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Activity of Public Institutions

Parliament
Government

Presidential elections by Igor Botan

Activity of Public Institutions

Parliament

On March 24, 2005 the Parliament of the XVI legislature convened for its first session. Parliamentary factions were established during that session, Chair of the Parliament was elected and the "Declaration of political partnership in achieving the objective of EU accession" was approved. One week later, Parliament elected one of the Deputy Chairs of the Parliament, approved the membership of the Permanent Bureau of the Parliament and designated leaders of the parliamentary commissions.

1.1. Parliamentary factions

During the first session of the newly-elected Parliament parliamentary factions were established. Surprisingly, Moldova Democrata Bloc split into two factions, and together with the Communist faction and that of the Christian-Democrats a total of four were established. Democratic Party broke away from the Moldova Democrata Bloc (MDB) that brought them to Parliament. Consequently, Communist factions holds 56 mandates, Moldova Democrata - 26, Christian-Democrats - 11, and Moldova Democrata - 8. Dumitru Diacov, leader of the Democratic Party explained that the breakaway did not mean refusal to cooperate with Moldova Democrata, but rather that the former had "its own message" and that via his own factions he would be able to better promote social-democratic positions. MDB dubbed the move as "a consequence of political corruption" and "political betrayal".

Finally on April 4, prior to the election of the President of the country, Social-Liberals declared they also left the MDB. Therefore the latter were left with only 23 deputies.

1.2. Parliament leadership

• Speaker

  Marian Lupu, former Minister of Economy, who run for Parliament on the Communist party list, was elected as the Speaker of the Parliament of the XVI legislature. He was elected with 65 votes against 24 votes, while Christian Democrats refrained from voting. Marian pledged to be the Speaker for all the deputies.

• Deputy Speaker

  On March 31, Maria Postoico was elected Deputy Speaker with 76 votes. Opposition postponed designation of their deputy Speaker for a later date. Allegedly, the factions that were the most cooperative with the Party of Communists would get the much coveted position. It is known for a fact that Moldova Noastra faction would like to designate Dumitru Braghis.

• Permanent Bureau

  On March 31, the Permanent Bureau of the Parliament was elected including: Marian Lupu, Maria Postoico, Eugenia Ostapciuc, Victor Stepaniuc, Vladimir Eremciuc and Ivan Calin (Party of Communists of the Republic of Moldova), Serafim Urechean, Dumitru Braghis and Oleg Serebrian (MDB [currently Moldova Noastra]), Iurie Rosca (CDPP) and Dumitru Diacov (Moldova Democrata). After April 4, Serebrian would represent the Socio-Liberal group.

• Parliamentary commissions

  After consultations held by Speaker Lupu with the Permanent Bureau the representation quota for each faction in parliamentary commissions was established, while the plenary session approved the membership of the commissions, as follows:

  No Parliamentary commission Chairperson Faction 1. Legal commission for appointments and immunity Vladimir Turcan Communist 2. Commission for economy, budget and finances Nicolae Bondarciuc Communist 3. Commission for national security, defence and public order Iurie Stoicov Communist 4. Commission for foreign policy and European integration Sergiu Stati Communist 5. Commission for culture, science, youth, sports, and media Victor Stepaniuc Communist 6. Commission for local government, environment and territory planning Veaceslav Untila MDB (currently AMN) 7. Commission for agriculture and food industry Valeriu Cosarciuc MDB (currently AMN) 8. Commission for human rights Stefan Secareanu CDPP 9. Commission for social protection and healthcare Valentina Buliga DPM

1.3. Right step

On the first day of its activity Parliament unanimously approved the Declaration of political partnership for achieving the objectives of accession to EU¹. The document provides for the consensus of the four factions on the consistent and irreversible promotion of the strategic course towards European accession. Deputies pledged to undertake joint actions to enforce the Action Plan EU - Moldova, to peacefully and democratically resolve Transdniestrian conflict, to ensure stability of democratic institutions, to ensure independence of the judiciary system, to fight corruption, to foster mass media, to observe the rights of national minorities, to contribute to social development, poverty reduction, improve investment climate and full-fledged development of the state language.

As for the Transdniestrian conflict, the document provides for the resolution of the conflict in line with the Constitution of the Republic of Moldova and international norms in close cooperation with OSCE, EU, Romania, Russia, US and Ukraine following the "3D" formula - democratization, demilitarization and decriminalization of Transdniestria.

Government

2.1. Decisions

On March 23, Government resigned due to expiration of its mandate, while Parliament accepted the resignation one day later. As for the next Prime-Minister two names are widely circulated: Vasile Tarlev, former Prime-Minister and Andrei Stratan, former Minister of Foreign Affairs.

2005 Presidential Elections

In line with Article 2 of the Law no.1234-XIV of 22.09.2000 on the Procedure of Electing the President of the Republic of Moldova, on March 24 Parliament passed Resolution no. 5-XVI thereby setting presidential elections for April 4, 2005. Via its Resolution no. 6-XVI of 24.03.2005 the Parliament decided on the membership of the special commission on the election of the President of the Republic of Moldova: Semion Dragan, Vladimir Eremciuc, Mihail Sidorov, Victor Stepaniuc, Larisa Zimina (Communist faction), Ivan Banari, Oleg Serebrian (MDB)², Ion Neagu (Christian-Democrats) and Valentina Buliga (Democratic Party of Moldova).

Special commission for the election of the President registered two electoral contestants. A group of 34 Communist deputies designated Communist leader Vladimir Voronin. The decision to designated Voronin was taken by the Plenary of the Party of Communists held on March 23, 2005. Given that other factions failed to designate their candidates by the deadline of March 29, sixteen Communist deputies designated another candidate Gheorghe Duca Head of Academy of Science, so as to comply with the Constitutional Court's requirement of having at least two candidates for the elections to be valid.

Election of the President of the Republic of Moldova marked the end of one electoral cycle and the beginning of another one. The event saw the triumph of President Voronin and surprising behaviour of the opposition.

Out of the 78 deputies who took part in elections, 75 cast their ballots in favour of Vladimir Voronin. His counter candidate, Gheorghe Duca garnered one vote, while two votes were declared invalid. Four years ago, 71 out of 89 deputies voted for Vladimir Voronin. Therefore, during this campaign Party of Communists got 15 less mandates, while the President four more.

In his discourse, Vladimir Voronin acknowledged that in the last four years of his office he committed a number of mistakes and that in his future mandate he would ensure: RM's accession to EU, improvement of socio-economic situation, democratisation of the society and resolution of the Transdniestrian conflict.

Those objectives are very much in line with the Declaration on the political partnership in view of achieving European integration objective signed by all the deputies in the Parliament of the XVI legislature. The Declaration was a test of the compatibility of the parliamentary factions' aspirations. Yielding to the aspirations of the opposition factions, the President promised to examine the possibility of amending the law so that the President would not be a party member, but rather would represent the interest of the entire society. That promise was aimed to justify the participation of opposition factions in elections. The latter conditioned their participation by the President suspending his position as a party leader.

After the results were announced, leaders of the Christian-Democrats, of the Democratic Party, and Social-Liberal Party explained the reasons why they had decided to vote for Vladimir Voronin. In fact, they reiterated the conditions set forth earlier. Thus, Christian-Democrats, Democratic Party, and Social-Liberal Party set themselves in a constructive opposition, while Moldova Noastra Bloc in an obstructive opposition, most probably the latter's vote would be assimilated by the former three parties.

Economic Policies

1. Banks and Insurance

• The National Bank of Moldova (BNM) has announced that the reference interest or basic interest rate (REPO rate) for March is 13 percent, by 1.5 percent less than in January. This is the rate paid by central bank for deposits attracted from banks within monetary policy operations. The 1.5-percent decline of reference rate certifies the reductions of interests in March both for credits in lei, and for adjustment of interest rates paid for deposits.

  "The recommendation" of BNM to commercial banks to review their policies on interest rates for liabilities³ was applied in practice. Commercial banks modified the interest rates for deposits and credits. For sure, the lower interest rates for liabilities may attract higher crediting and will reduce the risk of entry of speculative capitals. We can already speak about historical minimums of interest rates for deposits in lei of population.

  However, the generalization of interest rates for deposits below 13 percent will bring, of course, an evident rise of interest rates for credits, and this fact would lead to a higher consumption and resuscitation of inflationary expectations⁴. In addition, banks will have to ensure at least two percent of deposits over inflation rate to depositors, unless there is a risk to see them refusing to save their money in banks anymore. The inflation rate in February was 2.1 percent. A 3.2-percent cumulative inflation rate was registered in the first two months of this year (January-February), and this tendency will be typical to the next months as well. However, we will see what data will show when the Department for Statistics and Sociology will release accounts on IPC for March and the first quarter in the mid-April.

  We consider that if the interest rates for deposits are really negative compared with inflation rate, they could bring a consumption growth through orientation of savings of population to other investment sectors (eventually to acquisition of real estate), which could encourage the consumption in turn. Under these conditions, the minimum interest rates for liabilities could turn against objective of ten-percent inflation. How the market will receive the new situation is very important.

  In addition, a 2-3-percent reduction of bank deposits could attract a decline of interest rates for deposits in lei. In our opinion, the interest rates for credits in lei should drop by 3-4 percent the next period. The decline could be particularly dictated by low competition in bank system, as well as by not very large investments of banks. Also, the simultaneous adjustment of interest rates for credits in lei and credits in foreign currency will increase the danger of a larger volume of credits and consumption. The reduction of interest rates could also bring a series of administrative restrictive measures for stoppage of credits.

  Finally, there are two conclusions:

  1. decline of real interest clearly leads to reduction of pro-pension of population to save money (though this fact is not observed yet, but this is an issue of time). This happens in a country where the share of savings in GDP is very low: 14-15 percent;
  2. reduction of internal savings must be compensated through a certain rate of investments and GDP growth, through a bigger call for external savings.

• Elsewhere, the chief of state sought the creation of a permanent task force at last sitting of the Supreme Security Council, which would monitor the situation in financial-bank system and would draft efficient measures aimed to eliminate the factors that undermine the financial-bank security of the state.

  The Supreme Security Council members are interested in the need to enhance the cooperation in specialized international structures and bodies of other states, in order to prevent and combat the "money laundering" phenomenon. Also, they recommend the modification of legislation in order to introduce severer sanctions against banks for illegal actions, as well as to prevent the clauses and conditions which favour such activities.

  The key problem in this regard is related to commercial banks based in the Transnistrian region. In the context, a number of measures must be taken in order to stop the external financial activity of banks in the secessionist republic, which hold no legal bank activity because they are unregistered with the National Bank of Moldova. The recent decisions of banks in Austria and other European states, which decided to break off any relations with Transnistria-based banks because they work illegally, in response to appeals of official institutions in Moldova, are welcome.

  The bank system of Transnistria comprises two state banks and nine commercial banks, which have corresponding accounts with many commercial banks in Moldova and Russia that help Transnistria hold economic relations with almost all states of the world. As for example, almost 60 million dollars was officially transferred from the CIS in 2001-2002 via Moldovan commercial banks in favour of Transnistrian banks. Also, financial inflows from Transnistria accounted for 160 million dollars. About 147 million dollars of them was used for intermediary operations, which massively took place in late 2002, having a fraudulent nature and representing what is called as "money laundering".

2. Prices

• Prices of apartments rose by about six percent on average this year, in line with forecasts released by real estate experts in early 2005. The price of a one-room apartment rose from 19,300 dollars early this year up to 21,100 dollars in March. The price of a two-room apartment grew from 28,500 dollars up to 29,400 dollars, a three-room apartment is by 1,000 dollars more expensive and costs 35,000 dollars, while the price of a four-room apartment rose the most - from 41,000 dollars up to 45,000 dollars.

  Of course, these are the prices of suppliers, but transactions are usually registered with a ten-percent discount. Many real estate experts say that in general the balance between supply and demand remains constant while the forecast that prices will grow by 10-15 percent this year is still effective. They forecast that one square meter of dwelling space will cost up to 550-600 dollars by the end of this year.

  Also, the current real estate price rise hits the worst the poorest people and young families who cannot afford the price of a residence. The only solution to encourage them is to support the development of a mortgage market through better housing policies. Banks in Moldova should participate in release of mortgage loans (on mortgage credit market), the way many countries in Central and Eastern Europe do, with a ten-percent maximum interest rate (in national currency) and a 25-year minimum bank maturing period.

• Russia's gas giant Gazprom is considering to adjust the price of natural gases sold in Moldova to European level, Alexander Ryazanov, deputy chairman of Gazprom, was quoted by Ria-Novosti news agency as saying. On the other hand, Moldova-Gaz manager Ghenadii Abaskin told a news conference that Moldova is not a subject of the European energy market and therefore no European tariffs can be introduced.

  In addition, Tiraspol announced in late March the creation of a natural gas importer separately of Moldova-Gaz. The most of analysts think that Russia had inspired and supported this initiative. The creation of such a structure will allow Moscow to implement its old plans on introduction of higher tariffs for gas exported to Moldova. However, Moldova could increase in turn the transit tariffs, which would be deducted from importation prices.

  Gazprom currently sells natural gases in Moldova for 80 dollars per 1,000 cubic metres, while its daughter firm, Gaz-Export, collects lower prices, which depend on a number of factors, including the exchange rate. In the first trimestre of this year Gaz-Export sold gases in Moldova for 68 dollars per same volume. In late 2004, Moldova-Gaz ordered 3,150 million cubic metres of natural gases from Gazexport and Gazprom for the year 2005.

3. Public finances

• The Finance Ministry released data on fulfilment of the state budget at a cabinet sitting. As much as 1.33 billion lei was collected to the state budget of Moldova between January 1 and March 22 this year. That is 2.2 percent more than expected in the first trimestre.

  Independent experts estimate that about 1.5 billion lei will be collected to the state budget in incomes in the first trimestre or by about 16 percent more than planned. Under the 2005 public budget law, the government planned to collect incomes in the amount of 7.47 billion lei.

  However, a financial transparency is needed in case of higher budgetary incomes than planned so that people know how the additional resources are used. Unfortunately, the Finance Ministry unveils only the operative information on revenue collection paces, not any information about use of planned and unplanned spending.

4. Trade

• The retail trade last February rose by 2.8 percent compared with the same period of 2004 and turned over 1,217.4 billion lei (about 97 million dollars), but the pace of growth was slower. Retailing in February amounted to 602.3 million lei, compared with 615.1 million lei in January, when the growth was 6.1 percent. The advance in the first two months of 2004 was 14.4 percent.

  Private firms accounted for 65 percent of the total retail. They are more flexible and react faster to the market demands than the state enterprise Services in the first two months of this year turned over 967.3 million lei, which is a 6.0 percent rise in comparison with the similar period of 2004.

• Moldova imported oil products - petrol, Diesel oil and liquid gas - worth over 200 million dollars in 2004, by 52 percent more than in 2003, according to data of the national agency for energy regulation ANRE. Although Moldova registered a growth of more than 52 percent in financial expression, the rise in natural expression was by about 10.2 percent. Experts explain the difference between rises through the much higher prices of fuels in 2004 - Moldova imported a quantity of fuels a little bit larger than in 2003, but for higher

  prices.

  The petrol imports registered the highest growth - by 19.3 percent up to 241,000,000 tons. Moldova imported petrol worth about one billion lei (81 million dollars), while the average importation price was 335 dollars a ton. The importation price was by 29.5 percent higher than in 2003.

  On the other hand, the imports of Diesel oil rose by 5.6 percent compared with 2003 up to 298,000,000 tons of Diesel oil. The average importation price of Diesel oil was 337 dollars per ton, while Moldova imported Diesel oil worth 100 million dollars. Imports of liquid gas were almost at the level of 2003, respectively 52,000 tons. Companies Lukoil-Moldova, Petrom-Moldova and Tirex Petrol imported the largest quantities of fuels last year.

5. Labour market

• The number of economically active population dropped by three percent compared with 2004. This is one of factors which encouraged the reduction of number of job seekers. Data of the Department for Statistics and Sociology show that the dependence rate (number of job seekers per 1,000 workers) in Moldova is on the rise. Another dangerous tendency is that the number of people who are abroad rose by 19 percent.

  Labour experts say the three-percent decline of the number of working population and official employees last year was due to a decrease of the active population and due to the fact that a part of citizens prefers to emigrate or to work in the informal sector - in both cases getting a better pay.

  According to official statistics, agriculture employees represent 40.5 percent of all workers. After 2001, when they reached the level of 50.9 percent, this share dropped significantly. In 2004, industrial workers represented 12.3 percent of all employed persons, service area people 37.2 percent, healthcare and education 13.4 percent.

  Further, 69.4 percent of the population was employed in the private sector and another 25.3 percent in the public sector. The private sector dominated in the agriculture, 98.2 percent, in trade 94.0 percent, hotel industry 84.1 percent, construction 84.4 percent, and processing industry 66.1 percent.

• The medium salary in Moldova amounted to 1,114.2 lei in February or by three percent less than in January. Its reduction can be explained through season factors, which have a constant influence in January-February of every year. The generally positive tendency is also demonstrated by the 18-percent rise of salary in nominal terms compared with February 2004.

  However, the strong inflation in the past 12 months has eroded more than 11 percent of nominal growth. The rise of salaries in healthcare sector, which were much higher than the average on country starting January 2004, is observed in the structure of growth. The introduction of the mandatory health insurance system is a factor which determined the rise of salaries.

  Although the salaries paid to certain budgetary categories rose significantly in 2004, differences remain at the same high levels, as the average wage in budgetary sector accounted for about 70 percent of salary in private sector. The real difference could be higher, if taking into account the apparently high share of "illegal" salaries in private sector.

  Huge differences were observed inside the two categories. Thus, lecturers and doctors earn salaries higher than the average on country. Differences in activity sectors did not significantly decline, as the salary paid in agriculture, for example, accounts for less than 50 percent of the average wage, while the pay in financial-bank sector is two-fold and even three-fold higher.

Transdnistrian Conflict

On 27 March 2005 in the Transnistrian region were organised elections to the position of deputy in the town, district and village soviets and to the position of head of local administrations. According to the data of the department of statistics of the region, about 40% of the 410,000 voters registered in the region took part in the elections, which as a result were declared by the Transnistrian authorities valid. Most candidates - about 1,700 for the position of deputy, and 225 for that of head of local administrations - were representatives of business circles from the region, and only an insignificant part of them were candidates on behalf of the communist party from the region and of the Transnistrian branch of the Democratic Liberal Party of the Russian Federation. According to observers, the large number of candidates was due to the introduction last year of the status of immunity for the deputies in local soviets.

The Moldovan Foreign Ministry appealed to the international community on 26 March to condemn the organisation by the breakaway Transnistrian authorities of the so-called local elections. In a statement issued on 28 March, the Ministry of Foreign Affairs labelled the elections "a farce" and declared the poll unconstitutional, just like the breakaway regime itself. The communique stated that all attempt "from outside" to observe the so-called elections will be interpreted as an act of solidarity with the destabilising actions of the secessionist regime and interference in the internal affairs of Moldova.

Despite Tirapol's invitations, no international organisation has delegated observers to their elections. The attempt of the Moldova Helsinki Committee to send three teams of observers into the region failed because the Transnistrian authorities refused to issue the necessary accreditations. Helsinki Committee told the press it nonetheless managed to "observe certain things", which demonstrated that "the elections were organised with the violation of all national and international norms."

In the meantime, after the end of the electoral campaign in Moldova discussions on the prospects of the Transnistrian settlement were resumed. There is a general consensus among the political forces represented in the new Moldovan Parliament on the need to change the existing negotiations format by inviting other players, such as the EU, to join it. The recent finalisation of the Moldova-EU Action Plan, whose priority has been declared the EU contribution to conflict resolution, and the appointment of the Special EU Representative to Moldova, have been interpreted in Chisinau as two encouraging signs on behalf of the European Community. In parallel, the Presidents of Ukraine and Georgia announced they would present on 22 April a settlement plan during their attendance of the GUUAM Summit of Heads of State. According to the authors, the plan will seek to materialise the regional cooperation initiative which is GUUAM, for which the administration in Kiev has engaged to provide all support to make it efficient.

The great absentee from all these regional and international developments on the Transnistrian issue seems to be the Russian Federation, whom the Moldovan authorities have been accusing systematically of interference in the internal affairs of Moldova, political and economic support to the Transnistrian regime and illegal military presence on Moldovan soil. The unprecedented crisis in the Moldovan-Russian relations risks to materialise in the imposition by the latter of a number of severe economic sanctions on the former, such as oil transactions at world prices. At the same time, Russia remains an important actor in the conflict resolution process and a functional agreement on the issue may be reached only with Russian participation in one from or another. Thus it seems that the fist step in resolving the Transnistrian problem that the new government in Moldova needs to take is to repair relations with the Russian Federation.

Foreign Affairs

1. EU special envoy for Moldova

On March 16, at the recommendation of the EU High Representative for Foreign Policy and Security Affairs Javier Solana, Council of Europe designated Adriaan Jacobivits de Szeged as EU representative for Moldova. Solana noted that the designation illustrated EU's undertaken engagements towards Moldova, while in his turn Szeged pointed that Council of Europe's decision was a political one and showed EU's interest to play a greater political role in Moldova.

Special Representative who would commence his mission in Moldova on August 31 would monitor the respect of human rights and fundamental freedoms, the political processes and the consolidation of the democratic institutions in this Eastern European country. Hence he would oversee the implementation of the Action Plan EU-Moldova, boost bilateral ties, fight human trafficking, etc.

Adriaan Jacobivits de Szeged is the 8th EU Special Representative. EU also has Special Representatives to Afghanistan, Bosnia and Herzegovina, South Caucasus, Macedonia, Middle East, Great Lakes region in Africa and one for coordinating the Stability Pact for South-Eastern Europe.

2. Moldovan-Lithuanian ties

Moldovan Minister of Foreign Affairs, Andrei Stratan, hosted his Lithuanian counterpart Antanas Valionis in late May. Lithuanian official talked of his country's willingness to assist Moldova in accession to EU and boosting bilateral ties. The Two also exchanged opinions on enlarging negotiations format on Transdniestrian conflict and changing the status of peacekeeping forces.

Antanas Valionis also informed that Lithuania would open its diplomatic mission in Chisinau, while Andrei Stratan indicated that Moldova would also be interested to have its mission opened in Vilnius.

Finally, Moldovan Minister of Foreign Affairs extended President Voronin's invitation to his Lithuanian counterpart to visit Moldova on April 22.

3. "European bulletin"

European Integration Department (EID) of the Ministry of Foreign Affairs of the Republic of Moldova launched a publication entitled "European bullet". According the Ministry press service the bullet would be published once or twice per month in an electronic format. It would feature news on latest developments in Moldova - EU relationships and be targeted at diplomatic corps accredited to Moldova, state institutions, academic society and NGOs active in the field.

Studies, Analyses, Comments

Presidential elections
Igor Botan, 7 April 2005

If he honors his promises, then "constructive" opposition wins enabling it to grab Moldova Noastra's electorate (roughly estimated at 20%). Conversely, if Voronin doesn't honor his promises a part of "constructive" opposition would slip into a mere "collaborationist opposition", while the other would tacitly and humiliated join the "obstructionist" camp, with all the arising consequences…

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