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Activity of Public Institutions

Parliament
Government
Presidency

Visa facilitation agreement: "Beer for members of trade unions only?!" by Igor Botan
Moldova 2008: the new – old challenges for the economy by Galina Selari

Activity of Public Institutions

Parliament

Parliamentarians were on holidays on January 1–15 and they worked in commissions and factions in territory in the second half of January. The Parliament will hold an ordinary sitting on February 7, with the agenda proposed by the Permanent Bureau including about 30 draft legislative acts.

Sixteen draft legal acts were published on the website in January, in particular:

• The draft law on protection of witnesses and other participants in proceedings;
• The draft law on property of administrative-territorial units;
• The draft soil law;
• The draft law on ratification of the agreement concerning privileges and immunities of the Organisation for Democracy and Economic Development – GUAM.

Delegations led by chairman of the Parliament visited the United Kingdom and France on January 28–31.

Government

2.1. Appointments. Dismissals

Moldova’s President has appointed the member of the Parliament, Victor Stepaniuc, as deputy prime minister. He will coordinate central institutions working in social, science, culture, healthcare, and sport and tourism areas.

Veaceslav Dermenji was assigned chief of the State Ecological Inspectorate. Previously, Dermenji was deputy director of the State Guard and Protection Service.

Virgiliu Ciobanas was appointed plenipotentiary representative of Moldova, senior inspector of the bureau in charge with coordination of the struggle against organised crime and other dangerous offences in the Common Wealth of Independent States;

The executive has appointed Sergiu Goncearenco, director of a department in the Ministry of Foreign Affairs and European Integration (MFAEI), as consul-general of Moldova in Istanbul, Turkey.

Gheorghe Radu was dismissed from the post of senior state (legal) advisor for prime minister. Vladimir Botnari was dismissed from the post of deputy minister of transportation and road management, and Mihail Solcan from the office of deputy director of the Building and Territorial Development Agency. The reasons of the dismissal were not made public.

2.2. Decisions

Decision on activity of the Ministry of Justice. The activity of the Ministry of Justice is appreciated in terms of human rights and reformation of the judiciary. At the same time, there are many shortcomings:

• Defaults of cooperation with public authorities;
• Late reporting to the Council of Europe;
• Prevention of violation of the European Convention on the Protection of Human Rights;
• Complicated situation in penitentiaries;
• Shortcomings related to the functioning of the execution system (about 60 percent of the decisions are executed);
• Low quality of some documents;
• Insufficient endowment and inappropriate activity of the legal expertise centre;
• Insufficient coordination of some actions, etc.

Decision approving members and the regulation of the parity commission for administrative decentralisation. Observers note that the Law # 435-XVI from 28.12.2006 concerning administrative decentralisation entered into force on January 1, 2007, but the Government took certain measures to enforce it after more than one year.

Decision on implementation of the Law # 438-XVI from December 28, 2006 concerning regional development in Moldova. Following are created:

• The national council for the coordination of regional development;
• The national regional development fund administrated by the Ministry of Local Public Administration (MLPA);
• Regional development agencies (North, South and Centre) subordinated to MLPA.

Under the Law # 438/28.12.2006 concerning regional development in Moldova, these actions should be taken by late April 2007, but the process was protracted and thus first-ranking authorities had to intervene, in order to give an impulse to the activity of the MLPA and Government in this field.

Decisions approving some programmes, concepts, strategies:

• The Concept of the automatic information system called "register of held, arrested and sentenced persons";
• The national innovation strategy for 2008–2011;
• The strategy on development of internal public financial control;
• The programme of statistical works for 2008;
• The national plan on adjustment of legislation for 2008;
• The action plan on implementation of the strategy on reformation of central public administration in 2008;
• The 2008 national plan on protection of Moldovan citizens who are abroad;
• The national employment action plan for 2008.

Decisions approving draft laws:

• Concerning consular fees;
• Concerning the State Guard and Protection Service.

Decisions on allocation of funds:

• The Ministry of Social Protection, Family and Child will be allocated more than 2.7 million lei from the reserve fund of the Government "to renovate offices." Although the financial year has just begun, the allocated amount will be restored in the reserve fund when the 2008 state budget will be rectified;
• The Ministry of Foreign Affairs and European Integration is allocated 441,229 lei from the reserve fund to publish international treaties enacted in 2005–07;
• The Ministry of Local Public Administration is allocated 9,840,000 lei to purchase housing for victims of a gas blast in a residential block in the 117 Stefan cel Mare Street in Soroca.

2.3. Sittings. Decisions. Statements

Tasks for 2008

Prime minister has noted at the first governmental sitting in 2008 that this year will be decisive for the implementation of the Government’s Action Programme and it is important to make an in-depth analysis of the execution of these actions. The Government will continue in 2008 all activities within earlier approved strategic programmes. It will pay a special attention to the National Programme "Satul Moldovenesc" (Moldovan Village), the programme on gasification of the country, drinkable water supply, the national strategy on sustainable development of the agro-industrial complex, the programme on renovation and modernisation of public roads. The tasks of strategic importance are among others: the opening of jobs (300,000 new jobs); the three-fold rise of budgetary salaries; the two-fold rise of the number of state-funded seats in educational institutions, the three-fold rise of the number of scholarships.

The Government will focus on implementation of strategic documents, in particular, the National Development Plan until 2011, the public administration reformation strategy; the national anti-corruption strategy; the legislative programme (2005–2009), the action plan on human rights (2004–2008).

Vasile Tarlev has distinctly indicated the development of the judgment execution system, so that to function efficiently, transparently, and accordingly to the most advanced standards in the area. The Ministry of Justice was asked to make an in-depth analysis of cases and conditions favouring the sentencing of Moldova by the European Court of Human Rights (ECHR) and to do its best in order to prevent such cases, including by using alternative ways to settle litigations (amicable solutions).

As regards the foreign policy, the Government will take concrete measures in 2008 to accomplish the strategic European integration objective and to sign a new agreement with the European Union aimed to develop the relations between Moldova and E.U.

Also, he stressed the importance of respecting requirements on quality of draft acts delivered to the Government for examination, in order to prevent the presentation of uncoordinated drafts or after the deadline.

Sitting of the national commission for European integration

Moldova’s basic priorities regarding the European integration will be the diversification of the political dialogue with the E.U., development of cooperation in the field of justice, anti-corruption fight, trade development, limitation and control of migration, adjustment of legislation, etc. The prime minister said that the Moldova-E.U. Action Plan will not stop when it will be implemented in the due term because most of its provisions do not have a temporary end.

Implementation of agreements with E.U.

Vasile Tarlev has convoked a sitting on implementation of the facilitated visa and admission agreements and Autonomous Trade Preferences. The Ministry of Foreign Affairs and European Integration (MFAEI) assured that the facilitated visa agreement is being normally implemented and noted that no breaches are registered^[1]. Autonomous Trade Preferences in relations with the E.U. were institutionalised on January 21.

Indignations with cases lost in front of ECHR

Premier Vasile Tarlev was unsatisfied that the Government must pay damages for cases lost in front of the ECHR, saying that the executive has nothing in common with those who violated the legislation, but it has to pay huge amounts under final ECHR judgments. Tarlev considers that the damages will be collected from those who are to blame for violation of legislation and sentencing by the ECHR.

Modernisation of police

A working sitting convoked by prime minister decided to work out a special programme on development, endowment and modernisation of the police. The Interior Ministry says that the police work under inappropriate conditions at present, in particular, in rural areas (many police stations lack offices, appropriate endowment, specialised transports, and there are about 115 vacancies for sector inspectors). According to the ministry, the local public administration does not help endow police inspectorates and develop popular guards.

Giurgiulesti investment project

The premier has convoked governmental officials in charge with implementation of the portfolio of investment projects in the Giurgiulesti area. The Ministry of Economy and Commerce reported that the Giurgiulesti oil terminal is functioning and it started in late 2007 selling fuels imported on naval way on Moldovan market. At the same time, the cargo and passenger port in the southern area of Moldova is being projected. The premier urged competent authorities to speed up the building of the infrastructure needed for an efficient functioning of the oil terminal at maximum, while the Ministry of Economy and Commerce will promote draft decisions on construction of the passenger port to the Government. Competent authorities were instructed to take necessary measures in order to put into operation these facilities in the due term.

The Government approved on January 30 the plan on construction of the Giurgiulesti passenger port and the Ministry of Finance was instructed to allocate 5 million lei from the reserve fund, in order to increase the registered capital of the state-owned enterprise Ungheni fluvial port, which will use the funds to build the Giurgiulesti passenger port. According to the plan, the port will be put into operation by June 1, 2008.

National pharmacy network

A pharmacy network will be created on basis of the state-run Stock Society Sanfarm-Prim, while the Government will raise partnership proposals to local public authorities and business. The Ministry of Economy and Commerce said that economic agents opening pharmacies will not enjoy facilities and all of them will work under fair conditions.

Visits to enterprises

The prime minister has been on a working visit to the Moldelectrica Company and collected facts about its activity and situation of the Moldovan energy system. According to available accounts, the Moldovan CETs produce now maximal volumes of electricity and the total consumption of the country is covered 40 percent by domestic electricity and 60 percent by imported energy.

While on a visit to the enterprise Cariera de Granit si Pietris Soroca, Premier Vasile Tarlev was told by acting director that the company stagnated and was destroyed in 1995–2007 (it raised debts, salary arrears, workers of the enterprise were dismissed, 85 percent of the equipment went out of operation), but now the enterprise is recovering after the state has regained 60 percent of the shares under a judgment (about 38 percent of production capacities have been put again into operation, a recovery plan and a debt pay schedule have been worked out, salary arrears have been paid, and 200 workers earn 2,500 lei on average). Vasile Tarlev regretted that one of most prosperous enterprises in Moldova is in a disastrous state and ordered competent authorities to take measures in order to make 2008 a turning year in history of this business. He demanded the administration of the enterprise to re-employ the dismissed workers, open new jobs and modernise the company. Former owners of this enterprise have recently said that authorities had abusively dispossessed them and they will appeal to the ECHR.

Presidency

3.1. Decrees

Moldova’s president has awarded the Labour Glory order as follows:

• Teodor Olaru, deputy chairman of the Chamber of Commerce and Industry;
• Nicolai Cervencov, rector of the Taraclia-based State University;
• Anatol Dubrovschi, director of the Casa Presei Complex;
• Alexandru Burian, director of the Institute of History, State and Law of the Moldovan Academy of Sciences;

Artist Gheorghe Urschi was awarded the Order of the Republic.

The head of state awarded the Civic Merit medal as follows:

• Nicolai Telnov, coordinating scientist of the Moldovan Academy of Sciences;
• Andrei Porubin, moderator of the "Dimineata Ta" programme.

The former director of the Information and Security Service, Ion Ursu, was appointed Moldovan ambassador to Greece.

Eleven persons have been awarded or regained the Moldovan citizenship under two presidential decrees. Under another two presidential decrees, 275 persons renounced the Moldovan citizenship.

3.2. Sittings. Decisions. Statements

Participation in sitting of collegial councils

The Moldovan president has attended a sitting of the Collegial Council of the Information and Security Service (ISS) and appreciated the work of this institution in 2007. Vladimir Voronin noted that the new law on status of information and security officer requires the optimisation of the work of ISS subdivisions. At the same time, the ISS shall intensify its activity in order to anticipate the undermining of Moldova’s constitutional regime and statehood by combating the illicit financing of political parties and mass media, including from foreign sources. But the ISS shall not get involved into political processes, but rather exercise its duties in a strict accordance with the legislation in effect. The chief of state indicated among priorities of the ISS the monitoring of developments in the financial-bank system; combat of abuses and violations in the field of distribution and use of public funds; intensified actions to ensure the information security of the country and prevent the terrorism; contribution to the permanent development and modernisation of Moldova, definitive settlement of the Transnistrian conflict and advancing on the European integration route.

A sitting of the Collegial Council of the Ministry of Culture and Tourism has made the totals of the work in 2007 and indicated the tasks for 2008. The chief of state, who attended such a sitting for the first time, highly appreciated the work of subordinated institutions. Vladimir Voronin noted that the effective law on culture is out-of-date and shall be improved; the organisation of the Ministry of Culture and Tourism is imperfect, it does not cover the various segments of the culture; the Government shall work out an integrated policy on culture for a ten-year term (following could be the objectives of the national policy on culture: support for creativity, enhanced access to cultural values, development of cultural identity, promotion of intercultural dialogue and diversity of cultural expression); a tighter cooperation with local public authorities, district cultural directorates is needed to enhance the access of population from rural areas to cultural values; necessity of elaborating a multi-language website of the Ministry of Culture and Tourism; continued information of libraries, promotion of a "new philosophy" on serving readers. As regards the Year of the Youth, the president demanded the selection and promotion of young talents and appreciated the actions taken within the national project Caravel of the Culture coordinated by singer Lenuta Burghila.

A joint sitting of the Collegial Councils of the Ministry of Agriculture and Food Industry and Apele Moldovei Agency has considered the implementation of the programme on renovation and enlargement of irrigation networks in Moldova for 2008–2025. Hearing reports, Mr. Voronin stressed some problems that shall be resolved: authorities will focus on rehabilitation of the existing 125,000 hectares of irrigation networks; building of 58,000 hectares of new irrigation networks, enlargement of irrigation fields from local water sources (the so-called "small irrigation"); re-examination of findings of the inventory of irrigation systems and pumping stations; selection of irrigation systems and pumping stations which may be restored with small funds, and their rapid renovation; urgent opening of technological irrigation stations; creation of associations of users of an efficient staff training system in this field. The head of state demanded the elaboration and delivery to the Government of an action plan for the next 2–3 years concerning execution of works aimed to implement the first stage of the programme on renovation and enlargement of irrigation networks.

Working visits

The Moldovan president was on a working visit to SA Franzeluta on January 2, and the formal motivation was as follows: problems of ensuring bread in the context of the difficult agricultural year 2007 and increased consumption of bread products during winter holidays. Voronin reiterated the importance given by state authorities to supply of population with cheap bread, noted that in spite of difficulties related to the extreme 2007 drought, there are possibilities to ensure the country with the necessary grains and flour.

Visits to other countries

• The Moldovan president met European Commission President Jose Manuel Barroso while on a visit to Brussels on January 14.
• Vladimir Voronin visited Moscow on January 21, being awarded the prize "for an outstanding contribution to the strengthening of the unity of Orthodox nations." The Moldovan president met his Russian counterpart Vladimir Putin after the ceremony at the residence of Patriarch Alexy II.

Address to diplomatic corps

In a speech delivered to representatives of diplomatic corps to Moldova Vladimir Voronin has stressed some aspects of interior and foreign policy:

• Year 2008 proved that Moldova has trustworthy friends;
• Moldova and the E.U. have signed the facilitated visa adn readmission agreements, the Single E.U. Visa Issuance Centre has opened in Moldova, and the E.U. decided to award the Autonomous Trade Preferences to Moldova.
• A package of liberal reforms on capital amnesty, fiscal amnesty and zero tax on benefit have bee worked out and they radically changed the investment climate in Moldova;
• Stances of all participants in the negotiation process for the settlement of the Transnistrian conflict have been approached at maximum. A decisive aspect for the implementation of the mutual understanding in the resolution process has been found, in particular, the Transnistrian settlement is a process in which countries and mediators invest their moral rather than political expectations, their best ideas about a fair unification of the country.
• Moldova, as a neutral country, is becoming a comfortable area for mutual understanding and interested dialogue of the great powers.

Following will be the tasks for 2008:

• Political confidence, stability, maintenance of the pace of democratic reforms in the pre-electoral year;
• New efforts aimed at European modernisation, particularly at improving the judiciary, consolidating the human rights;
• The reunification of Moldova. In this respect, President Voronin hopes that authorities will do their best to see compatriots from Transnistria represented in the next Parliament of Moldova.

Economic Policies

1. Inflation and prices

Inflation is still a problem for Moldova on long term…

The inflation rate in Moldova was 13.1 percent in 2007 (compared with the 10-percent governmental forecast) and this is the main reason of concern for economy in 2008, too. The inflation target established by Government and National Bank of Moldova for 2008, 9 percent plus or minus one percent, could be failed because of internal and external factors, even if the central bank would increase the basic interest rate. At the same time, a rise of the reference interest of the central bank could affect the economic performances of companies by increasing the crediting costs. In addition, a higher interest and stricter conditions on monetary market would not make commercial banks careless, as they would not hesitate to increase the crediting costs in spite of competition. Therefore, effects on economy in general will not be the best.

Possible rises of volatile prices (food products, fuels, tariffs of public services) are expected to grow the next months, and this will strongly increase the annual inflation rate. However, the National Bank is not to blame for perpetuation of inflation, as current consumption prices for which the demand is inelastic are on one hand, and the evolution of the exchange rate is on the other hand. At the same time, the central bank may negotiate some solutions with the Government, as for example administrated prices, which could help the inflation on a short term. But as regards the long term, the inflation is a problem for Moldova so far, as inflationist pressures exceed the potential. Volens-nolens, the central bank will have to seriously consider stricter crediting conditions, as the recent expansion of high-risk credits could affect the inflation targeting policies in future.

Diagram 1. Evolution of economic growth and inflation rate, annual rates in percent



Source: NBM, Macroeconomic indicators

At the same time, the budgetary policy shall be prudent in continuation, in order to support efforts to reduce the inflation. However, it is unknown how real the 2008 budgetary deficit target of 0.5 percent of the GDP is, since the budget was constrained after the reduction of income taxes. Priorities regarding expenses shall be redirected from current expenses to productive investments. The role of the budgetary policy is limited, particularly because of small revenues from production and big development necessities of the country. Also, the ability of the monetary policy to compensate the impact of strong capital inflows and reduce the inflation is partly limited by weak delivery channels and undeveloped financial market.

2. Financial-banking system

Bank assets up to 2.83 billion dollars in 2007…

Overall assets of the banking system were worth about 32 billion lei (2.83 billion dollars) in 2007 and they increased by 68 percent, compared with 2006. The rise of assets of commercial banks was particularly due to the growth of the credit portfolio and supply of deposits by population, as well as to the continued advance of foreign investments in banks’ capital. The supply of deposits in banks rose by more than 63 percent in 2007. Interests on credits and deposits were stable in spite of inflationist trends and rise of basic rate and demand for loans, in particular by population. The average rate on credits increased from 18.7 percent in January up to 19.2 percent in December. At the same time, interests on credits in foreign currency decreased from 11.1 percent down to 10.8 percent.

The share of foreign investors in capital of domestic banks exceeded 65 percent. Although foreign investments have reached a record, the rise was lower compared with the precedent year, when it was 12 percent. The advance of foreign investments in capital of Moldovan banks in 2007 was particularly due to the rise of the share of the French group Societe Generale in the shareholder capital of Mobiasbanca up to 95 percent, investment of the ExImBank revenue in bank development and purchase of 25 percent of the FinComBank shares by the investment company Horizon Capital.

Financial sector is insufficiently developed so far…

A joint mission of the International Monetary Fund and World Bank, the Financial Sector Assessment Program (FSAP) in 2007 revealed that the banking is very resistant to external shocks, but it is still behind similar systems in terms of economic management. All assets and credits for the private sector have doubled starting 2001, but the share of the financial sector in economy, which is 54 percent and 51 percent of the GDP, is low so far, compared with more developed countries in the region (Diagram 2). Only about 10 percent of households from rural areas have access to bank accounts. Elsewhere, the IMF noticed that structural reforms aimed to improve the financial infrastructure and budgetary framework, agreed earlier within the PRGF, have been implemented.

Diagram 2. Share of bank assets in GDP: regional comparisons



Source: Economist Intelligence Unit

3. External financial place of country

International reserves of NBM estimated at 33 percent of GDP…

International reserves of the National Bank increased by 72 percent in 2007, up to 1.33 billion dollars, which is 33 percent of the GDP (2007). They reached an absolute record in terms of volume and rise pace. The great rise of reserves was due to interventions of the central bank by acquiring the excessive currency liquidity on domestic market occurred after large remittances from abroad. Accordingly to the August 2005 methodology, the mandatory reserves of the whole banking system and currency from the directorate of credit lines of the Ministry of Finance are calculated as part of the reserves. Of course, the value of reserves is relatively high, but it is unknown how enough is it, in order to help the Government control eventual financial or currency shocks, especially from outside. Even more, if comparing this indicator with those from other countries in the region, Moldova’s currency reserves are very low. In addition, they are incomparable with international reserves of most developed states compared with their share in the GDP. For example, Japan has an international reserve like the United States and Europe altogether.

However, some of the currency comes from modification of the minimal reserves in currency of commercial banks, which does not belong to the state. That’s why they are called reserves, as a bank must have currency to reimburse people if it goes bankrupt. International reserves have grown very much due to massive remittances. But the central bank is summoned to buy the currency excess in order to prevent a strong appreciation of the leu, as long as the economy cannot assimilate it, this being a dangerous trend in an economy which is vulnerable in front of external developments. At the same time, Moldova’s foreign debt exceeds 3 billion dollars. The state and state-guaranteed foreign debt exceeds 931 million dollars and the non-guaranteed private debt accounts for 2.1 billion dollars. The commitments by economic agents exceed 43 percent and of the governmental sector is 25 percent in the structure of the foreign debt. Short-term foreign commitments exceeded 1.1 billion dollars (37.5 percent of the debt).

Diagram 3. Evolution of international reserves of NBM, million dollars



Source: NBM data

Transdnistrian Problem

Prospects to settle the Transnistrian conflict in 2008

President Vladimir Voronin has said in a traditional year-start speech in front of foreign ambassadors to Moldova that "stances of all participants in the Transnistrian settlement negotiations have been approached at maximum" in 2007… "The Russian Federation, the United States, the European Union, the OSCE and Ukraine begin from the idea that this inveterate conflict cannot be settled but on basis of sovereignty and territorial integrity of Moldova… The Transnistrian settlement is a process in which countries and mediators invest their moral rather than political expectations, their best ideas regarding a fair unification of the country… Moldova, as a neutral country, is becoming a comfortable area for a mutual understanding and interested dialogue of the great powers… We follow the same principle in relations with Transnistria, the opening principle which was expressed in the programme on development of confidence between Chisinau and Tiraspol. There is no alternative for this way… We will do our best to see our compatriots from Transnistria as well in the next Parliament of the Republic of Moldova, which will meet the jubilee year, on the 650th anniversary of the Moldovan state, so that residents of the region to be able to effectively help building a modern, European Moldova."

President Voronin’s statements correlate with reports by the Moscow-based newspaper "Kommersant", which anticipating the January 22, 2008 meeting between Presidents Vladimir Voronin and Vladimir Putin said that they could discuss the Transnistrian settlement principles. According to earlier reports, Moldovan authorities agree to recognise Russia’s estate in Transnistria, guarantee Moldova’s permanent neutrality and interests of the Russian business in strategic sectors of the Moldovan economy in exchange for Moscow’s support for finding a solution to the legal status of Transnistria as soon as possible, so that to let residents of the breakaway enclave attend the 2009 parliamentary elections. This formula would allow President Voronin to gather the laurel of the country integrator and President Putin would be an unprecedented peacekeeper, particularly on the background of the situation in Kosovo. But no report indicating a deal was released after the meeting between the two heads of state. Even more, following President Voronin’s visit to Moscow, Russian authorities made public their plans to open 23 polling stations in Transnistria for the March 2, 2008 Russian presidential elections without asking Moldova’s permission. One can say, however, that President Voronin’s visit to Moscow was a success as Russia will open only 23 instead of 24 polling stations as it did during the parliamentary elections of December 2, 2007.

Earlier, Minister of Reintegration Vasile Sova has stated to BASA-press news agency that 2007 was the "year of investments in the Transnistrian settlement… Moldova has taken unilateral measures to strengthen the confidence and security… Mediators and observers of the negotiation process have reached a consensus aimed to establish the legal status of the Transnistrian region with respect for Moldova’s sovereignty and territorial unity."

On the other hand, Transnistrian leader Igor Smirnov met Russian Ambassador Valeri Kuzimin on January 14, 2008, saying that the latest initiatives by President Voronin do not bring anything new but they reiterate some former agreements which Moldovan authorities had turned down. Smirnov insisted on the need to guarantee the free move of commodities, citizens and transports, as well as on activity within the so-called "Zhukov-Smirnov protocol," which stipulates support for Transnistria and its integration into the Russian area.

Human rights in Transnistria

Vasili Kaliko, who is in charge with human rights in Transnistria, has reviewed the year 2007. He said that more than 5,000 complaints have been submitted.

But this number does not include the case of Anatolii Mospan, a young man who died on January 2, 2008, shortly after being enrolled in the Transnistrian army. The Transnistrian defence ministry released a statement prohibiting what it called "allegations regarding the death of soldier Anatolii Mospan." According to the statement, he died suddenly after a heart attack. On the other hand, the newspaper "Jurnal de Chisinau" has published an article "Ucis in batai la Tiraspol" (Beaten to death in Tiraspol) in which the relatives of the dead say that the latter had signs of violence that could kill him. Transnistrian authorities stopped the investigations, while human rights organisations summoned Moldovan authorities to investigate this case.

Demographic and social problems

According to the Statistical Yearbook of Transnistria, the eastern region of Moldova had 540,600 residents in 2006, and this number has decreased very much compared with 2002, when Transnistria had 633,600 residents. Retirees count for 133,000 people or approximately 24 percent of the population and children for 111,000 (about 20 percent). At the same time, there are approximately 3,000 inmates in Transnistrian prisons (for comparison, there are 9,000 detainees in Moldova, and compared with the number of residents, it is approximately twofold less).

These data correlate with statistics on the increasing labour force deficit. Low salaries are the main reason. A builder earns approximately 250 dollars on average a month (the unemployment indemnity is about 15 dollars), while qualified workers are paid about 300 dollars a month. These workers could earn two-fold more. The gravity of the problem is understandable, given the fact that the building sector registers the greatest development (a square metre of housing in Tiraspol costs 400–500 dollars, compared with 700–800 dollars in Chisinau). Statistics reveal that 80 percent of the vacancies are available for builders, locksmiths, hairdressers and drivers.

Transnistria has increased prices starting January 1, 2008, in particular, of dairy by 10 percent, bread products by 25 percent, electricity by 11 percent, gas by 14 percent, water by 125 percent. In these circumstances, retirees from the region are paid monthly indemnities worth approximately 10 dollars starting January 2008, and they are covered from 27.2 million dollars transferred by the Russian Federation to Transnistria as humanitarian aid. The amount of the humanitarian aid was a topic of the propagandistic battle between the legislature and Tiraspol administration, which cannot agree who is to praise for this assistance, Smirnov or Shevchyuk.

Economic developments

Starting January 2008, the Transnistrian region has increased very much (by 60 percent) the fee for the activity based on entrepreneurial patent in 58 branches.

The Ribnita-based Metallurgical Factory, the main income provider in the Transnistrian budget, is also facing difficulties, though it exceeded its production plan in 2007. The main problems faced by this enterprise were linked to the refusal to import used iron from Ukraine, as the latter introduced a 30-euro customs duty per ton. Russia and Kazakhstan are the main used iron providers at present.

According to Transnistrian officials, economic agents from the region lose 17 million dollars a year, as Moldovan authorities blocked the Transnistrian railroad starting 2004 and Transnistrian enterprises have to bypass. The Ribnita-based Metallurgical Factory loses the most. Transnistria has lost 35 million dollars inclusively because of Moldova’s customs control. In this context, Kalman Mizsei, the special representative of the European Union to Moldova, met Transnistrian foreign minister Valeri Litskai on January 21, 2008, who said that Moldova’s pressures against Transnistria is one of obstacles on way of resumption of the "Five-Plus-Two" negotiations.

According to a communication by the Ministry of Reintegration, Transnistria’s foreign commerce is not halted. In particular, in January – December 2007:

• The State Registration Chamber of Moldova has recorded 86 economic agents (233 overall) for a temporary term and awarded them the IDNO code and another 29 (142 overall) for a permanent term. Overall, 383 economic agents have been temporarily and permanently registered until now;
• The Moldovan Chamber of Commerce and Industry (CCI) has issued 5,821 origin certificates for exported commodities in the period concerned, including 3,505 – form Ñ certificates and 2,316 preferential certificates (ÑT-1–2183, EUR.- 133).
• Seventy-four out of 375 economic agents certified by the State Registration Chamber of Moldova applied for commodity origin certificates in January-December 2007. The chamber issued 596 origin certificates on average a month to economic agents in January-December 2007, by 176 more than in 2006;
• The Customs Service of Moldova issued 1,327 preferential origin certificates A to 23 Transnistria-based economic agents from January 1, 2007 to December 31, 2007 for the foreign trade with the E.U.;
• The State Licensing Chamber has issued 11 licences to economic agents registered accordingly to the effective legislation for different kinds of activity, in particular, electricity production and export, making, preserving and wholesale of spirits; production and sale of seeds; import and storage of toxic chemical substances, household chemical items and products; projecting of technical-urban installations and networks, reconstruction; pharmaceutics; block buildings and engineering constructions; import and sale of perfumery and cosmetics;
• Commodities exported and imported by Transnistria-based enterprises and controlled by Moldova’s Customs Service were worth 9,399,600 lei, of which exports worth 8,010,500 lei, and imports worth 1,389,100 lei.

Visit of the OSCE chairman-in-office to Moldova

Mr. Ilkka Kanerva, foreign minister of Finland, chair of the OSCE, visited Moldova on January 16–17, 2008. Meetings with Moldovan officials focussed on "latest developments in the Transnistria settlement process, with the sides sharing opinions regarding prospects of a definitive resolution of the conflict." The OSCE chairman-in-office supported "the need of stirring up efforts of all participants in the negotiation process in order to give an impulse to the Transnistrian process; the initiatives of President Vladimir Voronin aimed to strengthen the confidence between the two banks of the Dniester River; the activity of the E.U. Border Assistance Mission to Moldova and Ukraine." In Tiraspol, Mr. Kanerva has met Transnistrian leaders who "reported the evolution of the negotiation process after 1992,"seeking an equal footing for the conflicting sides. Transnistrian leader Igor Smirnov said that the OSCE cannot deal with the conflict resolution in dependence of the case. In consequence, Mr. Kanerva promised to appoint Finnish diplomat Heikki Talvitie as OSCE special representative in charge with the Transnistrian problem, in order to relieve the negotiation process.

Political competition between Shevchyuk and Smirnov

The Supreme Soviet in Tiraspol has started examining a draft law on president and vice-president of Transnistria. It motivates that the Transnistrian constitution stipulates the adoption of such a law. It is loud that the draft law has appeared when relations between Transnistrian speaker Yevgeny Shevchyuk and president Igor Smirnov have deteriorated and according to the Moscow-based newspaper Kommersant, Russian authorities have prepared the eventual withdrawal of Smirnov from Transnistria and have plans to deploy a delegation to Tiraspol in order to persuade Smirnov of this necessity. The draft law concerned was placed in the context of elaboration of the drafts on "public service" and "status of public functionaries" in late 2007. Also, planned reshuffles within security bodies raise interest. A strong activism is observed on behalf of Transnistrian vice-president Alexandr Korolyov, secretary of the security council. He intends to extend the authority of police and border guard bodies in order to entrust them to hold and arrest.

All these innovations emerge around the scandal regarding ways the Smirnov administration had sold (privatised) the Cuciurgan Power Plant estimated at 1.2 billion dollars in exchange for 29 million dollars. At the same, time speaker Yevgeny Shevchyuk reported for the Moscow-based newspaper Kommersant that he is still waiting for the investigation results concerning the way Smirnov’s family which administrate the GAZPROMBANK in Transndniestria has used $1.6 billions gas dept to GAZPROM.

Developments within the Joint Control Commission (JCC)

The commission decided on January 24, 2008 on come-back of the Moldovan peacekeeping contingent under the joint military command. According to Transnistrian media, Moldovan peacekeepers do not obey to the joint command starting January 11. The problem should be resolved through an appeal to representatives of the Moldovan and Russian defence ministries. The JCC co-chairman on behalf of Russia, Viktor Shanin, accused Moldovan authorities of intending to undermine the peacekeeping mechanism. It was noted that the actions by Moldovan authorities are part of the plan to withdraw the checkpoints and security structures from the security zone, in order to demonstrate the intention to strengthen the reciprocal confidence, but these are nothing but PR measures.

The JCC co-chairman on behalf of Transnistria, Alexandr Porozhan, was dismissed on January 23, 2008 under a decree by Smirnov. Oleg Belyakov succeeded Porozhan. Local observers indicated a connexion between this move and internecine battles of the Transnistrian elite.

Sources: http://www.olvia.idknet.com, www.nr2.ru, www.kommersant.ru

Foreign Affairs

European integration

Visit of President Vladimir Voronin to Brussels

President Vladimir Voronin was on a formal visit to Brussels on January 14, 2008. The meeting with European Commission President Jose Manuel Barroso was the main one from Voronin’s visit agenda. According to functionaries of the Commission, the meeting between Voronin and Barroso had a protocolar nature. As the European Commission president could not receive the Moldovan leader during the last visit to Brussels on December 5–6, 2007, the meeting of the two officials was postponed for early January 2008.

Prior to the visit to Brussels, President Voronin has told journalists that "Moldova will not extend the implementation deadline of [EUMAP] after February 2008, when the term is over,: and hinted that he will discuss in Brussels possibilities to negotiate a new contractual relationship between Moldova and the E.U.

But the conviction that Moldova will enjoy the opportunity to succeed to a contractual relation with the E.U. after February 2008, when the deadline for the implementation of the EUMAP is over, was exaggerated. Jose Manuel Barroso reconfirmed the December 5 initiative by the European Commission launched via the Communication A Strong European Neighbourhood Policy to extend the EUMAP implementation term. In spite of Moldova’s accomplishments regarding the EUMAP implementation stressed by Barroso at a news conference after meeting Vladimir Voronin, the European official concluded that the EUMAP is effective in continuation as a tool of cooperation of the E.U. with Moldova until the complete use of the potential of this document.

Meeting of E.U.-Moldova COPS Troika

Brussels hosted the Meeting of the E.U.-Moldova Committee for Policy and Security (COPS) Troika on January 16. Talks between the sides focussed on the Transnistrian conflict: initiatives by President Voronin aimed to strengthen the confidence between Chisinau and Tiraspol; E.U. readiness to assist Moldova in terms of expertise and financial aid; work of EUBAM, etc.

Autonomous Trade Preferences

On January 21 the E.U. Council gave green light to the European Commission proposal to award the Autonomous Trade Preferences (ATP) to Moldova. ATP is a more advantageous system than GSP+ in terms that it extends up to until 12,000 the number of types of duty-free products and shares for Moldova in the E.U. The new trade regime is expected to enter into force on March 1, 2008.

4^th meeting of the E.U.-Moldova Cooperation Subcommittee 2 on Economy, Finances, Statistics

Brussels hosted the 4^th Meeting of the E.U.-Moldova Subcommittee 2 on Economy, Finances, Statistics on January 23. It evaluated the implementation of EUMAP and discussed issues related to economic situation in Moldova. Participants discussed among others the management of public funds, regulatory reform, the National Development Strategy for 2008–2011. During talks on regulatory reform E.U. representatives participating in the meeting signalled the need of introducing a transparent mechanism for examination and elaboration of normative acts on regulation of entrepreneurship.

Priorities for 2008

President Vladimir Voronin told a January 25 meeting with representatives of diplomatic corps that the reformation of the judiciary, consolidation of human rights and social guarantees will be the priorities of Moldova in the European integration process in 2008. At the same time, at a similar meeting convoked by Minister of Foreign Affairs and European Integration Andrei Stratan a day before, the minister said that Moldova’s priorities in the dialogue with the E.U. in 2008 include among others the complete implementation of EUMAP; negotiation of a new document on cooperation with E.U.; implementation of the facilitated visa and readmission agreements, and use of ATP.

The National Commission for European Integration (NCEI) generally confirmed these priorities at a January 25 sitting. It added the diversification of the political dialogue with the E.U., development of cooperation in the field of justice, commerce, migration; participation in community programmes; harmonisation of legislation; attraction of other European states in the activity of the Joint Visa Centre (JVC).

Bilateral cooperation

Republic of Moldova – Romania

The Moldova-Romania relations in the period covered by this issue of the journal Governing and Democracy in Moldova have paid tribute to previous confrontations between Chisinau and Bucharest. Romanian priests from churches subordinated to the Metropolitan Church of Bessarabia controlled by the Romanian Patriarchate were forced to leave the Republic of Moldova in early January in a non-European spirit. The violation of the staying regime in Moldova was the motivation. As the incident took place in January, before the enforcement of the readmission agreement between Moldova and E.U., there are grounds that Moldovan authorities have violated this agreement.

President Voronin resumed accusations against Romania during a meeting with Russian Patriarch Alexy II on January 22, saying that the neighbouring country promotes an aggressive policy against Moldova. He stated that Moldova will resist to this "aggression". President Voronin delivered similar statements during an interview with the Russian-language newspaper Kishinevsky Obozrevateli^[1]. Some of them must be cited:

1. Romania’s role in the Dniester conflict in the early 1990s of the 20th century was underrated;
2. The conflict was started to establish Moldova’s border on the Dniester, as Transnistria was an obstacle for Moldova’s union with Romania;
3. For this purpose, Romania provided military hardware and military specialists, services turned later into a foreign debt of Moldova towards Romania;
4. Now some Romanian officials are categorically against Moldova’s reintegration and said more than once that Moldova will join Romania;
5. Bilateral relations between the sides will not be normal as long as Romania tries to raise territorial claims, willing to "swallow" Moldova and Moldovan-Romanian relations are not built on interstate agreements.

In addition, new accusations were brought against Romanian officials from the Bucharest Ministry of Justice, who had reportedly facilitated the regain of Romanian citizenship by a large group of Moldovan citizens. The accusations followed an investigation by the Interior Ministry in Chisinau.

On the other hand, Romanian authorities have reaffirmed that the relationship with Moldova is a priority of Romania’s foreign policy in 2008, too. Romanian President Traian Basescu expressed optimism in front of diplomatic corps to Romania that European partners of Romania will support the granting of a prospect to Moldova like the one enjoyed by Western Balkans.

Republic of Moldova – Russia

President Voronin was on a formal visit to Moscow on January 22. He met Russian President Vladimir Putin and Russian Patriarch Alexy II in Moscow.

There is little information about the meeting with the Russian president. The Moldovan presidential press service reported laconically the talks between the two presidents. It is known that the two presidents have tackled the "entire spectre of issues related to bilateral relations" and it is supposed that the Transnistrian conflict was a special topic, though the official presidential communication does not make any direct reference in this regard.

Following a meeting between Moldovan Minister of Foreign Relations and European Integration Andrei Stratan and Russian Ambassador to Moldova Valeri Kuzmin, it may be supposed that the Moldovan and Russian presidents have made certain deals in Moscow, which according to the MFAEI, could "encourage the cooperation between the two states in most diverse fields." According to the ministerial press service, the Moldovan minister and the Russian ambassador met to review the tasks of the sides aimed to implement the "agreements of the two presidents," in particular, in commercial-economic and social-humanitarian areas.

President Voronin was awarded a prize "for outstanding contribution to strengthening the unity of the Orthodox nations" on behalf of the International Fund of Unity of Orthodox Nations, at the meeting with the Russian patriarch.

Republic of Moldova – Italy

A Consulate-General of Moldova opened in Bolonia on January 29. The opening of the consulate aims to facilitate the dialogue with Moldovans working in Italy and provide consular services. Gheorghe Munteanu was appointed Consul-General.

The consulate opened after a visit of Italian Foreign Minister Massimo D’Alema to Moldova in early January. On this occasion, the Italian minister reported Italy’s decision to open an embassy in Moldova by June 2008 and to increase the number of Moldovan citizens allowed to obtain a legal labour permit in Italy up to 6,500 persons in 2008.

The sides signed a joint statement at the end of the meeting, expressing their willingness to strengthen the bilateral relations.

Multilateral cooperation

Republic of Moldova – Council of Europe

Conventions

Moldova has signed two Conventions of the Council of Europe in the period concerned, in particular, concerning cinematographic co-production and the framework convention on value of cultural patrimony for society.

ECHR judgments

The European Court of Human Rights (ECHR) passed 5 judgments against Moldova in January 2008, in particular, on Bulava vs. Moldova, Ceachir vs. Moldova, Rusu vs. Moldova, Cravcenco vs. Moldova and Balan vs. Moldova. It sentenced Moldova for violation of rights to a fair trial, effective appeal and protection of property. Moldova will have to pay 50,374 Euros (about 844,268 lei) in the five cases.

The ECHR has sentenced Moldova in 110 cases until now^[2].

Republic of Moldova – OSCE

Finnish Foreign Minister Ilkka Kanerva was on a formal visit to Moldova in the mid-January 2008, as Finland took over the OSCE Chairmanship for 2008. His meetings in Chisinau focussed on the Transnistrian conflict. For more details, see the "Transnistrian problem" chapter of this issue of the journal.

Studies, Analyses, Comments

Visa facilitation agreement: "Beer for members of trade unions only?!"
Igor Botan, 30 January 2008

The agreement allows the issuance of E.U. multi-visas and stipulates a 35-euro single visa issuance fee

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Moldova 2008: the new – old challenges for the economy
Galina Selari, 31 January 2008

The new year of 2008 traditionally began with summing up of the results for the previous year. We have to note that 2007 saw completion of both the first cycle of implementation of the "new economic policy" (Economic Growth and Poverty Reduction Strategy for 2004–2006 and the Moldova-EU Action Plan for 2005–2007) and preparation and approval of the National Development Strategy for 2008–2011

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