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Activity of Public Institutions

Government
Presidency

Disunited opposition running the risk… by Igor Botan

Activity of Public Institutions

Government

2.1. Appointments. Dismissals

Ion Munteanu was appointed Deputy Minister of Culture and Tourism.

Iurie Ursu was assigned Deputy Director of the National Regulatory Agency for Electronic Communications and Information Technology for a 4-year term.

2.2. Decisions

Note: Although no governmental holiday was announced on August 1–25, the agenda of Government sittings was not made public. Just on August 25, the agenda for the same day was published on the Government’s website.

Decisions approving the structure and regulations of certain central public authorities:

• The regulation, structure and maximum personnel of the central apparatus of the Ministry of Education and Youth;
• The regulation on organisation and functioning, structure and maximum personnel of the Ministry of Construction and Territorial Development.

Decisions approving higher tariffs and taxes:

• For basic postal services provided by the State Enterprise Posta Moldovei and its branches;
• Education fees of the State Medical and Pharmaceutical University "Nicolae Testemitanu" (specialities "dentistry" and "pharmacy").

Decisions approving draft laws:

• Concerning the authorisation and payment of interpreters and translators of the Superior Council of Magistracy, Ministry of Justice, prosecution bodies, criminal investigation bodies, law courts, notaries, lawyers and judicial executors;
• Concerning the modification and completion of some legislative acts (to exempt from income taxes the economic agencies which will build and renovate homes for flood victims).

Decision on allocation of funds to remedy consequences of floods. The Government has allocated 15 million lei to the Ministry of Agriculture and Food Industry from the special account for the assistance of victims of natural disasters. The cabinet of ministers decided to allocate the material assistance to people who suffered losses as their adjacent plots were flooded. A compensation of 10,000 lei per hectare will be paid to about 5,400 families for approximately 1,530 hectares of fields.

Decisions approving some regulations:

• The Regulation on revenue calculation methodology with the purpose of providing qualified state-guaranteed legal assistance;
• The Regulation on installation, operation, management, maintenance and/or destruction of electronic communication networks at the state border of the Republic of Moldova.

Decision on boosting tourism development in rural areas. A Republican Council for Promotion of Rural Tourism was established, its members and functioning regulation were approved. The concerned ministries will report to the Ministry of Culture and Tourism the implementation of the Rural Tourism Development Action Plan every semester.

1.3. Sittings. Decisions. Statements

Sitting of the Emergency Situation Commission

Prime minister has ordered at sitting the housing by November 10 of all families who became homeless after the late-June floods and the renovation of all homes from the out-of-risk area which were not seriously damaged by floods. The sitting examined aspects related to the construction of homes for floods victims and estimated losses suffered by agriculture after about 6,500 hectares of farm land were flooded. Prime minister stressed the necessity to encourage the functioning of the housing system, instructing the Ministry of Economy and Trade and the National Commission of Financial Market to elaborate a mechanism which would regulate responsibilities in case of failure to prevent specific risks.

Commission for elaboration of the National Security Strategy

Prime minister has chaired a sitting of the commission for elaboration of the National Security Strategy of Moldova, which examined the draft national security strategy and the related Action Plan. The strategy will be a basis for working out the Military Strategy, the Public Information Strategy on national security issues and other sectoral strategies on national security.

Appeal by MEY College to teachers

In order to prevent the planned protests by teachers and education unions, the College of the Ministry of Education and Youth has released an appeal recalling recent natural disasters and huge losses suffered by many families affected by floods, and by country in general. Members of the MEY College consider that even if teachers deserve higher salaries, but they will take into account the human and professional consciousness, feeling of civil responsibility and will not give green light to initiatives to block the beginning of the school year and educational process. The College noted that the salary problem cannot be resolved by protests, but rather by negotiating on the basis of a pertinent analysis of the situation, continuing ongoing negotiations and a final decision will be made after a definitive estimation of flood-related losses.

Presidency

Note: Moldovan president was on holidays in Croatia on August 4–12, 2008.

Under presidential decrees:

• Natalia Solcan was appointed Extraordinary and Plenipotentiary Ambassador of Moldova to the United Kingdom. Previously, Mrs. Solcan was Head of the Division in the Ministry of Foreign Affairs and European Integration;
• Veaceslav Dobinda was appointed Extraordinary and Plenipotentiary Ambassador of Moldova to Estonia. Mr. Dobinda has served in the Ministry of Foreign Affairs and European Integration;
• Aliona Dodon was assigned ad-interim Head of the Directorate-General of the Moldovan President Apparatus for a six-month term. The decree does not specify the situation of the incumbent Head of the Directorate-General.

Moldovan president has signed a decree on awarding the State Prize for 2008.

He awarded:

• Composer, academician Eugen Doga for his remarkable contribution to the development of national and universal musical art;
• Writer and academician Ion Druta for outstanding contribution to the development of national and universal culture and literature;
• Gheorghe Tibirna, Ion Corcimaru, Dumitru Sofroni, Nicolae Ghidirim, Anatolie Cernii for the cycle of works "Noi tehnologii in combaterea cancerului" (New anti-cancer technologies).

Note by ADEPT: The prize is worth 1,000 lei each; the rules and methods of evaluation, presentation of works were modified several times during the contest and the number of prizes was reduced from 10 announced at the beginning to 3. The media has earlier reported that Eugen Doga did not apply himself for the contest, but he was particularly awarded over his jubilee and nomination of 2007 as year of the composer.

3.2. Sittings. Decisions. Statements

Meeting with the Gagauz People’s Assembly (GPA) leadership

On August 4, the chief of state had a meeting with the newly-elected leadership of the People’s Assembly of Gagauzia represented by Chairwoman Ana Harlamenco and her deputies Demian Caraseni and Elena Covalenco. Vladimir Voronin greeted members of the People’s Assembly over the stabilised situation and noted that some very complicated problems were resolved with their own forces for the first time in history of the autonomy, with members of the People’s Assembly demonstrating much wisdom, reason and political willingness for the prosperity of Gagauzia. He reiterated the interest of the country leadership to continue cooperating contructively with the Comrat administration, in order to modernise and ensure the welfare of the Gagauz autonomy and country in general. Taking part in the meeting was also Moldovan Speaker Marian Lupu, who called for the continuation of a tight cooperation between the People’s Assembly of Gagauzia and Moldovan Parliament, in order to harmonise the Gagauz and national legislation, share experience.

Evaluation of losses and elaboration of plans to renovate flooded homes

Before leaving on holidays, Moldovan president has convoked a sitting on remedying floods consequences, and heard reports on situation in flooded areas and elaboration of plans to renovate the settlements. Vladimir Voronin highly appreciated actions taken by the Commission for evaluation of flood-related losses and elaboration of plans to restore the settlements, subdivisions of the Ministry of Interior and Ministry of Defence to combat natural disasters, but stressed the need to take efficient actions in remedying the floods’ consequences, too. The chief of state instructed the Commission for the evaluation of flood-related losses and elaboration of plans to restore the settlements to continue working in three directions: building houses or renovating the damaged ones; receiving and disseminating humanitarian aid, providing victims of natural disasters with food products, resolving problems related to organisation of flood victims’ lives, including their accommodation; estimating losses in agriculture, including flooded adjacent plots. It was noted the opportunity to operatively approve single loss evaluation criteria in agriculture, conditions to build homes for flood victims, providing assistance to renovate damaged residences, establish a way to give compensations to people affected by floods.

Holiday of Capriana Monastery

On August 28, Vladimir Voronin participated in the sanctification of the Capriana Monastery, saying that over 82 million lei was collected from more than 12,000 citizens and important national and international economic agents and spent for the reconstruction of the monastic complex.

Economic Policies

1. Inflation and prices

Moldova records deflation for second month in a row…

According to official statistics, consumer prices decreased by 0.9 percent in July compared with June 2008 under the influence of lower prices of food products, which declined by 3.3 percent and dearer manufactured goods which increased by 0.3 percent, as well as tariffs for public services – by 0.7 percent. Thus, Moldova recorded deflation for the second month in a row. The decline in price of foodstuffs in July was linked to the seasonal reduction of medium prices of agricultural products compared with June, in particular, prices of vegetables dropped by more than 24 percent, potatoes by over 8.3 percent, fruits by 17 percent, milk and dairy by 1.5 percent.

At the same time, prices of following products have grown in the period concerned: non-alcohol drinks by about 7 percent, honey by 4 percent, sausage products by 2.5 percent. Tariffs for following services rose in July 2008: house renting and dental services by about 5 percent, drinkable water supply and sewerage services by about 4 percent. So far, the inflation rate for 2008 (July 2008 compared with December 2007) is 5.3 percent. Medium prices have grown by 13.5 percent in the last 12 months (July 2008 compared with July 2007). In spite of the deflation in June and July, the inflation will be further high due to higher administrated prices (for gas, electricity, etc.).

2. Financial-banking system

Bank assets are worth 3.66 billion dollars…

The 1^st-degree capital, a key financial indicator revealing the consolidation of banks and their capacity to cover eventual losses, rose by about 13 percent in the 1^st quarter, up to approximately 5.9 billion lei. The share of foreign investments in banks’ capital was 72.5 percent, which is by 0.6 percentage points more than early this year. The average sufficiency of risk-liable capital on system is high so far – about 30 percent (the necessary minimum level is 12 percent) and indicates a high security of banks related to the potential to perform risky operations without affecting the capital.

Overall assets were worth about 36.2 billion lei (3.66 billion dollars) and rose by 13 percent compared with early this year. In particular, the credit portfolio rose by 13.6 percent up to 22.6 billion lei. The share of net credits in overall assets was 62.4 percent. As regards unfavourable loans in overall credits and share of unfavourable securities in overall securities, these indicators were 3.8 percent and 2.4 percent respectively.

In terms of risks diversification accordingly to priorities of national economy, the industry and trade traditionally received most credits – 48.3 percent. Following industry and trade, credits for real estate, constructions and development got 13 percent, agriculture and food industry about 14 percent and consumer credits more than 13 percent.

The net revenue on banks revealed more extended activities on system in the first semester of 2008, compared with the similar period of the precedent year, growing by 37.5 percent, up to 731.6 million lei, as of June 30, 2008. The return on assets and shareholder capital has increased by 4.2 percent and 24.6 percent respectively, with these indicators growing by 0.3 percentage points and 0.6 percentage points compared with early this year. The rise of bonds on banking system by 13.2 percent in the 1^st semester of 2008, up to 29.95 billion lei, particularly the growth of deposits by individuals (by over 18 percent) up to approximately 16.7 million lei reveals in continuation a high solvency and credibility of banks.

3. Currency and exchange rate

Authorities expect a continuing appreciation of Moldovan leu…

According to the draft budget law for 2009 delivered to the Government for examination, the Ministry of Finance expects a continuing appreciation of Moldovan leu versus U.S. dollar. Revenues and expenses of the 2009 state budget are estimated at an exchange rate of 9.12 lei per U.S. dollar. Therefore, the leu/dollar exchange rate could be like in late November 1998, when the national currency was on a free fall after the Russian financial crisis. An exchange rate of 10.25 lei per U.S. dollar was used to update estimates for 2008.

The exchange rate is used to calculate revenues on export-import operations (including VAT, which counts for 64.35 percent of the state budget incomes), consular fees, grants from external donors and expenses for external obligations towards international organisations, credits from foreign donors, maintenance of diplomatic missions, etc.

The evolution of the exchange rate of national currency supported by massive currency inflows could bring an additional pressure for the rise of imports and could have a double influence on budgetary revenues and expenses. The further appreciation of the national currency will be a risky factor for the state budget and, therefore, for the recapitalisation of the National Bank of Moldova (NBM); the Government will direct some of funds to increase the statutory capital of NBM or will issue state securities to cover the debit balance of the general reserve fund, and this requires additional funds for the internal state debt service.

Analysts from the German bank Commerzbank have recently noted after an analysis that the Moldovan leu had the best evolution versus other currencies after the Czech crown in the first half of this year. The leu was the second currency in the world which rose by 17 percent versus U.S. dollar and 15 percent versus Euro. German analysts described this evolution as a performance which reveals the real potential of Moldova. According to the National Bank of Moldova, the Moldovan leu increased by 14.16 percent versus U.S. dollar in nominal terms and by 18.17 percent in real terms in the first half of 2008. The leu/euro exchange rate reached on August 14 the lowest level after May 2004. On the other hand, exporters and nationals working abroad who send money to their families signal losses.

4. Macroeconomic forecasts

A 6-percent economic growth and a 10-percent inflation rate for 2009…

The state budget for 2009 was built on a 6-percent GDP growth, up to 70.5 billion lei, a 10-percent average inflation rate, a 19-percent advance of exports and 4-percent of imports. Macroeconomic indicators were estimated on the basis of development trends of the national economy and results for the 1st semester of this year. The Gross Domestic Product for this year is estimated at 62.7 percent, for a 7.5-percent planned growth. The advance in 2007 was 3 percent, and a nominal value of 53.4 million lei.

5. Social protection

World Bank estimates a 13-percent poverty growth…

According to preliminary estimates by the World Bank, the inflation rate in Moldova will be around 20 percent the next period; the country could face a 13-percent poverty growth, exacerbating more the challenge related to the necessity to ensure the access of people in need to food products. In particular, a direct nutritional challenge is the situation of institutionalised groups, inclusively children and elderly who survive at present with an intake below 2 dollars per day. This is a serious challenge for the country, as approximately 28 percent of its citizens are poor. As a rule, dearer foodstuffs affect people in need more, as they spend more of their earnings on food and they are more dependent on salaries and remittances.

Transdnistrian Problem

Once the armed conflict in South Ossetia started on August 8, 2008, Transnistrian authorities decided to introduce on August 11 a Moratorium on contacts with Moldovan authorities. An announcement in this regard was made by foreign ministry of the self-proclaimed republic. It motivated that Moldovan authorities did not condemn Georgia’s aggression in South Ossetia. On August 22, 2008 ad-interim foreign minister of Transnistria Vladimir Yastrebciac confirmed this position during a meeting with the Head of the OSCE Mission to Moldova, Filip Remler.

On August 25, 2008 Russian President Dmitri Medvedev invited his Moldovan counterpart Vladimir Voronin at the Bochyarov Ruchei resident in Sochi. According to Moldovan official press releases, the Russian president said about the conflict in the South Ossetia that "it demonstrated how dangerous frozen conflicts may be." Speaking about the Transnistrian problem, Mr. Medvedev assured that there are very good opportunities and possibilities now to settle the Transnistrian conflict, stressing the importance of formulating the approach and ways to settle the Transnistrian problem." In his turn, President Voronin said that "Moldova has carefully monitored developments in Georgia, give the frozen conflict in our country." In this context, President Voronin stressed the "necessity to draw conclusions on existing conflicts in the region and to find a lasting solution to the Transnistrian problem on a peaceful way." The two sides reconfirmed their intention to go on with consultations, making plans to hold meetings and negotiations with all interested parties, including representatives of Transnistria. (According to Moldpres)

The same day, Russian president has met Transnistrian leader Igor Smirnov. The talks with Smirnov made the foreign ministry of the self-proclaimed Transnistrian republic react to statements by President Voronin regarding topics he has discussed in Sochi. According to the Transnistrian foreign ministry, President Voronin’s statements are not true, they aim to mislead the international public opinion and introduce wishes of Chisinau as accomplished facts. Indeed, Voronin was invited in Sochi "to call upon the Republic of Moldova to refrain from uncalculated actions in the Transnistrian settlement process, which could stir up tensions in the region." A confirmation in this regard would be Voronin’s remark during the meeting with Medvedev: "Moldovan authorities were very wise since the existence of the Transnistrian conflict to prevent an eventual escalading of the situation." Transnistrian authorities were revolted with Voronin’s statements that the Republic of Moldova has got Russia’s support for a new draft law on autonomy status of Transnistria as part of Moldova, which would be based on the July 22, 2005 Law on basic regulations of the special legal status of localities from the left bank of the Dniester River. Transnistria considers that the optimal solution to the conflict would be a complex one, adopted on parity principles via mediation by Russia, Ukraine and OSCE. The basic principles of the resolution were explained in the draft agreement on friendship and cooperation between the Republic of Moldova and Transnsitria, which Igor Smirnov handed in to President Voronin at the April 11, 2008 meeting.

On August 26, 2008, when Russia recognised the independence of South Ossetia and Abkhazia, Russian Foreign Minister Sergei Lavrov explained Russia’s attitude towards the Transnistrian settlement, saying that the parties involved in the Transnistrian conflict are ready to reconsider the "Kozak Plan". According to Lavrov, no frozen conflict was so close to being settled like the Transnistrian issue: "Almost all the conflicting parties are sure of the necessity to reconsider the principles which were close to bring the Transnistrian resolution in 2003. We are studying them with Chisinau and Tiraspol, observers and we hope to make progress in this regard very soon."

On the other hand, on August 27, 2008 Ukrainian Foreign Minister Vladimir Ogrizko told a news conference with the participation of British Foreign Minister David Milibend that "Ukraine will continue to call for the implementation of the Yushchenko Plan on Transnistrian settlement. "Ukraine firmly supports the territorial integrity of Moldova, which cannot be violated… Any solutions like those concerning Abkhazia and South Ossetia will be illegitimate and will be not recognised by the international community, as they violate the international law and the U.N. status."

Foreign Affairs

Developments in Georgia and eventual consequences of the South Ossetia conflict on Moldova, particularly on the settlement of the Transnistrian conflict, marked the external relations of Moldova in August.

European Integration

As regards the European segment, Moldova backed the EU position on the military conflict in Georgia, joining the French EU Presidency Declaration released at the extraordinary meeting of the OSCE Permanent Council on August 8, 2008. The position of Moldova was presented in a press release by the Ministry of Foreign Affairs and European Integration on August 11, 2008, which says that "the European Union raises a serious concern with violent confrontations in South Ossetia (Georgia) and urges all parties to stop hostilities and to resume negotiations immediately, in order to allow a political resolution of the crisis by respecting the sovereignty and territorial integrity of Georgia."

After Russia recognised the independence of Abkhazia and South Ossetia on August 29, 2008, the Moldovan Government has released a Declaration saying that "Moldovan authorities and the whole society have been concerned over the development of situation in South Ossetia and Abkhazia in the last weeks. Regretfully, the interethnic conflict in Georgia, which has developed for many years, was not adequately settled this time again on the basis of the international law and human values, turning into a bloodshed drama and killing people. The Moldovan Government categorically rejects any methods to settle conflicting issues by force, including those related to territorial integrity, and it fears that the international recognition of Abkhazia and South Ossetia will not stabilise the situation. Like the recognition of Kosovo, this step reduces the responsibility of the conflicting sides in looking for a compromise between nations, their capacity to find fair and modern solutions by respecting territorial integrity principles and protecting human rights and freedoms. At the same time, we consider that there is no connection and parallel between situation in Georgia and Transnistrian region and interpretations that these developments could affect the Transnistrian settlement process are counterproductive, as there are very favourable premises and political willingness of all participants in the resolution process to stop this conflict. The Moldovan Government will keep determining its attitude towards developments in South Ossetia and Abkhazia on the basis of the Helsinki Final Act, U.N. Statute and all principles of the effective international law exclusively."

Bilateral cooperation

Republic of Moldova – Romania

The working visit paid to Chisinau by Romanian President Traian Basescu on August 20, 2008, at the invitation of the Romanian leader was the key event in the Moldovan-Romanian relations in August. The Romanian president met his Moldovan counterpart and discussed the situation in Georgia and consequences of hostilities in South Ossetia on regional stability, particularly on resolution of the Transnistrian conflict, and less the sensitive matters on Moldovan-Romanian relations related to the signing of the Basic and Border Treaties between the Republic of Moldova and Romania.

Speaking about causes of developments in Georgia, both presidents agreed that they were linked to the delayed settlement of the frozen conflict in Ossetia and strengthening of the separatist regime. In this context, Traian Basescu said that existing frozen conflicts lack a correct mechanism to relieve the situation, noting that the EU participation in the Transnistrian resolution process may be essential and fundamental to settle this issue. In his turn, Vladimir Voronin reconfirmed the position of Moldovan authorities to settle the Transnistrian issue by negotiating, with respect for Moldova’s sovereignty and territorial integrity. Traian Basescu assured that Romania keeps being an active supporter of the territorial integrity and sovereignty of Moldova and its European aspirations.

While tackling the European integration of the Republic of Moldova, Traian Basescu stressed that Romania firmly supports the necessity to negotiate a new agreement between EU and Moldova, which should extends travel rights of Moldovan citizens inside the EU (according to Medifax, www.president.md).

Little statements by the two presidents regarding bilateral relations had rather a protocol nature.

Republic of Moldova – Russia

The Moldova-Russia relations have also oscillated around situation in the Caucasus and its consequences on the Transnistrian issue. Remarkable developments include the meeting between Presidents Vladimir Voronin and Dmitri Medvedev in Sochi (see the Transnistrian problem) and meetings between Deputy Prime Minister Andrei Stratan, Minister of Foreign Affairs and European Integration, and President Voronin with Russian Ambassador to Moldova Valeri Kuzmin, who discussed hostilities in South Ossetia and perspective to develop commercial-economic relations between Moldova and Russia.

Studies, Analyses, Comments

Disunited opposition running the risk…
Igor Botan, 31 August 2008

The modification of the Electoral Code and the adoption of the new Law on political parties required indeed the rebuilding of the political scene. There is no other efficient solution against the exaggerated 6-percent electoral threshold and ban of pre-electoral alliances but to speed up the strengthening of political forces on certain doctrinaire or programmatic compatibility

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