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Activity of Public Institutions

Parliament
Government
Presidency

Political year 2006
Elections in Gagauzia – a new beginning or deja vu? by Igor Botan
Dilemma of economic growth by Iurie Gotisan
Implications of Romania’s accession to EU on Moldovan-Romanian bilateral relations by Monica Sitaru

Activity of Public Institutions

Parliament

1.1. Appointments

The Parliament has appointed members of the Board of Observers of the national public broadcasting company TeleRadio-Moldova, with at least 3/5 lawmakers voting every candidate selected by the competent parliamentary commission. The Parliament appointed Ludmila Barbus (for a 3-year term); Alexandru Burean (2 years); Viorel Cibotaru (2 years); Veaceslav Ionita (2 years); Anatol Dubrovschi (3 years); Boris Focsa (4 years); Victoria Musteata (3 years); Igor Munteanu (4 years); Mariana Slopac (4 years). The Board of Observers has the following tasks: approves the statute of the company; assesses the performance of the company and its administration; confirms the chairman of the company, director of the radio department and director of television, etc., on basis of a contest.

1.2. Legislative acts

• Package of laws on local public administration reform: law on administrative decentralisation; law on local public administration (it also includes provisions on district city halls and councils of the Chisinau municipality, apparatus of the municipal council); law modifying legislative acts on local public finances; law on regional development. The document derives from the action plan on fulfilment of commitments toward the Council of Europe, with speaker saying that by adopting these legislative acts, all commitments on "reform and local autonomy" are honoured.

• Law on general security of products. The law establishes the general legal framework ensuring the security of products sold in Moldova and it is applied at the extent of absence of technical regulations on security of these products.

• Law on activity of technical regulation. It explains the legal bases of technical regulation with the purpose to eliminate technical barriers on way of trade. The law establishes general requirements on composition and mode of regulation and supervision and protection of domestic market against dangerous, counterfeited products and those unfitting the prescribed and/ or declared requirements. The technical regulation is a prerogative of the state.

• Law on public debt, state guarantees and state re-crediting. The document explains the public debt, regulates its reference, establishes the goal, mode of contracting, disbursement, reimbursement, registration and administration of state debt, granting of state guarantees and re-crediting of means raised from state loans.

• Law on mandatory civil responsibility insurance for damages produced by motor vehicles. The document regulates the legal relations between insurers, insured persons and individuals and legal entities that derive from mandatory motor civil responsibility insurance for damages produced by motor vehicles, as well as the mode of implementation of this insurance.

• Law on insurance. The document regulates the organisation and functioning of insurance, insurance-reinsurance and reinsurance societies, as well as activity of insurance and/ or reinsurance intermediaries, organisation and functioning of the supervision authority, supervision of activity of insurers and re-insurers working inside or outside of Moldova, supervision of activity of intermediaries of insurance and reinsurance and other related activities.

• Law completing the law on abolition of visa regime for citizens of some states. The Parliament has decided to include the citizens of Norway and Iceland in the category of persons allowed to enter Moldova without visas.

• Law on modification and completion of the Parliament’s Regulation. The document has introduced many amendments declared to be needed for a better legislative activity and activity of working bodies of the Parliament. The law was adopted by Communist, Christian Democratic and Democratic factions. The faction of the Our Moldova Alliance (OMA), lawmakers representing the Social Liberal Party and the Party of Social Democracy, as well as unaffiliated parliamentarians boycotted that sitting of the Parliament, describing the draft and amendments as undemocratic, abusive and limitative and claiming that they neglect amendments and rights of opposition lawmakers unaffiliated to parliamentary factions. OMA faction said that it will contest the law in the Constitutional Court.

• Law on ratification of the framework agreement on foreign assistance between Moldovan Government and the Commission of European Communities. The Ministry of Economy and Commerce will take the measures needed to implement this agreement.

• Law annulling some old debts included in the object of the memorandum agreement, of some enterprises that implement reorganisation plans. Enterprises which honour their commitments and implement reorganisation plans (16 businesses overall, penalties and sanctions in the amount of over 40 million lei and more than 6 million dollars) are exempted from all old penalties and financial sanctions (accordingly to data for January 1, 2006), calculated and unpaid to the state and state welfare budgets, included in the object of memorandum agreements signed with the Board of Creditors.

• Laws modifying and completing the law on pay system in budgetary sector: the law was completed with provisions that:
  • prolong the term when salaries must grow (till December 1, 2007, January 1, 2008, January 1, 2010); annul certain additional payments for public functionaries (for speaking some foreign languages); introduce additional remunerations (30 percent of the basic salary) for public functionaries from localities from the left bank of the Dniester river controlled by Moldova. The parliamentary opposition has criticised the decision that postpones salary rises, saying that the Government’s arguments regarding the shortage of funds in the 2007 budget are not cogent since salaries do not cover the consumption basket and the governance distributed about 350 million lei to the National Bank and a state-owned enterprise in late 2006. Representatives of the Communist faction replied that they will ask the Government to take measures in order to identify additional funds in the process of execution of the 2007 state budget.
  • introduced 200-leu monthly indemnities for personalities who hold the titles "of People" and "Master of Art". Holders of the titles "Honour Person", "Skilful Master" and "Master of Literature" will be paid 100-leu indemnities a month.

• Law modifying and completing the law on making and trading of ethyl alcohol and spirits. It introduces provisions on: record of quantity of made production and concentration of alcohol through measurement, registration and control systems with fiscal memory, legalised and verified from metrological viewpoint accordingly to requirements from normative acts and documents; storage and delivery of spirits in bulk to domestic and foreign markets by producers of alcohol production only; regulation of exportation of raw wine and grape wine in bulk by Government; introduction of some restrictions for retail sale of spirits, etc.

• Law on mandatory health insurance funds for 2007. The price of a policy will grow by about 400 lei compared with 2006, which the state will pay for mandatory health insurance premiums of persons who look after 1st-degree disabled children under 16 at home and mothers who have at least seven children.

• Decision on status, structure, estimate and limit of salary of members and workers of the electronic media watchdog CCA. It approves the regulation on procedure and requirements for issuance of broadcasting licences and retransmission authorisations, the 2007 budget of CCA (about 2 million lei), staff of the CCA apparatus, etc.

• Law modifying the law that ensures military and members of command body and troops of interior affairs bodies with pensions. It stipulates the annual indexation of pensions on April 1, depending on growth of the consumer price index for the precedent year. The implementation of this law in 2007 will cost about 42 million lei.

• Parliament’s decision approving the action plan on implementation of the 2007–09 national strategy on the prevention and combat of corruption. The plan includes chapters seeking: improvement of legislative framework and ensured implementation of legislation; prevention of corruption in public institutions and private sector; intensification of cooperation between public institutions and civil society; extension of international cooperation.

• Draft law on political parties. The draft was tabled by representatives of the Communist and Christian Democratic factions, being promoted emergently without public and preliminary debates, the emergency being motivated with the need to implement the action plan on fulfilment of recommendations and commitments toward the Council of Europe. The essential innovation of the document envisages the financing of parties from state budget depending on electoral performances. Lawmakers representing the Our Moldova Alliance, the Social Liberal Party and the Party of Social Democracy, unaffiliated parliamentarians criticised this document, warning against imperfect provisions, discordance with constitutional norms, international practices and recommendations. Developers of this document did not comment on opportunity of promoting a new draft since the Parliament has earlier passed in the first reading a new complex law on parties and other social political organisations promoted by Government (Government Decision # 780 from 02.09.2000), but noted that the included innovations aim to enhance transparency of parties, their responsibility, financial support from public budget. The document will be sent to the Council of Europe for expertise and it will be examined in the final reading later.

• Draft law on administration and privatisation of public property. It regulates relations related to administration and privatisation of public property in non-budgetary sector of national economy (gaining, exercising and ceasing of the property right of state and/ or administrative territorial units; privatisation of public property will include the transmission of public patrimony for private property (privatisation) and granting of public services, transmission to property of administrative territorial units. The public patrimony except for public finances, patrimony of public institutions, farm land and residences will fall under incidence of this law.

1.3. Totals of activity

Totals made by parliamentary factions

Eugenia Ostapciuc, chairwoman of the parliamentary faction representing the Communist Party of Moldova, has said that the Parliament adopted a number of legislative acts of major importance, remarking distinctly the 2007 state budget law. She acknowledged that parliamentarians have also approved some legislative acts with a "certain negative impact on some categories of population", but their implementation will improve the life of residents.

Serafim Urechean, chairman of the Our Moldova Alliance, has noted that other opposition parliamentary forces avoid criticism against governance, while chief of state did not want to attend the festive plenary sitting. Urechean considers that the rescuing trends registered at the end of the year are due to citizens and foreign partners, international organisations that support Moldova, rather than to Government’s efforts.

Valentina Buliga, representative of the parliamentary faction of the Democratic Party of Moldova (DPM), has described the Parliament’s activity as productive, though the majority does not hear the opposition sometimes. DPM will call for a constructive approach of problems related to the Power-Opposition relations, considering the boycott and bitter criticism as inefficient measures.

Iurie Rosca, chairman of the Christian Democratic People’s Party (CDPP), has outlined two key accomplishments in his speech: political stability and partnership between Power and Opposition. CDPP has understood much better that all economic and social difficulties must be tackled constructively in order to find practical and lasting solutions. Rosca noted that the Power and Opposition have solitarily voted for the first time in 15 years of independence the state budget law that included a majority of proposals and amendments by CDPP. He also highlighted the cooperation in implementing the Broadcasting Code, modification of legislation on local autonomy, improvement of Parliament’s Regulation, adoption of a new law on political parties in the first reading. The considerable financial support of donor institutions and state is a success of interior and foreign policy, it is a response to the "atmosphere of cooperation and political stability due to the Power-Opposition partnership."

Totals made by speaker

Marian Lupu has revealed quantity parameters in his speech: the Parliament adopted 168 legislative acts, including 22 new laws, at 27 plenary sittings from the autumn session. The main documents include: the 2007 state budget law; the 2007 state welfare budget law; the 2007 law on mandatory health insurance funds; the law on public debt, state guarantees and state re-crediting; the law on technical regulation activity; the law on general security of products.

The implementation of the legislative action programme that results from Moldova’s tasks as a member of the Council of Europe included amendments on judicial reform (adoption of the law on status of penal investigation officer and law on international legal assistance in penal matters), consolidation of local autonomy (the package contains the law on administrative decentralisation; the new law on local public administration and the law on modification of the law on local public finances, the law on regional development), amendments and completions to the Parliament’s Regulation, recent adoption in the first reading of the law on political parties. The legislative programme was partly implemented in 2006 because the Government did not present a number of drafts included in this programme and this situation raises the concern of lawmakers and requires a more serious approach, especially regarding adjustment of legislation to the "acquis communautaire".

The speaker considers that more attention should be paid in future to exercising of the parliamentary control function, and new tools are needed for this purpose. The prospects include the start of some projects aimed to analyse the socio-economic impact of legislation, to diagnose their implementation.

Government

2.1. Appointments. Reshuffles

Valeriu Turcanu was relived from the post of deputy minister of culture and tourism, as this office was suppressed from ministry.

Valeriu Grumeza was relived from the post of chief of the Balti Territorial Office of the Ministry of Local Public Administration.

2.2. Decisions

• Decision on drafting, implementation, monitoring and assessment of the National Development Plan (NDP) of the Republic of Moldova for 2008–11. It approves an action plan on elaboration, establishes an institutional framework on drafting, implementation, monitoring and assessment of the plan (interministerial committee, the Ministry of Economy and Commerce, other ministries and central authorities, participation council). The Ministry of Finance will plan the medium-term expenditure accordingly to financing priorities of NDP, while the Ministry of Local Public Administration will ensure the participation of local authorities in the process of drafting and implementing the NDP.

• Decision on rules of elaboration and unified requirements on policy documents. The document is drafted in accordance with the central public administration reform strategy to improve the decision-making process.

• Decision approving the regulation on activity of coordinator in the field of human rights. The document was drafted in compliance with the national action plan on human rights after consultation with competent public institutions and nongovernmental organisations.

• Decision on marking of spirits. The regulation on modality of marking excised spirits with excise stamps and state trademarks, the regulation on marking spirits for exportation with state trademarks were approved to intensify the control on quality of alcohol production. Starting January 1, 2007, the exportation of spirits without state trademarks from Moldova’s customs territory is prohibited.

• Decision approving the Agreement between Moldovan and Romanian Governments on reciprocal travel of citizens. The agreement will be delivered to the Parliament for information, while the decision on approval does not contain any express reference to publication of this document and information of citizens about its contents.

• Decision approving the 2007 single mandatory health insurance programme. According to the Ministry of Health, the list of medical services will be extended with 25 percent compared with 2006. Thus, the number of compensated medications for diseases at digestive and cardiac systems was increased. Finances for hospitalised patients and ambulatory services were increased. The mandatory health insurance premium will cost 1,209 lei for unemployed persons in 2007, while workers will pay 2.5 percent of their monthly salaries.

• Decision approving the framework regulation on functioning of hostels. The document stipulates the arrangement of reading, computer and entertainment rooms in hostels, respect for sanitary accommodation norms (at least six square metres for every person); signing of a rent contract between beneficiary of a place in hostel and educational institution, a document which would stipulate the rights and obligations of every party.

• Decisions approving draft laws:
  • on ministerial responsibility;
  • on sanitary-veterinary activity;
  • on modification and completion of the Criminal Code (sanctions for exploitation of children).

• Decision on allocation of finances. Newspapers Moldova Suverana and Nezavisimaya Moldova have received assistance in the amount of 376,839 and 81,326 lei to pay debts toward the printing company Universul ^[1].

• Decision on mandatory purchase of antibiotics from Farmaco enterprise. The executive has obliged public medical-sanitary institutions to buy antibiotics from Farmaco enterprise only, while the state agency in charge with procurements will monitor the signing of acquisition contracts with this economic agent alone. Although these products are dearer compared with those made by some foreign producers, the Government considers that this decision will contribute to development of Moldovan pharmaceutical industry and will ensure the necessary security guarantees.

• Orders on sanctioning of health officials. The ministry is warned over inefficient control on public auctions organised by subordinated institutions to purchase medical devices. The ministry is told to hand in disciplinary sanctions to persons who violated the legislation on organisation of public auctions for needs of the Republican Clinic Hospital, so that auctions were suspended.

2.3. Sittings. Decisions. Statements

Results of implementation of Government’s action programme

According to a generalised report, the main components of the 2005–09 Government’s action programme Modernisation of the Country – Welfare of People are: the Economic Growth and Poverty Reduction Strategy Paper (EGPRSP), the Moldova-European Union Action Plan and the National Programme Moldovan Village. The document making the totals for 2006 notes that the development of national economy was affected by negative impact of foreign factors, which hit the macroeconomic indicators and economic sectors. Evolutions in 2006 reveal some problems in development of national economy, which may have a negative influence on its further development:

• rise of gas prices and obstacles on way of exportation of agricultural production, especially of wines to traditional markets;
• the dependence of national economy on foreign factors has grown;
• imports of goods have grown, while exports have declined;
• volume of industrial production has dropped, etc.

Better discipline

Moldova’s president has told the last governmental sitting in 2006 that discipline in executive has improved much in the past years. Vladimir Voronin noted that in spite of the complicated situation in 2006, the development principles of Moldova were maintained, national plans and programmes were implemented and, therefore, the chief of state is satisfied with Government’s activity. Voronin indicated among shortcomings the process of implementation of the E.U.-Moldova Action Plan and the Transnistrian problem.

A new sitting on passenger carriage system

A working sitting chaired by prime minister has warned competent bodies over need of modernising, distributing and including all motor stations in a single service system. Vasile Tarlev highlighted the need of holding a complete technical control on motor coaches, training motorists at a high level, ensuring transparency of the system, especially of money circulation record. The prime minister ordered an analysis in the field of formation of prices for cargo and passenger carriage services and solutions for this sector.

Implementation of social programmes

A sitting with the participation of officials in charge with welfare and healthcare sectors has studied the pace of implementation of the programme on free ensuring of retirees and invalids with eyeglasses, which was launched and it is implemented accordingly to the schedule.

A programme on free ensuring of deaf people with hearing devices was recently launched and an auction was already held to purchase the first 1,500 devices, which will be delivered to beneficiaries in early 2007 (more than 2,500 devices are needed).

The first 600 tons of coal went from state reserves to socially vulnerable people who paid accessible prices.

Serial manufacturing of devices invented by Moldovan scientists

Prime minister has ordered the creation of a task force to work out an efficient mechanism for certification, manufacturing and sale of devices invented by Moldovan scientists. The decision was made after Premier Tarlev has visited the Institute of Electronic Engineering and Industrial Technologies of the Moldovan Academy of Sciences. Tarlev wants a more efficient use of scientific elaborations, with the Government regarding their inclusion in economic circuit as a key direction of economic growth.

3. Presidency

3.1. Decrees

Chief of state has appointed chairpersons and deputy chairpersons of law courts, judges (who were selected at a contest for selection of instruction judges before age limit). This way, nine vacant offices have been filled.

3.2. Sittings. Decisions. Statements

Annual news conference

Vladimir Voronin summarised some problems "of general policy" in an introducing speech delivered at a December 20, 2006 news conference: European integration; neutrality and relations with other states. The chief of state reproached journalists with reporting sombre scenarios regarding Moldova’s future, not liking the governance and not supporting authorities’ efforts from information point of view. As regards political problems, Voronin said that:

• he is unsatisfied with the pace of the process "called European integration" and he shows a "red card" to the Government for this failure;
• the stance of the power regarding Moldova’s neutrality does not change; the path of Moldova to Europe is the way of a neutral country;
• the dialogue with Russia is based on new principles, but this country remains the strategic partner of Moldova. The settlement of the Transnistrian problem will be tackled in continuation "in a professional manner" within these relations;
• the Chisinau authorities do not want to discuss a privileged partnership, friendly relations with Romania, but cooperation with a member state of the European Union;
• investments in Moldova will be accepted after a serious studying of their origin and quality, while privatisation will be accepted only for high prices, with clear advantages for state;
• he is ready to accept a national or international investigation regarding properties of his family, but with the condition that those who have accused him of frauds tender resignation, if the accusations are not confirmed;
• the recent elections in Gagauzia were democratic, respected national and international rigours in the field, while cooperation with newly-elected governor must confirm political stability in the region, development of the autonomy in the same context with the whole country;
• the presidency remains neutral in the conflict related to Antena C and Euro TV and eventual violations in this process must be sanctioned in compliance with legislation.

Sitting on implementation of the European Union-Moldova Action Plan

The next day after he has shown the "red card" to the Government for failures related to European integration, the Moldovan president chaired a sitting on implementation of the EU-Moldova Action Plan, with the participation of heads of central public administration authorities in charge with implementing this document.

The Government was bitterly criticised for inefficiently coordinating activities in the process of implementation of the Action Plan at national level, insufficient cooperation between all executive structures for adjustment of integration efforts. In particular, the chief of state was unsatisfied with how Moldova honours its commitments on reform of justice and prosecutor’s office, highlighting the need of "a strict parliamentary control on the reform process in the field."

Vladimir Voronin also indicated the opportunity of establishing a concrete mechanism of presentation of Moldova’s official stance regarding certain issues based on a tight cooperation between all ministries and departments participating in its elaboration to European institutions. He outlined the need of introducing a single national mechanism with clear competences of competent institutions, which would consolidate the capacity of absorption of financial assistance of the E.U., with funds being directed to priority fields and administrated efficiently.

The chief of state concluded that he would not tolerate some irresponsible attitudes toward implementation of the E.U.-Moldova Action Plan, a document of strategic importance which is fundamental for future of our state, and he is waiting for immediate and firm actions of heads of central public authorities that must shortly produce clear results.

Concerns with exploitation of subsoil

A sitting of the Supreme Security Council convoked at the initiative of Moldovan president has examined the legality, ecological and economic security of exploitation of subsoil. The chief of state raised concern with alarming situation in this field, created due to the lack of an adequate control of the state. Vladimir Voronin revealed that subsoil in Moldova is exploited and administrated extremely inefficiently and this field of activity has turned into a very profitable field dominated by illegal and criminal interests. He bitterly criticised the existing practices when economic agents participating in exploitation of mineral substances establish prices of extracted natural resources without any grounds, while taxes paid to the state budget for activity in this field are symbolical or the obligation of paying these taxes is neglected.

The Moldovan president said that the introduction of strict regulations by state in the field of exploitation of mineral deposits could and should normalise the prices of building materials and prices of residences implicitly. The state is in charge with establishing conditions for use and administration of goods of subsoil, including policy on prices of useful mineral substances. Competent authorities were told to take complex measures in order to ensure a strict control on administration and exploitation of subsoil of Moldova, so that to prevent grave damage on interests of state and citizens in future.

Economic Policies

1. Inflation and prices

Prices will reach a seasonal maximum…

The inflation rate will unlikely be lower than 1.5 percent in December 2006 and, therefore, we may expect an inflation rate of over 14 percent for this year. The growth will be particularly due to higher prices of food products, which will be produced, of course, by euphoria of winter holidays inclusively. Inflation means a devaluation of salary, pension, savings from banks and other earnings for a common citizen.

Where it is more reasonable to buy fruits and vegetables in this period?
(Medium prices established in lei)

Name              Supermarket   Central market   Wholesale market
Potatoes          8             3.5-4            3
Tomatoes          23            18-20            16-18
Cucumbers         20            14               12
Peppers           40            33               25
Garlic            25            20               16-17
Onion             9             5-6              4
Cabbage           8             3-4              2
Beet              4             3                2
Carrots           4-5           3.5              2
Vegetable marrows 30            26               23 
Eggplants         34            30               25
Dates             30            22               17
Oranges           25            16               12-13 
Mandarins         21            15               12
Kiwi              35            25               22-24 
Bananas           22            15-16            12
Lemons            18            14               11
Pomegranates      36            25-28            22-25

Source: Our estimates

2. Real sector

Alarm must be beaten in industry…

The Ministry of Economy and Commerce (MEC) has made some forecasts for 2007 at the end of this year. It forecasts a 4-percent economic growth and a 10-percent inflation rate. The GDP rose by 4.6 percent in ten months of this year and MEC estimates a growth of about 4 percent for the 12 months of this year.

According to generalised results of implementation of the Government’s action programme Modernisation of Country – Welfare of People in 2006, the indicator of industrial production was 92.9 percent compared with January-November 2005 and it declined by 7.1 percent compared with the similar period of 2005. The decline of industrial production in the period concerned, compared with January-November 2005, was due to reduction of production volume by producers of wines, distilled alcohol drinks, cigarettes, glass and glass items, paper and cardboard.



Source: NBM, NBS and our estimates

3. Financial-banking system

Banks continue to grow constantly…

According to statistics of the National Bank of Moldova (NBM), the 1st-degree capital in the banking system rose by 22.2 percent in ten months of 2006, up to about 3.45 million lei (265.4 million dollars). At the same time, the share of foreign investments in capital of banks was 55.2 percent and rose by 4.6 percentage points compared with late 2005, after the registered capital has grown on account of investments of non-resident shareholders. At the same time, the total assets of the banking system rose by about 21.7 billion lei (1.67 million dollars) or by nearly 21 percent in January-October 2006.

Credits offered to industry and trade count for 48.9 percent of the total, followed by those for agriculture and food industry – 20.4 percent, real estate, construction and development 9.2 percent, and consumption 8.6 percent. As of November 1, 2006, 15 stock commercial banks were working in Moldova, including three branches of foreign banks. There were 956 specialised institutions of banks.

Currency reserves of NBM are evaluated at about 721 million dollars. According to the programme with IMF, currency reserves of Moldova are expected to account for 750 million dollars at the end of 2006, by 152.5 million dollars more than registered in late 2005. The central bank will probably intervene in continuation on currency market by massively purchasing currency, but these measures will perpetuate more the inflation, contrary to the priority goal of NBM – stability of prices.

4. Labour market

Medium salary on economy has grown…

The medium salary on economy amounted to 1,875 lei (140 dollars) in November or by 95.3 lei more than in October. The medium salary in budgetary sector amounted to 1,553 lei (119 dollars), while the average pay in real sector of economy accounted for 2,049 lei (157 dollars).

Statistics also show that teachers earned 1,231 lei (94 dollars) on average in October, doctors and social assistants were paid by 1,377 lei (105 dollars), while farmers got 1,353 lei (104 dollars) on average. Salary arrears on economy exceeded 134 million lei (10.3 million dollars) on November 1, by 21.1 million lei (1.6 million dollars) more than on July 1, 2006.

5. Foreign trade

Commercial relations with Romania will stagnate, at least in the first half of 2007…

Trade exchanges between Romania and Moldova will decline in the first three months of 2007 after cancellation of the free trade agreement between the two sides. At the same time, they could be influenced by incapacity of Moldovan firms to meet and respect the standards of the European Union.

On the other hand, the Chisinau authorities invest big hopes in the new free trade agreement CEFTA, which was recently signed in Bucharest. Moldovan exports to Romania were valued at 120 million dollars in January-October 2006 and grew by 32.4 percent compared with the same period of 2005, while imports rose by 34.8 percent, up to 280 million dollars.

Transdnistrian Problem

An optimistic end of the year on the Transnistrian conflict settlement

After a year when the political talks on Transnistria were basically stopped, the joint bodies of control set up according to the ceasefire agreements practically did not function, the Russian Federation has granted more massive and overt political, economic and social support to Transnistria than ever, and the Transnistrian authorities have strengthened their position by staging two actions with significant propagandistic effect – the September referendum and the December "presidential elections", the end of 2006 has witnessed a number of quite optimistic statements on the prospects of the Transnistrian conflict settlement from Moldovan, Russian and Ukrainian officials.

Thus, between 19–20 December the Moldovan Reintegration Minister, Vasile Sova, and the Presidential adviser on foreign policy issues, Mark Tkaciuk, visited Moscow where they discussed Transnistria with a number of high-ranking Russian officials. According to a Ministry of Reintegration communique, the sides stressed the need to continue consultations among all actors regarding the resumption of political talks. The visit has been a reason for the Russian Foreign Minister, Serghei Lavrov, to state that "the dialogue with Moldova proceeds well". "There is an honest, correct and professional dialogue on all issues, including the commercial-economic ones. All these problems are being solved consistently. We are happy with the way the agreements reached between the Russian and Moldovan Presidents are being implemented", said Lavrov, referring to the agreements reached between the two presidents during their bilateral meetings in August in Moscow and November in Minsk in 2006.

Resonating with these statements, President Voronin has stated during his end of the year press conference that "certain progresses" have been achieved on the Transnistrian settlement. He expressed his special satisfaction at the course of consultations between Moldovan and Russian officials, "which are taking place in an open manner, with EU Member States ambassadors being kept informed on each round".

And finally the Transnistrian issue was on the agenda of the discussions between the Russian President Vladimir Putin and his Ukrainian counterpart during the former’s visit to Kiev this December. According to the electronic news portal NR2.ru, during the joint press conference the two spoke about the progresses reached on Transnistria in the past months. "In the past months we believe that certain progresses have been reached. On the one hand, the customs regime is ensured, which has reduced the tension to a large extent, and, on the other hand, the passenger and goods traffic has been re-established as has been the railway transportation between Ukraine, Russia, Transnistria and Moldova", President Yushcenko stated. "We believe that today there exist all the premises to speak about the prospects of resumption of the "5+2" talks", Yushcenko added. On the other hand, President Putin stated that Russia and Ukraine "can give a new push to the Transnistrian settlement".

Smirnov’s "inauguration" and forecasts for the future

In the meantime in Tiraspol took place the "inauguration" of the new elect "president" of Transnistria, Igor Smirnov. The pompous ceremony gathered the cream of the Transnistrian "establishment" as well as guests of honour, such as for example the "president" of another unrecognised republic, Sergei Bagapsh of Abhazia. After making the oath with his hand on the "constitution", Smirnov held his inaugural speech in which he reiterated the break away entity’s orientation to Russia and has noted the progress already reached in harmonising the Transnistrian laws with the Russian ones, cooperation projects in the social and cultural fields, etc.

The Transnistrian "presidential" elections and Smirnov’s "inauguration" have triggered numerous comments by observers both from Moldova and abroad. Thus the Moldovan political analyst, Oazu Nantoi, has remarked in a comment that Smirnov’s fourth mandate will also be his final one. According to Nantoi, this will happen because in the next years the "value of the Transnistrian pawn for its Moscow masters" will significantly decrease. The latter might want to replace Smirnov with a "cleaner successor" and thus the "absurd theatre show called the Transnistrian conflict will go on". A more optimistic scenario however could be that the process of territorial reintegration of Moldova might be relaunched before a successor to President Putin takes over in Moscow. According to Nantoi this is the scenario that President Voronin is trying to put into practice and to which the latest developments in the Moldovan-Russian relations indicate.

In a comment published on 14 December, the News Agency Moldpres has forecast that although Smirnov will have to remain loyal to Moscow mainly due to the large Transnistrian debt for Russian gas consumption, Russia might abandon Transnistria at some point in exchange for more loyalty from the West or concessions from Ukraine. According to Moldpress, hence Smirnov’s efforts both during his electoral campaign and after it to maintain Transnistria in the Russian range of attention. At the same time it is expected that Smirnov will reform the Transnistrian administration, which has fully proved its inefficiency. However, his biggest challenge will be to preserve the balance of power with the Scheriff Company whose power ambitions are on the rise, concludes Moldpres.

On the other hand, the British analytical centre, Oxford Analytica, has written that the 10 December "elections" have considerably consolidated Tiraspol’s position in its relations with Chisinau and have considerably distanced an eventual resolution of the Transnistrian conflict. The think tank assumes that the resumption of Moldovan wine exports to Russia might have been conditioned by Moscow with the revitalisation of the ill-fated Kozak Memorandum. And given that Ukraine seems incapable of counter-balance Russian influence, Moldova finds itself in a very vulnerable position and only US and EU support may consolidate Chisinau’s position.

Foreign Affairs

Republic of Moldova – Council of Europe

The European Court of Human Rights (ECHR) sentenced Moldova on December 19, 2006 in the case Moisei vs. Moldova. The ECHR concluded that a previous judgment in favour of the applicant was not executed without plausible grounds, so that Article 6 (1) and Article 1 of Protocol 1 of the European Convention on Human Rights were violated. As the applicant did not benefit from an effective appeal, the ECHR has also indicated the violation of Article 13 of the Convention. The Court ordered the payment of 192 euros in pecuniary damage, 500 euros in non-pecuniary damage and 600 euros in costs and expenses.

The same day, the ECHR decided on the case Oferta Plus vs. Moldova. The applicant has claimed the violation of the right to a fair trial and protection of property through non-execution of a final judgment (on payment of 20 million lei) by national courts and its further revision, at the request of the Prosecutor-General’s Office. The ECHR noted that the non-execution of the final judgment and its annulment contravene to Article 6 of the Convention and Article 1 of the Additional Protocol. The Court considers that the penal investigation against director of the applicant and his arrest aim to discourage the applicant in maintaining his application to the ECHR, this being a violation of Article 34 of the Convention. The problem of non-pecuniary and pecuniary damages (estimated at 1.2 million euros), costs and expenses will be resolved under a distinct ECHR judgment. Representatives of the applicant in front of ECHR have published the names of persons who are to blame for the sentencing at www.lhr.md.

Republic of Moldova – European Union

On December 19, 2006, the European Union (EU) Council adopted mandates that empower the European Commission to negotiate agreements on readmission and facilitation of visa regime between the EU and Moldova.

The signing of these agreements is stipulated by objectives 47 and 48 of the EU-Moldova Action Plan, the start of negotiations on facilitation of visa regime being a priority of Moldova’s dialogue with the EU in 2006. Given this: an interministerial working group was created in March 2006 so that to work out a draft national action plan on facilitation of visa regime for EU; the Parliament adopted on June 8, 2006 the law on abolition of visa regime for citizens of EU member states, the US, Canada, the Swiss Confederation and Japan, a list completed in December with Norway and Iceland; the Government approved in November 2006 the mentioned national action plan.

However, President Voronin was unsatisfied at a news conference held to make the totals of 2006 that negotiations on facilitation of visa regime did not start in 2006 and he was angry with the lack of a visible progress in gaining the Autonomous Trade Preferences of the EU. For comparison, assessments by the European Commission regarding implementation of the first seven action plans signed with the EU within the European Neighbourhood Policy (ENP), published on December 4, 2006, show that Ukraine initialled the agreements on readmission and facilitation of visa regime with EU in October 2006.

Generalising his dissatisfaction with the pace of the European integration process, President Voronin warned that "I will show a red card to Government, if things go the same way in continuation." President Voronin has reiterated similar criticism at a meeting on implementation of the EU-Moldova Action Plan, with the participation of important decision makers. The chief of state invoked: the inefficient coordination at the national level of the activities undertaken in the implementation process of the Action Plan; the unsatisfactory coordination between ministries and departments participating in cooperation with community institutions; failure of Moldovan representatives to honour commitments or their late fulfilment.

In the context, Vladimir Voronin demanded that 2007 become the stage of some decisive and unordinary measures aimed at proximity with the EU. For this purpose, he highlighted the need of working out an action plan on basis of an analysis of the progress report for Moldova within ENP, published by the European Commission on December 4, which would exclude any possibility to fail the recommendations by European experts. The president also indicated the need of establishing a single national mechanism with well-chosen competences of responsible institutions, which would consolidate the capacity of absorption of financial assistance from EU.

Later, President Voronin has told the last sitting of the cabinet of ministers held in 2006 that mistakes and delays in the European integration process "were not committed deliberately, but on the contrary."

Republic of Moldova – Romania

Romanian President Traian Basescu has said among others in an interview with the French publication Les Dernieres Nouvelles d’Alsace that many Moldovans are trying to obtain the Romanian citizenship. At present, Basescu noted, there are 450,000 naturalisation applications submitted especially by youths willing to study or work in Romania. At the same time, the Romanian president hinted that Romania will not take unilateral measures to award the Romanian citizenship and this issue will be consulted with the EU.

Speaking about Transnistrian problem, President Basescu said that its resolution would be simple, if the international law was respected and if the international community respected the integrity of every state and inviolability of borders. In the context, the Romanian president called for respect for international law and invited Russia to honour its commitments and withdraw its troops from Transnistria.

Republic of Moldova – Russian Federation

President Vladimir Voronin has told the totalling news conference mentioned above that the atmosphere in which the Moldova-Russia dialogue is developing is based on new principles. Moldova and the Russian Federation, the president continued, have never worked in such a tight contact and such an intense regime before. According to President Voronin, the Moldovan-Russian ties have gradually improved after his August 8, 2006 meeting with Russian President Vladimir Putin. The Moldovan president noted that Russia was and will be the strategic partner of Moldova and he expressed his belief that stances of Chisinau and Moscow regarding the Transnistrian settlement process will also approach.

Russian Foreign Minister Sergey Lavrov has appreciated the Moldovan-Russian relations in a relatively similar manner. He told a conference held to make the totals of the diplomatic year 2006 that Russia’s relations with Moldova are based now on "a honest, concrete and professional dialogue, including commercial-economic ties." According to the Russian minister, existing commercial problems are gradually resolved and a favourable base for resolution of other problems is being created. This dialogue, Lavrov continued, is "normal, without elements of show […], as the two heads of state have agreed," noting that Russia is satisfied with implementation of the earlier reached agreements.

Some recent evolutions in bilateral dialogue confirm the trends to extend the Moldovan-Russian relations. Experts of the Russian Service Rosselihoznadzor have inspected some Moldovan meat processing enterprises to identify companies "which respect all sanitary-veterinary requirements" for resumption of meat and sausage exports to Russia. Secondly, the signing on December 27, 2006, in Moscow, of a bilateral Protocol on concluding negotiations between Russia and Moldova regarding accession of Russia to the World Trade Organisation (WTO) may be invoked. Minister of Economy and Commerce Igor Dodon was announcing earlier that Moldova would like to obtain instead the signing of an export taxation agreement, especially the one on Russian natural gas. Russia is still applying VAT on natural gas exports by Moldova, while WTO requirements stipulate that the destination country, not the exporting country must apply the VAT.

Under recent agreements with Russia’s Gazprom, Moldova will pay 170 dollars per 1,000 cubic metres of natural gas in 2007, 75 percent of the European average in 2008, 90 percent in 2009, and the price will be adjusted to the European average starting with 2011. This gradual rise of natural gas price is seen as a result of the extension of bilateral relations. At the same time, Russian media outlets said that Moldova accepts to cede the gas distribution networks to Gazprom and to increase the participation of the Russian concern in the Moldova-Gaz society in exchange for a gradual rise of the gas tariff. First Deputy Premier Zinaida Greceanii replied that Moldova will capitalise the distribution grids and will include them in the registered capital of Moldova-Gaz, while the sides have agreed not to touch the shares.

CEFTA

Moldova attended the CEFTA summit in Bucharest on December 19, 2006. Taking part in the meeting were also Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Macedonia, Montenegro, Romania, Serbia and Kosovo. Moldova along with other participating states signed the agreement on modernisation and enlargement of CEFTA, becoming part of this agreement, and undersigned to a joint declaration.

The agreement on modernisation and enlargement of CEFTA, known as CEFTA 2006, replaced the old Central European Free Trade Agreement signed in 1992 and bilateral free trade agreements. CEFTA was created in December 1992 by founding members the Czech Republic and Slovakia (Czechoslovakia in that period), Poland and Hungary. Romania joined the CEFTA in 1997, Bulgaria in 1999, Croatia in 2003 and Macedonia in 2006. An initial goal of CEFTA was to prepare member countries for accession to the EU and this aim remains in force for CEFTA 2006, being reiterated in the joint declaration. The Czech Republic, Slovakia, Poland and Hungary had withdrawn from CEFTA when they joined the EU, taking over the commercial policy of the EU, and Romania and Bulgaria will do the same on January 1, when they will become EU members.

CEFTA 2006 calls for the annulment of import and export duties, quantity restrictions and other taxes with equivalent effect in trade with industrial products and majority of agro-industrial products. The new agreement also contains provisions on trade with services, intellectual property, procurements, investment promotion, customs management and preferential origin rules, procedure and conditions for implementation of safeguard measures and commercial protection tools. CEFTA 2006 corresponds to WTO norms and obligations of the Parties in relations with the EU.

CIS

Minister of Economy and Commerce Igor Dodon represented Moldova at the 32nd sitting of the CIS Economic Council in Moscow on December 27, 2006. The sitting tackled problems related to energy, transportation, construction, etc. Also, the Council examined measures to combat the penetration of counterfeited medications on CIS markets and the draft concept on tariff policy in the field of railway transportation coordinated by CIS members.

Studies, Analyses, Comments

Political year 2006
30 December 2006

The political year 2006 was difficult for Moldova. It began with the gas crisis and the gas price rose two-fold in the second half of 2006. It was followed by Russia’s embargo on wines, Moldova’s main products for export

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Elections in Gagauzia – a new beginning or deja vu?
Igor Botan, 30 December 2006

The Comrat-based Court of Appeal confirmed on December 22 the legality of the two rounds of elections held on December 3 and 17 and the election of the leader of the regional opposition, Mihail Formuzal, as governor of Gagauzia

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Dilemma of economic growth
Iurie Gotisan, 30 December 2006

I have indicated in the precedent issue of our publication the growth of GDP in January-September 2006 and benefits "harvested" by common people from this rise. With permission of our readers, I will develop the same topic in this article

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Implications of Romania’s accession to EU on Moldovan-Romanian bilateral relations
Monica Sitaru, 30 December 2006

As it was already said, the accession to the European Union (EU) is a historical moment for Romania. But the moment of euphoria will pass and it is normal to focus on concrete actions that Romania should take to continue internal reforms and to respect commitments assumed during negotiations with the EU

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