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Poverty reduction factors

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November 25, 2002
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A month ago, Prime-Minister Vasile Tarlev declared that elaboration of the Poverty Reduction Strategy (PRSP) should become a priority for all the public officers. In his turn, Stefan Odagiu, pointed that once developed PRSP would become a cornerstone in Government activity. Last week governmental press published the concept of PRSP. All the other documents and strategies developed by the incumbent or former Governments would have to be subordinated to PRSP. Given the fact that PRSP is actively promoted by international organizations, the ruling party gave up the enforcement their electoral program and decided to coordinate its activity with the WB and IMF.

Although the deadline for PRSP elaboration expires next March, activists of civic NGOs have already embarked upon debating it. Last week Institute of Public Policies with the support of WB launched a series of seminars in this respect. Participants gathered to debate on sources of economic growth and rural development.

Independent experts agree that in the case of Moldova there are four sources of sustainable economic growth that might as well contribute to poverty reduction, especially in the rural areas, wherein the great majority of the population resides. So, the following are the sources: boosting entrepreneurship, especially small and medium businesses; ensuring a sustainable macroeconomic balance; investments; and efficient and accountable governing.

It would be very difficult for Communist authorities to ensure all the aforesaid. Firstly, according to some experts GDP growth registered last year and this year is not the merit of the incumbent governing. Indeed, despite statistics manipulations, there were some objective factors, which have influenced to a certain extent the economic growth. This refers to the reforms conducted by the previous governments, whose effects were expected to show up 2–3 years later. Furthermore, regional economy registered a growth due to the gradual recovery from the financial crisis in Russia of 1998. Consequently, domestic and regional conjuncture is accountable for the economic growth registered in the last two years. Experts claim a professional and reforming team in governing would have contributed to a much more significant economic growth, able to lead in the long run to sustainable economic growth. Still, Communists’ also had their contribution to the economic growth, namely the Government refrained from enforcing the Communist Party electoral program and from making any major mistakes. Nevertheless, Communist party should share the merit with WB and IMF representatives who closely monitor the incumbent governing not allowing it to slip away from the agreed standards.

According to the official statistics private sector accounts for 85% of GDP. We could only wonder, what is then the Government role? Obviously, the government should work towards establishing a favorable environment for business. However a recent poll conducted among businessmen shows the contrary, the pressure on their business has significantly increased since Communists came to power.

As for the second one, namely macroeconomic balance, there are problems as well. In spite of pro-European declarations, incumbent governing insists that Moldova’s major economic interests lie to the East, in CIS and Eurasia Union. Noteworthy Ukraine and Belarus, Moldova’s biggest partners after Russia, are undergoing a deep political crisis that might lead to economic and financial crisis. If true, then a regional financial crisis is to be expected.

As for third factor ensuring sustainable economic growth, the situation is even worse. After Communists damaged their relations with such strategic investors as Union Fenosa, Lafarge and others, it is hard to believe that any investor would seriously consider investing in Republic of Moldova in the nearest future. An illustration of this is the Moldtelecom privatization. There are problems with regard to domestic investments too. Domestic finances are so meager that they cannot boost investment activity. Money that is wired by Moldovan citizens working abroad could be a potential source of investments. The amount yearly wired is comparable to the yearly state budget. If Government manages to ensure the protection of the right on property and abolish bureaucratic barriers, then population’s savings might turn into investments. However, Government does nothing in this respect.

And finally, ensuring an efficient and accountable governing is a task as difficult to achieve as the ones mentioned above. It’s hard to speak about an accountable governing when the incumbent one is undertaking actions destabilizing social and political situation. For instance, the recent ruling party’s initiatives to revise the judicial system and local public administration risk triggering another deep political crisis.

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