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Democracy and governing in Moldova
e-journal, year VIII, issue 151, 1–17 January, 2010
Activity of Public Institutions
Studies, Analyses, Comments
Activity of Public Institutions
Report on the first 100 days
The prime minister has tabled a report on the Government’s first 100 days that presents the situation since the cabinet took over the tasks (September 25, 2009), when the country was facing a serious economic crisis, had an antagonised and divided society, was isolated from other countries and had frozen relations with development partners. According to the report, the former government did not hand over the authority in a civilised manner and the cabinet in office had to do in three months what its predecessor should do in one year – drafting the budgetary-fiscal policy, the Medium-Term Expense Framework, the State Budget Law etc. According to Premier Filat, in 2009 (first 9–10 months) the country’s economy suffered the gravest economic decline in the last 15 years: – the GDP decreased by 7.7 percent in January-September 2009; – exports and imports dropped by 24.2 percent and 36.9 percent; – investment inflows have suddenly fallen; – investments in fixed capital decreased by 42.5 percent; – industrial production declined by 24.3 percent (in comparable prices); – agricultural production in all farms turned over 89.8 percent (in comparable prices); -a 16-percent annual budgetary deficit of GDP was forecasted before the new cabinet was appointed, but the Government succeeded to reduce it to 7.8 percent at the end of the year; – the economic crisis hit the state budget incomes, which dropped by 8.6 percent, while electoral rises of wages and pensions in 2009 increased public expenses by 3.7 percent.
The following progress in implementing the Priorities of Governance was mentioned:
- The European Integration and Foreign Policy Agenda is being implemented, by enhancing the Moldova-EU relations and bilateral dialogue with EU member states;
- The impact of the economic crisis is being controlled, as relations with IMF were resumed, the dialogue with the World Bank, European Bank for Reconstruction and Development (EBRD) and European Investment Bank has developed, and public expenses were reviewed and prioritized;
- An economic growth is underway again, as actions were taken to remove administrative restrictions, build a friendly business environment, demonopolize the import and export, apply innovative reporting technologies for economic agents, start reforming the legal and institutional framework on entrepreneurship regulation;
- The agriculture is being sustained, as the subsidising fund for this sector was completed by 250 million lei, the supply of wines in bulk was relieved, and barriers for grape exports and some administrative obstacles which increased the production costs were removed;
- As for the social sector, resources were found to implement a new social assistance system, which is expected to increase social assistance allocations by 40 percent in 2010, compared with 2009 (allocations will amount to about 630 million lei). The single indemnity on childbirth for 2010 was increased by 300 lei;
- The state budget funding to the healthcare system was increased, as transfers to the mandatory health insurance funds went up by 5.4 percent, compared with 2009. Transfers for 2010 will cover 58 percent of overall mandatory health insurance funds. The spreading and fight against pandemic flu A (H1N1) were stabilised;
- Progresses in the area of judiciary and rule of law include execution of previous laws on Supreme Council of Magistrates and Prosecution reform, liberalisation of notary profession (liquidation of public notaries), as well as ongoing legislative changes aimed to liberalise the execution of judgements, reform the bar, dissolve economic and military law courts etc.
Commission in charge with finding funds
Prime minister has demanded to be set up a special commission to find funds needed to compensate the difference of electricity, gas and heating tariffs for socially vulnerable categories. The Government gets involved after the National Agency for Energy Regulation decided to increase these tariffs starting January 19, 2010.
Aid for Albania
The executive decided to provide humanitarian assistance to flooded Albania. The assistance is estimated at about 700,000 lei.
Instructions for cultural authorities
The prime minister instructed the state minister and culture minister at a cabinet sitting on January 9 to build a monument to torture victims in front of the Parliament of Moldova before April 7, 2010. The culture minister was instructed to propose changes to legislation at the next cabinet sitting, so that to allow Moldovan citizens to watch movies in official languages at cinema theatres inclusively. According to the premier, "the approach shall be very clear, raise interest all citizens of the Republic of Moldova, without harming the rights of anybody".
The commission for studying and assessing the totalitarian communist regime of the Republic of Moldova was set up under a decree by interim president of Moldova. According to the preamble to the decree, despite progress made by the Republic of Moldova to build the state based on the rule of law and join the EU, our country is still a state which does not know the truth about the totalitarian communist regime. The unbiased and multilateral information of society is necessary to let generations born in the post-communist period know the totalitarian essence of the communist regime and prevent similar regimes in future. The decree invokes Resolution # 1096 (1996) by the CoE Parliamentary Assembly on measures to dismantle the heritage of former totalitarian communist systems and Resolution # 1481 (2006) by the CoE Parliamentary Assembly on the need for international condemnation of crimes of totalitarian communist regimes. The commission is made of 30 members, with most of them being historians and jurisprudence experts. Doctor of history Cojocaru Gheorghe was nominated to head the commission. The commission is due to table proposals in the area to the President of Moldova before June 1, 2010.
On January 15 Moldova’s president issued a decree awarding stated distinctions as follows:
- 6 "Orders of the Republic’;
- 1 "Labour Glory" Order;
- 1 "Civic Merit" medal;
- 13 medals "Mihai Eminescu".
2. Sittings. Decisions
Sitting of the Constitutional Commission
The commission for constitutional reform convened in the second sitting on January 11, 2010 to approve its regulation and hear a report by the working group for constitutional research and analysis, which signalled the need to modify 69 articles of Moldovan Constitution. Therefore, commission members voted for the adoption of a new Constitution and empowered the task force to work out the necessary modifications, as well as a draft law on the procedure of adopting a new Constitution.
1. Inflation and prices
Moldova reports lowest inflation rate in the region for 2009…
Moldova recorded an inflation rate of 0.9 percent in December 2009, compared with November. Foodstuff prices increased by 1.7 percent in December 2009 and prices of manufactured goods and tariffs for public services rose by 0.5 percent each. Given the deflation of 0.9 percent for 11 months of 2009 and inflation rate of 0.9 percent for December 2009, the data of the National Bureau of Statistics say that Moldova recorded an inflation rate of 0.4 percent in 2009, the lowest level in the region.
Foodstuffs prices decreased by about 4 percent on average in 2009, while prices of manufactured goods increased by 2.5 percent and tariffs for public services by more than 2 percent. To note that Moldova reported an inflation rate of 7.3 percent for 2008 and the Government forecasts a 5-percent inflation rate for 2010. However, latest price rises, of energy agents (natural gas, electricity, heating etc.) in particular, as well as the rise of some fiscal policy taxes which will be part of the final production cost (inclusively of imports) will fuel prices and inflation respectively.
In fact, the inflation will be most monitored and enounced indicator in 2010. The conduct of other macroeconomic indicators with a strong impact on population and economic agents will depend on inflation. So far, it seems that the annual inflation rate will not exceed the 5-percent limit foreseen by the draft budget law for 2010, but it could exceed this target, given the potential price rise declared by authorities as well. The inflation will keep being the indicator with the strongest impact on economy for sure.
Their evolution could follow another, ascending trend…
According to an express analysis by Valeriu Prohnitchi from Expert-Grup (EG) regarding the evolution of remittances (decline in this case) for 11 months of 2009 based on data of the National Bank of Moldova (NBM), the decline in remittances should not trouble, as this evolution reveals the seasonal nature of this indicator. According to NBM, overall remittances by individuals accounted for 102.2 million US dollars in November, compared with 111.5 million US dollars in October. However, the fall should not raise concern, as this evolution is linked to the seasonal nature of this indicator. In all likelihood, remittances increased again in December 2009, according to EG (they are estimated at 130–135 million US dollars). Accounts for November 2009 (and EG estimate for December) concerning remittances reveal that the negative trend of remittances in January-August 2009 has reversed and it is recovering now.
Finally, these accounts reveal a stabilisation or even an economic growth in areas employing Moldovan emigrants (less in Russia, given the falling share of Russian rouble in overall remittances). There is a decisive economic recovery for the time being, but correlating the evolution of remittances by migrant workers with evolution of exports, domestic trade and public services in November one may note that Moldova is succeeding an economic stabilisation, according to the EG analysis.
Table 1.Evolution of remittances (January-November 2009), million US dollars
Source: Graphical representation by ADEP, based on NBM data
3. Foreign trade
Both exports and imports are on the decline…
The National Bureau of Statistics reported overall exports worth about 1.16 billion US dollars for January-November 2009, which is by over 21 percent less than in the similar period of last year. Commodity exports to the EU-27 bloc turned over 605 million US dollars (by over 20 percent less than in January-November 2008), covering 52.2 percent of overall supplies (51.6 percent in January-November 2008).
CIS member states attracted 38.2 percent of Moldovan exports (38.8 percent in January-November 2008), which equal to about 443 million US dollars. Commodity exports to CIS dropped by 22.5 percent, compared with January-November 2008. An analysis of exports on countries reveals that the decline in supplies to Romania (by about 30 percent), Ukraine (by 46.1 percent), Russian Federation (by 11.2 percent), Italy (by 19.4 percent), Poland (by 41.7 percent), Kazakhstan (by 40.6 percent), Switzerland (by 41.7 percent), and Belarus (by 13.6 percent) reduced the overall exports by more than 19 percent.
At the same time, imports turned over 2.91 billion US dollars in January-November 2009, which is by 35 percent less than in the similar period of 2008. Imports from EU-27 turned over 1,274 billion US dollars (by about 35 percent less than in January-November 2008), covering 43.7 percent of overall imports (43.6 percent in January-November 2008). Imports from CIS exceeded one billion US dollars (by more than 35 percent less than in January-November 2008), which is equivalent to 34.6 percent of overall imports (34.9 percent in January-November 2008). The trade balance deficit was 1,757 billion US dollars and the import/export coverage level was about 40 percent in the examined period, compared with about 33 percent in January-November 2008.
1. European integration
Green light to negotiations on new Moldova-EU Association Agreement
Negotiations on the Republic of Moldova – European Union Association Agreement began in Chisinau on January 12, 2010. The delegations were led by Mr. Gunnar Wiegand, Director of the European Commission Directorate-General for External Relations, and Mrs. Natalia Gherman, Moldovan Deputy Minister of Foreign Affairs and European Integration. The negotiations developed within four task forces: 1. Political Dialogue and Reforms, Cooperation in the area of Foreign and Security Policy; 2. Economic, Sectoral and Financial Cooperation; 3. Rule of Law, Freedom and Security; 4. People-to-People Contacts. The parties shared opinions about structure of definitive elements of the future agreement, establishing the roadmap for negotiations.
The head of EU negotiation delegation, Mr. Gunnar Wiegand, told a news conference at MFAEI after the first negotiation round that the round was well prepared, the talks were substantial and the positions of the parties regarding the structure of the future agreement are generally convergent. However, Mr. Wiegand stressed that the good preparation for negotiations shall be also confirmed by real actions aimed to implement the negotiated regulations. In turn, the Moldovan foreign minister acknowledged that the horizon of expectations for achieving the political association and economic integration with EU is large, but Moldovan authorities will do their best to succeed it.
Studies, Analyses, Comments
Does the ace up Ghimpu’s sleeves beat the revenge card of Communists?
Igor Botan, 17 January 2010
The option of the Party of Communists of the Republic of Moldova (PCRM) to boycott the presidential elections in order to retaliate at eventual early parliamentary elections in 2010 has transferred the political crisis from 2009 to 2010. In this respect, the political year 2010 will be marked by the 2009 events, and the PCRM is to blame definitively for perpetuation of political crisis