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Activity of Public Institutions

Parliament
Government
Presidency

"Europe must not forget: gas is coming from East"! by Iurie Gotisan
New customs regime and Ukrainian factor: Main piece of resistance or weak link? by Radu Vrabie

Activity of Public Institutions

Parliament

1.1. Reshuffles

• Dumitru Braghis (PDSM) and Oleg Serebrian (PSL) were excluded from the Permanent Bureau of the Parliament at the May 18 sitting of legislature. The amendments came at the initiative of the AMN faction, which has earlier appointed these persons to the Permanent Bureau. Although AMN has sought the appointment of two own representatives to the vacancies, a member of the majority faction PCRM was named to one post. The two AMN lawmakers said before voting that they withdraw alone from the Permanent Bureau, but asked that opposition representatives be appointed to the vacancies.

• Dumitru Braghis and Oleg Serebrian were excluded from the parliamentary delegations to different international parliamentary organisations on May 25, at the proposal of their former faction AMN. Representatives of Dumitru Braghis have criticised these actions of AMN and accused its leaders, but AMN faction deputy leader Veaceslav Untila rejected the charges.

• PDM Deputy Efim Agachi was appointed member of the legal commission for rules and immunities instead of AMN lawmaker Leonid Bujor, who was transferred to the human rights commission. AMN Deputy Alim Afonin was named deputy chairman of the commission for public administration, ecology and territorial development instead of his faction mate Ivan Gutu. PCRM Deouty Elena Bodnarenco was named secretary of the commission for public administration, ecology and territorial development.

• The PPCD faction has asked the withdrawal of lawmakers Valentina Cusnir and Zoia Jalba from all offices held in working bodies of the Parliament and parliamentary delegations, as both of them have quitted the faction as a sign of protest against authoritarian, "non-democratic and non-Christian" attitude of the faction and party leadership, intolerance of separate opinions on certain issues. Jalba and Cusnir asked that their names be associated with PPCD only as "non-affiliated" deputy of the faction. The PPCD faction will count for 8 members after Ion Neagu was excluded from party and parliamentary faction and the two lawmakers have recently quitted, following the PDM faction, which has now 9 members after the mandate of Efim Agachi was validated. The decline of the number of PPCD faction members was a ground for Valentina Cusnir to seek the revocation of Iurie Rosca from the post of deputy speaker.

1.2. Legislative acts

Law for the modification and completion of the Law # 64-XII from 31 May 1990 on Government. The law voted in two readings at once calls for the creation of the agency of sports as independent central structure in charge with sports. Earlier, it was said when the acting cabinet of ministers was created that the amalgamation of the Ministry of Education and structures in charge with youths and sports is am efficient measure for combat of bureaucracy, reduction of state apparatus, with the "concentration" contributing to a uniform development of all fields. The concept was declared wrong after a year of implementation, with the sport field requiring a "separate" attention. Representatives of opposition parliamentary factions have proposed that the new structure take over the management of youth field, but a representative of the executive and the majority faction in the Parliament turned down this initiative. It should be noted that the creation of the new structure is not stipulated express by the central public administration reform strategy and its action plan.

Law on modification of the law on fuels market. The adopted document calls for the exclusion of obligation to create an automatic fuel record system. It argues that the customs record system Asycuda World allows the record of imports of oil products and the situation in the field is better than when the law seeking the introduction of this system was adopted. At the same time, lawmakers and Government have earlier backed and promoted the decision to create automatic systems to record pharmaceutical products and alcohol production made or imported in Moldova.

Law for the modification and completion of the Law # 243-XV from 8 July 2004 on subsidised insurance of production risks in agriculture. It calls for the rise of administration expenses of insurer included in insurance premiums and of subsidy of insurance premium.

Law on ratification of some international acts. The Protocol between Moldovan Government and Hungarian Government on succession of Moldova to bilateral treaties signed between the Union of Soviet Socialist Republics and Hungary; the Convention between Moldovan and Macedonian Governments on avoidance of double taxation and prevention of tax evasion regarding income and capital taxes, the Protocol to this Convention were ratified.

Decision on appointment of a commission to examine draft laws on modification of Article 24 of Moldovan Constitution. The drafts laws seeking the abolition of death penalty in all circumstances (abrogation of constitutional provisions allowing the death penalty) will be prepared for examination by the legal commission for rules and immunity, which was told to report to the Parliament by 15 June 2006.

Draft laws on abolition of visa regime for citizens of some states. The two drafts adopted in the first reading stipulate the abolition of visa regime for citizens of the European Union, the United States, Canada, etc. A similar document was proposed by AMN Deputy Vitalia Pavlicenco, but its examination was postponed.

Draft law on modification and completion of the law on rehabilitation of victims of political repressions. The amendments seek the creation of a mechanism of restitution of goods seized from victims of repressions who have been rehabilitated meantime and fair compensations for the goods that cannot be returned. Most of expenses related to the implementation of this law will be covered from local budgets, but the Government intends to ensure the annual transfer of sums needed for this purpose to accounts of local authorities. The total amount for the implementation of this law was not officially announced, but it was earlier estimated at over one billion lei (about 75 million dollars). The European Court of Human Rights has sanctioned Moldova more than once for non-restitution of property to victims of repressions. Representatives of opposition factions have supported the draft, but invoked the need to improve it and they will table amendments for this purpose.

Draft law for the modification and completion of the law on the National Bank of Moldova. Some technical amendments and modifications of composition, including the ban of state crediting and establishing of the insurance and maintenance of price stability as fundamental objective. These provisions result from the memorandum signed by Moldovan Government with IMF, but the mechanism and means for maintenance of prices are not clear, a fact that raised the criticism of opposition lawmakers. Proposals to award immunity to members of the BNM Board of Directors, obligation to obtain the consent of BNM for all normative acts on fields tin which the central bank has competences for all normative acts; external auditing mechanism have also raised objections of lawmakers.

Draft law on mediation in penal cases. The document adopted in the first reading proposes introduction of the mediation institution in in the criminal law system as optional modality of an amicable settlement of conflicts, with the help of a third specialised party as mediator, under conditions of neutrality, fairness and confidentiality. The conflicting sides may choose the mediation voluntarily.

Draft law on modification of the Law on privatisation programme for 1997-1998 (#1585). The document adopted in the first reading proposes the modification of lists of objects for privatisation by replacing them with new lists proposed by Government. The list of objectives proposed by Government included important objects such as SA "Moldtelecom", S.A. "Aroma", S.A. "Barza Alba", I.S. "Giuvaer", S.A."Power Distribution Grids "Nord" and "Nord-Vest", I.S. Hotel "DACIA", state-owned shares in S.A. "TUTUN-CTC", B.C. "EuroCreditBank" S.A.", I.M. "JOLLY-ALON" S.A., S.A."Floare-Carpet, S.A."Zorile", I.M. "Glass Container Company" S.A., etc.

1.3. Parliamentary control. Declarations

Hearings

The Justice Ministry has answered an interpellation of Deputy Vitalia Pavlicenco regarding the inappropriate financing of justice in Moldova, describing a study on this field conducted by nongovernmental organisations as incomplete. According to the Justice Ministry, the sum allocated from the state budget to courts and other law enforcement bodies fits the international standards in the field. Pavlicenco has described the stance of the ministry as categorical, without verticality in promoting the interests of independent justice.

The Ministry of Economy and Trade has reported the situation in the field of import-export relations. According to a communication, a negative trade balance of 1.2 billion dollars was registered in 2005. The main exports went to the Russian Federation - 30%, Italy 12%, Romania 10%. Following were the main commercial partners of Moldova for imports: Ukraine - 20%; the Russian Federation - 12%, Romania - 11%. The largest trade deficit was registered with Ukraine, Romania and Germany. The negative balance rose by 50% in the 1st quarter of 2006 compared with the same period of 2005. More than 63% of goods in the structure of imports cannot be substituted in Moldova (oil, energy resources, machines and equipment). External collections counterbalance the situation in the field and allow the maintenance of situation in the estimated limits.

Questions. Interpellations

• AMN Deputy Alexandru Lipcan has invoked some violations committed by Centru court chairwoman Lidia Vasilevici during trying of some persons (sentencing of some people to detention in a case in which the prosecutor has withdrawn the accusation). The illegal actions were confirmed by annulment by the Court of Appeal of the sentence passed by Vasilevici and release of the accused persons. Deputy Lipcan asks the Prosecutor-General's Office and the Superior Council of Magistracy to examine the actions of judge and to comment on presence of offence.

• PPCD Deputy Gheorghe Susarenco has asked the chief state sanitary doctor of Moldova to make expertises and to check the quality of agri-food production imported in Moldova from the Russian Federation, replying this way to blockades and "unfriendly" attitudes of Russian authorities towards goods made in Moldova. Replying the interpellation of Susarenco, chief state sanitary doctor Ion Bahnarel said that the Moldovan authorities have taken "internal and external" measures related to the access of domestic goods to the Russian market and of Russian goods to the Moldovan market. According to Bahnarel, previous controls have directed to fines and interdictions applied individually, but the Government only can make a general decision to ban the importation of a certain product from a country in special situations.

• Deputaty Stefan Secareanu has described the lack of an answer from Victor Tvircun, minister of education, youth and sport, to the conflict related to the change of the name of the Chisinau-based lycee "Gheorghe Asachi" as "a defiance of the Parliament and lawmakers." Secareanu has asked the prosecutor-general to consider the possibility to punish Minister Victor Tvircun for violation of the law on status of parliamentarian. Tvircun did not answer a request of the chairman of the parliamentary commission for human rights for three weeks and Secareanu sent his interpellation to the prime minister.

• Deputy Igor Clipii has asked the Interior Ministry to report on legality of traffic of automobiles with Transnistrian number plates in Moldova, without paying appropriate import duties. Also, Clipii asked the Ministry of Foreign Affairs and European Integration why the competent authorities did not examine the application of Romanian Senator Ilie Ilascu for regaining of Moldova's citizenship, an application that Ilascu submitted to the consular authorities of Moldova in Bucharest in November 2005.

• PDM Deputy Vladimir Filat has asked the director-general of the Customs Service to argue the legality of a decision on payment of customs duties for household appliances imported in Moldova only at the "Airport" customs and ban of these procedures at other territorial customs station.

Government

2.1. Reshuffles

The executive has appointed Deputy Finance Minister Feodosia Furculita as director-general of the Customs Service. In 1996-2006 Furculita was employed in different offices in the Tax Inspectorate and the Ministry of Finance. Although the Customs Service is a governmental structure, President Vladimir Voronin has introduced Furculita to the staff.

The chief of state has appointed Vitalie Vrabie, mayor of the Ungheni city starting 1999, to head the Ministry of Local Public Administration. Vrabie was promoted in 2005 for the post of director of the Regional Development Agency, but he gave up the proposed office. Now Vrabie heads the Association of Mayors and Local Communities, an organisation that brings together heads of local administrations. In 1998 Vrabie participated in the parliamentary elections as part of the list of the electoral bloc Civic Alliance Furnica, while in 2003 he was elected mayor on behalf of the Communist Party of Moldova.

2.2. Decisions

• Decisions approving some draft laws: on insurance (new editing); for the modification of the law on local public administration and law on public communal administration services (which empowers the National Agency for Energy Regulation to establish the tariffs); for the modification of the Penal Code (sanctioning for activity without licence), etc.

• Decision approving the notification to the Parliament's draft decision "concerning denunciation of some agreements". The Government has turned down a proposal to denounce the constitution agreement of CIS submitted by AMN lawmakers Vitalia Pavlicenco and Valeriu Cosarciuc, saying that "this problem is extremely complex and it will be examined very minutely through all signed treaties and commitments assumed in front of other CIS member states." At the same time, given the progress of relations with the European Union, the Government will examine and made clear political decisions on present commitments within CIS with which it could intervene late on the European integration line.

• Decision on measures of preparation of national economy and social sector for activity in autumn-winter 2006-2007. The document indicates the tasks of central and local authorities, heads of budgetary institutions (schools, kindergartens, asylums, hospitals, etc). The Ministry of Industry and Infrastructure will be in charge with some objectives related to insurance of energy security of the country.

• Decision on measures of reorganisation of some specialised central bodies of public administration. Under the document, the Ministry of Local Public Administration will take other the posts related to regional development and local public administration from the Regional Development Agency. The functions of the National bureau for Migration, which was closed, will be transferred to the Ministry of Economy and Trade and the Interior Ministry. The Government will learned within one month the structure, maximum staff and regulations on activity (new or reviewed acts) of the Ministry of Local Public Administration, Agency for Construction and Territorial Development; Ministry of Economy and Trade; Interior Ministry. The Finance Ministry must table proposals for the modification of the state budget law within 3 months, with the purpose to finance reorganisation-related expenses.

• Decision approving the land consolidation programme for 2006-2012. The programme will be implemented on stages, voluntarily, and compact sectors will be created for as much as possible place and time. The execution of the programme will start with the implementation of a pilot project in six villages and the localities will be selected at a contest.

• Decision approving the 2006-09 action programme on support of Moldovan nationals who reside other countries. The programme stipulates the elaboration of a legal framework on sustenance from the state budget of educational institutions in localities massively populated by Moldovan nationals and their public associations abroad, granting of scholarships in Moldova. Central authorities are concerned with cooperating with Moldovan nationals since 2000, when former president Lucinschi has issued a decree on support of Moldovan-born people who reside other countries and cooperation with them (#1638-II from 30.08.2000). The Government adopted the Decision # 1322 in late 2000 concerning some measures of support for Moldovan nationals who reside other countries. The Government adopted the Decision on coordinating council of Moldovan nationals who reside other countries in early 2005, while on summer 2005 adopted the functioning regulation of the council concerned.

• Decision approving the Moldova-NATO Individual Action Plan. The document drafted by a national commission created by chief of state was earlier approved by NATO Council.

2.3. Sittings. Decisions. Declarations

Sitting of the Moldovan-Ukrainian commission for commercial-economic cooperation

The prime ministers of Moldova and Ukraine have reiterated at the sitting the intention to respect the December 30, 2005 Joint Declaration regulating the transit of goods over the Moldovan-Ukrainian border. Vasile Tarlev said that the declaration has a historical value, marking the implementation of European standards at the Moldovan-Ukrainian border. Speaking about the sitting of a "cooperation protocol" between Transnistrian leader Igor Smirnov and Russian Deputy Premier Alexander Zhukov, Tarlev said that it does not have legal power.

The sitting of the Moldovan-Ukrainian commission for commercial-economic cooperation has signed protocols on modification of the agreement between Moldovan and Ukrainian Governments regarding border crossing points of the Moldova-Ukraine state border and simplification of border crossing formalities for citizens who reside the border districts.

Premier Tarlev promised that Moldova will back Ukraine to join the World Trade Organisation.

The sides have also tackled the problem of recognition of patrimony in both states, in compliance with the bilateral agreement on mutual recognition of rights and regulation of property rights signed on 11 August 1994. It was ascertained that the Ukrainian side has recognised the rights on 30 objects of Moldova out of 120 solicited objects in the period when the agreement was implemented. Acts on recognition of another 5 objects of Moldova located in Ukraine are expected to be signed in June.

Concerns with situation in agriculture

A sitting convoked by prime minister has analysed the implementation of the subsidising system for agricultural producers. According to the Ministry of Agriculture and Food Industry, all demands for subsidising in agriculture sector are operatively examined, while the money is transferred on time. The value-added tax for delivery was reimbursed to about 400 economic agents working in agriculture sector until now (the reimbursements from budget are estimated at about 3 million lei). However, no economic agent has applied for VAT reimbursement in some districts and the prime minister considers that this is a proof that businesses either stopped working or took measures to evade the law and these situations require the immediate intervention of local authorities.

The situation in agriculture and spring agricultural works was studied at a TV conference organised by Government with the participation of heads of district authorities. According to available data, about 90 percent of the planned volume was seeded and the works were late because of climatic conditions. The prime minister ordered the competent authorities to concentrate the technical means and human resources in order to finish the spring works by late May, as well as to create stocks of Diesel oil and reserves of spare parts in territorial subdivisions, to prepare stations and equipment for irrigation. Tarlev ordered measures to give an impulse to restoration of the system of acquisition of agricultural production through the consumption cooperation network.

Meeting with officials in charge with education, youth and sport

Prime Minister Vasile Tarlev has highlighted the need to reform the national education system in line with a governmental decision on modernisation of Moldova's education system at a meeting with heads of central and local public administration authorities in charge with education, youth and sport. He demanded a series of actions and activities within pre-school system, pre-university education of all levels. Tarlev indicated a series of problems in general secondary education and educational management, launching a series of proposals for their settlement.

3. Presidency

3.1. Decrees

Vladimir Voronin has signed a degree on awarding of the Labour Glory Order to Vasili Panciuc, mayor of the Balti municipality, for long and prodigious work in public administration bodies, contribution to promotion of reforms, intensive organisation activity.

The next day after participating in the inauguration of the stadium of the soccer club Zimbru, the chief of state has awarded the Honour Order to Nicolae Ciornii, honoured chairman of Zimbru club, for contributing to the building of the sport complex of the team.

The chief of state has awarded the Civil Merit medal to Moldovan Ambassador to Germany Igor Corman after a visit to Germany.

Vladimir Voronin signed a decree on May 19 on creation of the Cairo-based Moldovan Embassy to Egypt. The Government will establish the structure, staff and budget of this diplomatic mission.

3.2. Sittings. Decisions. Declarations

Visit to Germany

The Moldovan president led Moldovan delegation to Germany on 15-16 May, where he had meetings with the head of the German Bundestag, the Berlin city mayor. Voronin has attended a meeting of the Fridrih Ebert Foundation.

In Stutgart, which hosted the exhibition Moldova Present, Voronin has a meeting with representatives of the Association of Bessarabian Germans who left Moldova in 1940 and called them for economic cooperation.

GUAM summit

The Moldovan president has attended the GUAM Summit and handed over the chairmanship in this organisation to his Ukrainian counterpart. The Moldovan leader has signed the constitution documents of GUAM, which turned into the Organisation for Democracy and Economic Development - GUAM. Addressing the summit over handing over of the chairmanship,Voronin described the organisational development of GUAM as successful and proposed to call GUAM as the Commonwealth of European Option for Democracy and Economic Development.

Declaration on presence of Moldova in CIS

Asked on the Kiev airport about Moldova's staying in the CIS, Voronin said that the withdrawal of our country from this structure "rests with the Parliament's competence," declining this way his responsibility for delivering some clear statements. Voronin noted that the agenda of the GUAM leaders did not include issues on withdrawal from CIS and GUAM is not "an alternative" for CIS. It is worth to note in this context that the Government has turned down a proposal of opposition lawmakers to denounce the agreement on constitution of CIS, while the Parliament excluded this initiative from its agenda without examining it, indicating the absence of its developers at the sitting.

Summit of Central European leaders

Vladimir Voronin addressed the May 19 Summit in Varna, Bulgaria, and indicated mainly developments in the Central European area, the European integration course of Moldova. The chief of state said that the modernisation of Moldova is reduced to several basic tasks:

• building of a functional and efficient democratic system;
• combat of corruption;
• political settlement of the Transnistrian conflict.

Sitting of the Supreme Security Council

On May 22, Vladimir Voronin chaired a sitting of the Supreme Security Council that examined measures against forgery, disorder and abuses discovered in the national system for awarding of invalidity degrees. The Supreme Security Council has approved a series of measures aimed to improve the situation in the field, including the modification of the regulation on bodies in charge with medical expertise of vitality, improvement of normative acts on invalidity; permanent monitoring of respect for legislation in the field; adequate sanctioning of people who forged medical files and awarded invalidity degrees illegally, with pay of pecuniary damage to state. The sitting also discussed the problem of extended participation of the National Army military in the international post-conflict humanitarian operation in Iraq, tackled at the initiative of the U.S. Government. The Supreme Security Council has accepted the proposal and asked the Government to start the necessary procedure, noting that military will be voluntarily deployed through contract.

Sitting on participation in The Millennium Challenge Account

A sitting of the governmental working group for the participation of Moldova in The Millennium Challenge Account has informed the chief of state about finalisation and delivery of a draft action plan against corruption for examination. The document contains five chapters:

• consolidation of capacities of judicial system in preventing and combating corruption;
• consolidation of capacities of civil society and mass media;
• prevention and control of corruption in healthcare system;
• prevention and control of corruption in tax, customs system, police;
• optimisation of activity of the Centre for the Struggle Against Economic Crimes and Corruption.

Vladimir Voronin stressed that the setup of an anti-corruption system is a fundamental interest of the entire society and state institutions and civil society, business environments, mass media, etc. will be rallied to accomplish it. The chief of state ordered a urgent elaboration of a mechanism for anti-corruption expertise of draft laws submitted to the Parliament, insisting on implementation of his previous indications that every state structure implements an internal mechanism of control and prevention of corruption.

Special attention for child's protection

The situation in the child's protection system was examined at a sitting convoked by President Voronin with the participation of Prime Minister Vasile Tarlev, heads of some ministries, state and public structures. According to the chief of state, the current child's protection system is inefficient, a little targeted at prevention and reduction of desertion of children by own parents and support for families in need. The institutionalisation is the main form of protection of child in need within the present protection system, a form much more expensive than prevention based on family support systems and different community services. Voronin seeks a cardinal reformation of the child's protection system based on a new organisation structure of the system; development of mechanisms of assistance of families with children in need; ,reformation of the residential protection system; elaboration of a complex normative act on protection and promotion of children's rights; revision of the mechanism of financing of the system, etc.

The ideas and proposals launched at the sitting were also part of a speech that Voronin delivered at a national conference on social dimension of the child's protection system in Moldova, which took place on 29 May 2006.

The Moldovan president has indicated hypothetic reforms in his statements and did not tackle directly the problem of the rise of indemnities for birth and primary maintenance of child, these amounts paid by Moldovan authorities being the lowest ones in European states and discourage young families. Nor he spoke about perspectives of promoting the draft law on additional social protection for large families, which is part of the Parliament's agenda since late 2003.

Economic Policies

1. Financial-banking sector

Depreciation of leu has shaken currency market...

A clear depreciation of the Moldovan leu versus dollar and euro, notably by 0.5% and about 1%, was observed in May. The evolution of European economy was a primary cause, as it has grown more visibly than the American economy, which has also influenced the evolution of the euro. As the domestic market is dependent on the external market in a big measure, the evolution of the pair euro/dollar was visible on Moldovan leu, too. Media reports said that the depreciation of leu is a consequence of restricted wine exports to the Russian market and it could have a negative impact on the system. As a response, the National Bank of Moldova has denied the local press reports in a press release, describing them as speculative attempts aimed at a groundless depreciation of domestic currency.

On the other hand, we must admit that the National Bank purchased much currency in May, injecting this way more money on market, a phenomenon that leads to a depreciation for sure after the rules of the market. In addition, we suppose that BNM has deliberately used this measure to grant a respiro to exporters, given the blockade of Russia on Moldovan products and knowing that exporters harvest benefits from depreciation. The trends on currency market are influenced by developments on international oil market and performances of economies in the region. The Moldovan leu inverted its trends in late May and it appreciated a little versus dollar and euro.

At the same time, commercial banks in Moldova hold liquidities estimated at about 3 billion lei, an indicator which rejects an eventual crisis of default of Moldova from the very beginning. In addition, the credit portfolio of banks granted to vine growing, wine making and trading of vine and wine products hold a relatively small share in their assets - 8%, and 14% in the total credit portfolio. Finally, the currency reserves of BNM were estimated at over 646 million dollars (8.41 billion lei) in late May, reserves confirming that there are no premises for a potential crisis on domestic currency market.

...but rating of country risk was improved

The international bond rating agency Moody's Investors Services has improved the rating of long-term country risk of Moldova from Caa1 la B3 after modifying the rating methodology. The perspective for the rating awarded for the long-term credits in foreign currency was appreciated as stable. Indeed, the methodological changes improved the rating for 70 states. The methodology has changed for the ratings for bonds in currency. The short-term rating for Moldova is Caa2 for deposits in foreign currency and Caa1 for domestic currency. Last time the country risk of Moldova was rated in May 2003, when Moody's improved the long-term rating from Ca to Caa1.

Moody's started estimating the rating for Moldova in 1997. The rating for external securities of Moldova was reduced from Ba2 to B2 because of late payment of interest and stop of external financing in 1998; from B2 to B3 in April 2000, down to Caa1 in July 2001, and down to Ca in July 2002, after the government was late to redeem the Eurobonds placed on international markets.

What does this madness of ratings mean? International rating agencies such as Fitch IBCA, Moody's Investors Services and Standard & Poor's are aimed to rate the country risk in dependence of evolution of main macroeconomic indicators, focussing mostly on health and security of financial-banking sector. The studied countries are rated on a value scale from A to D (Standard & Poor's and Fitch IBCA), respectively from A to C (Moody's Investors Services), and investors are advised to credit and to start or not business in these areas depending on ratings.

The risk of long-term external debt in currency is the main rating of country risk. Also, the ratings forecast the rating perspectives of countries. In general, the agency will retrograde the country in the next rating if this prospect is negative. At present, all the three agencies rate Moldova as a "stable" country regarding investments.

2. Real sector

Wine crisis pulls down industry...

The industrial production of Moldova declined by 5.9% in January-April 2006, down to 6.4 billion lei (488 million dollars). According to experts, this reduction is explained through the crisis in wine making sector. Exports of wines to Russia, the main market for Moldovan wineries, suspended in late March have limited or even stopped the production of many wine plants. According to data of MoldovaVin, wineries use less than ? of capacities at present.

Associated with negative trends in wine making sector besides serious declines in engineering and equipment industry (-21%), tobacco (-7%) (though this fall was absorbed by some important rises in stone processing sectors (+64%) or cement production (64%), but less important as share in the total of industrial production), the industrial sector is on the continued rise. The government did not modify yet the forecast of industry growth estimated at the level of 6.5% for 2006, but nor it rules out a long-term negative impact of situation in the sector on industry in general.

"However, Chisinau is trying to recover the Russian market by resuming the wine exports on summer," Speaker Marian Lupu has stated to the Russian radio channel Yekho Moskvi. He said the sides have agreed that the deliveries will be resumed only if wine makers introduce stricter conditions of control on quality of production. Indeed, "the wine war" was a good lesson for Chisinau, which has confirmed the need to diversify the exportation markets and to respect the quality for wine production made in Moldova.

3. External sector

Trade deficit give serious headaches...

The Government has updated its trade deficit forecast for 2006. It forecasts now a trade deficit of 1.59 billion dollars for this year, compared with 1.33 billion dollars estimated earlier this year. It motivated the change through the continued rise of energy price, which will be a source of uncertainty for economy in 2006. According to updated macroeconomic indicators, exports will grow by 15% in 2006, while imports will advance more rapidly, by 23%. The negative trade balance of Moldova grew 1.5-fold after the first three months of this year, compared with the similar period of 2005, up to 295 million dollars. The external deliveries rose by 4.6% in the 1st trimester, while imports grew by 25.7%.

4. Labour market

Medium salary in budgetary sector declined...

The medium remuneration in budgetary sector dropped by 21.2 lei in April, down to 1,254.6 lei, while the medium salary in real sector grew by 57.2 lei, up to 1,731.4 lei (133 dollars). According to a monthly report by the National Bureau for Statistics, the average salary on economy accounted for 1,564.8 lei in April, by 31.2 lei more than in March.

The highest salary in April was traditionally paid by financial institutions - 3,798 lei, but by 66 lei less than in March. The average remuneration in industrial sector declined by 14 lei in April compared with March, down to 1,965 lei, while the medium pay in construction sector rose by 154 lei, up to 2,163 lei. Teachers earned 1,140 lei on average last month, by 31 lei less than in March, while doctors and social assistants were paid 1,325 lei.

Transdnistrian Conflict

The OSCE Chairman in Office will visit Moldova, Ukraine

On 24 May in Brussels took place a round of consultations of the representatives of mediators on behalf of the OSCE, Russia and Ukraine and the observers on behalf of the US on Transnistria, convoked at the initiative of the OSCE Chairman in Office, Belgium's Foreign Minister, Carol de Gught, on the eve of his visit to Moldova and Ukraine this week.

According to a communique of the Russian Foreign Ministry, the participants in the consultations discussed the current situation and prospects of settling the Transnistrian conflict, the possibilities of resuming the negotiations process in the "5+2" format, and reaffirmed their readiness to restore trust between the two parties with a view to identifying a comprehensive and lasting solution to the Transnistrian problem.

De Gucht will visit Moldova on 31 May - 1 June, during which time he will also visit the military unit of the mixed peace keeping forces in Bender and will meet with the Commandment of the peacekeeping operation. On 1 June the OSCE official will meet with the Ukrainian and Moldovan Foreign Ministers at the border cross point Kuciurgan-Pervomaisk on the Transnistrian sector of the Moldovan-Ukrainian border. On 2 June, De Gught will meet with Ukraine's President Viktor Yushcenko.

Chatham House hosts conference on Transnistria

On 24 May in London took place the international conference "Ways of solving the Moldovan-Transnistrian conflict: Views from the two Banks of Nistru River", organised by the London based Royal Institute of international Affairs (Chatham House). The conference was attended by representatives of Moldova, mediators and observers in the Transnistrian settlement process. Among the invitees featured the Speaker of the Transnistrian "Parliament", Evghenii Sevciuc, who could not travel to London because he is one of the 17 Transnistrian leaders banned to travel to the EU. To allow the Transnistrian official to express his views, the organisers tried to establish a video link with Tiraspol. Due to technical problems, the video link only lasted 20 minutes, following which Sevciuk organised a press conference.

"We are in principle ready to examine the proposals regarding the re-election of the Supreme Soviet if the international community would guarantee in the conditions of a certain procedure the organisation of a referendum in Transnistria...The problem is not in who governs, the problem is that the population does not reunification with Moldova. We have to look for other ways. One such way is to organise under international monitoring, preferably of the UN, a referendum in Transnistria", Sevciuk said at the press conference on 24 May, quoted by Regnum.ru.

According to Sevciuk, "the two banks must come to an agreement, but without dictat, pressures or blackmail, which the official Chisinau is using today against Transnistria". "The unification of the two banks cannot take place only on the basis of political efforts from outside, if the idea is not accepted by the people", added Sevciuk.

The Russian News Agency published excerpts from the speech that Evghenii Sevciuk prepared for the London Conference. In his speech, Sevciuk, was to propose his own vision of taking the Yushcenko plan forward, a model that he called "through referendum to elections, through elections to stability". The model envisages the creation of an international monitoring group under UN aegis, which would prepare and monitor a referendum that would determine if the Transnistrian inhabitants want to be part of Moldova as an autonomy. Depending on the results of the referendum, the sides would create either a union state or Transnistria will join Moldova as an autonomy. Whichever the scenario, during the implementation of the settlement roadmap the p[arties will abstain from any pressure and will ensure the free exercise of economic activity, including Transnistria's right to establish direct economic ties with the EU, Ukraine and Russia.

On the other hand, on 24 May the "Supreme Soviet " from Tiraspol voted in the first reading a draft law regarding the annulment of the Decision "Regarding the creation of the Moldovan Confederation" adopted by the Transnistrian "parliament" in 1993. The draft law was passed at the initiative of the Transnistrian leader Igor Smirnov. The "Speaker" Sevciuk stated that the "Supreme Soviet" will soon annul a series of other acts adopted in 2003 with regard to the drafting and adoption of a joint federal constitution with the Moldovan side.

Foreign Affairs

Republic of Moldova - Council of Europe

The Committee of Ministers of the Council of Europe has ascertained again that almost all human rights are violated in the Transnistrian region of Moldova. As regards the torture, inhuman and degrading treatment, the Council of Europe recalled the case of Ilascu group, whose two members are in "arbitrary detention". The freedom on religious denominations ignored by Tiraspol authorities who refuse to register certain religious groups, including Baptists and the ban of the rent or purchase of buildings for religious meetings, is another violation of human rights. The Committee of Ministers is unsatisfied with freedom of expression, situation of NGOs in Transnistria, which do not have the right to receive aid from international organisations.

As the Russian Federation took over the Chairmanship in the Committee of Ministers of the Council of Europe (CoE), CoE Secretary-General Terry Davis said that Russia "must have a consistent stance: if it claims that the Chechen Republic is part of the Russian Federation, it must also support the complete integrity of the Republic of Moldova." Speaking about non-execution of the ECHR judgment on release of prisoners from Tiraspol, Davis said that governments of all countries participating in the Council of Europe must enforce the ECHR judgments, no matter if they like them or not, and Russia cannot be an exception from this principle.

CoE experts are concerned that provisions of the draft Broadcast Code contain many incompatibilities with recommendations of international organisations and with the fact that they could not be essentially modified. Ascertions in this regard were made at a conference on the draft Broadcast Code on 19-20 May, with the participation of national and international broadcasting experts. CoE expert David Ward told the conference that he is concerned with provisions of the draft Broadcast Code, which neglect the existence of local broadcasters, limit the activity of the regulation body of the Public Company TeleRadio-Moldova, etc.

Republic of Moldova - European Union

The head of the European Commission Delegation in Bucharest has said that Romania must become the 7th economic power of Europe, not only as number of representatives in the European Parliament and Romania must become a model for the Republic of Moldova in the European integration process the next ten years.

Republic of Moldova - Romania

The Romanian president has described the freezing of the Moldovan-Romanian relations as mistake in an interview with the Moscow-based newspaper Kommersant. Traian Basescu reiterated that Romania has elaborated an own plan on settlement of the Transnistrian conflict and promised that the Romanian state will accelerate the efforts for the conflict resolution once it becomes member of the E.U. Although Moldova, Ukraine or Russia did not invite Romania to take part in negotiations, Bucharest will propose a solution to the conflict acceptable for all sides, President Basescu assured.

Republic of Moldova - Russian Federation

Non-execution of ECHR judgment

Russian Foreign Minister Sergey Lavrov said that the Russian Federation has executed the ECHR judgment on "Ilascu and others" case as regards the payment of compensations. Russia cannot do more than that "because it would interfere the jurisdiction of another sovereign state." Lavrov was sure that those who adopted this judgment "were aware of its political nature." The ECHR and the CoE's Committee of Ministers continue to urge Russia and Moldova to execute the ECHR judgment by ensuring the release of the two prisoners of the Tiraspol regime.

Moldova backs Russia's entry in WTO, but with some conditions

Moldova will back the entry of Russia in the World Trade Organisation (WTO), with the condition that this country respect the WTO norms accurately, the Moldovan prime minister has told a news conference held together with the head of the IMF Mission to Moldova. Vasile Tarlev avoided to make a connection between joining negotiations and exports of Moldovan goods to the Russian Federation, but noted that "all national interests will be taken into account during negotiations with Moscow."

Minister of Economy and Trade Valeriu Lazar expressed the same stance, saying that the Moldovan authorities "make no connection between resumption of wine exports to Russia and the vote for entry of this country in WTO." This statement replied the claims of the Russian negotiator to WTO that Moldova has conditioned the entry of Russia in WTO with annulment of restriction on importation of wines and vegetal production from Moldova.

Continued negotiations for unblocking of wine exports

The national television channel of Russia ORT - 1 Kanal broadcasted reportage in May about destruction of 8,000 bottles of Moldovan wines by a bulldozer, with all hidden regrets of many participants and witnesses of the process.

The MoldovaVin Agency has drafted an action plan aimed at resumption of Moldovan wine exports to the Russian Federation. The planned or take measures include the ban of use of pesticides of the 2nd security degree; creation of some commissions to inspect the wines stored at depots of exporting companies; creation of a state inspectorate to verify the quality of wines; inspection of all wines at the stage of making, bottling and delivery; inspection of vineyards and wine plants by representatives of the Russian sanitary service Rospotrebnadzor.

The Moldovan speaker has also hinted that the Russian Federation could resume the imports and he "did not rule out" the return of Moldovan wines to Russia next summer. However, many experts are sceptical over resumption of exportation of the previous quantity, especially because other foreign producers have already joined the Russian market and they promote an aggressive policy to enter the trade network.

Moldova in the world

The Ukrainian premier has told a news conference of participants in a sitting of the Moldovan-Ukrainian commission for commercial-economic cooperation that Moldova has a serious place in exports of electricity from Ukraine. According to Yekhanurov, Moldova could ensure the transit of energy to Romania, Bulgaria and other states, especially from perspective of construction of the power line Balti-Novodnestrovsk.

Studies, Analyses, Comments

"Europe must not forget: gas is coming from East"!
Iurie Gotisan, 30 May 2006

Officials of Western Europe are testing different methods aimed to strengthen their positions in energy sector and to reduce the dependence on Russian energy resources, especially on natural gas, after the feud of many European governments, diplomats and entrepreneurs for formation and development of the energy map of Europe

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New customs regime and Ukrainian factor: Main piece of resistance or weak link?
Radu Vrabie, 17 May 2006

The new-old customs regime introduced at the Moldovan-Ukrainian border on March 3 is being implemented for the third month, but the attitude of the main participating actors towards this measure has not substantially changed

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