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Activity of public institutions

Parliament
Government
Presidency

Financial rating and foreign competitiveness of Moldova by Iurie Gotisan
Stability and Security Pact for the Republic of Moldova by Igor Botan

I. Activity of public institutions

1. Parliament

1.1. Legal acts

Law on the Amendment of the State Budget for Year 2004 decreases budget revenues by 170 million Lei and increases expenditures by 109 million Lei. Total budget revenues would amount to 5.477 million Lei, whereas total expenditures 5.416 million Lei with a meagre budget surplus.

The law has shown that this year less excises would be levied than initially forecasted - 109.1 million Lei (only for oil and diesel budget would not get excises worth 59.1 million). Due to the fact that national currency exchange rate against other convertible currencies was lower than the forecasted one, net revenues to the state budget had reduced by 251 million Lei. Noteworthy, National Bank gathered a rich harvest of criticism from the President himself who threatened with reshuffles in the Bank leadership by the end of the year.

Under the budget, funds were allotted to pay back compensation as ruled by the court for cancelling contracts with foreign investors: 20.2 million Lei to Dacia hotel owners and 25.4 million Lei to Europharm. Also under the law budget would not receive foreign grants worth 277.5 Lei.

To collect additional revenues as provided by the law, by the end of the year fiscal revenues should surge by 267 million Lei, whereas revenues collected by Customs Department by 471 million Lei.

The law provides additional expenditures in several areas, one of them redeeming debts of the State Company "Teleradio-Moldova" worth 14.2 million Lei. Opposition criticized this initiative. It also provides for establishing a fund worth 15.3 million Lei providing subsidies for fall agricultural works.

Under the Law on Reducing VAT on Sugar 8% VAT shall be applied to beat sugar imported and or delivered on the soil of the Republic of Moldova, as compared to 20% this year. The law comes in response to the crisis, when sugar market was over-flooded (about 108 thousand tones amidst average domestic consumption of 80 thousand tones) as a result of smuggling from Ukraine through the eastern regions of Moldova. It is expected that the law would put an end to smuggling, boost domestic production and as a result bring more revenues to the state budget.

Law on Modification of the Law on Veterans provides that persons who have a work experience over 35 years for women and 40 for men and are not decorated with orders or medals, have no honorific titles shall be eligible to one free trip to a sanatorium once in three years. Until now only veterans decorated with medals or honorific titles were entitled to such benefits.

Law on Ratification of the Convention Prohibiting Development, Production, and Stockpiling of Bacteriologic Agents and Toxic Weapons ratifies the Convention signed on April 10, 1972. It bans the development, production and stockpiling of such substances not required for peaceful purpose. It is believed that by ratifying the convention our country would earn a pacifist image and would be seen as sharing commitment to international security and disarmament. Parliament had one reservation to the Convention, namely until restoring territorial integrity of the Republic of Moldova, Convention provisions shall apply only on the territory under the control of Republic of Moldova authorities.

Law on Enforcing the Convention Prohibiting Development, Production, and Stockpiling of Chemical Weapons and their Destruction outlines procedures of enforcing the law, rights and obligations of the subjects of law, interdiction to any person to use prohibited chemical weapons, as well as responsibilities of the specialized National Authority in the field. Noteworthy, Moldova ratified the Convention back in 1995, which has been in force on the soil of the Republic of Moldova for almost eight years.

Last week Parliament approved the Law on State Budget for 2005 in the final reading. Law provides for revenues worth 7 473.2 million Lei and expenses worth 7 724.2 million Lei. In contrast to this year when a 340 million excess was forecasted and latter on adjusted to 61 million Lei, in 2005 a 251 budget deficit is expected.

Law on State Budget for 2005 was based on a 6% GDP growth (36.7 billion Lei), 9% inflation rate and 12.7 Lei per 1 USD exchange rate. The law reduces fiscal burden both for legal and natural entities. According to some estimates the move would deprive the budget of about 1 billion Lei. However, it is expected that those measure would payback by boosting investments.

Officials said the budget is socially oriented, though experts pointed that social spending represent only 13% of the GDP, i.e. half of the consolidated budget. "It comes as no surprise that those expenditures surge in an electoral year. It is a sign of disgrace towards citizens, who after being robbed by corruption are tricked by governmental generosity. Doubling expenses on social programs and the advertisement Government makes to it, are immoral, especially as they are exploited for political purposes", say many independent analysts.

(For further details on Parliament activity see http://www.e-democracy.md/en/comments/legislative/)

2. Government

2.1. Reshuffles

During its November 3 session, Government appointed Deputy Minister, Mariana Durlesteanu as Republic of Moldova Ambassador to Great Britain and Northern Ireland.

2.2. Decisions

• On November 1 Government decided to provide subsidies to the farmers to compensate for the price hike on oil worth 500 Lei for each tone of diesel used for fall agricultural works. Subsidies shall be granted from a special fund, which according to official sources would amount to 15 million Lei.

• At the initiative of the President, on November 3 Government imposed a restriction on issuing foreign passports to minors whose parents are divorced. To get a passport both parents would have to provide their consent, which should be legalized at the notary. The move aims to fight trafficking in human beings.

• On November 10, Government approved draft National Strategy on fighting corruption and an Action Plan. The two documents were developed by the Commission set up in this respect via presidential decree on November 7, 2003. The Strategy and Action Plan were completed early this year and were presented for public debates on April 22, 2004. It is not known what was the result of public debates, however we do know that the two documents were submitted for the expertise of the Council of Europe. The Strategy has the following objectives:
  • To ensure rule of law (identifying problem areas, conditions favouring corruption, preventing corruption, strengthening the system of measures detecting and preventing corruption);
  • To ensure separation of branches of power and preventing corruption in each of them;
  • To adjust domestic legal framework to international standards;
  • To ensure transparency of public institutions, access to information, promoting ethnic standards;
  • To mobilize civil society and business in preventing corruption and foster intolerance towards corruption.

  To achieve those objective the following measures shall be undertaken as part of the Strategy:

  • Improving legal framework;
  • Ensuring transparency and responsibility in political activity;
  • Increasing efficiency of the institutional system;
  • Diminishing corruption effect on private sector;
  • Boosting cooperation between public institutions and civil society;
  • Increasing international cooperation.

  Due to Parliament's delay to approve the Strategy, on August 3, 2004 Governmental approved via a motion an Action Plan to increase the cooperation between law enforcement forces in fighting corruption. The plan included many of the Strategy provisions, but also further detailed some of them.

• One of the most important decisions passed by the Government in the aforesaid period referred to reorganisation of the Ministry of Labour and Social Welfare so as to optimize its activity. It provides for personnel cuts and transforming departments, as follows: Department on wage policy and cooperation with social partner; Family policy and equal opportunities Department; Reform and analysis Department; Economy, finance and booking keeping Department; Foreign relations Department; Social assistance Department; Social assistance Department; Social institutions Department; Legal Department, and HR Department.

• Government approved the Regulation on awarding the status of war veteran. Under the document, war veteran status may be awarded to military who fought in the soviet army or Romanian army during the WWII; in the military operations led by the URSS army; in the military operations defending territorial integrity of the Republic of Moldova; persons who fought in partisan units or served in the URSS Ministry of Interior or Defence during the WWII.

• Under the Program of single obligatory medical insurance for 2005 that was approved by the Government on November 10, as of next year holders of medical insurance would additionally be entitled to certain services of the dentist, some emergence surgery and medical investigations. Those services don't come cheap as the price of medical insurance for the next year went up by 50%, i.e. 441.23 Lei in 2004 and 664.40 Lei in 2005.

3. Presidency

3.1. Decree ousting ISS Deputy Director

On November 11, President Vladimir Voronin ousted Simion Rusu as Deputy Director of the Information and Security Service. The decree makes no reference to the grounds for ousting the dignitary, however it is not a secret that ISS' failure to prevent the theft of munitions from Bulboaca military unit was the reason why Supreme Security Council asked for Mr. Rusu's resignation back in October.

3.2. Initiatives

• Reorganisation of State Chancellery

  During the Government session on November 3, President came up with the initiative of reorganizing State Chancellery. "Chancellery was an ambition of the previous Governments, whereas now it does nothing except duplicating other ministries and departments" said the President. Anticipating possible criticism that the initiative was yet another electoral stunt, Vladimir Voronin pointed "we should manage to reorganize this structure prior to elections, as those who would come to power might do nothing good in this respect".

  Government already approved President's initiative, while Parliament passed it in the first reading.

• "Moldovan village" National Program

  Yet another initiative presented by the President during the joint session of the Government and rayon heads referred to National Program of social-economic development of the villages throughout 2005-2015. According to the President the document would have to be coordinated with Economic Growth and Poverty Reduction Strategy Paper (EGPRSP) and include concrete actions aimed at setting up new businesses based on consolidating lands, machine stations, veterinary centres, agricultural markets; applying advanced technology in agriculture, organic food; and extending wine yards, etc.

  The Program is to be completed by January 8, 2005 in three stages: at the level of community, rayon and nation-wide. By December 15, each rural community would have to draw its own development plan, while by December 20 each rayon would have to put all of them together in a development plan for second level administrative localities. During the final stage, Government would have to draw the national program capitalizing on the rayon and community plans.

II. Economic polies

1. Republic of Moldova - slow pace of reforms

According to Transition Report released by the EBRD, Republic of Moldova ranks among countries having a slow pace of reforms, however above average, i.e. 2.7 as compared to maximal 4.5. FITCH agency had a similar opinion on the slow pace of reforms in Moldova.

Under the report, Moldova is ahead of many CIS countries, Azerbaijan, Tajikistan, Uzbekistan, Belarus and Turkmenistan, but lags behind Russia, Ukraine, Georgia, Armenia, Kazakhstan and Kyrgyzstan. ERBD points to the considerable progress made by Central Europe with Hungary being in top, followed by Czech Republic, Slovenia, Estonia and Latvia. To the other end, Turkmenistan and Belarus are seen as having lower level of reforms with the lowest score of 1.5.

In the ten years since it granted the first loan in Republic of Moldova, EBRD funded projects worth 170 million USD. It was the only one to fund both governmental and private projects. A total of 29 projects were funded in Moldova representing 0.9% of the total EBRD's investment in CEE and Central Asia.

2. WB supports PRSP and is ready to finance

On November 11, the World Bank's Board of Executive Directors discussed and approved Moldova's Economic Growth and Poverty Reduction Strategy Paper (EGPRSP) and stated it stands ready to support its enforcement. The amount would be decided on December 14, 2004 when World Bank's Board of Executive Directors would discuss the new Country Assistance Strategy for the next three years.

The Executive Directors noted with concern several critical areas where current policies do not match those articulated in the EGPRSP. These include slow progress in implementing structural reforms, increased government interventions in economic activity. Directors urged the authorities to rectify these policy actions, especially in the areas of state monopolies, licensing and regulation, land consolidation and agriculture subsidies, pension reform, and privatization.

If successfully implemented, WB would double its assistance to Moldova. It is said that Government would channel WB funds to developing rural services, social welfare, education, infrastructure and support to small and middling business. Some independent experts say the document is not "sustainable", as 95% of EGPRSP actions would not improving the situation existing in the country. According to them, it is more of a pay check issued to World Bank for solving important issues.

EGPRSP includes economic policies and actions that are to be implemented over 2004-2006 so as to bring economic growth and reduce poverty. In particular it provides for reducing by half the number of people living on less than 2.15 USD per day by year 2015, i.e. from 39.8% in 2002 to 18.0% in 2015. Non-reimbursable credits shall cover for 60% of the funds necessary to implement EGPRSP estimated at 9.2 billion Lei.

III. Transdnistrian Conflict

On 8-9 November, the Bulgarian town of Varna hosted a round of consultations between the Moldovan Reintegration Minister, Vasile Sova, and the head of the Transnistrian "foreign ministry", Valeri Litkai, which was also attended by representatives of the mediators - OSCE, Russia and Ukraine. The consultations were convoked almost three months on since the official Chisinau suspended its participation in the five-sided negotiations mechanism by the OSCE CiO, Solomon Passy, Bulgarian Foreign Minister.

After the consultations, Minister Sova said it was premature to talk of the resumption of the negotiations, but reckoned the possibility of holding further consultations with Tiraspol. According to Sova, the Moldovan side put forward within the talks a series of proposals that would detention relations between Chisinau and Tiraspol, such as identifying mechanisms that would allow for a long-term functioning of the Moldovan Latin script schools, restoring the telephone connection between the two banks of Nistru River and removing all check points from the security zone that are not under the control of the Joint Control Commission.

At the same time, Sova showed disappointed by the results of consultations and accused the representatives of the mediators of passivity and lack of a consensus, which prevented the capitalisation of Chisinau's "serious intentions" within the consultations. "We felt that the mediators lacked consensus and a shared position on promoting certain proposals with regard to the negotiations process", Moldavskie Vedomosti quoted Sova as telling a press-conference on 12 November in Chisinau. On the same day he convoked a meeting with the EU and US ambassadors whom he told that the Varna talks had demonstrated the inefficiency of the five-sided format and the need to change it. Sova called upon the EU and the US to get more involved in the Transnistrian crisis settlement and encouraged the US, EU, Russia, Ukraine and Romania to support the Declaration on the Stability and Security of the Republic of Moldova so that it can be sighed at the OSCE Ministerial Summit to be held in December in Sofia.

The Tiraspol "foreign department", on the other hand, published on 13 November a press statement on the Varna consultations on the web site of the official news agency Olvia-press, in which Tiraspol expressed its openness to "constructive cooperation on the principles of equality" with all participants in the five-sided negotiations mechanism. The statement said "the Varna consultations were not sufficient for reviving the Moldovan/Transnistrian dialogue ... due to the unwillingness of the Moldovan side to resume the negotiations"."Transnistria is alarmed, in the first place, at the fact that the frequent changes in the Moldovan politics have led to the situation where the position of the Republic of Moldova in Varna was totally confuse", the statement read.

At the same time, the Russian Ambassador with Special Missions, Valeri Nesteruskin, was quoted by the Chisinau press as assessing as positive the fact that the Varna consultations were held, as they allowed the two parties to talk directly to each other. Nesteruskin expressed Moscow's hope that new such talks will be held soon.

Meanwhile, the Tiraspol ‚supreme soviet' adopted on 3 November in the first reading the concept paper on the foreign policy of Transnistria, according to which Transnistria aspires to become a full fledged subject of international law and build its relations with other international law subjects on principles of equality. According to the concept paper, Transnistria's position in the talks with Chisinau will be based on the principle of equality between the two parties and the agreements signed to date. One realistic method of overcoming misunderstandings with Chisinau could be setting up an "interstate association" with the Republic of Moldova that would not affect the sovereignty and independence of the two states and would presuppose a number of models, ranging from contractual federation to common state to unionist state.

In parallel, on 11 November the Tiraspol administration started the population census. The official news agency Olvia-press has informed that the census is being held without any outside financial help, and the obtained data will only be used in Transnistria. The census papers were prepared by the Kiev based branch of the German UBM Solutions Gmbh, experienced in holding censuses on Ukraine and Georgia. According to Basa-press, many Transnistrian residents who have already been questioned said that the census questionnaire contains questions related to the nationality, citizenship, spoken languages, etc., which makes analysts in Chisinau believe that the Transnistrian authorities will could use the results of the census to demonstrate the existence of a "Transnistrian people", distinct from that of the Republic of Moldova.

The preliminary data of the census will be published in December 2004, and the final ones in approximately six months. The data will not be officially recognised by Chisinau because the Transnistrians have reused to allow international experts monitor the census. Earlier, the Tiraspol administration failed to come to an agreement with Chisinau to organise the census in Transnistria along with the census held in the Republic of Moldova on 5-12 October 2004. According to the last census, held in 1989, about 700,000 inhabitants lived in Transnistria.

IV. Foreign affairs

1. Moldovan-Romanian Mixed Commission

The Intergovernmental Moldovan-Romanian Commission for economic and technical-scientific cooperation gathered in Chisinau on November 8. High on the agenda were opportunities for cooperation in agriculture, transportation, energy sector, and R&D. Furthermore, parties agreed on signing cooperative agreements in industry, standardization and statistics. Those documents note Commissions' commitment toward European integration, that is why it was decided to rename the intergovernmental structure into the Commission on economic cooperation and European accession.

V. Studies, analyses, comments

Financial rating and foreign competitiveness of Moldova
Iurie Gotisan, 18 November 2004

In spite of economic growth, FITCH did not raise the country rating for the Republic of Moldova, on the grounds the pace of reforms is to slow, while foreign debt is too big

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Stability and Security Pact for the Republic of Moldova
Igor Botan, 18 November 2004

US, EU, and Romania are ready to sign a Declaration on Stability and Security for the Republic of Moldova, that is they assume moral obligations to support Republic of Moldova. Signing a Pact is not even considered, which according to the President should be "a document of international law"

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