Democracy and governing in Moldova
e-journal, year VII, issue 149, 1–15 December 2009
Activity of Public Institutions
Studies, Analyses, Comments
Activity of Public Institutions
1. Legislative acts
Law for the modification and completion of the 2009 state budget law. Under the bill delivered to the Parliament, the national public budget for 2009 is estimated at incomes worth about 22.5 billion lei, expenses worth about 27.8 billion lei and a deficit of about 5.3 billion lei.
Law for the modification of the state social insurance budget law for 2009. It redistributes some expense positions, raises the family and child protection fund, the unemployment fund, and reduces the healthcare fund, expenses for the organisation and functioning of the public social insurance system.
Law for the modification and completion of some legislative acts. It entrusts the State Chancellery to execute governmental policies on local public administration via its territorial offices led by "Government’s territorial representatives" as public dignitaries.
Law for the modification and completion of some legislative acts. It removes the regulations which oblige local public administration authorities or Government to provide priority housing to some categories (prosecution organs, police forces, victims of the Chernobyl catastrophe, victims of political repressions, parliamentarians, judges, and others).
Law for the modification of Article 1 of the law concerning the use of some real estates. Under the amendments concerned adopted through derogation, the field allocated previously to the Supreme Court of Justice was made available to build the German Embassy to Moldova.
Note by ADEPT: These amendments are motivated with the lack of funds by the Supreme Court of Justice to carry out building works. The Court reacted to this bill, fearing that the draft aimed to lift the real estate from 85 Mateevici Street harms the national interests, contrary to the goal of the judiciary and action principles of the legal authorities in a democratic society (SCJ Decision No. 7 of 09.11.2009).
Decision approving the budget of the Constitutional Court for 2010. The Court’s budget will consist of incomes worth 5,929,400 and expenses in the amount of 5,929,400 lei, with the Government being due to include this amount into the 2010 state budget law. The Constitutional Court’s budget for 2009 accounted for 5.47 million lei.
PCRM parliamentarian Galina Balmos presented a statement regarding the modification of the state budget law and state social insurance budget law for 2009.
PCRM parliamentarian Ludmila Belcencova presented a declaration concerning the situation in the broadcasting area.
PLDM parliamentarian Liliana Palihovici read a statement on the International Day of Persons with Disabilities.
Decisions approving some regulations:
- Concerning the organisation and functioning of the Ministry of Environment, its structure and maximum staff of its central apparatus;
- Concerning the organisation and functioning of the Agency of Material Reserves, its structure and maximum staff of its central apparatus.
Decision concerning the extraordinary national public health commission. It approves the nominal composition and regulation of the commission.
Decisions concerning the allocation of financial means from the reserve fund of the Executive:
- More than 630,000 lei were allocated for sittings of some CIS councils;
- 145,000 were allocated to the Curative-Sanatorium and Recovery Association of the State Chancellery to treat a Parliament member.
2. Sittings. Decisions
Meeting with Palanca residents
Prime Minister Vlad Filat has met residents of the Palanca village in the rayon of Stefan-Voda to discuss issues related to the 7.7-kilometre-long Odessa-Reni route, which crosses this village and is now used by the Ukrainian side, in accordance with the Treaty on the delimitation of the Moldovan-Ukrainian border along with Additional Protocol. Palanca inhabitants told the premier that Ukrainian border guards do not allow them to circulate and reach own fields and signalled problems they face with trade facilities located along the route, as their operation is almost blocked by border guards and their restrictions. Premier Filat noted that this problem is important both for Palanca and for all country and requires a many-sided approach. At the same time, the Agreement on the delimitation of the Moldovan-Ukrainian border is to be executed because this is an effective international document. The premier assured Palanca residents that his cabinet will take into account their interests during negotiations with the Ukrainian side and promised to not sign the document on transmission to Ukraine of the area adjacent to the route portion before reaching a consensus with natives.
Meeting with representatives of fuel companies
A cabinet-hosted sitting tackled issues relating to fuel imports and trading on domestic market, necessity of modifying normative acts which regulate deals on fuel market. The participants exchanged opinions regarding the formation of fuel prices, while the prime minister instructed fuel companies to be very responsible over this issue and to prevent groundless rises. He assured that his cabinet is open to a frank and efficient dialogue with business environment while representatives of fuel companies promised to prevent groundless price rises.
Meeting with heads of commercial banks
The sitting reported the condition of Moldovan currency market, assuring that the current situation should not alarm people, as this is a normal phenomenon, a result of consolidation of international reserves by National Bank of Moldova (NBM) and seasonal currency procurements by importers. NBM governor assured that the situation is stable and there are no reasons of concern. The sitting also discussed the situation in construction and winemaking and vine growing sectors.
The Commission for constitutional reform was constituted of 39 personalities from diverse areas and will be headed by interim President Mihai Ghimpu. It will identify and study shortcomings of the existing constitutional system, work out recommendations for the constitutional reform. The first sitting of the commission held on December 4, 2009 decided to set up a task force for constitutional researches and analyses to consider shortcomings of the constitutional system from scientific prospects, establish political, legal, social and other kinds of consequences of such regulations; study the constitutional framework of developed democracies with the purpose to provide a compared analysis of constitutional institutions liable to new regulations and work out recommendations for the constitutional reform.
Mihai Balan was assigned presidential adviser for foreign policy and European integration.
Under a presidential decree, Alexandru Roman was relieved from the office of rector of the Academy of Public Administration under the President of Moldova.
Mr. Alexandru Cuznetov, Mr. Viorel Furdui and Mr. Ion Manole were nominated members of the Certification Commission advising the Ministry of Justice.
The Honour Order was awarded to Mr. Petr Kypr, Extraordinary and Plenipotentiary Ambassador of the Czech Republic to Moldova.
1. Inflation and prices
Zero inflation likely to be recorded for 2009…
Official statistics reveal that the inflation rate for November increased by 1 percent compared with October 2009. On the other hand, the cumulated rate for 11 months was minus 0.5 percent that means deflation. Prices of foodstuffs rose by 1.6 percent last month, those of manufactured goods increased by 0.9 percent, and tariffs for public services went up by 0.2 percent. This dynamics or better saying state of things was very clear for common people, as it concerned prices of housing, food products and public services etc.
Well, at a first glance, one should be happy unless this indicator does not show something else. However, thinking about a worse combination of factors than in this case is hard, first of all:
- Reduction of consumption due to the fall in people’s incomes;
- Reduction of remittances;
- Reduction of salaries and other incomes, inclusively from investments;
- Forced vacations or even dismissal of employees etc;
- Reduction of companies’ revenues, actually their lock, as little is sold and little is purchased respectively;
- Use of savings and reduction in population and businesses capacity to get loans.
These facts altogether give birth or encourage deflation directly or indirectly. There are winners and losers in such a situation. Of course, deflation advantages all consumers in Moldova, especially those earning little. As well, deflation advantages the Government as consumer when it carries out public procurements of foodstuffs and manufactured goods for orphanages, kindergartens, elderly asylums, military, and others. And falling prices will make consumers happier. But happiness with falling prices is short, as it may turn into discontentment in a long term since a lasting deflation makes businesses reduce or even cease production and often become insolvent and/or go bankrupt.
This fact amplified by falling incomes of Moldovan population reduces revenues of national public budget and people’s wages. In consequence, everybody suffers: employees from private and public sectors, retirees, students and even businesses that provide the state with goods, works or services. There are cases when employers tell their employees to agree with salary cuts in order to keep being competitive. This way, households are more embarrassed to get rid of the debts raised during economic boom, as deflation fuels debts. On the other hand, the latest evolution of exchange rate could reverse this trend and this would easily increase prices.
Economic recession of 7.7 percent recorded in nine months of 2009…
In January-September 2009 the Gross Domestic Product was worth about 44.17 billion lei in current market prices and decreased by 7.7 percent, compared with January-September 2008 (www.statistica.md). The gross value added on economy dropped by 8.3 percent compared with January-September 2008. The gross value added in commodity sector declined by more than 19 percent compared with January-September 2008 along with a serious fall (by 23.3 percent) of gross value added in industry, followed by decline (by 10.6 percent) of gross value added in agriculture, hunting, forestry and fishing sectors. In terms of contribution to GDP formation, the gross value added in commodity sector decreased by 1.4 percent, compared with the similar period of last year, reducing (by 4.2 percent) the GDP.
The gross value added in service sector dropped by 4.5 percent compared with the similar period of 2008. Serious falls were recorded in building sector (by 30.8 percent), followed by transport and communication (by 14.8 percent) and wholesale and retailing (4.5 percent), while production volume in "other sectors" exceeded by 5.9 percent the accomplishments recorded in the similar period of the last year, covering 52.2 percent of the service sector and 34.2 percent of GDP, compared with 46.2 percent and 29.5 percent respectively in January-September 2008.
The gross value added rate (gross value added compared with output volume) on economy exceeded by 3 percentage points the level recorded in the similar period of the previous year, and in commodity and service sectors by about 2 percent and 2.3 percent, respectively due to the fall in the volume of intermediary consumption out of output volume (from 62.6 percent in January-September 2008 down to 59.6 percent in January-September 2009 – total on economy and from 75.5 percent in January-September 2008 down to 73.6 percent in January-September 2009 for commodity service, and from 52.3 percent in January-September 2008 to 50.0 percent in January-September 2009 for service sector).
Diagram 1. Evolution of GDP and inflation rate
3. Currency market
Recent evolutions of exchange rate…
The up to date evolution of the currency market seems to be natural, as such fluctuations were observed in different periods. On the other hand, the depreciation of leu by about 10 percent versus dollar and by more than 8 percent versus euro would go out from recent statements delivered both by the central bank and economists that these sudden deviations of exchange rate would be linked to some seasonal factors. For example, the exchange rate for the similar period of 2008 or even 2007 was among lowest ones – 10.4 lei/USD and 14.5 lei/Euro. Therefore, saying that this devaluation would be mainly linked to some seasonal factors would be wrong.
The leu should go up in this period for several reasons or at least many people would expect so. But one should not forget that many things have changed in one year. One should carefully look at economic developments in the current conjuncture. The economic system, particularly the productive sector, was the prey of economic crisis. The increasing external and internal debts, rather high budgetary deficit, decline in almost all indicators are serious reasons for Government to take an attitude. And it would do so via NBM, which intervenes into market by slightly devaluating the leu, as the state is very "hungry" of money, giving a respiro to exporters as well in these hard times. So, as formal data are unavailable, one may just suppose that this would be a NBM intervention in the market, which could bring advantages on a short term only.
Developments on international markets…
The conjuncture on international markets and evolution of Euro-dollar pair unlikely influenced so strongly the ascension of these currencies on domestic market. Yes, the domestic market is connected to the exterior one or another way, but not at the extent at which effects of international exchanges would have a strong influence and immediate effect. Even more, financial markets did not achieve such evolutions like the domestic currency market does.
Stability of exchange rate is probably more important than liberalisation in current economic conjuncture. Of course, a weaker leu would advantage exporters, and one may expect it given the blocked foreign markets, which are not avid of Moldovan products. In addition, a stronger, more stable leu encourages a lower inflation or Moldova makes great progress in this respect. That’s why running a risk would not be recommended, as devaluation would resuscitate the panic of people, this being worse than downfall of some economic indicators.
One knows: some businesspersons or economic agents who see an exchange rate of 18–19 lei per Euro (particularly exporters), but on the other hand, estimates by some analysis centres indicate an exchange rate of 17–17.5 lei per Euro, while the country’s budget for 2010 is built on an exchange rate of 12.5 lei per dollar and authorities will do their best to not exceed these limits too much. Let’s hope that Moldova will be able to prevent a sudden depreciation of leu.
1. European integration
Meeting of foreign ministers within the Eastern Partnership
The first meeting of foreign ministers within the Eastern Partnership (EP) was held on December 8, in Bruxelles. The meeting drew high level participation from the 27 EU Member States, the European Commission, the six Eastern European Partner countries – Armenia, Azerbaijan, Belarus, Georgia, Republic of Moldova and Ukraine, and European institutions. The participants discussed about the achievements realized during the first year of implementation of the Eastern Partnership and established the priorities for the next year. During the Ministerial meeting, four representatives of the Eastern Partnership Civil Society Forum, presented to the ministers the conclusions and recommendations of the Civil Society Forum, which met for the first time in Brussels on 16–17 November.
As significant achievement was recognized the adoption of Work Programmes of the four thematic cooperation (1. democracy, good governance and stability; 2. economic integration and convergence with EU sectoral policies; 3. energy security; 4. Contacts between people) for the next two years and the launch of Flagship Initiatives on Integrated Border Management and Regional Electricity Markets, Improved Energy Efficiency and Increased use of Renewable Resources, as well the Eastern Europe Energy Efficiency and Environment Partnership. During the first quarter of 2010 the two remaining flagship initiatives for Small and Medium Enterprises and on Environmental governance will be launched.
The ministers underlined the need to make further progress in line with the priorities of the Partnership, in particular regarding the negotiations on Association Agreements, including Deep and Comprehensive Free Trade Areas, where appropriate, mobility of citizens, availability of funding from EIB, EBRD and international financial institutions to the Eastern Partnership, the Comprehensive Institution-Building Programmes etc.
During the meeting, Moldovan minister for Foreign Affairs, Iurie Leanca stressed the commitment of the Republic of Moldova to use all opportunities granted by the Partnership, stating that Moldova’s objectives within the Eastern Partnership are: the continued strengthening of relations with the EU, the opportunities for an Association Agreement, a free trade agreement and visa liberalisation.
Note by ADEPT: Although the EU confirmed that the future Agreement to be signed with the Republic of Moldova will an Association Agreement, it will not provide an European perspective. There are low chances that one of the states partners to the Eastern Partnership will become a candidate country to join EU in the nearest future.
Republic of Moldova – Romania
In early December, the Romanian Foreign Ministry made an inventory of actions to be taken at level of administration with the purpose to enforce decisions agreed after the November 13–14 visit by Moldovan prime minister to Bucharest. According to the interim foreign minister of Romania, Catalin Predoiu, the current relationship between Romania and Republic of Moldova is excellent of work and pragmatic.
The Chisinau Government welcomes the opening of Romanian authorities. According to a press statement, Moldovan Prime Minister Vlad Filat confirmed that the Republic of Moldova will keep very good and necessary relations with Romania, no matter who will be elected president of Romania.
Republic of Moldova – Russia
The Republic of Moldova keeps doing its best to establish pragmatic relations with the Russian Federation and develop economic cooperation with this country. The deputy Prime Minister, Minister of Economy Valeriu Lazar was on a working visit to Moscow on December 11 and met there the co-chairman of the Russian-Moldovan intergovernmental commission, Andrei Fursenko, Russian minister of education and science, as part of the 44th Meeting of the CIS Economic Council. According to a statement delivered to Novosti-Moldova Agency, Valeriu Lazar stated that Russia is the key strategic partner for Moldova and good cooperation with this country is the No.1 factor to stabilise the economy of Moldova.
Republic of Moldova – Slovakia
The Slovakian Government has provided a 35,000-euro grant to Moldova for social projects. It will fund 7 projects aimed to renovate social facilities in several villages and repair roads. (According to Infotag)
Republic of Moldova – USA
The U.S. ambassador to Moldova, Mr. Asif J. Chaudhry, told a news conference on December 1 that the Board of Directors of the Millennium Challenge Account of the US Government has decided to give green light to the 262-million-dollar Compact Programme for Moldova. The assistance will be provided under the shape of a grant within 5 years to assist two sectors: the agriculture (renovation of 11 irrigation systems) and the transport (renovation of roads). The Compact Programme for Moldova will be signed in Washington in the second half of January 2010.
At the same time, the Moldovan authorities seek a strategic partnership agreement with the USA, which would strengthen the bilateral political dialogue, develop commercial-economic collaboration and cooperation in international security area. While meeting Celeste Wallander, U.S. Deputy Assistant Secretary of Defence for Russia, Ukraine and Eurasia, Moldova’s Parliament Speaker and interim President Mihai Ghimpu reported that the draft agreement was already delivered to the U.S. Embassy in Chisinau.
Republic of Moldova – Poland
Competent organs of Poland and Moldova began negotiations on December 10 to provide a 15-million-dollar credit for covering the budgetary deficit of Moldova. According to preliminary agreements, the credit will be released for a one-year term and a 3–4-percent interest rate.
3. Multilateral cooperation
Republic of Moldova – Council of Europe
In the period examined, the European Court of Human Rights has pronounced judgements in the following cases: Gavrilovici vs. Moldova, Leva vs. Moldova and Fedotov vs. Moldova. The Court established violation of the right to not be subjected to torture and degrading treatment, freedom of expression, right to a fair trial and effective recourse, right to protection of property, right to freedom and security, right to know the reasons of arrest. Overall, the Court granted 18,300 Euros to applicants in pecuniary, non-pecuniary damages and costs and expenses.
Republic of Moldova – OSCE
During December 2–3 Athens hosted the OSCE Ministerial Council, attended by a Moldovan delegation led by Deputy Prime Minister Iurie Leanca, minister of foreign affairs and European integration.
The meeting focussed on the dialogue regarding the European security architecture (known as Corfu Process) in front of new anti-security risks. At the end of the meeting the participants adopted several declarations and decisions concerning the future dialogue on the Corfu Process, peaceful settlement of the Nagorno-Karabakh conflict, consolidation of energy security cooperation, etc.
The Moldovan foreign minister addressed the meeting and called for the immediate and unconditioned resumption of the 5+2 Transnistria settlement negotiations, complete withdrawal of Russian forces and munitions from the Transnistrian region and transformation of the current peacekeeping mission into an international civil observation mission.
Studies, Analyses, Comments
BOP at the end and beginning of governing…
Igor Botan, 15 December 2009
The phenomenon of change of governance that the Republic of Moldova underwent in 2009 influenced people’s perception regarding the social-political life in Moldova compared with the ruling period of the Party of Communists of the Republic of Moldova (PCRM)