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Activity of Public Institutions

Government

Activity of the Parliament within the first session by Sergiu Grosu
Real estate market in a deadlock by Iurie Gotisan

Activity of Public Institutions

Government

1.1. Appointments

On September 7, Government appointed Vasile Sturza as Republic of Moldova Extraordinary and Plenipotentiary Ambassador to Russian Federation, and recalled him from his previously hold position as Moldova's Ambassador to Bulgarian Republic as well as other positions. The office of Moldovan Ambassador to Russia became vacant when Vladimir Turcan was elected to Moldovan Parliament and Chair of the Parliamentary Juridical Commission for Appointments and Immunities. The office was vacant for over six months, which might be explained by the deadlock in the Russian-Moldovan relations. Accordingly a figure able to address it and be seen by good eyes by the Russian side was sought. Vasile Sturza has a rich political background: he served four years as the Minister of Justice, later for several years he represented Moldovan side at the negotiation table with Transdnistria. The latter brought him in contact with numerous Russian diplomats and made him acceptable to the Russian side. Noteworthy, there are a number of vacant offices, namely Moldovan Ambassador to Poland, Portugal, Bulgaria, Azerbaijan, etc.

1.2. Sessions. Resolutions

• On its August 30 session Parliament examined the issue of IDs for Republic of Moldova citizens residing in Transdnistria. The decision was taken at the initiative of the President and provides that starting September 10 until the end of the year persons residing to the left of Dniester and entitled to Moldovan citizenship would be able to reconfirm it at any territorial population registration unit and would get their ID free of charge.

• The cost of the decision has not been calculated beforehand, while objections on the discriminatory character of the decision were neglected by the Prime-Minister who replied that the decision was "unique in the world", accordingly it was to be adopted with the majority vote, said and done.

  Currently IDs are issued within 20 days at a cost of 125 MDL, within 5 days at a cost of 250 MDL, and within 24 hours at 500 MDL. Opposition harshly criticized the Department responsible for issuing IDs, asking for dropping the exaggerated cost, reorganization of the department, and canceling the contract with foreign private companies getting considerable amounts for lending the equipment. The Government remained silent to the requests to drop the price at least for children up to 16 years, on the grounds there were no funds available to cover the expenditures.

• At the same session Government approved the draft Presidential Decree on closing Republic of Moldova Embassy to Uzbekistan on the grounds the mission was inefficient, plus Uzbekistan left GUUAM. Yet another reason was the opening of a diplomatic mission in neighboring Azerbaijan, as the relations between the two countries are booming, the later being the largest investor in Giurgiulesti oil terminal.

• Prime-minister Vasile Tarlev presided the session of the National European Integration Commission. It approved the Evaluation Report on the implementation of the RM-EU Action Plan and National Program on implementing the Action Plan. According to the official press release, the ministries were praised for their active involvement in the implementation process. The interim evaluation report is to be submitted for EU's review in September. High on the agenda were discussions on the need for the ministries to join their efforts in meeting all the obligations assumed by the Republic of Moldova. Ministry of Foreign Affairs and European Integration was entrusted to monitor the process and report on any shortcomings. Media also reported that Prime-Minister called the latter to speed up together with the Ministry of Economy the approval of the Asymmetric Trade Agreement between EU-Republic of Moldova. Discussions also focused on greater involvement of local government, civil society and public associations in the implementation of the Action Plan EU-Republic of Moldova.

• Prime-minister presided another session on aerospace security of the Chisinau International Airport. An Action-Plan was developed to raise the security of the airport following a decision passed by the Supreme Security Council. In particular the measures envisage companies rendering plane parking services however fail to ensure adequate security on the territory leased from the airport. In order to address the issue, a working group was established that would control the activity of all the businesses located in the Chisinau International Airport and would provide recommendations on raising the security of the airport.

• Noteworthy, more than one year ago the leadership of the airport, as well as heads of customs and police were ousted due to serious violations. Later violations were found in the activity of "Air Moldova" State Company, while its leadership was arrested. Recently press reported on the crush down of a Moldova plane in Congo, however the State Aviation Administration and Prosecution refuted the news.

• During the September 7 session Government approved the Regulation on the collecting narcotic or psychotropic plants. The regulation allows certain legal and natural entities to cultivate those plants for scientific purposes, but only after receiving the approval of an authorized body.

• During the same session another document was approved, the draft law on the rehabilitation of the victims of political repression. The amendments will outline the mechanism for returning the confiscated goods to persons repressed and later on rehabilitated. Under the current law the repressed persons are entitled to receive back their property, and if that is impossible receive a reasonable compensation. The lack of a mechanism for granting compensation was contested in the Constitutional Court. Under the proposed amendments goods worth up to 50 thousand MDL shall be compensated within one year; those worth more than 50 thousand MDL but less than 200 thousand MDL within three years; while those over 200 thousand within five years. So far Republic of Moldova was sanctioned several times by the European Court for Human Rights for the failure to return the assets of the repressed persons.

• Finally, the same day the Government heard the report on the enforcement of the Program on fighting illegal transportation of passengers over 2004 - first quarter of 2005. The activity of the Fiscal Department and other responsible institutions was found as inefficient. The state coffers were robbed of considerable amounts, while the number of accidents committed by illegal transporters is surging. Noteworthy, back in 2002 Government approved a Program on fighting illegal transportation of passengers.

Economic Policies

1. Prices and inflation

Prices of fuels have exploded again...

Filling stations in Moldova carried out last week the most important rise of gasoline and Diesel oil prices this year. The gasoline prices rose by about 16 percent while prices of Diesel oil grew by over 6 percent. Prices of fuels rose significantly though Premier Vasile Tarlev attended a sitting with importers of oil products on September 5 and opted for reexamination of the functioning regulation of oil market, in order to simplify it and to establish some clear rules in this sector. The prime minister proposed that all taxes for sale of oil products at filling stations be reduced to maximum and amalgamated in order to facilitate their administration.

...factor which could lead to a higher inflation

Importers of oil products motivate the price rise through higher prices at international exchanges. They do not rule out a new rise of fuel prices soon. Of course, the way the international oil quotation will change would represent a concern for inflation rate in Moldova, since the gasoline and Diesel oil influence almost all prices included in calculation of this rate and, respectively, of costs of finished production, which will finally affect the common consumer as well.

...though it accounted for only 0.2 percent in August

According to data of the National Bureau for Statistics (BNS), the inflation rate for August was 0.2 percent. A 3.7 percent cumulated inflation rate was recorded for January-August 2005. The consumer price index (CPI) for food products dropped by 0.6 percent, while CPI for manufactured goods rose by 1.3 percent, and tariffs for services granted to population grew by 0.3 percent.

2. Public finances

Government forecasts a 6.5-percent growth for 2006

The Finance Ministry has recently unveiled the first version of the draft budget law for 2006. Thus, the draft stipulates about 9.68 billion lei (some 770 million dollars) in incomes and almost 9.78 billion lei (some 778 million dollars) in spending. The Finance Ministry made these calculations by taking into account that the Gross Domestic Product (GDP) will grow by 6.5 percent in 2006 compared with 2005, and a 10-percent inflation rate is expected.

The prime minister said when the draft budget law for 2006 was unveiled that the fiscal policy for next year must be optimised including through introduction of the single agriculture tax in the entire country. Also, the executive proposes to exempt agricultural producers from income tax for maximum five years, to create funds for subsidizing of zoo-veterinary sector and sugar making sector.

3. Financial-banking system

Appreciation of leu led to a lower foreign debt...

The state-guaranteed and public foreign debt dropped by 15.7 million dollars in July due to appreciation of the dollar verso other currencies and of the leu verso dollar, with the difference of exchange rate reaching, for example, 4.78 million dollars. Debts in dollars had an important share in the structure of public foreign debt.

...but exporters will suffer, however

Of course, this is not a bad news on one hand, the composition of Moldova's foreign debt, mainly in dollars, would be an advantage for its reimbursement at a very favourable exchange rate. On the other hand, the appreciation of the leu verso dollar will affect exporters who will raise lower incomes from export, while imports will grow, increasing the trade deficit this way, a deficit which is very high under the current market juncture. Risks in such a direction are huge and visible enough.

Statistics of the National Bank show that the private foreign debt not guaranteed by state accounted for 479.4 million dollars in July, compared with 480.3 million dollars in June. About 121 million lei (21 million dollars) was spent from the state budget in the first half of 2005 for the foreign debt service, of which 10.8 million dollars represents direct reimbursement of the government's debts toward foreign creditors, and 10.2 million dollars is interest for foreign loans.

4. Foreign trade

Trade deficit turned over about 600 million dollars in January-July 2005...

Moldova's trade deficit turned over almost 600 million dollars after seven months of this year, by over 220 million dollars or 1.6-fold more than in the similar period of 2004.

...mainly provoked by weak capacity of external competition of the country

Trade deficit also exceeded Moldova's exports in January-July 2005, estimated at about 595 million dollars. This is a strange situation when deficit is larger than exports, and perhaps few countries face such a situation. This state of things indicates an inefficient domestic market and a weak capacity of the country in general to external competition.

..on background of massive imports

Moldovan exports rose by only 10 percent in the first seven months of this year, while imports grew by about 30 percent, up to some 1.2 billion dollars. The imports/exports coverage level is already below 50 percent, amounting to 49.8 percent in January-July 2005, compared with 58.8 percent in the similar period of 2004. Imports from Central and Eastern Europe rose by over 39 percent, supplies from the European Union grew by 30.2 percent, and exports from the CIS increased by 20.2 percent.

5. Labour market

Almost half of economically active population performs agricultural works...

Most of Moldova's economically active population works in agriculture. About 43 percent out of 1.4 million citizens employed in national economy worked in agriculture sector in the first six months of this year. Data of BNS show that 12 percent of population was working in industry, 11.8 percent in trade, and 12.5 percent in healthcare and education system.

...while the highest employment rate is registered among graduates from special secondary education

Almost half of employees (48 percent) work in private enterprises, while about 24 percent of citizens work in public sector. The highest employment rate is registered among graduates from special secondary studies - 48 percent, while graduates from institutions of higher learning count for 16.1 percent. As many as 96,000 job seekers were officially registered in early July, by 8.7 percent less than in the similar period of last year, while unemployment rate was 6.6 percent. About 56 percent of job seekers are men. The average joblessness period is 25 months.

6. Moldova in the world

Moldova loses ground regarding human development index (HDI)

According to the 2005 U.N. Human Development Report, Moldova is ranked the 115th place regarding the human development index (HDI), descending two places compared with last year. The decline was mainly due to reduction of incomes per capita compared with the purchase power, while the other key dimensions of HDI such as life expectancy and education remained at the same level. Moldova is ranked the 143rd place among 177 countries as regards income per capita.

Moldova is ranked after Mongolia and before Honduras. In comparison with other CIS member countries, Moldova is the second but last, before Tajikistan, which is ranked the 122nd place among 177 states. The human development in member states of the CIS and South Africa degraded the most. In particular, the 2005 report shows that the Russian Federation lost 15 positions, Ukraine descended 17 places, while Tajikistan lost 21. Romania climbed five places up to the 64th.

Transdnistrian Conflict

Between 31 August and 2 September, the Transnistrian authorities organised a series of events to celebrate the 15th anniversary of the "Transnistrian state". The tone of manifestations was set by the Transnistrian leader Igor Smirnov who held a press conference on 31 August. "The statehood of Transnistria alone is the guarantee of life and security of the inhabitants of the region", told Smirnov the press conference, qualifying Moldova's policy towards the Transnistrian region as a "political theft under the cover of democracy and respect for human rights". Smirnov reiterated his readiness to restart the political negotiations with Moldova, but only on terms of equality, and showed ready to offer all borders and enterprise to international monitors, saying that in Transnistria there exist "all the premises for fighting border smuggling". Smirnov also declared that the peacekeeping operation should be carried out under Russian leadership, because the "people trust the Russian peacekeepers" and Russia has always been present in the region. Speaking about the legislative elections scheduled for the end of 2005, Smirnov said they will take place to schedule "according to the laws of Transnistria". "We have invited foreign observers to monitor the elections and we have done everything to ensure they are open ones. The international community can recognise them or not," Smirnov also said.

The key celebrations included a festive meeting on 1 September attended by a group of Russian deputies, a show about the history of Transnistria and a military parade on 2 September. In addition, three commemorative coins of gold and silver were put into circulation on the occasion. According to a communique of Smirnov's press service, over 30 foreign media institutions accredited journalists at the manifestations, including BBC, Reuters and France-press. Delegations from Abkhazia, Northern Karabakh and South Ossethia attended, as well as a delegation from Russia, led by the Deputy Speaker of the Russian Duma, Serghei Baburin.

In an interview with Transnistria's official news agency Olvia-press, the latter defined Transnistria as a "geopolitical reality" and stated that Moldova and Transnistria are at present "two different states that have emerged from the ruins of the former MSSR". Pointing to a change of "the ideology of power" in Moscow, Baburin expressed hope that already during President Putin's current mandate Russia will recognise Transnistria as an independent and sovereign state.

It is worth noting that during the same period Russia's special representative to the talks on the Transnistrian conflict resolution, Ambassador with Special Missions of the Russian MFA, Valeri Nesteruskin, told the press in Moscow that for the time being the necessary conditions for the evacuation of the Russian troops from Transnistria are not in place. Among the "necessary conditions" for the evacuation Nesteruskin mentioned an active political dialogue between the conflicting parties that would allow for a well organised and constructive cooperation with the local authorities in the process. At the same time, Nesteruskin said that Russia will only withdraw its army from Transnistria when it will be sure that "some unacceptable conditions will not be forced upon Tiraspol".

Among other important events related to the Transnistrian conflict resolution one may also mention the two initiatives launched in Bucharest, one on the state of negotiations and another one proposing on possible evolutions in the field.

Romanian Academic Society (SAR Policy Brief no.16) launched the project "How could we help Moldova to help itself". According to the report, intensively promoting Transnistrian issue under the current political context might be counterproductive both to Romania's security and Republic of Moldova' consolidation.

It is believed that Moldova should progress in European accession as Cyprus did, while the conflict resolution might go high on Romania's agenda once it becomes an EU member. Until then, Republic of Moldova should steer its foreign policy towards West rather than East and get seriously prepared for joining EU. In essence, the project envisages Moldova becoming autonomous from Transnistria, while the latter be isolated via an international embargo.

Meantime, MP Adrian Severin released in Bucharest the policy research developed by "Ovidiu Shincai" Institute entitled "Transnistria - evolution of the frozen conflict and prospects of resolution". The document recommends decision-makers in Bucharest to take steps in view of "setting loose Transnistria as a territory of the Republic of Moldova and placing it under a regime similar to that applied to Kosovo province". Later, after being placed under international protectorate, the 3D (demilitarization, democratization and decriminalization) strategy should be applied. Simultaneously, a process similar to the one launched in Cyprus aimed at Republic of Moldova accession to EU should start, provided that EU "would replace its good neighborhood policy for Moldova into an integration, enlargement one".

The report claims that "after Romania and Bulgaria join EU, the next two countries to follow should be Croatia and Republic of Moldova. Republic of Moldova's accession to EU should represent a security guarantee for EU's eastern border. EU's borders lying on Dniester river would be stable on the long-term, while Ukraine stands slim chances of accession to EU".

For now, none of Moldovan officials commented on the two initiatives. The official press reported that on September 11, Moldovan and Romanian Foreign Ministers met in Iasi.

Foreign Affairs

• A delegation of legislators headed by Speaker Marian Lupu flew to New York to take part in the World Conference of Parliament Speakers on September 7-9. A reunion of Presidents and Prime-ministers is to follow on September 14-19. The conference hosted by UN looked at multilateral cooperation, activity of international organizations, cooperation between Inter-parliamentary Union and UN, etc. As part of the event Speakers of the GUAM member states had a separate meeting.

  In addition Marian Lupu met Boris Gryzlov, Speak of the Russian State Duma. The Two talked problems in the relations between the countries and how closer ties between the legislative bodies might contribute to their resolution. Transdnistrian issue was also high on the agenda.

• Same time, another legislative delegation including Deputy Speaker Maria Postoico and leader of the Christian-Democrat faction in Parliament Vlad Cubreacov (both members of the Republic of Moldova permanent delegation to the Council of Europe Parliamentary Assembly) attended the sessions of the PACE Monitoring Commission held in Antalya, Turkey. Moldovan delegation presented a report on the progress made in complying with the obligations assumed when Republic of Moldova joined Council of Europe and the recommendations made by the Monitoring Commission. The reunion is to pass a draft resolution on the functioning of democratic institutions in the Republic of Moldova, to be later approved by the PACE. Noteworthy, PACE representatives pointed to the need of amending Republic of Moldova law on the status of magistrates, functioning of the Supreme Magistracy Council, change the status of the prosecution, revise the law on the public broadcasting, political parties, pass a new law on religious cults and improve the law enforcement.

• Republic of Moldova and US signed an Agreement on opening and funding a Center to fight trafficking in human beings. US would provide about 2 million USD for witness protection programs. The project is part of a set of initiatives aimed at fighting trafficking in human beings announced by the US at the UN General Assembly in 2003.

  In 1998 Republic of Moldova passed a Law on State Protection of the Victims, Witnesses and other Persons Cooperating with the Investigation, however its enforcement was stymied by the lack of funds and poor technical base. There is no law regulating fighting human trafficking, a draft in this respect was passed in the first reading.

• By the end of the year, European Union would provide the assistance necessary for monitoring Moldovan-Ukrainian border by European observers. The status and mandate of the mission shall be outlined in a Memorandum, submitted for review to Chisinau and Kiev. The monitoring mission shall work on the Transdnistrian section of the border and shall oversee all the procedures from customs to border control.

• Center for Fighting Economic Crime and Corruption of the Republic of Moldova signed a Cooperative Agreement on fighting money laundering with the Romanian National Office for fighting money laundry. Moldova adopted the Law on Fighting Money Laundry at the request of specialized international bodies. It provides for a special control mechanism in the field working closely with fiscal bodies and law enforcement forces.

• According to the Minister of Foreign Affairs and European Integration the situation in Ukraine would not affect the bilateral relations between the two countries. The Minister saw the Governmental crisis as a simple reshuffle that would not affect the cooperation in areas of mutual interest, specifically resolution of the Transdnistrian conflict.

  Noteworthy, the relations between Kiev and Tiraspol had its ups and downs, initially Kiev was supportive of Chisinau, later on it took a more neutral stance after Igor Smirnov's visit to Kiev. Experts reckon the changes are largely due to the commercial interests Pyotr Poroshenko, recently ousted Secretary of the Ukrainian Security Council, group has in Transdnistria.

Studies, Analyses, Comments

Activity of the Parliament within the first session
Sergiu Grosu, 12 September 2005

An overview of legislative activity. Priorities and tendencies for the future

»»»

Real estate market in a deadlock
Iurie Gotisan, 12 September 2005

Real estate market seems to be stymied by the skyrocketed prices as well as some psychological factors

»»»