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Activity of Public Institutions

Parliament
Government

Chisinau's economic dependence on Moscow, Iurie Gotisan

Activity of Public Institutions

Parliament

1.1. Government sworn in

During the aforesaid period a special session of the Parliament was reserved for reviewing Cabinet members and its governing program. The candidate for Prime-Minister position, Vasile Tarlev outlined the top priorities of his team. Afterwards leaders of the parliament factions took turns in criticizing the previous Government as well as the next governing program. The position of Moldova Noastra Alliance was quite clear, as they neither voted the Parliament Speaker nor the Prime-Minister. As for the constructive opposition, it wasn't because no governmental portfolio was offered to them that they didn't vote the new Government in, but rather for fear to assume responsibility for the act of governing. Therefore, Christian-Democrats and the Democratic Party of Moldova have reserved the right to criticize the Government as well as be caustic in the upcoming mayoral and general local election.

1.2. Legislative documents

The Parliament passed the Law for Modification of the Penal Code. At present, Article 264 of the Penal Code stipulates the "imprudent causing of serious material damages" as part of offence. Taking into account the cost of transportation units and parts for them, the material damage resulted after traffic accidents is larger than the big damages (10,000 lei) in most of cases. Police bodies have to file penal cases, though the damage is covered.

Also, Article 124 of the Code of Administrative Contraventions stipulates punishment for "violation of traffic rules by motorists, so that the transportation means were seriously deteriorated."

The Parliament decided to exclude this sentence from the Penal Code, decriminalizing the actions which will be object of civil, insurance relations, and of Contravention Code in future.

Government

On April 19 Parliament (with the vote of 56 Communist deputies) approved a new Cabinet of Ministers and its governing program "Country modernization - peoples' welfare". Moldova Noastra Alliance voted against, while Christian-Democrats, Democratic Party and Social Liberal Party refrained from voting. Next day members of the Tarlev Cabinet were sworn in front of the President of the Republic of Moldova. President stressed the importance of fulfilling tasks outlined in the governing program and asked Ministers to be responsive to the country. Finally, Voronin expressed his hope that the Governmental team would be the "best".

2.1. Cabinet of Ministers

The new Cabinet of Ministers stands as follows:

• Vasile Tarlev - Prime-Minister
• Valerian Cristea - Deputy Prime-Minister
• Andrei Stratan - Deputy Prime-Minister, Minister of Foreign Affairs and European Integration
• Valeriu Lazar - Minister of Economy and Trade
• Zinaida Grecianii - Minister of Finance
• Vladimir Antosii - Minister of Industry and Infrastructure
• Anatolie Gorodenco - Minister of Agriculture and Food Industry
• Miron Gagauz - Minister of Transportation and Roads
• Constantin Mihailescu - Minister of Environment and Natural Resources
• Victor Tvircun - Minister of Education, Youth and Sports
• Valerian Revenco - Minister of Healthcare and Social Security
• Artur Cozma - Minister of Culture and Tourism
• Victoria Iftodi - Minister of Justice
• Gheorghe Papuc - Minister of Home Affairs
• Valeriu Plesca - Minister of Defense
• Vladimir Molojen - Minister of Informational Development
• Vasili Sova - Minister of Reintegration
• Gheorghe Tabunscic - Governor (Bashkan) of Gagauz-Yeri
• Gheorghe Duca - Chair of the Moldovan Academy of Science

Eight of them served in the previous Tarlev government, namely: Andrei Stratan, Zinaida Grecianii, Constantin Mihailescu, Valerian Revenco, Victoria Iftodi, Gheorghe Papuc, Valeriu Plesca and Vasili Sova.

As for the new ministers, prior to that Valeriu Lazar served as Deputy Minister of Economy, Vladimir Antosii - Director of Floresti Canned Food Factory, Anatolie Gorodenco - Chair of Glodeni rayon, Miron Gagauz - Director of Moldovan Railroads, Victor Tvircun - Moldovan Ambassador to Turkey, Artur Cozma - Moldovan Ambassador to Israel, while Vladimir Molojen - Director of the IT Department.

Currently, there is one position vacant in the Government, namely that of Senior Deputy Prime Minister. The same happened in 2001, later on. Though, President granted the position to Communist deputy Vasile Iovv.

2.2. Governmental services, bureaus, and governmental agencies

Shortly after the approval of a new Cabinet, the latter designated heads of governmental services, bureaus and agencies established as a result of governmental reform.

• Valentin Mejinschi - Centre for Fighting Economic Crime and Corruption;
• Zinaida Chistruga - Licensing Chamber;
• Sergiu Baban - Standardization and Metrology Service;
• Nicolae Vilcu - Customs Service;
• Igor Colenov - Border Guards Service;
• Vitalie Valcov - National Statistics Bureau;
• Olga Poalelungi - National Migration Bureau;
• Olga Goncearova - Interethnic Relations Bureau;
• Valeriu Mironescu - Agro-industrial Agency "Moldova-Vin";
• Anatolie Popusoi - Forestry Agency "Moldsilva";
• Alexandru Bannicov - Land and Cadastre Agency;
• Vitalie Vrabie - Regional Development Agency;
• Ion Turcanu - Stocks, Public Acquisitions and Humanitarian Aid Agency.

Out of them only Vitalie Vrabie didn't head any governmental institution before, he served as mayor of Ungheni town.

2.3. Governmental program "Country modernization - peoples' welfare"

The gist of the Second Tarlev Government is inferred by its title - economy modernization and ensuring welfare of the people. When presenting the governing program of his team Vasile Tarlev indicated that it built on three key principles:

• principle of consistency and continuity;
• principle of adjusting institutional, legal, and organizational framework to the European norms and standards;
• principle of holistic and scientific approach.

According to the Prime-Minister the document sets national objectives, outlines key problems and provides solutions for them throughout 2005-2009.

Tarlev team identified five "vital priorities" for its activity:

• economy modernization;
• country reintegration;
• better quality of life;
• consolidation of society;
• European integration.

Tarlev Government also ambitions to: revise fiscal policy by lowering income tax to 15% for legal entities and 7%, 10% and 15% for natural entities; provide economic incentives for small and middle businesses; facilitate businesses' access to affordable credits; triple pensions and double medical insurance package; set a single agricultural tax, etc.

Prime-Minister Tarlev also spoke of measures to be undertaken in fighting corruption, human rights protection, and in such areas as social dialogue, local government, agriculture, informatization of society, education system, youth and foreign policy.

Finally, Vasile Tarlev reiterated the seven strategic tasks set by President Voronin for the new Government: on April 8

• Implementing Poverty Reduction and Economic Growth Strategy;
• Implementing Action Plan EU - Moldova;
• Extending the implementation of Midterm Expense Budget;
• Implementing National Program "Moldovan Village";
• Implementing National Program on informatization of society;
• Drawing and enforcing a sustainable human development plan (reforming education, science and innovation, supporting youth and sports);
• Drawing and enforcing a program for de-bureaucratization and economic liberalization, reforming regulatory framework.

2.4. Resolutions

On April 20 Government approved Action Plan EU - Republic of Moldova (RM), which was signed on February 22 by both sides. The move was the first step towards formalizing the document domestically. It outlines bilateral relations for the next three years, time in which authorities would have to carry out all the activities provided.

In general the document provides for: consolidating stability that would guarantee democracy and rule of law; independence of the judiciary; fighting corruption; freedom of media; human rights observance; resolution of the Transdniestrian conflict; poverty reduction; consolidation of public finances; regional and rural development; social security policy; circulation of goods, capital and people; taxation; industrial policy; border management; police and judiciary cooperation; etc.

According to the Minister of Foreign Affairs and European Integration, Andrei Stratan, while implementing the Plan relevant ministries and institutions would submit monthly and quarterly status reports.

Economic Policies

1. Prices

Inflationary tendencies registered in Moldova in the first quarter of this year (4.2 percent) could remain unchanged. In addition, many experts indicate possible administrative rises of prices, higher prices of natural gas and other energy resources.

Local press quoted officials of the National Bank of Moldova (BNM) as saying that the central bank will monitor and stick to the objective of allowing 8-10 percent maximum inflation growth set for this year. They noted that the four-percent price rise this year is explained through growth of monetary mass and influence of non-monetary factors such as big difference between growing pace of salaries and labor productivity.

The high inflation rate in the first quarter, which was not typical to similar periods the precedent years, could be reduced by a possible deflation the next period, so that to fulfill the established objective at the end of 2005. On the other hand, representatives of commercial banks and independent experts said that the state should direct a part of massive remittances from abroad to production and securities, in order to control the inflation.

To promote the domestic production, experts named among others the following solutions: exemption or reduction of duties for imports of production equipment, reduction of taxes for dividends, reduction of fiscal pressure on construction activities. Certain commercial banks have stopped the reduction of interest rates for credits and deposits after evolutions of inflation in the first quarter.

Elsewhere, the BNM considers the possibility to work out a base inflation indicator, which would serve as a ground for monetary and currency policies and macroeconomic forecasts.

It is presumed that some non-monetary and season factors will not be taken into consideration while working out this indicator, while products and goods whose prices are under major oscillations will be excluded. Similar practices of calculation of a base inflation indicator are also applied in certain western countries. The National Statistics Bureau (former Statistics and Sociology Department DSS) calculates the inflation rate at present on basis of evolution of prices of food products, manufactured goods and services.

Moldova registered a four-percent inflation rate in the first quarter, so that prices of foods rose by 6.5 percent, manufactured goods by two percent, and services by 1.9 percent. The BNM and government forecast a 8-10-percent inflation rate for this year.

2. Banks and insurance

• The Easter holidays represented an additional pressure for the exchange rate, which was influenced by appreciation of Leu against U.S. dollar. This appreciation was probably due to rising remittances from migrant workers. They easily covered the deficit of currency on market due to imports and start of repatriation of profits by foreign companies, provoking even an appreciation of Leu.

  The net supply from individuals was about 197 million dollars in January-March 2005. It rose by 65 percent compared with the similar period of 2004. In parallel, a part of savings in foreign currency is converted into Moldovan lei to live off the holidays, so that the supply of cash has been increasing. This is intensified by speculative operations, the bank explained.

  The Leu could register an appreciation tendency this month, and with the "permit" of the National Bank as well. We mean the already forecasted price rise generated by potential growths of energy prices. On the other hand, a stronger Leu would keep the inflation rate in the limits of 8-10 percent forecasted by government.

  To reach this goal, the BNM could influence the evolution of exchange rate, since it aims to keep the stability of prices. We have already observed the first signs, while Moldovans who come back home or send money for holidays lend a helping hand. We think that the dollar will drop below 12.6 lei by the mid-May.

• The total assets of the bank system in Moldova rose by more than three percent in the first quarter up to 13.76 billion lei.

  The growth of 1st-degree capital up to 18.45 percent of overall assets in late March indicates a big capacity to cover eventual losses in favor of financial stability of the system.

  The 1st-degree capital rose by 3.94 percent in January-March 2005 compared with late 2004, and by 18.22 percent compared with the similar period of last year, up to 2.5 billion lei. The 1st-degree capital is created to minimize the eventual financial destabilization of banks.

  The increase of deposits by 3.16 percent up to 9.8 billion lei on March 31, including the growth of deposits of individuals by 12.52 percent confirm the credibility of the bank system. Deposits of individuals rose by 57.53 percent compared with the similar period of 2004.

  The share of foreign investments in social capital of banks was 51.59 percent on March 31 compared with 60.2 percent in early 2004. The share of foreign capital in banks dropped after rise of investments of local businessmen.

3. Labor market

The medium salary in Moldova amounted to 1,203.5 lei (some 96 dollars) in March, or by 89.3 lei more than in February. In the publicly-supported sector the salary was 944.9 lei, and in the non-budgetary sector the wage was 1.340.1 lei.

The general positive tendency is also indicated by fact that the salary rose by about 20 percent in normal terms compared with March 2004. However, the high inflation rate of over four percent in the first quarter "deleted" more than 10 percentage points from nominal rise.

The salary raise could be explained as a consequence of inflation and source of new inflationary volutes. Related trade unions could be unsatisfied after the recent growth of prices, including of fuels.

The rarity of labor force in important economic sectors (agriculture, constructions) is one of the key factors which influence the salary raise in Moldova. The big difference between medium salary paid in Moldova and countries which host Moldovan migrants generates both an emigration of labor force, and bigger earning pretensions from those who are ready to leave the country or receive money from their relatives who live abroad.

4. Trade

• Moldova's foreign trade turned over 9.62 billion lei (about 769 million dollars) in the first quarter of this year, that is 1.2 billion lei more compared with the same period of last year. The commercial transactions added 986 million lei to the state budget.

  The imports into Moldova accounted for 6.11 billion lei in the first quarter, that is 1.5 billion more than in January-March 2004. The exports fell by 1.26 billion lei down to 3.41 billion lei in the first three months.

  In 2004, the exports from Moldova dropped by 660 million lei down to 16.4 billion lei compared with the precedent year, while the imports rose by 2.5 billion lei up to almost 24.16 billion lei.

• Moldovan wines accounted for 60 percent of all wines sold in the Russian Federation in the first quarter of 2004, in spite of Russian forecasts that they would decline by at least four percent.

  The union of wine exporters predicts for this year a 12-percent rise of wine exports from Moldova up to about 300 million dollars from sales. Last year Moldova sold outside almost 800 million deciliters of sparkling and frothy wines, which is 42 percent more than in 2003. About 80 percent of this headed to Russia. Other markets for Moldovan wines are the CIS [most countries], certain states of the European Union, Canada, China, Israel, Australia, Japan, and the United States.

• Moldova had a positive balance of the current trade account, amounting to 280 million dollars in 2004 with its key commercial partner, the Russian Federation, which is 2.7-fold more than in 2000.

  The trade balance with goods and services with Russia had a surplus of 145.69 million dollars, transfers, including payments for work 103 million dollars, and current transfers 31.67 million dollars.

  The positive balance with Russia is the highest one of Moldova with its commercial partners. Russia ranked the 1st place in the top of states to which Moldova exports goods and services, and held 35.83 percent of the total in 2004.

Transdnistrian Conflict

At the GUUAM Summit of Heads of State, which took place on 22 April 2005 in Chisinau, the Ukrainian President Victor Yushcenko did not present a Transnistrian settlement plan, as he had announced previously, but just seven general principles, under the generic title Towards Settlement through Democratisation, that are to be laid at the basis of the Transnistrian settlement:

• the Transnistrian authorities need to assume the commitment to democratize the Transnistrian society, develop civil society and a multi-party system;
• organize in the nearest future free and fair elections to the Transnistrian supreme soviet as the representative body of the region "under the legal circumstances ensuing from the status of Transnistria";
• these elections are to be monitored by the EU, OSCE, Council of Europe, Russia and the US along with Ukraine;
• the EU and the US need to assume a greater involvement in the conflict resolution process;
• the current peace keeping format is to be transformed into an international mechanism of military and civil observers under the aegis of the OSCE and involving larger Ukrainian and Transnistrian contingents;
• organization of an international mission of inspection of enterprises from the military-industrial complex from the region;
• deployment of a short-term OSCE monitoring mission to the Transnistrian segment of the Ukrainian-Moldovan border.

According to Yushcenko, if the proposed principles are accepted, Ukraine will present a full fledged settlement plan shortly.

Both at the Summit and afterwards, Romania was the only state to take an official stand towards Ukraine's proposals. The Romanian President Traian Basescu subjected to tough critique the proposals of his Ukrainian colleague, stating that there can be no international monitoring of elections in Transnistria, because this would mean recognition of the break away regime. Thus, it seems that despite the joint statement made by the Romanian and Ukrainian presidents just a few days before the GUUAM Summit that the two states are ready to cooperate in the resolution of the Transnistrian conflict, Yushcenko's proposals came as a complete surprise to his Romanian counterpart.

The official Chisinau has not made any comments on Kiev's proposals, although a number of local and foreign observers have noted the disappointment that the Moldovan side should have felt at proposals that did not refer to the status of the Transnistrian region within the unitary Moldovan state, did not mention the inefficiency of the five-sided negotiations mechanism and the need to change it, did not urge for the immediate withdrawal of Russian military and weapons from the region, and did not plead for joint Moldovan-Ukrainian customs check points. Asked by Radio Free Europe, Reintegration Minister Vasile Sova avoided to give a straightforward view on the Ukrainian proposals, but said that these were being examined with great attention in Chisinau. At the same time, Sova said that the proposals denote Ukraine's intention to assume a greater role in the Transnistrian settlement process, which is a positive development. The reaction of the local public opinion has been an extremely critical one, the Ukrainian proposals being rejected fully as they would legitimize the break away authorities, preserve the status quo and ignore such important aspects of settlement as the demilitarization and decriminalization of the region. Thus, many civil society representatives called Ukraine's proposals as a "Ukrainian Kozak Plan".

On the other hand, the Transnistrian official news agency Olvia-press, published on 24 April a commentary in which most of Yushcenko's proposals were welcomed, as was Ukraine's will to assume a greater role in the settlement process. The Transnistrian side supports in particular Kiev's proposals to organize elections to the Transnistrian supreme soviet and invite an international monitoring mission, which in Tiraspol is interpreted as an international recognition of the legitimacy of elections and of the said body. Transnistria also accepts Kiev's proposals to deploy an international monitoring mission on the Transnistrian segment of the Moldovan-Ukrainian border and the inspection of enterprises from the military-industrial complex from the region - measures that the comment claims Tiraspol would have long demanded to show the international public opinion that it is not a "black hole" as it is called in Chisinau and elsewhere. Less acceptable for the Olvia-press commentator is Ukraine's proposal to develop the civil society in the region, which to the Olvia-press commentator has an equivocal meaning, given the role that civil society - a network of non-governmental organizations funded by foreign states - has played in the organization of "colour" revolutions in the CIS.

The participants in the GUUAM Summit declared that the Summit had been a great success and adopted a joint statement in which they engaged, among other things, to collaborate in fighting the phenomenon of secessionism in the region. The first step made in this direction - Ukraine's initiative with regard to the Transnistrian conflict, is not a very promising one.

After the political change in Ukraine, there was real hope in Chisinau that Ukraine would assume a more active and constructive role in the Transnistrian settlement process. A political will to settle the Transnistrian crisis in Kiev would mean in the first place the interruption of the illegal smuggling activities over the Transnistrian segment of the Ukrainian-Moldovan border, which would leave the Transnistrian regime without sources of existence and would determine it to accept a compromise solution. The 'orange' Ukraine has not justified yet its claims to be a regional leader, Yushcenko's proposals being a set of disparate principles that would be difficult to incorporate into a coherent and functional Transnistrian settlement plan.

As the Ukrainian opportunity has not materialized itself yet, the Transnistrian settlement process enters a new phase of incertitude that will only be overcome through a greater involvement of the European Union in the settlement efforts, including through an intensified political dialogue on Transnistria with the mediator states and other interested actors, notably Romania.

Foreign Affairs

1. Moldovan - Azerbaijan bilateral relations

Azerbaijan President, Iliham Aliev flew to Chisinau one day prior to the GUUAM Summit to meet his Moldovan counterpart, Parliament leadership and Prime-Minister Tarlev. During the meeting the Two Presidents talked cooperation within UN in view of fighting secessionism, as well as opening their embassies in each others countries.

Following the meeting five bilateral agreements were signed on labor and social security, IT, airspace, audiovisual, and a sanitary-veterinary convention.

During his meeting with Moldovan legislators President Aliev pointed the importance of capitalizing on the 35 existing bilateral agreements and boosting inter-parliamentary ties between Moldovan and Azerbaijan legislators.

2. GUUAM Summit

On April 22, Chisinau hosted one of the most important events of the year in foreign policy, namely GUUAM Summit. Besides President Voronin, other top official present at the Summit included: Georgian President Mihail Saakashvili; Ukraine's Victor Yushcenko, Azerbaijan' Iliham Aliev, Romania's Traian Basescu and Lithuania's Valdas Adamkus - the last two as observers. An US delegation headed by Stiven Mann of the Eurasia State Department was also present, as was an OSCE delegation headed by OSCE Secretary General Jan Kubis, and a number of foreign ambassadors accredited to Moldova. Despite all the organizers' efforts, Uzbekistan President was absent, as were the Presidents of Bulgaria and Poland, the latter two invited as observers.

President Voronin inaugurated the Summit then gave the floor to the Presidents of GUUAM member countries, who called on reviving and reorganizing its structure. The following ideas are worth citing:

• Moldovan President Vladimir Voronin referred to the joint efforts to be undertaken in view of fighting phenomena that threaten regional security on the European continent; market liberalization and approaching WTO standards; importance of complying with European standards on free trade, circulation of people, capital and services; talked of revising cooperation as regards customs, border, financial-banking sector, labor market and migration; proposed resuming talks on energy security; boosting cooperation in such areas as tourism, IT and infrastructure.
• Georgian President, Mihail Saakashvili talked of the European character of the GUUAM member countries and of the need to have a joint course towards EU; proposed to sign a joint declaration on Belarus in support of democracy in that country; proposed hosting an international conference in Yalta to talk GUUAM enlargement.
• Ukrainian President Victor Yushcenko proposed establishing a Parliamentary Assembly and consolidating GUUAM; bolstering cooperation in line with three principles: democratization, security, and economic cooperation; launched the initiative of signing a free trade agreement between GUUAM member states. Finally, he presented the seven principles for settling Transdniestrian conflict.
• Azerbaijan President, Iliham Aliev expressed his strong belief that GUUAM would morph into a major force in Balkans and Black Sea region; and was pleased that common grounds for the settlement of conflicts in the region had been identified.

Hence it is worth mentioning President Basescu's speech. He referred to security issues in the Black Sea region and proposed GUUAM to develop a long-term strategy so as to secure stability in the region in line with EU principles. Referring to the conflicts in the region, Basescu indicated that they might be only settled by observing the constitutions of the GUUAM member states and in compliance with local autonomy principle, rather that by means of federalization.

Moldova took over the presidency of GUUAM from Georgia. Referring to the priorities throughout Moldova's presidency, Vladimir Voronin mentioned securing GUUAM region and ensuring stability in the region, by means of closer ties with EU and US.

At the end of the Summit a joint Declaration on democracy, development and stability and a Joint Declaration of the Presidents of Azerbaijan, Georgia, Lithuania, Moldova, Romania and Ukraine "Promoting democracy from the Baltic Sea to the Black Sea" were signed.

3. Moldovan - Lithuanian bilateral ties

Moldovan and Lithuanian Presidents had a separate meeting and talked closer bilateral ties, interest to open diplomatic missions in each others countries. The two countries signed an Agreement on easing visa regime providing that Moldovan citizens would get a visa free of charge with no invitation being required, while Lithuanian citizens would travel to Moldova with their passport.

4. "Moldova and Europe: consolidating ties" conference

On April 26, Association for South-Eastern Europe from Germany and Institute for Public Policies hosted a conference in Chisinau, with the financial support of German Ministry of Foreign Affairs and Stability Pact for Southeastern Europe. The conference sought to draw EU's attention to the gap between limited capacity of Moldova and major objectives outlined in the Action Plan EU-Moldova as well as towards Transdniestrian conflict.

The conference gathered academia and civil society from Moldova, Germany, Romania and Ukraine. Among the notorious personalities present at the event one might mention: President Vladimir Voronin; Chair of the Bundestag Foreign Affairs Commission Volker Ruehe; IMF negotiator on Moldova Thomas Richardson; Special Coordinator for the Stability Pact for Southeastern Europe, Erhard Busek; German Ambassador to Moldova Wolfgang Lerke etc.

In his inauguration speech President Voronin mentioned that Moldova saw EU' Neighborhood policy as an intermediary stage towards accession to EU. The first stage would be to obtain upon enforcing the Action Plan a new status for relations between Moldova and EU. Given the high number of European officials gathered at the event, President Voronin asked for their assistance in modernizing Moldova.

Studies, Analyses, Comments

Chisinau's economic dependence on Moscow
Iurie Gotisan, 4 May 2005

Moldova morphed into a subject of Russia's economic policy, and this because it lacks an active stance in negotiations

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