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Activity of Public Institutions

Parliament
Government
Presidency

Factors that might influence elections' outcome by Igor Botan

Activity of Public Institutions

Parliament

1.1. Legislative documents

Appointment of Supreme Court judges took the center stage of the legislative body. After a number of deputies talked on the issue, it was requested to postpone the decision, still the ruling party decided to appoint the six judges, while declining 4 for no reasonable grounds. This raised a storm of criticism from opposition that claimed that was an attempt to influence the independence of the judiciary and politicise it. Another evidence to those claims was the refusal by the majority faction to endorse Supreme Council of Magistracy recommendation to reconfirm the same persons, i.e. Constantin Gurschi and Vasile Pascaru as Deputy Chairs of the Court.

Noteworthy the same happened recently with the appointment of the Chair of the Supreme Court of Justice, who after numerous criticism voiced by opposition was endorsed by the majority faction.

Another controversial issue was the Law on Gender Equality, however the debates were more tolerant and constructive this time. Deputies also considered a number of international acts and amendments to the domestic law.

In this respect it is worth mentioning the Law on Ratifying the Protocol no. 14 to the European Covenant on Human Rights. The protocol was adopted by the Ministerial Committee of the Council of Europe in 2004 in view of improving the control system and endowing European Court for Human Rights with mechanisms to promptly examine the applications.

The Protocol also includes provisions allowing EU, as a legal entity, to adhere to European Covenant on human rights.

Via the Law on Modification of the Law on Education Parliament extended by a year the deadline for accrediting high education institutions. Especially, the law provides the minimal registered capital. The law also obliges private educational institutions to have their own premises and technical equipment for the educational process.

Previously, heads of private education institutions protested against restrictions imposed and the short time period allowed for complying with the legal provisions. Deputies satisfied only partially those claims, by extending the deadline.

The Law on the Modification of the Criminal Code introduced a new article 309 entitled "Torture". Under the law acts of torture shall be sanctioned by two to five years in prison. However torture of pregnant women, minors; torture by two or more persons taking advantage of the victims incapacity, or by a high rank official shall be sanctioned by 5 to 10 years in prison. Noteworthy many non-governmental organisation working in the field lobbied for amendments to the Criminal Code that would recriminate torture and inhuman treatment, practices common in the Moldovan judiciary.

(For more information on the legislative activity please see "Legal Commentaries" on ADEPT website).

Government

2.1. Reshuffles

On July 22, Cabinet of Ministers accepted the resignation of the Head of Government Apparatus Pantelei Tiltu and appointed Oleg Rotaru as Deputy Chief of Government Apparatus, while Sergiu Tatarov as a senior state councillor to the Prime-Minister.

2.2. Resolutions

• Government endorsed on June 22 the Regulation on the use of funds from the Fund set for boosting technological machinery stations. The regulation outlines the selection of beneficiaries of subsidies, spending of funds, reimbursement of subsides. The money shall be provided by the state in the form of reimbursable credits with no interest rate for a four year period.

• Via another motion, Government approved the draft law on the Red Book of the Republic of Moldova. It regulates the social relations in the field of rare flora and fauna protection and revival. Under the draft, rare flora and fauna may be used only for reproduction and cultivation purposes, etc.

• In addition, it approved the list of professions to be taught in higher education institutions. Under the draft, the list shall be valid until the students recruited in 2004-2005 complete their studies.

3. Presidency

3.1. Initiative on abolishing death penalty

Albeit the Criminal Code passed in 2002 does not provide for death penalty, the Constitution does make a reference to the possibility of applying such a penalty "for acts committed at time of war or threat of war". Given this provision in the Constitution, President Voronin launched an initiative calling deputies to revise Article 24 paragraph 3 of the Constitution to abolish death penalty at any circumstances.

According to the President that provision represents "a factor tarnishing the image of the country, while the proposed amendment would reconfirm Republic of Moldova's commitment to observe human rights and freedoms" and would enable Republic of Moldova to complying with the commitments assumed when signing RM-EU Action Plan.

It is worth mentioning that RM-EU Action Plan does not explicitly require modification of the Constitution of the Republic of Moldova as initiated by Voronin, but is more general asking for ensuring observance of human rights and freedoms in accordance with international and European standards. Obviously death penalty does not fall under those engagements, this prompted President Voronin to come up with such an initiative.

Economic Policies

1. Prices

Annualized inflation rate in the Republic of Moldova for January - May 2005 reached 13.4%, Moldova ranking third together with Russian Federation among other CIS countries. The highest inflation rate was registered in Ukraine - 14%, Armenia - 2.9%. This indicator reached 13.6% for Azerbaijan, Belarus - 11.8%, Georgia - 9.5%, Kazakhstan - 7.2%, Tajikistan - 6.7% and Kyrgystan - 4.2%.

2. Labor market

The medium salary in Moldova amounted to 1,270 lei (101.6 dollars) in May 2005. Also, the average salary rose by 21 percent compared with May 2004. According to statistics, in the publicly-supported sector the salary was 995.5 lei (79 dollars), and in the non-budgetary sector the wage was 1.409.5 lei (112 dollars).

The largest salaries were paid to bank employees, 3,394 lei (269 dollars), by 911 lei less than in April. Following financial institutions and banks were enterprises working in the energy industry, heating, gas, and water supplying sectors, which paid 2,689 lei (213 dollars) on average to their employees.

On the other hand, the lowest salary was paid in the agriculture sector, 580 lei (46 dollars) a month on average, by 27 lei less than in April. The average salary in the education area was 898

lei (71 dollars); and in the healthcare and social assistance, 1,034 lei (82 dollars).

Also, the medium salary on economy in Moldova accounted for 1,196 lei (95 dollars) in January-May 2005, by 20 percent more than in the similar period of 2004. The lowest salary was registered in the agriculture sector - 548 lei (43 dollars) on average, which covers only 70 percent of the cost of the minimum living. The cost of the minimum living in January-May 2005 was 771 lei (61 dollars) a month for one person.

3. Trade

• The retail trade rose by 6.4 percent in January-May 2005, compared with the similar period of 2004, up to 3,613,100,000 lei (287 million dollars), while the growth in May was 11.1 percent. Constructions and retail trade continue to post a massive growth, being fueled by remittances of Moldovans who work abroad, economists estimate.

  According to data of the National Bank of Moldova (BNM), Moldovans working abroad transferred 153 million dollars in the 1st trimestre of 2005, by 53 percent more than in the similar period of 2004. Every second out of five dollars or euros transferred by Moldovans who work abroad goes to consumption.

  Joint ventures registered the highest growth of sales in January-May 2005, respectively 11 percent, and they held 23.1 percent of overall sales.

  Private enterprises, which held 68.8 percent of the total of sales, registered a 6.4 percent rise, while retail sales of public and mixed companies continued to decline, respectively by 15.0 percent and 0.6 percent.

  The volume of paid-for services granted to population accounted for 2,531,800,000 lei (201 million dollars) in five months, and rose by 8.3 percent compared with January-May 2004. Services provided by public enterprises represented 41 percent of the total, while private companies registered the highest rise - 14 percent.

• Moldova's exports to the European Union (E.U.) dropped by 2.5 percent in January-May 2005, down to 120.9 million dollars, after a long period of growth, when supplies to the E.U. markets rose about 2.5-fold. The difficult political situation inside of the E.U., depreciation of euro verso dollar, and small diversity of Moldovan goods exported to the European area explain this state of things.

  The E.U. held 28.5 percent of Moldova's overall exports in January-May 2005, compared with 32.5 percent in the similar period of 2004. Moldova's exports to Portugal dropped by 66.2 percent, Germany by 48 percent, the Czech Republic by 47 percent, Austria by 38.2 percent, Hungary by 37 percent, the United Kingdom by 26.3 percent, and Slovenia by 3 percent.

  Although exports to other countries registered significant rises - 7.9-fold to Slovakia, Poland 6.2-fold, Lithuania 2.8-fold, Greece 2.4-fold, the handicap registered with some of Moldova's most important partners in the area concerned was not recovered.

  Moldova's imports from the E.U. rose by 32.8 percent up to 274.9 million dollars, the CIS by 20.7 percent up to 330.5 million dollars, Central and Eastern Europe by 42.7 percent up to 85 million dollars, and other countries 1.5-fold up to 129 million dollars.

  Updated statistics show that Moldova's trade deficit accounts for 395 million dollars and rose 1.6-fold in January-May 2005, compared with the similar period of 2004. We consider that our forecasts on trade deficit for the first half of this year will become true ¹.

4. Banks and insurance

• The international reserves of BNM dropped by about one percent in May, down to 473 million dollars. According to data of BNM, the central bank purchased 7.2 million dollars on the interbank market in May, or 2.5-fold less than in April. The BNM's share on the interbank market in May was 11.0 percent.

  The forward deposits and placements held the highest share in the structure of reserves - 346.1 million dollars, including 244.62 million dollars in banks abroad, 101.4 million dollars in other central banks and in the International Monetary Fund. Reserves worth 126.8 million dollars are kept in securities.

  The international reserves amounted to 470.3 million dollars on December 31, 2004. The central bank intends this year to maintain the international reserves "at an acceptable level to cover at least three months of imports."

• Deposits in bank system rose by 400 million lei or 4.6 percent and accounted for 9,182,700,000 lei (734.62 million dollars) in late May. Deposits in lei rose by 7.3 percent. Also, deposits in foreign currency dropped by 0.9 percent due to depreciation of Leu and reduction of interest rates applied by commercial banks.

  The share of spot deposits in the total was 3.42 billion lei (273.6 million dollars) or 37.3 percent, and rose by 1.6 percentage points compared with April, when they accounted for 3.15 billion lei.

  Forward deposits in lei amounted to 392.2 million lei (31.4 million dollars) in May, up by 27.6 million lei compared with April. The average interest rate on forward deposits in lei dropped down to 13.35 percent.

  Forward deposits in foreign currency in May accounted for 27.1 million dollars (338.4 million lei), and dropped by 11.4 percent. The average interest rate on deposits in foreign currency amounted to 5.24 percent.

• The foreign public and state-guaranteed debt of Moldova dropped by 7 percent in five months of this year down to 817.26 million dollars. It accounted for 878.64 million dollars on December 31, 2004.

  The foreign public and state-guaranteed debt dropped by 12.8 million dollars in May. Also, Moldova paid interest arrears in the amount of 0.26 million dollars, while the difference of exchange rate after appreciation of the U.S. dollar verso other currencies accounted for 10.9 million dollars.

  The government's debt was 650.8 million dollars on May 31, and dropped by 8 million dollars compared with April. BNM officials have recently said that the governmental debt is declining in continuation and it dropped down to 36 percent out of the overall foreign commitments. It amounted to 36.3 percent in late 2004 and to 42 percent in late 2003.

  Certain experts say that the public debt will decline in continuation due to the slight appreciation of Leu, partial reimbursement of the debt, and arrears for energy resources. On the other hand, the foreign private debt unguaranteed by state (governmental credit) remains very high, and it amounts to about 465 million dollars.

  Also, the foreign guaranteed and unguaranteed public debt of Moldova amounts to about 1.9 billion dollars or equivalent of 74 percent of GDP for 2004, a much higher level than the average of about 60 percent on underdeveloped countries. In addition, the debt for energy resources amounted to about 290 million dollars at the end of the 1st trimestre of 2005. If comparing the current payment obligations of Moldova and capacity of the national economy to generate internal budgetary incomes and obtain international reserves from exports, we can realize that a budget which is stifled by a permanent lack of resources will not bear the pressure of foreign debt for a long time.

5. Moldova and the world

• A delegation of the International Monetary Fund (IMF) headed by Thomas Richardson was on an assessment visit to Moldova from June 22 to July 1, in order to evaluate the macroeconomic environment and other aspects of economic policies and structural reforms, medium-term spending framework, fiscal reform, salary policy, and the foreign debt problem.

  The IMF mission highlighted the economic growth registered in Moldova the past four years and its perspectives for future, with IMF officials expressing readiness to update the process of granting of necessary assistance. Also, the Chisinau authorities opted for an urgent signing of a cooperation program with the IMF, which would encourage a better investment environment in Moldova, and re-organization of foreign debts of Moldova.

  However, the IMF officials said that negotiations on a new financing program will start not earlier than in the 4th quarter of 2005. They noted that well-considered actions are needed in spite of certain progresses in some directions. According to the IMF mission, it is important to maintain the economic stability.

  The IMF dignitaries appreciated the intention to reform the public service, but recommended an assessment of public offices and reduction of staff on basis of this evaluation. Also, it saluted the implementation of the so-called guillotine law. On the other hand, the IMF experts recommended Moldova to review the State Board of Creditors. Businesses which benefit from support of this board enjoy better conditions than enterprises working under a normal fiscal regime. Evidently, this is a discriminatory treatment between businesses which enjoy facilities and enterprises which do not benefit from the same conditions.

  At present, Chisinau does not have any financial program with the IMF. The old program valued at 147 million dollars, of which Moldova received only three parts worth about 37 million dollars, expired in December 2003. The last tranche was released in July 2002.

• More and more employers working in the Romanian light industry want to transfer their business to Moldova or Ukraine, after the Bucharest government has increased the value-added tax up to 22 percent.

  Maria Grapini, chairwoman of the Romanian federation of light industry employers, has told journalists that many foreign investors working in the textiles sector in the Botosani area seriously consider the possibility to stop business in Romania in favour of other states such as Ukraine or Moldova, because they have no competitive advantage in Romania.

  Romanian entrepreneurs are also unsatisfied with frequent amendments to legislation, higher prices for public services, appreciation of national currency, and, not the last, unloyal competition of imports from China, Vietnam or Turkey.

  Most textiles, ready-made clothes and fur and leather articles in Moldova are made in lohn, that means investors provide raw material, equipment, technology and models. The relatively cheap and well-skilled labor force represents the advantage and attractiveness of industry.

  Moldova's exports of textiles and items accounted for 63.5 million dollars in January-April 2005, compared with 51.5 million dollars in the similar period of 2004.

• The Russian executive has decided to create commercial representations in eight states in the CIS in 2005-2006, including Moldova, Azerbaijan, Armenia, Georgia, Kyrgyzstan, Tajikistan, Turkmenistan, Uzbekistan. Also, a governmental decision calls for closure of Russian commercial representations in 52 states, including in countries such as Portugal, Greece, Romania, Cyprus, Cuba, Korea, Israel, Afghanistan, Iraq, Ireland, Estonia, etc.

  The commercial representations will aim to promote the foreign economic policies of Russia, to increase and diversify the exports. Russia is the key commercial partner of Moldova. It absorbed more than 36 percent of Moldovan exports in January-April 2005. Moldova's exports to Russia accounted for 125 million dollars in the first four months of 2005, by 17.5 percent more than in January-April 2004, while imports amounted to 78 million dollars, up by 14.7 percent.

Transdnistrian Conflict

On 29 June the Moldovan delegation to the Joint Control Commission (JCC) presented to the mediators, the OSCE Mission and the Russian and Ukrainian Foreign Ministries a series of proposals on stabilising the situation in the security zone. Chisinau's proposals envisage evacuation of the Transnistrian customs and border guard points from the security zone, ensuring normal conditions of activity for the JCC's operative investigation group from Bender, for the Moldovan Latin script schools, the penitentiary institutions from Bender, media institutions, railways and auto transport enterprises, etc. Moldova also proposed that by 15 July the auto traffic on the bridge near Gura Bicului is resumed and that the unrestricted access of the JCC military observers to military units in the security zone is ensured. Moreover, the Moldovan side proposed that any object in the security zone may be inspected under OSCE aegis.

Chisinau's proposals will be discussed at the JCC meeting on 7 July. If the JCC co-chairs accept them and adopt a document in this sense, the Moldovan side will resume its participation in the JCC work, which it suspended on 19 April 2005.

Meanwhile Tiraspol fulfilled one of Chisinau's requirements by registering on 4 July four out of the eight Moldovan Latin script schools from the region. The schools were registered as private educational institutions teaching in the Romanian language. We would like to remind that in the autumn 2004 the schools were registered temporarily after the Transnistrian authorities had declared them illegal, for which reason the Moldovan side suspended its participation in the five-sided talks and introduced a series of economic measures intended to legalise the Transnistrian enterprises and qualified by the break away authorities as "economic blockade".

On the other hand, on 1 July the representatives of the Moldovan and Ukrainian customs and border services signed an agreement on setting up the first two joint customs check points, in Briceni and Reni, in line with the provisions of the Intergovernmental Agreement on the Organisation of Joint Controls at the customs check points signed earlier by the Moldovan and Ukrainian presidents. According to this agreement, by 10 July five joint check points will be set up, of which two will be placed on the Transnistrian segment of the Moldovan-Ukrainian border. The setting up of joint Moldovan-Ukrainian check points is considered by Chisinau as a key measure for the fight against contraband activities through Transnistria, which is a prime source of income sustaining the anticonstitutional regime in Tiraspol.

However, the event most widely covered both in the Moldovan and in the Transnistrian press in the past two weeks has been the visit to Moldova of the Moscow official Modest Kolerov, the Head of the Department for Inter-regional and Cultural Relations with Foreign States under the Russian President Administration, a structure created recently and whose aim is to protect Russia's interests and the interests of Russian citizens in the post-Soviet areal. In Chisinau, Kolerov did not meet with any officials, but just with representatives of the media and some pro-Russian political parties, with whom he reportedly discussed the situation of Russian citizens living in Moldova. In Tiraspol, however, Kolerov met with the Transnistrian leader Igor Smirnov, members of the security bodies, representatives of the Congress of Russian Communities, as well as with representatives of the Corporation Proriv - a movement of so-called non-governmental organisations supported by the Transnistrian security forces. In Tiraspol Kolerov proclaimed the beginning of a new stage in the Russian-Transnistrian relations, and during his meeting with Igor Smirnov he said that Russia is "extremely interested in the stability and success, both in political and economic terms, of the Moldovan Transnistrian Republic". Kolerov's statements have been interpreted in Chisinau as in recognition of the independence and statehood of the Transnistrian region by an official representative of the Kremlin, and the Moldovan Foreign Ministry convoked the Russian Ambassador to Moldova on this occasion. A few days later, Kolerov said in Moscow within an international forum that the issue of recognition of the sovereignty of self-proclaimed republics is at present of key and principle importance and needs to be resolved.

As Russian Duma deputies have constantly shown support for the self-proclaimed Transnistrian regime, it was the first time that a representative of the Russian executive made such declarations, contrary to the official line taken by President Putin who supports Moldovan Government's efforts to solve the Transnistrian conflict. Observers have interpreted Kolerov's visit to Moldova, which coincided with Russia's withdrawal from its border agreements with Estonia, as one of symbolic significance denoting a new, tougher policy of the Russian Federation towards the former Soviet republics. This policy is said to be a reaction to the colour revolutions from the CIS and the subsequent reorientation towards the West of these states, and aims to restore Russia's hegemonic position in the CIS. It seems however, that by supporting anti-constitutional entities like Transnistria, Russia does a disservice in the first place to its co-nationals, who along with the rest of Transnistrian residents are the victims of an illegal and authoritarian regime. At the same time, such tactics will but push Moldova farther away from Russia and fuel the anti-Russian feelings in Moldova - both bad news for the Russian nationals living here.

Foreign Affairs

1. Opening of a permanent European Commission delegation to the Republic of Moldova

Thus far, diplomatic relations between RM and EU were maintained through the Ambassadors of member states accredited to Chisinau and recently through EU Special Envoy to Moldova Adriaan Jacobivits. From now on this function shall be taken by permanent delegation of the European Commission to the Republic of Moldova. In this respect on June 28 an Agreement between the Republic of Moldova and European Commission was signed in Brussels on the privileges and immunities enjoyed by the delegation in Chisinau. The document was signed by External Relations and the European Neighbourhood policy Benita Ferrero Waldner and RM Ambassador Eugen Carpov.

According to the European Commission, permanent delegation in Chisinau would seek to boost the cooperation between the parties, support RM-EU Action Plan enforcement and settlement of the Transdnistrian conflict. In his turn, Eugen Carpov pointed that the event would boost the cooperation between EU and Republic of Moldova and help to the Action Plan enforcement.

Apart from protocol declarations, it is worth mentioning that opening a permanent EC delegation to Moldova is provided in the paragraph "New partnership perspectives" of the RM-EU Action Plan. So, Moldovan authorities might take the credit for the event in fall when reviewing the progress of the Action Plan enforcement. Republic of Moldova should also take concrete steps to show their interest in the Action Plan enforcement, for instance by improving the judiciary system in the country. They might have taken into account opposition's recommendations in approving the judges of the Supreme Court of Justice.

2. Endorsing governmental plan on enforcing RM-EU Action Plan

During the reported period Republic of Moldova submitted to CE advisory opinion on the Governmental Program on Enforcing RM-EU Action Plan, in particular request to grant autonomous trade preferences (ATP) for Moldova. The main CE requirement in this respect is to effectively control the origin of goods, including by transferring to Customs Service the responsibility to issue and verify goods' certificates of origin.

Granting ATP is one of the "priorities for action" identified in the Action Plan. Therefore, EU has made the first step towards Moldova by setting the conditions and requirements for obtaining ATP. However, Moldova even if it makes a step forward it is a "lump"one. How else could one interpret the fact that Moldovan authorities developed and submitted for CE approval a governmental plan without even consulting civil society, in line with the Action-Plan provisions.

Studies, Analyses, Comments

Factors that might influence elections' outcome
Igor Botan, 6 July 2005

There are several factors worth considering when estimating elections' outcome, namely: inert voter sympathies; "Gagauz syndrome"; "national consensus"; low voter turnout, which increase the ratio of the "low mobility voters"

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