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Activity of public institutions

Presidency
Government

New investments are needed by Galina Selari
Changes on the Political Scene by Igor Botan

I. Activity of public institutions

1. Presidency

President Vladimir Voronin granted the Award of the Republic to the President of Ukraine Leonid Kuch'ma through a presidential decree. The award was given to the Ukrainian President "as a sign of profound gratitude and for his special contribution to the development of friendship and co-operation between Ukraine and the Republic of Moldova." On 8 August 2003, the Ukrainian President celebrated his 65th anniversary.

2. Government

Foreign funding

In a statement made on 15 August 2003 Prime Minister Tarlev said that the recovery of relations of co-operation with the international financial bodies is the priority of the Republic of Moldova, one on which depends Moldova's overall capacity of overcoming the current economic crisis. Rightly so, for this statement reflects perfectly well the seriousness of the situation in which the Moldovan Government found itself after the IMF and the World Bank had successively withdrawn funding to Moldova worth about US$30 million as a result of the lack of consistency in Moldova's economic policies and its failure to meet the requirements for funding (see e-journal no. 12). The withdrawal of funding has put under question the restructuring of Moldova's foreign loans worth about US$200 million through the Paris Club and created a considerable gap in the budget once the non-reimbursable donations, provided for in the budget, are no longer available. And since the revenues to the budget, and hence the expenditure, will have to be cut down, the government will not be able to sustain financially a number of its projects, including the ongoing territorial administrative reform and the strategy for economic growth and poverty reduction.

Under these circumstances, the Government will draft, with the help of the IMF consultants, a number of action plans to cover the budget deficit that will soon emerge. A number of scenarios will be considered, including the one where the Government will not be able to secure alternative non-refundable funds and will fail to negotiate a postponement of its foreign debt payments. Analysts have indicated that in this latter case the Government will have to either give up a series of internal social and economic programmes, for which it now lacks funds, or turn to the National Bank of Moldova (NBM). The NBM currency reserves will be indispensable for restructuring the foreign debt when there are no preferential foreign loans. At the same time, the exhaustion of the NBM reserves will raise the risk of devaluation of the national currency and uncontrolled price rises, which, according to analysts, might result in yet another economic crisis with serious social and political consequences.

It was probably this sort of reasons that have made Prime Minister Tarlev to call upon the Finance Ministry to identify "real sources of funding the budget expenditure" and draft a budget that is "well-balanced, has sure revenues and prioritises expenditures" for 2004, whose draft the ministry is to submit by 25 August 2003.

Dialogue with the trade unions

An additional reason for concern for the Moldovan Government under the current circumstances are the demands of the trade unions, in particular the ones related to raising the salaries of public employees. Recently, the Government has announced a 15% raise of public employees' salaries, as provided in the 2003 budget, starting 1 September 2003. At the same time, the Confederation of Trade Unions of Moldova has been demanding since May 2003 a doubling of salaries, and has threatened with mass strikes and street protests should the Government fail to meet this demand.

Since the negotiation round on 1 August 2003 between the Government and the trade unions produced no compromise, the talks on the subject continued during the meeting of the Republican Tripartite Commission for Collective Negotiations (Government-Unions-Employers) on 7 August. Although this time the unions made certain concessions and demanded a raise of only 50%, which they deemed acceptable both to the Government and to the unions, the Government maintained the 15% threshold and suggested in exchange to the unions to be more assertive with the employers when it comes to paying salaries on time and thus help avoid salary arrears.

In reply, the Confederation of Unions sent the Government an official letter in which it urges the signature of an Agreement by 20 August 2003, that is to include a number of concrete measures towards finding a solution to the issue of raising salaries. The unions have proposed a 50% raise as of 1 September 2003, the payoff of all salary arrears in the public institutions and in the production sphere by 1 September and 1 October 2003 correspondingly, and the drafting and adoption of the law on the system of determining salaries in public institutions.

According to the unions, these measures are absolutely necessary given that in July 2003 the fees for electricity and gas were raised and the inflation has hit 40%. In addition, the average salary of public employees is currently 662 lei (around US$50), which is only 60% of the value of the minimum consumption budget. As a result, most of the public sphere employees live under the poverty threshold.

In the event that the Government accepts to sign the Agreement proposed by the unions and respects its provisions, the unions will not revert to the protest actions that they have announced earlier. In the meantime, the union of health system employees has already instructed its field offices to prepare the employees for strikes as a sign of protest against Government's failure to raise salaries.

Personnel changes

Through a presidential decree of 5 August 2003, Marian Lupu, Deputy Minister of Economy, was appointed Minister of Economy, and Valentin Beniuc, Chancellor of the Academy of Diplomatic Studies and International Relations, was appointed Minister of Education.

Marian Lupu is 37 years old, holds a PhD in Economics from the Academy Plehanov in Moscow, and has served as a trainee at IMF and the WTO. Since 1991 he has held various positions at the Ministry of Economy, and since 2001 he has been Deputy Minister of Economy. He is known as a reform-minded economist holding pro-western views.

Valentin Beniuc is 47 years old, holds a PhD in History and his career has been mainly academic. Between 2000 and 2003 he was Chancellor of two higher education institutions. Beniuc was appointed Government representative to the Council of Observers of the Public Institutions "Teleradio Moldova", whose chairperson he was elected later.

Administrative

The Government has created, under the Ministry of Foreign Affairs (MFA), the Department for European Integration, by merging three relevant institutions from the MFA and the Ministry of Economy. The Department will be run ex officio by Andrei Stratan, First Deputy Minister of Foreign Affairs. The Department will have 29 employees and three directorates: one working on the political relations between Moldova and the EU, one working on the economic relations between the two, and a National Bureau of the Stability Pact. The Department will be responsible for the implementation of the strategy of European integration of Moldova and the government policy in the field, it will see to the compatibility of programmes and policies of the Moldovan government with the objectives of European integration and regional co-operation in South-Eastern Europe, as well as deal with issues related to the financial assistance that Moldova receives from the EU. The institution of this specialised body has been described by the Moldovan government officials as a positive step that would facilitate considerably the process of Moldova's integration into the EU.

The Government also approved the Regulation for the Activity of the State Department for Migration. The Department will take over the functions and personnel of the Principal Division for Refugees under the Justice Ministry, the functions of issue of invitations to foreign and stateless citizens upon the request of legal persons, and the ones of issue of invitations upon the request of physical persons. The Department will also deal with the extension of entry visas and the issue of entry visas and temporary and permanent leaves to stay to foreign and stateless citizens.

II. Transnistria

The Joint Constitutional Commission

The members of the Joint Constitutional Commission (JCC) met for the third time and agreed upon the basic principles of Title II of the new federal Constitution, on the fundamental rights and liberties of citizens. The text of the Title will be considered at the next meetings of the JCC. The issue of Transnistrian citizenship, which the Transnistrians demand, and which the Moldovan side does not accept, has not been resolved. In exchange, according to the statements of a member of the Transnistrian delegation to the JCC, a number of other issues have been solved: the sides worked out a compromise formula on the issue of cults, and, upon the proposal of the Transnistrians, an article has been adopted on the "right to oppose". Apparently, such articles exist in other European federations and envisage the right of individuals to oppose those who challenge the foundations of the constitutional regime.

At the same time, during the meeting, the Transnistrians have handed to the Moldovan delegation their own draft of the future constitution of the Moldovan Federal State. Among the provisions of the draft, there is a number that deserves special attention, such as the one included in the very preamble of the draft (!) and providing for the right of the federal subjects to secede from the federation, the provisions on the equality of rights of the subjects and their representation in the federal structures on the basis of parity, the prevalence of the rights of subjects over the rights of the federation in areas of common interest, the institution of a two-chambered parliament, whose two major factions would represent the deputies from the two sides, the majority of both factions being necessary for the adoption of decisions etc. Thus, in general terms, the Transnistrian draft actually envisages the foundation of a union of independent state or a confederation, which the Transnistrians euphemistically call "contractual federation". Analysts have described the draft as yet another attempt by the Transnistrians to block the process of adoption of the new constitution and to undermine the support of the USA and the EU for the resolution of the Transnistrian conflict by the end of 2003 (see ADEPT Comment).

The Joint Control Commission / the evacuation of armoured vehicles

The Joint Control Commission (JCC), a multilateral structure set up in 1992 to supervise the security zone between Moldova and Transnistria and which joins Moldovan and Transnistrian representatives assisted by those of Russia, Ukraine and the OSCE, has worked out the mechanism of withdrawal of armoured vehicles from the usage of the peacekeeping forces deployed in the security zone along the Nistru River. Thus, the issue of armoured hardware, which has been negotiated since 1994 and which is part of measures to demilitarise the area provided for in the Odessa agreements, has been finally solved. The Moldovan and Transnistrian peacekeeping forces will withdraw 40 and 31 armoured vehicles each, and the 17 Russian armoured vehicles that will stay in the area will be evacuated by the end of 2003 if the situation remains stable.

The issue of withdrawal of armoured vehicles caused a brief crisis in the activity of the JCC last month, when the members of the Transnistrian delegation blocked the work of JCC claiming that the Moldovan side had blocked the process of withdrawal. Although the differences between the two sides over the issue have been overcome, notably with the mediation of the OSCE Mission, the Moldovan side insists that the Transnistrians withdraw not only the vehicles that are owned by its peacekeepers, but also the ones belonging to Transnistrian military and paramilitary forces that are currently deployed in the security area in breach of the cease-fire agreement of 21 July 1992.

Both the OSCE and Russia have welcomed the resolution of the issue of armoured vehicles, which they called a step forward towards the resolution of the Transnistrian conundrum and building confidence between the two sides. However, another conflict has arisen between the two delegations to the JCC last week, this time over the demands of the Transnistrians to disassemble the Joint Moldovan-Transnistrian Operative Group of Investigations in Bender (Tighina) and to move the Moldovan police station from Tighina to Varnita. The Moldovan side has categorically rejected these claims, since the 1992 cease-fire agreement provides that in Tighina the forces of public order of the two sides will work together.

Polemic in The Wall Street Journal

During the period covered here, the American newspaper The Wall Street Journal inserted a polemic on the ways of solving the Transnistrian conflict. The polemic was opened by a letter signed by three American diplomats who refuted the arguments put forward in an article published earlier in the same newspaper by the analyst of the Washington based Institute for Advanced Strategic and Political Studies Vladimir Socor. In his article, Socor wrote that the plan of federalisation of Moldova was "primarily a Russian project" that "will provide Moscow with permanent leverages of influence over Moldova". The three diplomats these claims, and argued that the federalisation plan launched a year ago by the international mediators is "a first chance in more than a decade to transform Moldova into a stable, unitary and democratic state".

In a letter of reply, Robert J. Loewenberg, the President of the above mentioned Institute, wrote that the collective reaction of the three diplomats reflected "the issue's international prominence as well as the U.S. State Department uneasiness in having endorsed this project". Loewenberg supported Socor's views and argued that the federalisation plan would force the Moldovan authorities "to share the power with a group of citizens from Russia, who seized Trans-Dniestr in the August 1991 Soviet putsch and control it to this day with a Soviet-style police apparatus, banning all opposition" and advocating openly a Greater Russia. The current mediation mechanism that the three diplomats regarded as satisfactory had been intended from the start to preclude direct international participation in the conflict resolution efforts and guarantee Moscow's dominance over Moldova. "Is it not official U.S. policy that these troops must withdraw?" asked Loewenberg pointing to the pressures that Russian President Putin currently makes on the Moldovans to legalise the deployment of Russian troops in Transnistria.

Loewenberg's counter-arguments to the three diplomats were later supported by 15 Moldovan non-governmental organisations in a common press statement. The NGOs reiterated the idea that the current negotiation and mediation mechanisms, as well as the proposed federalisation plan serve Russia's geopolitical interests. Among the measures that need to be taken to solve the conflict, the NGOs propose to internationalise the conflict resolution efforts, democratise Transnistria and involve the civil society in the process.

Notably, the polemics took place following a number of statements made by high American diplomats who reaffirmed US support for Moldovan authorities' current efforts at resolving the conflict through federalisation and expressed their hopes that the conflict will be solved by the end of 2003.

In the meantime, the International Crisis Group (ICG), an international think tank working on conflict resolution world-wide, has published a report on the conflict in Transnistria. The report argues that there can be no swift resolution to the conflict by the end of 2003, as proposed by the Dutch Chairmanship of the OSCE. The conflict requires a complex approach, one to take into account the root causes of the conflict and the factors that have prevented its resolution over the past decade. The ICG makes a number of generic recommendations for such an approach: 1) implement a number of measures to reduce and/or abolish the benefits, primarily economic, that the Transnistrians draw from the current status quo, 2) promote an open society in Transnistria, 3) further democratise Moldova to make it more attractive to the Transnistrians, 4) prepare a fair plan of solving the conflict, preferably through a multi-member asymmetrical federation, and 5) work out political and military guarantees including a functional dispute settlement mechanism and an international security presence under OSCE mandate.

III. Foreign affairs

European Integration

Following the institution of the Department for European Integration (DEI) under the Ministry of Foreign Affairs (MFA), the ex officio head of DEI, Andrei Stratan enumerated a number of steps that the DEI together with the MFA will undertake with a view to fulfilling the primary objective of the Moldovan foreign policy - European integration. Thus, according to Stratan, Moldova will submit an application for EU membership after the conclusion and negotiation with the EU of two documents that are currently being drafted. The first document is the Conception of the National Strategy of European Integration that is to be drafted by 25 August and submitted to the European Commission for review in September. The second document, the Strategy of European Integration, will elaborate on the provisions of the Conception and include concrete steps that Moldova will take to adjust to the EU standards. Once the Strategy is negotiated and agreed with the EU, Moldova will submit its application for EU membership.

Stratan reiterated that the priority of Moldova's foreign policy in the medium term is to become EU associate member by 2007, and assessed Moldova's chances to join the EU as realistic, since our problems are not more serious than the ones of other south east European states, with whom we share in a number of EU initiatives. At the same time, lately we have been getting encouraging signals from Brussels, including regarding an eventual inclusion of Moldova in the Stabilisation and Association Process. According to Stratan, once included in this process, Moldova could join the EU together with the states of the Western Balkans, within a post-2007 third wave of enlargement.

IV. Studies, analyses, comments

1. New investments are needed
by Galina Selari

The maintenance of sustainable economic growth is declared as a priority by the government. At the same time, it would be rather early to assert that factors of sustainable development are already available in the country. There are too many alarming signs: the external debt and the problem of fulfilment of debt liabilities, aggravated as a result of "freezing" Moldova's relations with the IMF, the scarcity of investments, both internal, and external, the obviously insufficient growth of new jobs and the mass migration abroad of the most active part of the able-bodied population. According to the Ministry of Economy, it is essential to increase the volume of domestic investments by 15% - 17% and to attract not less than USD 80 - 90 million of external investments to ensure the expected GDP growth rates of 6-7%.

The Investment Strategy of the Republic of Moldova, as it is known, was adopted at the beginning of 2002. It is too early to assess the effectiveness of its implementation, so let us look at the current situation.

At the beginning of 2003, in the Republic of Moldova there were registered 2, 670 entities with foreign capital, from which only about 1,500 or only half of them reported about their activity.

Since the moment of registration, the total volume of equity capital of the entities has reached US$ 671 million, of which US$ 414 million (62%) were allocated by foreign investors from 87 countries. At the same time only 14% of the total number of entities have the equity capital exceeding US$ 500 thousand; entities whose equity capital does not exceed US$ 10 thousand (70% of all entities) mainly prevail.

In spite of the fact that the absolute value of foreign direct investments in economy has been increasing gradually - according to the National Bank data at the end of 2002 the total volume of foreign direct investments constituted about US$ 720 million - Moldova is still among the countries with one of the lowest rates of investments per capita, that is US$ 31 only.

Let's turn to the independent expert's assessments. The World Investment Report for 2002, prepared by the UN Conference on Trade and Development (UNCTAD), used the share of foreign direct investments in the growth fixed capital formation as one of the indicators of effectiveness of state policy in attracting foreign capital. In general, this figure constitutes about 25% for the countries of Central and South Eastern Europe and for Moldova it was more than 40%, so it needs some additional explanations. According to the authors of the report, this "leading" position reflects in Moldovan case just a very low GDP per capita level and a small size of the internal market.

Other two indicators are used in the UNCTAD Report: Inward FDI Performance Index (the ratio of a country's share in the global foreign direct investment flows to its share in the global GDP) and Inward FDI Potential Index (based largely on the structural economic factors - the rate of growth of GDP, per capita GDP, share of exports in GDP, telephone lines per 1,000 inhabitants, commercial energy use per capita, share of research and development expenditures in gross national income, share of tertiary students in the population and country risk). The use of these indicators allows, on the one hand, to abstract from the size of the internal market (Inward FDI Performance Index) and, on the other hand, to range countries on the basis of their potential in the field of attracting foreign direct investments (Inward FDI Potential Index).

According to the Inward FDI Performance Index, Moldova is included in the group of countries with high index value (for the period from 1992 to 2001 it was permanently 1,7). It means that the country attracted more foreign direct investments that could be expected on the basis of the relative GDP.

According to the Inward FDI Potential Index, the situation is, unfortunately, different. If for the period 1992 - 1994 the value of the index was 0.285 (46-th place among 140 countries), in 1998-2001 the value of the index considerably decreased and constituted only 0.194 (109-th place for Moldova, respectively).

With regard to both indicators, Moldova was among "front-runner" countries in 1992 - 1994, but because of the result of significant declines in the Inward FDI Potential Index in 1998 -2001, the country is referred to the group of the "above potential economies", which means that in order to attract foreign direct investments into the country, further structural economic transformations and development of industrial potential are required. Thus, as the evident reserves for economic growth have been exhausted in Moldova, well co-ordinated practical actions on modernisation of the Moldovan economy contrary to formal optimistic forecasts take on special significance. Moldova is a small open economy. Joining the WTO and European or regional structures (Stability Pact for South Eastern Europe, Euro Asian Economic Community etc.) provides not only access to new markets, but also new opportunities in the field of realisation of the investment projects, simultaneously increasing the requirements for economic and investment policy. Moldova took on the collective responsibility for the creation and development of a favourable investment climate in the region as a whole, having signed, within the framework of the Stability Pact, the Declaration on Attracting Investment to South Eastern Europe, in July 2002.

Will the year 2003 be a turning point? First, it is necessary to recognise, that the last two years, by virtue of circumstances, have not brought constructive changes in the investment policy. There were adjustments to the legislation, initiatives on strengthening methods of government regulation in economy, etc. However, the implementation of some important, though politically complex, intentions in the field of structural reforms has been slowed down. No noticeable results in the improvement of the investment climate, in the elimination of the separation of the banks and the real sector and in the reduction of the shadow economy have been attained. Inappropriate management has complicated the relations with foreign investors and international organisations.

This year, nevertheless, is characterised by livening up of the dialogue between authorities and civil society, in particular with the representatives of business circles both Moldovan and foreign (January - the Moldovan-Bulgarian economic forum, April - the Moldovan-Russian economic forum, June - first session of the Moldovan-American committee on economic and investment co-operation, July - the Moldovan-Israeli businessmen's forum).

In the common opinion of the participants of all these meetings, Moldova has many advantages, which could attract foreign investors: the geo-economic location, which opens the opportunity of export both to CIS countries - the interest of western investors - and to Eastern and Western Europe - interest of eastern investors (Russia and China); well educated (81% of the population in able-bodied age have secondary education, for the countries with low and average level of income this indicator constitutes about 50%), trained and wage competitive labour force; bilinguism; Moldova feels itself comfortable in various cultural environment, both in the East and in the West.

Unfortunately, these advantages have not been fully explored so far, as President V. Voronin put it, "these advantages have to be recreated and money has to be invested into them".

So, again, there appears a problem with the quality of investment climate in Moldova, as the criterion of market reforms maturity, confidence of business circles in steady property, judicial system, etc.

Strange, though, the Republic of Moldova, perhaps, is the only CIS country, which does not have the Law on Investment Activity and, as a consequence, the state policy in the field of attraction of internal investments is not precisely determined. Probably, this fact explains the low volume of internal investments. It is impossible to consider the sum of 1.5 billion lei (2002) sufficient for the sustainable development of the country's economy. According to the latest data of the Department of Statistics and Sociology, in the first half of 2003 the investments amounted to 897.8 million lei (about USD 63 million), although this is 30% higher as compared with the same period of 2002, it is evidently not enough. According to the sources of investments, self-funding (including individuals' resources) constituted 75%, foreign investments - 16% and only 5% was the investments on account of the state budget. It is clear that foreign investors will not invest in an economy in which local businessmen do not want to invest.

The drafting of the Law on Investment Activity, which is to even the rights of local investors with those of foreign ones, started in 2001 and the terms of its adoption still have not been determined. However, the country has some regional experience: it is the Law on Investments and Investment Activity in the Territorial Autonomous Unit Gagauz Yeri (2001). In contrast to the Republic of Moldova's Law on Foreign Investments (recognised by the independent foreign experts as one of the best among similar laws of CIS countries), the law of Gagauz Yeri does not make any difference between foreign and local investors. On the territory of Gagauz Yeri all investing agents have incentives stipulated by the Moldovan legislation, as well as additional ones according to the local law. Therefore, today, Gagauz Yeri, in a sense, can be appreciated by potential investors as an oasis in the Moldovan investment environment.

Businessmen, local as well as foreign, wish for a transparent market with predicted rules. They are eager to work to make the Moldovan market one of the most favourable in the region. The first words of the new Minister of Economy Marian Lupu concerned the same matter: "We should win back the confidence of both international donors and the Moldovan business circles in the consistency and predictability of our state economic policy. Without this, our main task - attraction of sizeable foreign investments - can not be accomplished".

2. Changes on the Political Scene
by Igor Botan

On 19 July 2003, the Founding Congress of a new political party - the Alliance Moldova Noastra (Our Moldova) (AMN) took place. The event can be regarded as a highly salient one. The new party is made up of three parties, of comparable weight: the Social Democratic Alliance (SDA), the Alliance of Independents (AI) and the Liberal Party (LP). These were later joined by the low profile People's Democratic Party (PDP). For reasons of convenience of registration with the Justice Ministry and political succession, the AMN has been declared the political successor of the SDA. As a result of the merger, at present there are 22 registered political parties in Moldova.

1. Essential characteristics of the AMN

The founding parties of the AMN have been part of the Electoral Bloc Social Liberal Alliance Moldova Noastra (Our Moldova), that was created on the eve of the 25 May 2003 local elections. The bloc performed fairly well in the recent elections and received about 20% of the votes, which made it the most important opposition force. The leaders of the party claim to have 100,000 members, which is 5 to 6 times as much as the Communist Party of Moldova (CPM) and the People's Christian Democratic Party (PCDP), until recently considered the main opposition force in Moldova.

AMN proclaimed itself a "party of citizens" and has pledged for the harmonisation of inter-ethnic relations in Moldova. In addition, the AMN has claimed it will promote social policies and "represent the interests of the middle class in formation". This latter option draws upon the social-liberal doctrine to which the AMN has adhered, willing to "combine the principle of individual freedom with that of social solidarity, the minimal role of the state and its responsibility for the unconditioned and equal respect for the law". The major political issue currently faced by Moldova, the Transdnistrian conflict, the AMN intends to resolve through the internationalisation of the conflict resolution efforts. In the foreign policy field, the AMN agenda is topped by the European integration of Moldova. This task, in the view of AMN, may be accomplished "through the declared and clearly demonstrated support of Romania, with whom, in the context of the European community, we will share a common European historic, economic, cultural and language space".

2. Factors that have determined the foundation of the AMN

There is a series of factors that have determined the founding of the AMN. First, the main constituent parties and its leaders have been in an overt conflict with the authorities and the ruling party. None of these parties had the capacity to cope with that conflict on its own. Secondly, the merge is a logical follow up of the events that started with the foundation of the Democratic Forum of Moldova in May 2001 following the CPM absolute victory in the 2001 parliamentary elections. These were succeeded by a number of important mergers that reduced the number of registered parties from 31 to 25. Hence, the foundation of AMN was to be expected after the relative success that it registered in the May 2003 elections.

This has made the new party rather attractive both for the potential new members and for the voters who are looking for a strong reform-driven party to invest their hopes. Likewise, the foundation of the AMN could attract potential sponsors from the business environment who have become disillusioned with the current government's economic policies. Secondly, the AMN name and symbols seem to have been properly chosen and, most importantly, they are already familiar to the voters. Interestingly, in the neighbouring countries, the most important opposition formations or those affiliated with the government bear in their names the name of the country, which seems to be popular with the voters, as for example "Íàøà Óêðàèíà" (Our Ukraine), "Åäèíàÿ Ðîññèÿ" (United Russia). Thirdly, the AMN has been created after the potential of the Moldovan political forces has been clearly elucidated. It has thus become clear that in the upcoming parliamentary campaign, which is to start in one year and a half, about four political forces will be able to compete seriously. These are, in the conventional left-right order, the CPM, the Democratic Party of Moldova (DPM), the AMN and the PCDP. Another serious competitor in those elections could be the recent electoral bloc between the Social Democratic Party and the Social Liberal Party. The remaining 15 registered parties will be non-significant allies of these strong contestants or they will merely harness votes for the parties that will pass the 6% threshold.

From this perspective, the positioning of the AMN, the most powerful opposition force, at the centre of the political spectrum increases its chances to participate in the future coalition government, be it centre-left or centre-right. That such positioning is advantageous has been proved by the Movement for a Democratic and Prosperous Moldova in the aftermath of the 1998 parliamentary elections. Back then, the Movement held the key position in the talks on setting up the parliamentary majority with the right-wing parties, on the one hand, and the CPM, on the other hand. Notably, the current electoral weight of the AMN is almost similar to the one held by the Movement in 1998.

Another important factor for the future electoral projects of the AMN is that the rating of the current ruling party has stepped into a phase of decline. This has clearly shown in the recent local elections. Despite the official reports of "impetuous economic growth", independent experts have insisted on an eventual cumulating effect of the negative factors in the economy of the country, such as the increase in prices on energy and foodstuffs. All these factors have exacerbated the frustration of the entire local and central state administration caused by endless reforms, revisions of previous reforms, new conceptions and strategies in the domestic and foreign policy, of which none can possibly be carried out fully. Importantly, these assumptions have been confirmed by the former presidential adviser Victor Doras, who contributed greatly to the CPM victory in 2001 and who knows in minute detail the state of the art in various fields of major importance for the development of the country. Thus, the prospect of the CPM rating shrinking to levels attested elsewhere in the CIS area (20 to 30 percent in Russia and Ukraine) is the most probable. Differently put, on the eve of the 2005 parliamentary elections, the CPM rating might be equal to that of the AMN. Of course, this sort of estimations is very approximate. Nonetheless, it was the CPM leader himself, Vladimir Voronin, who said immediately after the CPM victory in 2001 that he was aware of the fact that an important share of the electorate had supported the CPM largely out of a feeling of protest against the previous governments. It is the current government itself that might become the main object of discontent of the protesting voters in future elections. One can thus assume that most of the discontent ones will opt for the parties at the centre of the political spectrum, the DPM and the AMN. Surely, after the ceremonial "putting into practice the vertical axis of power" during the last CPM plenary meeting, one can expect it to become the principal resource that the CPM will use to cling to power.

3. Risk Factors for the AMN

There is a range of risk factors for the ascending evolution of the AMN. First, the ambition of the AMN leaders to "prevent the accession to power of parties of extreme right and left" has prompted response reactions. To the left of the Communist Party (CP) and to the right of the People's Christian Democratic Party (PCDP) there is no political formation of any significance, and therefore these two parties were the ones to react first to the constitution of the AMN.

From this point of view, it is worth shedding light on the risk factors as seen by the political opponents of the AMN. The biggest danger for the AMN lies in the fact that the party is made up of extremely heterogeneous elements. What is meant is that, on the one hand, the AMN is led by pragmatic personalities from the Alliance of Independents (AI) and the Social Democratic Alliance (SDA), who have developed obvious economic interests during the previous governments, and, on the other hand, there are the so-called romantics from the Liberal Party (LP), who over the past 10 years have promoted "democratic and European values". By all appearances, this is what made the press organ of the Social Liberal Party (SLP) call the AMN "a new party of the old politicians".

The consequences of this melange have clearly reflected on the rather complex internal structure of the new party. At the first site, this structure is far from being a flexible and functional, but rather one aimed to secure the interests of the founding elite. Indeed, the government and the pro-CPM press have commented maliciously on the internal structure of the AMN, which is made up of the Supreme Council, the Central Political Council, the Permanent Bureau of the Political Council, the Central Steering Committee and the Ethics and Adjudication Court. The AMN has declared itself the successor of the SDA probably in order for the former leader of SDA, Dumitru Braghis, to become co-ordinating Chair of the AMN. Beyond doubt, there are other factors that have contributed to the identification of Dumitru Braghis as the first of the three co-chairs. He is former Prime Minister, he has wide reaching connections and he is highly knowledgeable of the economic and social processes in the country. As important is the fact that Braghis is now the leader of the parliamentary faction of the SDA. In any case, getting all the structures of the new party represented by the three co-chairs and 16 deputy chairs, to work as an efficient and purposeful mechanism towards reaching the political goals of the party seems quite difficult a task. However, below we will try to argue that this cumbersome structure might prove one well thought and successful for the AMN.

The AMN opponents believe that the recent success of the party in the May 2003 local election was a passing one and was due to AMN's positioning in the opposition. So, it was convenient for them to criticise the government. If AMN continues to position itself in this way, it could boost its rating further. Yet, the heterogeneous nature of the component parts of the party is in some way suggestive of the ways in which its political rivals could undermine its viability. Thus, it is worth mentioning that during the recent plenary meeting of the CP, Chairman Vladimir Voronin spoke in detail about the dangers that the AMN poses for the CP. He said: "for us, it would be unforgivable to sit with our hands down and wait till our political opponents start fighting. Their capacity to get together at critical times could be underestimated only by the politically naive, and political naivety is always punishable". Such statements by President Voronin need to be taken seriously by the AMN leaders if they do not want to be "naive and punishable". During the same meeting, Voronin made it clear where the political will emanates from and what sort of tasks are to be accomplished, including by the top state institutions. For example, he said that "the parliamentary activity is just another, subordinated part of the activity of the party".

If the task not to wait "till the political opponents start fighting" is set in such context, it is necessary to have a look at the methods that might be used in this sense. The experience to date has shown that, usually, such measures are varied and their intensity grows proportionally with the resistance they meet. Thus, the opposition mass media has assumed there is a risk that some of the AMN pragmatic leaders could be made offers by the CP to participate in the current government following eventual government reshuffles. Such assumptions are founded on the fact that earlier the SDA leaders did want to share in a coalition government with the CP. It is true that over the past year and half relations between the SDA and the CP have deteriorated dramatically and the SDA faction boycotted Parliament meeting as part of several actions of protest. It is equally true, though, that the CP has succeeded to recruit almost half of the Braghis Alliance faction, which then changed its name to SDA.

The same happened in the case of the Mayor of Chisinau, Serafim Urechean, who said a few months ago that President Voronin had proposed him the position of ambassador to some European capital in exchange for his withdrawal from the electoral race for Chisinau mayor. Otherwise, Urechean was told, he would have a lot of troubles, which he actually did.

If such measures were applied to influence the results of local elections, in which the party elite does not hold a direct stake, then we can imagine the sort of measures that will be applied when it will be necessary to influence the results of the parliamentary elections, which, in their turn, will be decisive for the results of the presidential elections. The government press has alluded to this sort of measures when it called the AMN Founding Congress as "a congress of millionaires". The recent events in Russia, from which the Moldovan authorities have borrowed such notions as the "vertical axis of power", "the dictatorship of law" etc. might suggest certain actions that could be taken concerning the economic interests of the politically ambitious in Moldova.

Another risk factor for the AMN could be related to the perception of its message by potential voters, as it was reinterpreted by its opponents. The latter have singled out certain imaginary and real inconsistency and the eclectic character of the AMN programme. The PCDP press wrote that the AMN leaves one the impression that it claims to be "horse and donkey" at the same time.

The danger of an eventual expansion of the AMN onto the electoral segments of its main rivals worries the latter. It is natural for political competition. For example, the SLP supporters have had their reasons to be bothered by the fact that the AMN claims part of their electorate by embracing the social liberal doctrine. In the recent electoral campaign, the bloc formed by the AMN components was called the Social Liberal Alliance "Moldova Noastra".

The fact that the AMN, in its political programme, sees itself as a formation of the "middle class", which is still very weak in Moldova, is also of some interest. From this point of view, the AMN is much more modest than the CPM that has recently declared itself the party of the people. Of course, the political programme of any party is intended to foster the adherence of its members to its values. For the expansion of the electoral basis, the offer made to the voters matters a lot. Usually, such an offer is founded on the principles enshrined in the programme. The fact that the AMN wants to assume obligations to unfold certain social programmes has bothered the CP, which, probably due to its name, seems to assume that it holds the monopoly in promises of social character. It is difficult to estimate how long it will take for a sound middle class to take root in Moldova. What is certain is that when this happens, the electoral basis of the CP will considerably shrink, as it is well known that the CP's popularity feeds on poverty and social misery.

On the other hand, the AMN plea for balancing private initiative with social programmes can be easily found in the SLP and PCDP programmes.

As for the AMN position on the Transnistrian issue through the "internationalisation of conflict resolution efforts", one may easily note that the CP is doing exactly this, but with little fuss. The Transnistrian issue is a serious one for the Moldovan political life, and therefore taking a position on this issue is important.

First, the views of the three AMN leaders on Transnistria differ from one another. There is no doubt that there might be internal conflicts because of this difference of views, but the probability of a conflict actually happening is unduly exaggerated. First, the pragmatics in the AMN have already proved a high degree of awareness of the pressures from the outside and have survived in the political battles of the past years. Secondly, the romantics in the liberal wing have repeatedly indicated that an acceptable solution of compromise could be one that would guarantee the sovereignty and territorial integrity of Moldova and not stand in the way of Moldova's accession to the EU.

The views of the pragmatic leaders of the AMN are very different from the ones of the ruling party and of the right wing opposition parties. Thus, one of the major characters in the AMN, the Mayor of Chisinau Serafim Urechean, during his recent meeting with the Transnistrian leader Igor Smirnov, said: "the Transnistrian conflict will be solved when Vladimir Voronin leaves ", that is after an eventual defeat in the future parliamentary elections of the CP. The PCDP harshly criticised the actions of Urechean and demanded public explanations for his contacts with Smirnov.

Another AMN leader, Dumitru Braghis, published one day before the founding congress of the AMN an article entitled "The Current Proposal on Unifying the Country is Wrong ". He criticised the fact that the President Voronin did not consult with the political forces and the citizens with regard to the resolution of the Transnistrian conflict. The solution proposed by Dumitru Braghis was that before the text of the Constitution of the new reintegrated state is drafted, the citizens should vote in a consultative referendum on a number of sensitive issues, and the text of the Constitution be drafted based on the results of the referendum. One can note that the proposal offers a lot of field of manoeuvre for the Transnistrian leaders obsessed with the vague idea of a "common state".

From this perspective, the proposal of the co-chair of the AMN Dumitru Braghis is well correlated with the statement of the co-chair Serafim Urechean that the Transnistrian conflict will only be solved when the current government leaves.

As for the AMN vector of European integration, one should note that at present in Moldova there is no political entity with a rating higher than 2% which would not claim European integration as its strategic objective. Even the CP during the past year has constantly spoken about it. The difference is that the AMN proposes to achieve this objective with the "clearly demonstrated support of Romania", while the current government speaks of integration into the EU by other means, independent of Romania. This plea of the AMN is probably imposed by the liberal wing of the party and it is fully consonant with the positions of the PCDP and SLP.

In this sense, the SLP has reproached the AMN for avoiding to speak on the subject of Moldova's eventual accession to NATO. Indeed, this is not a trivial issue. Whoever pleads for integration into the EU should take into account the experience of other post-communist countries that first joined NATO for security reasons and then proceeded with the economic and political integration into the EU. It is for this reason that few believe in the honesty of the pro-European rhetoric of the CP. The fact that one of the AMN leaders, Serafim Urechean, is confident that Russia may survive without Moldova, but that Moldova may not survive without Russia, prompts the AMN rivals put upsetting questions. Especially that one knows about the pro-NATO stance of the liberal wing of AMN.

Still, the expectations that the differing views within the AMN on a number of issues might lead to serious conflicts seem a bit exaggerated. One can invoke here, for example, the argument that the prospect of Moldova's accession to the EU is so distant that the debates on the ways to achieve this task are not likely to happen in the near future, and the circumstances will shape appropriate attitudes at the right moment. Moreover, the experience of development of political parties in Moldova has demonstrated that even the strongest tend to change their strategic objectives depending on circumstances. The same experience has also showed that this openness to change does not affect negatively these parties, but, on the contrary, some develop an ascending vector of evolution. Others promote policies that are completely opposite to the objectives of their programmes. For example, the CP has fixed in its programme, adopted in April 2001, two months after their absolute victory in the 2001 parliamentary elections, the objectives of joining the Russia-Belarus Union and founding a federation of the former Soviet republics; at present it promotes with as much ardour the objective of integration into the EU.

Thus, it will be no problem for the AMN to adapt to circumstances and the AMN leaders do have a lot of experience in this sense. What is crucial, though, is the problem of the immediate future facing the party.

In this sense, the most imminent danger for the AMN is the preparation for the electoral campaign for the next parliamentary elections due in early 2005. The danger lies in compiling the party's candidate list. The experience of the three previous electoral campaigns has shown that in parties where there is a large degree of internal democracy it is the compilation of candidate lists that causes the biggest public scandals that result in splits and leaders walking away from parties. For example, the LP, one of the founders of the AMN, was left by one of its leaders Sergiu Mocanu in the recent electoral campaign.

But even in this respect it seems that the pragmatics in the AMN have planed well for the drawbacks of the complex structure, rightly noted by their rivals, to be turned into advantages. It is challenging the fact that AMN rating of 20%, proved in the recent elections, practically coincides with the number of co-chairs and deputy chairs of the AMN (19). This coincidence will save the AMN leaders the trouble to look for criteria for an eventual algorithm for the compilation of the party candidate list. Of course, the AMN ambitions to share in the government within a centre-left or centre-right coalition will determine the leaders of the AMN to identify another 10-15 candidates from the middle echelons of the party with real chances to be represented in the parliament, but this could be done on the eve of the electoral campaign. Thus, the AMN will be able to avoid conflicts with serious consequences. In addition, it is extremely important that the AMN was founded right after the local elections, in which it could gain for a considerable number of its members seats in local and district councils as well as mayor seats. Certainly, the above argument will hold only if the current system of proportional representation is not changed for the next elections.

Avoiding internal conflicts is essential for the AMN because this will boost its chances of success. It is obvious that the AMN main opponents' negative reactions with regard to the constitution of the AMN will be followed by estimations of the AMN chances and of the possibilities to enter into coalitions with it. As a consequence, the tone of attacks might soon turn into one of invitations for partnerships.

Still, at the moment, immediately after constitution, the AMN looks more like an electoral alliance than a self-sufficient political entity. The main factor that has contributed to the merger of the component parts of the AMN has been one of external pressure and an expression of their common desire to join forces to resist the CP abuses. From this point of view, it is obvious that the task of identifying and achieving common objectives within the AMN will be much more difficult. To survive politically and evolve in an ascending way, the AMN needs to be successful in the next parliamentary elections. Then, probably, the party will reconsider its structure and programme to make them functional and achievable.