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Activity of Public Institutions

Government

Reflections on draft budget law for 2008 by Iurie Gotisan

Activity of Public Institutions

Government

1.1. Decisions

Decision approving the farm land consolidation regulation. The farm land merging process financed by the World Bank (about 700,000 dollars) will begin in several localities. This is a temporary regulation and it could be necessary to modify the legislation on this area after the implementation of projects. According to some data, 6 percent of the private farm land was consolidated in 2006 and the process will be accelerated thanks to foreign assistance (the estimated expenses for the farm land consolidation process exceed 340 million lei). Info-Prim Neo news agency has quoted Premier Vasile Tarlev as saying that majority of scientists, experts and politicians have convinced themselves of the need to consolidate the land and "10 years were needed to persuade the donors who financed the division into plots and destruction to additionally finance the land consolidation."

Decision on creation of the fund to guarantee the grain deposit certificates. The fund will be a legal entity chaired by an administrator appointed by its management board.

Decision on introduction of the Day of Grandmother. This day will be celebrated every year on September 30 and it was proposed by the first lady of Moldova.

Decision approving some regulations on collection, use and record of consular fees and special taxes for pay-for services of diplomatic structures. These funds will finance the activity of diplomatic institutions and some of them will go to the state budget as revenues. It is worth to note that the Chamber of Auditors has signalled many violations related to administration of these sources, ordering the revision of normative procedures and acts on this field.

Decisions approving some draft laws seeking:

• the modification of the law on basic entrepreneurship regulation principles;
• the modification and completion of the law on free economic zones;
• the ratification of the credit agreement between the Republic of Moldova and the European Bank for Reconstruction and Development (the road repairing programme in Moldova) and the draft law on ratification of the finance agreement between the Republic of Moldova and the European Bank for Investments (the European roads in Moldova project).

Decisions approving some programmes, concepts, strategies:

• Concept of the system of monitoring of events, motor vehicles and people at customs stations in a real time;
• Automatic integrated information system in the field of mandatory civil responsibility insurance for damages produced by motor vehicles (the National Commission of Financial Market will create and administrate the system).

1.2. Sittings. Decisions. Statements

Concerns with preventing ECHR sentences

Prime Minister Vasile Tarlev has stated while on a visit to the Constitutional Court that a new mechanism must be implemented nationwide to settle the cases that make the European Court of Human Rights (ECHR) sentence Moldova. He evoked this opportunity as the number of ECHR judgments against Moldova is on the rise and this is a major problem of the country at present. The premier assured that the executive is not behind with executing the ECHR judgments and "the good cooperation is observed in current activities as well, when the Government notifies the Constitutional Court over constitutionality of some decisions."

Note: Constitutional jurisdiction reports released in 2001–2007 contradict Tarlev’s statements because the Government has notified the Constitutional Court only once, in 2001, and there is no cooperation in the field of appealing, while the acting executive cannot critically or legally approach the Parliament or Presidency.

Sitting of the Commission for Emergencies

The premier has chaired a sitting of the Republican Commission for Emergencies, which focussed on agriculture. It was established after working groups have presented reports on areas that the food security is stable and competent bodies monitor it strictly. The premier regretted that the funds allocated by Government to subsidise farmers affected by drought remain on account for one month and not all of them are used, instructing competent bodies to urgently disseminate the subsidies by the end of September. He asked the minister of economy and commerce to study how prices of dairy and first-need food products are formed and to table efficient proposals aimed to improve the situation in this area. Tarlev assures that higher prices of social bread would be unjustified at least till the New Year and the Government is ready to intervene with its reserves in order to keep the current prices.

2008 budget

The draft state budget, state social insurance budget and mandatory health insurance budget have been delivered to the Government for examination. The minister of finance said that the overall revenues of the national public budget for 2008 are estimated at about 23,308,000,000 lei, which is by 8 percent more than expected in 2007. The planned expenditures are estimated at 23,592,600,000 lei, by 20 percent more than this year. The main factors that increased the expenses include larger transfers to the mandatory health insurance funds, summer vacations of children, compensations for connection to natural gas pipe paid to some categories of population from rural areas, larger expenses for reimbursement of preferential credits to some categories of population, rise of the scholarship fund of vocational schools, larger allocations for programmes on science and innovation. Capital investments in building sector will grow by 51 percent, compared with 2007. Foreign loans worth 660.5 million lei shall be reimbursed in 2008. As much as 574 million lei was reserved to serve the internal state debt in budget. The Gross Domestic Product for 2008 is expected to grow by 7 percent, compared with expectations for this year, up to 56.8 billion lei. The prime minister indicated the need of optimising the maintenance expenses and increasing at maximum the investments, seeking an assessment of possibilities to additionally support young specialists, an impulse to mortgage building of apartments, higher single birth indemnities, encouragement of the gasification process, endowment of medical institutions with equipment, etc. He also stressed the importance of readjusting the draft budget law for 2008 to provisions of the National Development Plan which is being finalised.

Agricultural strategy elaborated in 2 months

Vasile Tarlev has chaired a sitting of the state commission in charge with drafting the National Sustainable Agro-Industrial Development Strategy, at which the draft strategy concept was presented and approved and proposals and tasks seeking an efficient document were raised. According to the concept, the strategy will focus on 5 areas – the present situation in agro-industrial sector and SWOT analysis; the sustainable development goals of agro-industrial sector; the policies on implementation of goals and the performance indicators of a sustainable development of agro-industrial sector. The Academy of Sciences, social partners, competent NGOs, and experience of other states have been consulted to work out the concept. Tarlev noted that the Government is relying on an active contribution of scientists, agricultural trade unions and NGOs. At the same time, the document must reflect the interests of farmers and ensure conditions to grow non-pollutant, internationally competitive products.

Speeding up the implementation of E.U.-Moldova Action Plan

Premier Tarlev has demanded at a sitting of the National Commission for European Integration that all provisions of the European Union-Moldova Action Plan (EUMAP) be finished by November 17, 2007 (March 1, 2008 is the formal deadline). Some shortcomings of this process were revealed, stressing the importance of operatively remedying the signalled debts. Tarlev asked decision makers to adopt firmer stances capable to ensure an important progress in efficiently implementing all chapters of the Action Plan. Also, it was underlined the need of giving an impulse to work of Moldovan diplomatic missions to E.U. In particular, Tarlev stressed the importance of implementing the EUMAP chapters on reformation of the judiciary.

Videoconference on autumn agricultural works

Central and local public authorities have attended a videoconference on harvesting of late crops, autumn sowing and ploughing. According to reports, late crops are being harvested and good results were observed for the grape crop (about 560,000 tons are expected overall, by approximately 100,000 tons more than in 2006). All districts have already received the Government’s subsidies to work the land. The premier asked the local public administration to speed up the issuance of the lists of beneficiaries of subsidies, so that to support them more operatively.

Interview with TV channel Moldova 1

The prime minister has tackled several topics:

• The difficult situation in agro-food sector because of climatic conditions, which imposes serious reforms in this sector (insurance, irrigation, new technologies);
• The perspective of Moldovan wines to return to the Russian Federation is still sombre, but the hope to compensate with larger exports to other countries is alive;
• Energy tariffs will not essentially grow; the Government will keep paying some compensations;
• The Government will keep cooperating with local public authorities, but these authorities must want this as well. The Government will intervene accordingly to legislation in case of needs and blockings (inclusively in the Chisinau municipality);
• The 2008 budget will have a social orientation in continuation;
• Presidential initiatives on fiscal amnesty and legalisation of capital are being implemented via necessary formal procedures; debts of 32,065 taxpayers toward the state budget and of another 7,029 toward the mandatory health insurance funds have been annulled until now. The National Social Insurance House has annulled debts afferent to the state social insurance budget on basis of the record system which it administrates. The absolute majority of debts were old and they were reported every year on paper only. The legalisation of capital is slowly developing, capital worth about 6 million lei has been legalised;
• Successes of 16 years of independence: adoption of Constitution and national legislation; building of the bank system; approval of strategic documents by Government (Millennium Development Goals, EGPRSP, EUMAP, National Programme Moldovan Village, national programmes on renovation of heating, drinkable water providing and sewerage systems, national gasification programme). Moldova has become an equal, credible and well-known member of the international community;
• Most serious failures: the 1992 bloodsheds; the unsuccessful privatisation with patrimonial bonds; the unwise agriculture and retirement reforms.

Economic Policies

What happening on the domestic currency market or where the leu "is going"?

The Moldovan leu has appreciated by about 10 percent versus dollar and by approximately 4 percent versus euro this year. The appreciation of the leu versus dollar has exceeded the maximum level registered three years ago. Of course, both global and regional trends influence the strengthening of the leu, since the economy of the country is connected to the regional market as regards the export of commodities and products, as well as to financial transactions and conjuncture of the domestic currency market. Similar appreciations were also observed in countries in the region which develop commercial relations with Moldova.

The growth of remittances from abroad has internally advanced the appreciation, so that the National Bank of Moldova (NBM) had to intervene more often on domestic market, acquiring large amounts of foreign currency. The rise of international reserves of the central bank up to over one billion dollars particularly explains and justifies this situation. Even more, the bank system has lowered the interest rate on credits as an effect of the appreciation of leu.

However, both the Government and NBM should be more careful when the appreciation of the leu is supported one or another way, even if it helps somehow stop inflation. Or, a stronger leu advantages the state, which finally buys fuels such as natural gas, for example, as a worthier leu allows the state to pay less currency for gas when the currency is converted accordingly to the exchange rates. By telling this, we think about exporters above all, as a strong leu disadvantages them and they already face a difficult situation, the exported production is cheaper and therefore they raise less money.

An appreciation of the leu by 10–12 percent on average is not sustainable for sure when the trade deficit for the first half of this year accounts for 1.2 billion dollars, by over 40 percent more than last year, and the economic growth of Moldova is approximately 8 percent (and it is mostly stimulated by consumption), compared with other states which report a growth of 2–3 percent only. This is a proof that something goes wrong and the figures run counter each other. Even a correlation between the trade deficit and the exchange rate may be done, as the imports have grown very much. Finally, the strong appreciation of the leu lacks an economic ground and this deficit is chronic since it is on the rise for approximately six years.

We do not rule out a reversal of the trend in the near future, that means a light depreciation that could be fuelled including by a deepening of inflationist pressures (especially because the inflation rose up to 7.3 percent in eight months of this year), which is now the main target of the National Bank. Such pressures could also come from the strong rise of salaries, indemnities, as well as from the avalanche of remittances from other countries. The Government and NBM will probably update soon the 10-percent inflation forecast for 2007. If the National Bank does not intervene on currency market via massive currency acquisitions in order to reach the inflation target, the domestic currency could depreciate down to 12.5 lei per dollar at the end of this year.

Transdnistrian Problem

• Minister of Reintegration, Vasile Sova, published an open letter to the participants in the "5+2" talks, calling for additional efforts towards resuming the negotiations process. Minister Sova expressed his concern regarding the tensioning of the situation in the security zone and the multiple cases of human rights violations and of limitation of the freedom of movement, as well as the negative consequences these might have in the absence of any dialogue between the two sides. "We are convinced that the immediate return of participants to the negotiations table and the full resumption of talks can stabilise the situation, while the constructive cooperation of all interested sides will help identify solutions to the issues Moldovan and foreign citizens are facing on a daily basis", the open letter says.

• The OSCE Mission to Moldova announced it will summon the mediators and observers to a new round of consultations in the near future to discuss opportunities for resuming the "5+2" talks. The consultations round will precede the visit to Moldova of the OSCE Chairman in Office, Spanish Foreign Minister, Miguel Angel Moratinos, scheduled for early October. According to the OSCE, this visit could have a significant contribution to the resumption of negotiations in the "5+2" format.

• On 6 September the US Ambassador to Moldova, Michael Kirby, had meetings in Tiraspol with the head of the Transnistrian foreign affairs department, Valeri Litkai, and the chairman of the local legislative, Evgeni Sevciuc. The meeting with Litkai seems to be part of the US efforts aimed at resuming the political dialogue in the "5+2" format, this being the main subject discussed, according to a press release of the Transnistrian department. This subject however did not feature on the agenda of the meeting with Evgeni Sevciuc. According to the Internet page of the Tiraspol legislature, Ambassador Kirby stated the following after the meeting: "We discussed about the drought, which caused important losses to the agricultural sector. We discussed a broad range of economic problems. In the Transnistrian region live people and they suffer as a result of natural calamities. We examine a number of possibilities of granting assistance and we will see what can be done". It is worth noting that these two meetings follow a number of visits by the American diplomat to Transnistria in the past months, during which he met with Transnistrian journalists and NGOs, including the "Proriv" movement. These visits have attracted criticism against the US Ambassador from some Moldovan commentators who said that these visits would legitimise break away ideas, movements and leaders. The opinion of this e-journal is that although these visits do involve some risks, they are necessary and need to continue because they offer a good opportunity for knowing and understanding each other. This is an opening that other diplomatic missions accredited to Moldova, international organisations and NGOs need to adopt. The humanitarian rationale and the solidarity with the ordinary residents of Transnistria need to prevail over fears of undermining the territorial integration of Moldova.

• The budget of the Transnistrian region for 2008 will not include among its revenue lines the financial assistance from the Russian Federation, of which the region benefited until 2006. In order to supplement budget revenues, Transnistrian leader Igor Smirnov proposed increasing the tax on retail sales by 3%, as well as increase the income tax for business. The proposals prompted heated debates among Transnistrian deputies who thought they could have negative effects on the socio-economic situation of citizens, could increase the inflation rate up to 12% and excessively increase the fiscal burden born by businesses. Equally controversial proved to be the proposals to introduce direct financial management of the Camenca and Dubasari districts, bread allowances for pensioners and protection measures for citizens in case of high inflation rates. "In Transnistria there are 134,000 pensioners, 70,000 budget employees and only 120,000 employees, of which 46, 000 work in industry. Unless we have 200,000 employees, even if we develop the best fiscal system we will not get any results", the head of the Transnistrian legislative, Evgenii Sevciuc, said in the context of budget debates. Thus, it seems that immediate solutions for overcoming the critical budgetary situation in which the region found itself in 2007 seem difficult to be identify, rather a thorough revision of the economic and fiscal policies of the region being necessary.

Foreign Affairs

European integration

Conference "Working Together – Strengthening the European Neighbourhood Policy"

Brussels hosted on September 3 the Conference "Working Together – Strengthening the European Neighbourhood Policy". The conference was organised at the initiative of the European Commission and it was the first event of this kind since the ENP was launched. Taking part in the event were high-ranking functionaries of European institutions, including European Commission President Jose Manuel Barroso and Benita Ferrero-Waldner, commissioner for External Relations and European Neighbourhood Policy (ENP), as well as high-ranking officials, representatives of business environments and civil society from countries participating in ENP.

Andrei Stratan, minister of foreign affairs and European integration, represented Moldova at official level.

By organising this conference, the European Commission wanted to understand better the wishes of ENP participating states in order to include them further in the offer that the European Union (E.U.) is making to its neighbours via ENP. Thus, the conference was part of E.U. efforts to improve and multiply the cooperation mechanisms within ENP, as the participating parties are capable to draw the necessary conclusions regarding the functioning of ENP with more than three years since it was released. The event followed two tries of E.U. to improve the cooperation within ENP at conceptual level. It tried first via the December 4, 2006 Commission’s Communication on Strengthening the ENP, and the German E.U. Council Presidency tried later, when it stressed a series of opportunities that the ENP is to use, starting from the Communication from the Commission.

Andrei Stratan has presented the attitude of Chisinau toward ENP while addressing the conference, stressing the need of: (a) diversifying action priorities from Action Plans in the context of the four freedoms: of goods, of citizens, of services and of capital; (b) economic-commercial integration; (c) access to the internal market of E.U.; (d) gradually liberalising the visa regime between partner states and E.U. and (e) developing the legal framework of E.U.-Moldova relations.

Sitting of EP Committee on Foreign Affairs

Mr. Stratan has repeated, at a September 12 sitting of the Committee on Foreign Affairs of the European Parliament (EP), the main reference points from the speech he delivered at the September 3 Conference. He reiterated the need of defining a new legal framework of relations which will be developed with E.U. after 2008 and which will gradually bring Moldova in the area of the four freedoms.

NCEI

The National Commission for European Integration (NCEI) held a sitting on September 13. Valeriu Ostalep, deputy minister of foreign affairs and European integration, presented a report on implementation of the E.U.-Moldova Action Plan (EUMAP) and Moldova-E.U. relations.

Prime Minister Vasile Tarlev had then a speech. He said that though March 1, 2008 is the deadline for the implementation of EUMAP, he has demanded that the EUMAP goals be accomplished by November 17, 2007. Why November 17, 2007 was chosen as a deadline? The premier explained that it will be five years on that date since President Voronin has signed a decree on creation of NCEI, document that demanded a "European integration concept" and "laid the first stone to build the pro-European vector." Two explanations are required for more accuracy: (a) the decree concerned was signed on November 13, 2002 and (b) it truly stipulated the creation of NCEI, but this commission should draft and deliver to the Parliament the European integration strategy of Moldova and work out and approve an action plan on implementation of this strategy.^[1]

Mr. Tarlev noted that NCEI will meet once a week, every Thursday, in order to study how the process of implementation of EUMAP goals is developing. The prime minister instructed the minister of foreign affairs and European integration to meet within 10 days with ambassadors of E.U. member states which signalled drawbacks related to the implementation of EUMAP, and to find out what problems they have signalled and adequate solutions.

Also, the premier asked Moldovan embassies to be more active, warning that inactive ambassadors will be recalled. The Ministry of Foreign of Affairs and European Integration (MFAEI) was asked to notify regarding "misinforming" reports written by "pseudo-patriots with the purpose to trouble the relations between Moldova and E.U." Also, Mr. Tarlev ordered competent ministries to coordinate their moves with MFAEI, so that Moldova speak with a single voice with EU and in the virtue of future meetings of Moldova-E.U. subcommittees created via APC.

Mr. Tarlev mostly made a succinct analysis of activity of some central public institutions concerning the implementation of EUMAP. The work of the following institutions was analysed: the Interior Ministry, the Centre for the Struggle Against Economic Crimes and Corruption, the Ministry of Justice, the Supreme Council of Magistracy, the electronic media watchdog CCA, the Ministry of Economy and Commerce, the Ministry of Agriculture and Food Industry, the Customs Service, the Ministry of Health and Protection of Family and Child, the Ministry of Transportation and Road Management, and the Ministry of Local Public Administration. The premier particularly stressed the shortcomings of these institutions, warning their heads to urgently take the necessary measures in order to remedy them, otherwise "the next steps may be much severer." He warned in the same spirit over the personal responsibility of heads of public institutions, if the next report of the European Commission will note such an institution as having certain drawbacks. If any institution is named, its head will be held responsible, Tarlve assured.

By delivering categorical statements, Mr. Tarlev hinted that he does not want to be a "scapegoat" in case of any problems related to execution of EUMAP and to relations between Moldova and E.U. in general. The attempt of prime minister to prevent the situation registered in late 2006, when President Voronin warned the Government that it could receive a "red card" for the state of things regarding the European integration, could explain the severe tonality of Tarlev. In other terms, the premier took precautious measures, so that not to be warned again by president. In case of any problems, Tarlev will be able now to invoke easily the personal responsibility of ministers.

Assistance

The E.U. released 4 million Euros to Moldova on September 3 as part of the 2006 Food Security Programme. The overall budget of the 2006 Food Security Programme is 9.2 million Euros. The first part worth 1.2 million Euros went to the treasury of Moldova in October 2006 and the remaining amount will be transferred by late 2007.

Moldova has received 3 million Euros from E.U. to attenuate the consequences of the 2007 drought. The European Commission Delegation in Chisinau said that this is a short-term measure and the E.U. will support the state budget of Moldova on medium and long terms. The E.U. is expected to allocate approximately 40 million Euros to the state budget of Moldova the next six months.

Bilateral cooperation

Republic of Moldova – Romania

The official relations between Moldova and Romania have been critical in continuation in the period concerned. MFAEI has convoked the charge d’affaires of Romania’s Embassy in Chisinau, Monica Sitaru, to raise concern with intentions of a Romanian parliamentarian to hear Moldovan citizens in Chisinau. The parliamentarian, who visited Chisinau at the invitation of the Christian Democratic People’s Party, motivated his gesture, saying that the hearings focussed on awarding of Romanian citizenship, issuance of Romanian visas, relations between Moldova and Romania, and other related issues.

An emergency ordinance adopted by Romanian Government to modify the law on citizenship was the key event in the period concerned capable to influence the Moldovan-Romanian relations in future. It is aimed to facilitate the process of awarding of Romanian citizenship, including to Moldovan citizens. The ordinance brings some news, among others:

1. It changes the members of the commission for citizenship, which will be made of legal advisers assimilated by magistrates who are employed with the Ministry of Justice, and it will permanently work. A commission made of judges of the Bucharest Tribunal study the citizenship applications at present but it cannot do this work permanently;
2. The citizenship will be awarded under an order by minister of justice, at the recommendation of the commission for citizenship. Now the citizenship is awarded at the recommendation of the Ministry of Justice under a Government decision, which requires a complex procedure of elaboration and notification;
3. The applicant will be able to fill his dossier by correspondence, without showing up to the commission, within 6 months after he receives a notification in this respect;
4. The Romanian citizenship will be awarded when the holder will be sworn in front of Romania, and this ceremony will take place within three months since publication of the order of minister of justice on awarding of citizenship in Part I of Monitorul Oficial.

Republic of Moldova – Russia

Rospotrebnadzor has announced that the problem of Moldovan wine exports to Russia could be resolved if one more inspection is accepted to Moldovan wineries, after Moldovan authorities had described as biased and useless in future the inspections of the Russian sanitary service to Moldovan wine plants, following the last inspection of Russian experts on August 8–13, 2007.

We recall that 17 Moldovan wine enterprises have been allowed until now to deliver for an expertise some samples of the products they sell, 11 Moldovan companies have already delivered such samples, and another 7 received sanitary-epidemic certificates for 149 types of products which they sell.

According to Rospotrebnadzor, the customs station Borovsk was chosen as a "one-stop-shop" to control the Moldovan wine exports to Russia and it will inspect every shipment of spirits.

Multilateral cooperation

Republic of Moldova – Council of Europe

The European Court of Human Rights (ECHR) passed a judgment in the Ungureanu vs. Moldova case on September 6, 2007. ECHR indicated the violation of the rights to a fair trial, to an effective appeal and protection of property. It told Moldova to pay 500 Euros to the applicant in non-pecuniary damage. The Strasbourg-based Court has sentenced Moldova in 69 cases until now.

Studies, Analyses, Comments

Reflections on draft budget law for 2008
Iurie Gotisan, 15 September 2007

The draft budget law for 2008 may be commented from two viewpoints or on two directions in terms of quantity and quality, if saying this way

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