisation process. Yastrebceak’s conclusion regarding the conflict resolution initiatives by Chisinau, including the "package approach", which includes the draft law on Transnistria’s status and a draft political declaration, does not contain any new facts and is not worthy of a great consideration. At the same time, Yastrebceak hinted that it would be better for Transnistria to expect half a year, as the Chisinau governance will be changed after the spring 2009 parliamentary elections and persons who do not care much about the Transnistrian settlement could succeed to the power.

Gas crisis

The gas conflict between Russia and Ukraine has found the Transnistrian authorities unprepared. In consequence, the region did not have gas for approximately ten days or it had just a little. Heating plants were short of alternative fuel and thus the education process was interrupted for about 10 days. But the utmost curiosity was that while Transnistrian education minister Maria Pashchenko was admonishing journalists for "vicious forecasts" on ceasing gas supply, the supply was really ceased. Transnistrian dignitaries concluded that they have to learn from what has happened, as capacities to store alternative energy agents are empty since 1996. After the gas crisis the electricity consumption has increased by 30 percent and hit power networks and generators which went out of work.

The gas crisis had serious consequences on Transnistrian economy. According to estimates by Transnistrian dignitaries, economic enterprises will be able to resume their normal activity by early February only, while daily losses related to the gas crisis are estimated at three million dollars.

The EU special representative to Moldova, Mr. Kalman Mizsei, has stated in connection with the gas crisis that it could encourage the approach of Transnistria and Moldova in terms of conflict resolution. The crisis conditions may reveal the necessity of "confidence measures" and persuade the parties that joint efforts are capable to help finding a favourale solution for both sides.

Foreign Affairs

European Integration

Meeting of the EU-Moldova Political and Security Committee (PSC) Troika

Brussels hosted on January 14, 2009 the first meeting of the Political and Security Committee (PSC) Troika this year. It focussed on political situation in Moldova and progresses made by Moldova to implement internal reforms in the context of preparations for negotiating the new EU-Moldova agreement. As well, it discussed the evolution of the Transnistria settlement process in 2008. The Moldovan delegation headed by Valeriu Ostalep appreciated the work of the EUBAM and asked the European Commission to extend the mandate of the Mission after December 3, 2009. In Brussels, the Moldovan delegation has met Helga Schmid, director of the Political Unit, secretary-general of the EU Council, and John Kjaer, head of the Unit for Relations with Moldova, DG RELEX, European Commission.

Bilateral cooperation

Republic of Moldova-Latvia

On January 13, 2009 Riga hosted Moldovan-Latvian political consultations between delegations representing the Foreign Ministries of the Republic of Moldova and Latvia. The agenda of consultations included topics relating to development of bilateral relations; priorities of EU-Moldova relations and Latvian experience in negotiation process, in the context of the new EU-Moldova Agreement. Deputy Minister Valeriu Ostalep, head of the Moldovan delegation, expressed gratitude to the Latvian side for the assistance and expertise provided to Moldovan authorities in the process of adjustment of national sanitary and phytosanitary standards to European regulations. In its turn, the Latvian side expressed readiness to share its experience in the process of preparation for negotiating the new EU-Moldova Agreement both to the Ministry of Foreign Relations and European Integration and other competent ministries which will participate in this process. (According to press releases by MFAEI)

Studies, Analyses, Comments

Moscow-related hopes of Chisinau and Tiraspol or "Moscow never sleeps"?
Maxim Kuzovlev, 18 January 2009

Two meetings between Voronin and Smirnov have been organised under Moscow’s pressure last year. The first one was hosted by the Bender City Council, and the second meeting took place at the artistic centre for children and youths in Tiraspol

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