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Democracy and governing in Moldova
e-journal, year VII, issue 143, 1–31 August 2009
Activity of Public Institutions
Studies, Analyses, Comments
Activity of Public Institutions
On August 28, 2009, the 18th Legislature elected on July 29, 2009 convened in the constituting sitting. All 101 members of the Parliament whose mandates were validated by the Constitutional Court attended the sitting at the beginning. The constituting sitting was initially chaired by the eldest member, PCRM MP Ivan Calin. After the Constitutional Court Chairperson read the report on results of the parliamentary elections and validation of mandates of the newly-elected members, parliamentary factions should be built. The following factions were made: PLDM (18 lawmakers), PL (15 lawmakers), PDM (13 lawmakers) and AMN (7 lawmakers). PCRM representatives demanded a break until September 4, 2009 in order to make their faction. Although, they asked it formally, the request of PCRM lawmakers was not voted by the Parliament, with the sitting chairman announcing a break by his will, and PCRM legislators left the sitting hall. Further, PCRM representatives announced that they will attend the September 4-set parliamentary sitting.
The 53 members of parliamentary factions continued the sitting under the lead of the eldest lawmaker among them, Ion Hadirca, and constituted a 53-strong parliamentary majority called Alliance for European Integration (AIE).
Further, legislators elected the Chairperson of the Parliament, with all the factions representing the parliamentary majority nominating one candidate, Mihai Ghimpu, chairman of the Liberal Party. The commission for election of the Parliament speaker was created and held a secret voting. Mihai Ghimpu was elected speaker with the votes of 53 legislators. Representatives of the four factions forming the parliamentary majority read some statements concerning further activity and goals.
The Parliament adopted two decisions at the end of the sitting, asking the national public broadcaster Teleradio-Moldova to provide an hour of airtime to Parliament members on August 28 evening and broadcast live all plenary sittings of the legislature starting September 2, in accordance with existing express stipulations of the Parliament Regulation (Article 99 (2) of Regulation). On August 28 evening the Teleradio-Moldova administration announced that it would not give green light to the Parliament’s requests and further released a Declaration on the Parliament Decision concerned. The way the national TV station Moldova-1 covered the constituting sitting of the Parliament and the parliamentary events of the same day was described as harming the right of people to correct and unbiased information on public affairs.
AIE representatives stated after the parliamentary sitting that PDM chairman Marian Lupu will be proposed as chief of state and PLDM leader Vadimir Filat will be nominated as candidate to the seat of prime minister.
1 Under Article 38 (2) of the Parliament Regulation, plenary sittings are deliberative shall majority of elected members attend them (52 legislators).
On August 26, the Government adopted the decision on its resignation, without publicly presenting the report on achievement of the action plan approved in July 2009, which focussed on "keeping the Republic of Moldova on the world map."
2.1. Appointments. Dismissals
Sergiu Sitnic was relieved from the post of director of the National Regulatory Agency for Electronic Communications and Information Technology (ANRCETI) upon his demand.
Under a Government decision, Valeriu Diozu, former presidential advisor for information development affairs, was assigned ANRCETI director.
Adrian Cazacu was appointed director-general of the Agency for Geology and Mineral Resources controlled by the Ministry of Environment and Natural Resources. Previously, Cazacu was deputy director of the same agency.
Valentin Mejinschi was accepted by Government as Extraordinary and Potential Ambassador of the Republic of Moldova to Poland.
Boris Golovin was assigned director-general of the Drug Agency, being relieved from the office of deputy minister of health.
Gheorghe Rusu was relieved from the post of director-general of the National Health Insurance Company (CNAM) upon his demand. The former deputy health minister, Mircea Buga, was nominated CNAM director-general.
Decision approving the Regulation of the Agency for Geology and Mineral Resources. The agency will be controlled by the Ministry of Environment and Natural Resources and will have a maximum staff of 28 persons (except for the service personnel), being the legal successor of the AGeoM State Agency for Geology of the Republic of Moldova. The Main State Inspectorate for Technical Supervision of Dangerous Industrial Objectives will deliver to the agency the register, projects and documents of mine fields.
Decisions approving some regulations:
- The regulation concerning the record of traffic contraventions and access of holders of driver’s licences to reports on penalty points;
- The regulation concerning the application and examination of applications for invention brevets and issuing of brevets;
- The concept of the automatic information system called state "register of domestic violence cases";
- The sanitary regulation on food supplements;
- The regulation concerning the coercive treatment for patients suffering from catching tuberculosis;
- The regulation on organising the work of interpreters and translators of the Superior Council of Magistracy, Ministry of Justice, prosecution organs, criminal investigation organs, law courts, notaries, lawyers and judicial executors.
Decisions on allocation of funds:
- The executive committee of Gagauzia was allocated 400,000 lei to organise and hold the 2nd World Congress of Gagauzians on August 18–19;
- As much as 10,000 US dollars went to the United Nations Central Emergency Response Fund from allocations foreseen in the state budget in 2009 to pay Moldova’s fees as UN member;
2.3. Sittings. Decisions
Honouring of social and external commitments
According to data provided by minister of finance, the Government does not have any debt for social payments and external debt service, as the last 100 million lei to serve a debt of Moldova contracted from the Russian Federation in 1992–1994 was transferred on July 30, 2009. Prime minister indicated that the unimportant expenses should be postponed, while the Ministry of Finance was instructed to revise the schedule of transfer of funds to accounts of local public administrations, so that to prevent any difficulties in honouring social payments.
Reduction of natural gas tariff
Prime Minister Zinaida Greceanii has stated that the average natural gas tariff for final consumers will shortly decrease by at least 10 percent, as starting the third quarter of this year Moldova imports Russian gas for a price of 186.85 dollars per 1,000 cubic metres, which is by about 25 percent lower than the last quarter.
Reduction of budgetary incomes
According to a report by the Ministry of Finance, the state budget incomes were by 1.38 billion lei lower than planned, decreasing by more than 1.1 billion lei compared with the similar period of last year. Budgetary expenses exceeded 9.1 billion lei, which is 78.5 percent of the planned indicators, by nearly 1 billion lei more than last year. In January-July Moldova operated external payments worth 43.8 million dollars, and 416.5 million lei (31.2 million dollars and 319 million lei in 2008) was spent on the internal state debt. Budgets of administrative territorial units collected revenues worth 3.69 billion lei, by 616.5 million lei less than planned, while expenses amounted to 3.72 billion lei (by 1.35 billion lei less).
The acting Moldova’s President was on holidays in Turkey during August 7–15.
The acting Moldova’s President has signed a decree convoking the newly-elected Parliament in the constituting sitting on August 28, 2009.
The Order of the Republic was awarded to:
- Dumitru Pulbere, chairman of the Constitutional Court;
- Vladimir Colesnicenco, chairman of the Board of Observers of the Joint Venture "Jolly Alon" S.A.;
- Nicolae Ciornii, head of the Black Sea Interregional Bloc "Lukoil".
The Honour Order was awarded to:
- The bishop of Balti and Falesti, Marchel (Nicolae Mihaiescu).
The Civic Merit Medal was awarded to:
- Lidia Gutu, Extraordinary and Plenipotentiary Ambassador of the Republic of Moldova to Bulgaria.
- Anatolie Spivacenco, Deputy Minister of Agriculture and Food Industry;
- Iurie Betisor, forester master of the Natural Reservation "Padurea Domneasca", Glodeni;
- Vasile Osoianu, head of the Hayward Chiscareni of the Balti Forestry Enterprise.
Under a presidential decree the special police general ranking was awarded to Vladimir Botnari, chief of the Police Commissariat General of the Chisinau municipality.
Natalia Visan was relieved from the office of head of the Moldovan presidential press service "in connection with a new post."
3.2. Sittings. Statements
The acting Moldovan President Vladimir Vorinin has convoked a working sitting to consider the execution of previous presidential instructions on demographical situation and annihilation of noxious factors which harm the healthy and civilised lifestyle. Participants agreed to work out a complex programme on educational, health, institutional, socio-economic, cultural dimension of the tackled issue. Voronin instructed all competent state institutions to be responsible while holding activities related to strengthening the healthcare of people, stressing the opportunity of involving nongovernmental organisations more actively and raising public awareness. He underlined the importance of amplifying the process of improving and optimising the secondary professional and vocational education institutions.
Participation in the world congress of Gagauzians
The acting chief of state attended the opening of the forum and addressed it. He said that the Moldovan nation "has found the strength to see the own victory in the victory of the Gagauz self-determination," while the self-determination of Gagauzians is "an exceptional example of conflict-free self-determination in the history of modern Europe." As well, Vladimir Voronin reiterated his previous statements that Moldova is at a crossroad and faces a difficult challenge, while the authorities will prevent "the comeback to the economic reaction, policy of struggling clans, policy of crises and cynical experiments."
Balti-Ungheni Gas line
Vladimir Voronin was on a working visit to the district of Ungheni and attended an event occasioned by the putting into operation of the high-pressure gas line Balti-Ungheni. The 100-kilometer-long line with an annual capacity of 550 million cubic metres will link approximately 150 localities from three districts: Singerei, Falesti and Ungheni. The gas line will unify the gas providing system of the northern area of the republic with the central region, ensuring a stable natural gas delivery to villages. While addressing the meeting, the president stressed the imperative of doing the best to accomplish the national gasification programme and the special importance of the gasification process for modernising the regional infrastructure, stirring up social-economic processes nationwide.
Release of the Encyclopaedic Edition "Republic of Moldova"
The Encyclopaedic Edition "Republic of Moldova" was worked out at president’s initiative, with the participation of more than 100 notorious scientists from academia and university environment, known economic specialists, experts from various fields, artists. The Encyclopaedia "Republic of Moldova" opens an ample project of 10 volumes of the new edition "Encyclopaedia of Moldova". The work elucidates the history of our country, its socio-economic, political and cultural-scientific development.
Situation in agro-industrial sector
According to a report released at a sitting convoked by the chief of state, about 1.2 million tons of crops were harvested on 550,000 hectares of 1st-group grains and vegetables, and the overall productivity on the country was 2.2 tons per hectare. The food wheat covered about 45 percent of the overall production or nearly 344,000 tons, and will ensure the food security of the country. According to production programmes, autumn crops will be sown on about 421,000 hectares, inclusively autumn wheat on 300,000 hectares. More than half of the reserved fields have been prepared for the autumn sowing, which is by 16 percent more than last year. As well, the autumn ploughing process develops better than last year. An overall crop of more than 1 million tons of corn is expected from 620,000 hectares for the 2nd-group crops, and a better productivity than in 2002–2008; 390,000 tons of sunflower with a productivity of 2 tons per hectare, compared with 1.3 tons in the last six years; 730,000–750,000 tons of sugar beet, which is enough to cover internal needs and export quota to EU. The chief of state indicated some objectives aimed to settle problems related to development of agro-industrial sector: priority of domestic products at public auctions and intensive promotion of these products; payment of debts of the fund for subsidising agricultural producers for 2008–2009; stimulation of modern vineyards; stimulation of cutting old vineyards; honouring of financial commitments towards economic agents which build new vineyards and enjoy compensations for these purposes; consideration of opportunities to export technical grapes etc.
Concerns with VAT-related frauds
The acting chief of state has chaired a sitting on preventing and combating frauds related to Value-Added Tax (VAT), being informed that the registration of 689 taxpayers as VAT payers was annulled during January 1 – July 31, 2009, of which 39 were declared so-called shadow firms. The chief of state warned the Center for Combating Economic Crimes and Corruption (CCECC) and State Tax Inspectorate over necessity to ensure a tight cooperation and to remove any bureaucratic barriers, in order to combat any VAT-related fiscal evasion, and stressed the importance of speeding up the elaboration of electronic fiscal invoice, which would prevent any VAT fraud possibility. Control bodies were indicated the necessity of checking and monitoring economic agents by using existing information systems and databases for this purpose. At the same time, CCECC will intensify the operative activity to detect and collect facts on fiscal evasion attempts by economic agents which use services of illegal firms. The Ministry of Economy and Trade will convoke decision makers of all public authorities in charge with VAT management in order to organise the current activity in this respect.
Participation in summing-up governmental sitting
Vladimir Voronin has attended the sitting at which the Government of Moldova tendered resignation, as the new Parliament elected on July 29, 2009 was convoked. The sitting heard a report on social-economic development of Moldova in 2001–2009, which says that:
- The GDP has increased fourfold in the last eight years;
- The revenues of the National Public Budget have grown fivefold;
- The foreign investments have increased 6 fold, exports 3.4 fold, pensions 7 fold, subsistence level 3 fold;
- 400 kilometres of roads, thousands of kilometres of gas pipes have been repaired or built, new water pipes of 500 kilometres long have been built, more than 850 schools, nearly 500 kindergartens, about 70 cultural facilities have been renovated.
While addressing the sitting, the acting chief of state noted that key goals aimed at improving living standards have been accomplished in the last eight years, with the rise in the average life expectancy in country from 59.7 years up to about 70 years and improved demographical indicators being a proof in this regard. The chief of state gratified the cabinet of ministers for having participated actively in social-economic development programmes and Prime Minister Zinaida Greceanii expressed deep gratitude to the acting Moldovan President for having supported the central executive to honour constitutional duties.
1. Inflation and prices
Rather about deflation…
A deflation of more than 2 percent was recorded for the seven month of this year. Advantages and disadvantages of this phenomenon will be explained below. Firstly, the deflation is an absolutely normal phenomenon in the current conditions of crisis, while the fall or freezing of prices of majority of products and services is recorded in almost all countries hit by the crisis, in which the consumption (generated by the decline of incomes, remittances, wages), economic or production activity are on the suspense or decline. This is a first explanation.
Another explanation of deflation is related to underrating of dynamic of vicious circles in economy, as the country experiences a relative lack of liquidity. In fact, an increased demand of liquidity is observed, with both companies and individuals willing to enjoy as much as possible cash. This state of things is also clear in the conduct of banks, as they are much more reticent over providing credits, despite the rise of the monetary mass. This phenomenon is obvious in Europe, United States, in the world, too.
Thus, one could ask what inflation it is when the cash does not circulate? What inflation when goods are not sold and bought any longer? All countries record a fall of inflation while experiencing a decline of consumption, and even a certain deflation trend. The inflation in the Eurozone is zero, and many states record deflation.
Advantages and disadvantages…
Unquestionably, the deflation advantages all consumers in Moldova, especially those earning little. As well, the state is advantaged as consumer when it purchases food products and manufactured goods for orphanages, kindergartens, army, and others, or while purchasing energy agents such as natural gas. Therefore, this fall in prices will make consumers happier on the one hand. On the other hand, the contentment with falling prices has a short term and it could turn into anger on a long term, as enterprises reduce/cease their production or even become insolvent and/or go bankrupt during a long-term deflation.
Of course, suffering companies cannot pay taxes and fees to the state and the public budget faces difficulties to honour commitments towards nongovernmental sector. Even more, about 70 percent of the state budget incomes for 2007–2008 were made of customs fees. Imports have decreased by about 35 percent in the first half of 2009, as well as customs fees. In consequence, everybody suffers: employees in private and public sectors, retirees, disabled people and students, and even enterprises which provide the state with goods and services. In addition, many domestic enterprises are involved in expense-cutting processes, which often imply massive dismissals.
Eventual forecasts, recommendations…
Frozen crediting, precarious circulation of currency in economy, which could give birth to a financial lock deepens the economic fall. This relation should be considered in mutual terms: the public budget collections depend on fate of private economy and vice versa. The rise of budgetary deficit is unavoidable in 2009 and it could exceed 5 percent of GDP, up to 3 billion lei. Even more, one should not forget that the heating season is close and it will require larger public expenses. So far, the signing of a memorandum with IMF, extension of programmes with WB, eventual attraction of funds from EU and other donors would be the only piston capable to resuscitate the economy and budgetary collections the least partially. Unfortunately, no decisive step was made in this regard, and it is clear that the uncertain political situation makes administrations of institutions concerned postpone decisions in this respect. On the other hand, the earlier developed European economies will get rid of recession, the easier Moldova will stop the economic decline.
Currency inflows reducing…
Remittances from Moldovan nationals working abroad via banking system have decreased by nearly 32 percent in January-June 2009, compared with the similar period of last year, down to over 515 million dollars. According to NBM, about 420 million dollars or 81.5 percent of the overall transfers in January-June came via rapid money transfer system. More than 54 percent of currency transfers came in US dollars, about 41 percent in Euros and 5 percent in Russian roubles. The largest amount of nearly 110 million dollars was sent to Moldova in June 2009 and the smallest amount of over 64 million dollars in January 2009.
The decline of currency inflows in the first half of 2009 may be explained by the loss of jobs by many migrants, their reticence towards sending home large amounts like before and perhaps the reduction of the number of those who come back home on holidays. Many Moldovan migrants work in building sector and while being able to negotiate their summer holidays until last year, now they cannot afford this luxury during the crisis. In addition, their earnings have decreased and now they are trying to use their work time at maximum. However, the decline of remittances could be seasonal, and savings of some of those working abroad could be counted next year.
However, money keeps going in…
Despite the fall of remittances in the first half of 2009, currency keeps going in. According to IMF, WB, and others, Moldova shares the 2nd-3rd places in the world concerning remittances by emigrants, recording 1.6 billion dollars in 2008, which counts for 1/3 of the country’s GDP, but many economists say that their real value could be higher. According to estimates, more than 500,000 Moldovans work abroad or about 15 percent of country’s population.
According to IMF and WB forecasts, remittances by immigrants to origin countries will decrease by more than 7 percent in 2009 but less than foreign direct inflows to the same states. Perhaps this constancy of remittances could be explained by the fact that while new migration inflows have declined, the number of emigrants was hit by the economic crisis a little. However, Moldova experiences a deeper decline of remittances than other developing countries on background of economic crisis in Spain, Italy, and other states.
Remittances of emigrants are very important at regional level, especially in areas where they are a key income source. They have a double importance for Moldova, as the economy is on the decline and a fall of money transfers is dangerous for our country as long as foreign direct investments in Moldova are very small.
3. Investment environment
Investments will fall down…
For comparison, foreign direct investments in Moldova have grown up to 680 million dollars in 2008, according to official accounts, which is by nearly 38 percent more than in 2007, while half or even less is estimated for this year, and FDI could be much lower than remittances of Moldovan migrants. The effects of economic crisis hit the Moldovan economy for sure. On the other hand, despite the rise of investments in the last period, they could not cover capital outflows from economy especially through imports.
Despite the statistical rise of investments, Moldova’s economy is one of least attractive countries for foreign investors in the region, ranking the 19th place among 22 states included in the 2008 World Bank’s rating on investments per capita. For example, the leader of the rating, Estonia, has investments worth 10,000 dollars per capita, Romania – 3,000 dollars per capita, Georgia and Armenia 800–1,000 dollars per capita. As for Moldova, it records 250 dollars per capita. Moldova is ranked before the three Middle Asian states (Kyrgyzstan, Uzbekistan and Tajikistan).
Some causes which halt investment abundance…
The causes include political instability, government’s meddling into business, unjust and corrupt legal system, and other factors which taken altogether place Moldova far away from countries with most attractive investment environments. In addition, an unusual trend is observed: the labour force is not a determinant for making decisions and placing investments. The crisis made many foreign investors optimise their investments at maximum and make a strict evaluation of destination markets, on the basis of outputs, costs etc.
Fields of investments…
As for the structure of investments (just foreign), they rather go to electricity and gas providing sectors, telecommunications, banks, trade, which means in sectors with a maximum and safe profitableness. Domestic capital stays in 2nd-degree sectors, which require much work to get profit and difficult investment efforts. Of course, foreign investments which are not very strong but influent compared with investments by domestic companies are building economic growth, but with a low employment rate and polarised distribution of its results, with the most of profit being repatriated.
Instead of conclusion…
The evolution of foreign direct investments which are the key funder of the current account deficit of Moldova or foreign debt is an enigma and concomitantly a great challenge of 2009. Given their low level this year, FDI cannot be any longer the main funder of Moldova’s debt, particularly foreign debt, current account deficit and some of the long-term external debt. Signing an agreement with the International Monetary Fund would be the only way to fund Moldova’s foreign deficit.
Kalman Miszei: Negotiations on new EU-Moldova agreement will begin on autumn
The Special EU Representative to Moldova, Mr. Kalman Miszei, has stated to the local mass media that negotiations between the European Union and Moldova regarding the new agreement could begin on autumn, after a new Government is formed and Moldovan-Romanian relations become normal. According to the European official, the negotiations will be complex, as the new agreement should cover important issues: free trade regime, simplified visa requirements for Moldovans, Moldova’s participation in ensuring the pan-European energy security. Mizsei stressed that EU is ready to help Moldova by strengthening relations and providing financial assistance, but it should be clear how ready Moldova is to re-establish relations with IMF, WB and European Commission after election of a new president and Government. In addition, the cancellation of visa requirements for Romanian citizens is a condition to develop the EU-Moldova dialogue.
European Commission provides 45 million Euros to reform the water providing sector in Moldova
On August 14, the Moldovan Government and European Commission signed a funding agreement concerning the assistance programme on reformation of the water providing and sewerage sector. The funding is provided within the European Neighbourhood and Partnership Instrument. The programme has a 60-month term.
Republic of Moldova – Romania
The official Moldovan-Romanian relations are on the suspense so far. The Moldovan authorities have reduced the intensity of accusing messages against Romania, being concerned with internal political developments. In their turn, the Romanian authorities said that they would like to normalise the Moldovan-Romanian relations after the election of a new Chisinau government, and clearly supported the European option of Moldova.
Republic of Moldova – Russia
On August 21, incumbent President Vladimir Voronin met Russian President Dmitri Medvedev in Sochi. According to the press release by the Russian presidential administration, the two leaders discussed "economic cooperation issues, particularly solutions to the fall of commercial-economic relations and regional problems, inclusively relating to the Transnistrian settlement."
Note by ADEPT: According to knowledgeable sources, while on visit to Sochi, Vladimir Voronin had plans to discuss with Dmitri Medvedev the post-electoral political situation in Moldova and get Russian support in the internal political battles. In addition, the sides were expected to discuss the conditions for the release of the 500-million-dollar credit promised by the Russian authorities to Moldova.
Republic of Moldova – Ukraine
The Moldovan Ministry of Foreign Affairs and European Integration informed on August 13, 2009 that the new border crossing regime at the Moldova-Ukrainian border, adopted in accordance with Decision # 445 by the Cabinet of Ministers of Ukraine from 06.05.2009, which includes Moldova into the list of countries with "migration risk", enters into force on August 25, 2009. According to the new requirements, while crossing the Ukrainian border Moldovans must confirm that they hold 12,600 hryvnas (about 1,500 dollars) regardless of the stay term. The new regulations do not concern the Moldovan citizens who reside the areas closed to the Moldovan-Ukrainian border, children under 16 who travel with their parents, people who hold touristic vouchers and two-way tickets for a scheduled day.
Shortly after the press release, the Moldovan authorities opened a dialogue with the Ukrainian side to cancel the new border-crossing requirements. Following talks between Ukrainian Prime Minister Julia Timoshenko and incumbent Moldovan President Vladimir Voronin on this issue, Mrs. Timoshenko promised to demand the cancellation of the new border-crossing requirements for Moldovan citizens and erasing of Moldova from the list of countries with migration risk. Talks on this issue were also held between Sergei Pirozjkov, Ukrainian Ambassador in Chisinau, and Vlad Filat, PLDM leader, who delivered a request to the Ukrainian Government to seek a moratorium on the new requirements until a new Government will be formed to negotiate with the Ukrainian side.
Note by ADEPT: The decision of the Ukrainian cabinet of ministers and the late reaction of MFAEI to this decision prove the precarious Moldovan-Ukrainian relations and reveal the faulty communication at level of central public authorities of the two countries.
1 Statements by Romanian President, Mr. Traian Basescu from 7.08.2009.
Studies, Analyses, Comments
Igor Botan, 31 August 2009
The results of the July 29, 2009 early elections confirmed that the Moldovan electorate generally maintains its political preferences despite factors that give birth to social and political cleavages. In this regard, one may say that after the political crisis linked to the April 7 developments and blocked election of a chief of state the Moldovan electorate actually reiterated its electoral options from the April 5 elections