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Activity of Public Institutions

Government
Presidency

Presumption of guiltiness by Igor Botan

Activity of Public Institutions

Government

1.1. Appointments. Dismissals

Under a presidential decree, former PPCD legislator Iurie Rosca was nominated deputy prime minister. He will be in charge with coordinating actions aimed to ensure legality, respect for rights and freedoms of citizens, maintain public order, combat crime and corruption, trafficking in human beings and illegal migration, ensuring security and defence capacity of the country. The coordinated public authorities are: Interior Ministry, Ministry of Defence, and Ministry of Justice, Centre for Combating Economic Crimes and Corruption, Customs Service, Border Guard Service and Agency for Material Reserves, Public Procurements and Humanitarian Aid (relating to state material reserves).

Note by ADEPT: The media noted the "separate" nomination of the new deputy premier shortly after the granting of the vote of confidence to the entire governmental team, as well as the neglecting of the executive leadership during this promotion.

Natalia Gherman, former Moldovan ambassador to Sweden, was assigned deputy minister of foreign affairs and European integration.

Vitalie Iurcu was relieved from the office of director-general of the National Energy Regulatory Agency and nominated director-general of S.A. Moldtelecom.

Alexandru Gisca was relieved from the office of adviser to the deputy prime minister upon his demand.

1.2. Decisions

Decision on redistribution of assisting competences for the National Commission for European Integration. According to changes approved by the Government under the June 17, 2009 Decision, competences of providing organisational and information assistance to the National Commission for European Integration (NCEI) went back to the Ministry of Foreign Affairs and European Integration from the Government Apparatus.

Note by ADEPT: The takeover by the Government Apparatus of the NCEI secretariat functions was earlier regarded as a successful solution, with Moldova’s president (self-nominated as NCEI Chairman) telling positive and praising words in this regard. At the same time, the minister of foreign affairs and European integration said that building the NCEI Secretariat to advise the Government was the "masterpiece" of a presidential adviser who "had plans to redirect the European integration area outside of the ministry and MFAEI did not know the actions of this structure for one year .

Decision concerning the 29^th of July 2009 as day-off. In connection with holding early parliamentary elections on July 29, 2009 this working will be transferred to another day, which the Government will establish later.

Decision approving the regulation on the free-of-charge release of some assets. Under the Regulation, agricultural producers will receive Diesel oil to hold the harvesting campaign and develop crops, as well as enlarge forest areas. The lot of 9,500 tons was provided by the Russian Federation as humanitarian aid.

Decision concerning the allocation of funds for elections. The Central Electoral Commission was allocated 22,390 lei from the Reserve Fund of the Government to prepare and hold early parliamentary elections on July 29, 2009. This amount could be restored at a further correction of the state budget for 2009.

Decision concerning the granting of humanitarian aid. Moldova will provide pecuniary assistance worth 50,000 Euros to the Czech Republic in order to redress consequences of floods there. The funds will go from the Reserve Fund of the Government.

Decisions approving some policy documents (plans, strategies):

• The Government’s action plan for the 3^rd quarter of 2009.

1.3. Sittings. Decisions

New deputy premier proves activism

On the first days of activity newly-assigned Deputy Premier Iurie Rosca has heard several citizens, opened a hotline in his cabinet and chaired sittings of:

The Coordinating Council for social adaptation of former detainees;

The National Committee for Combating Trafficking in human beings;

The National Traffic Security Council;

• The permanent governmental Commission in charge with organising the execution of the definitive decisions of the European Court of Human Rights versus Moldova.

As well, Rosca visited the Interior Ministry, the Centre for Combating Economic Crimes and Corruption, the Customs Service.

Presidency

2.1. Decrees

Moldovan president has signed decrees on nomination of certain ambassadors:

• Valeriu Bobutac was assigned Extraordinary and Plenipotentiary Ambassador to Belarus;
• Lidia Gutu was nominated Extraordinary and Plenipotentiary Ambassador to Bulgaria.

Decrees concerning the awarding of some state distinctions:

• The Labour Glory Order was awarded to Valeriu Ostalep, deputy minister of foreign affairs and European integration, Iurie Zidu, ad-interim director-general of the State Administration of Civil Aviation; Oleg Morii, adviser to the Agro-Industrial Agency Moldova-Vin;
• The Honour Order was awarded to Taras Kozak, deputy chairman of the State Customs Service of Ukraine, and Deputy Prosecutor-General of Ukraine Viktor Kudreavtsev;
• The 3^rd Faith to Homeland Order was awarded to Valentin Foros, directorate chief of the State Information Resources Centre "Registru" controlled by the Ministry of Information Development;
• The Military Merit medal was awarded to Oleg Chirisenco, deputy director of the State Guard and Protection Service;
• The Civic Merit medal was awarded to Alexei Cracan, department chief in the Ministry of Foreign Affairs and European Integration; Grigore Paun, director of the Curative-Spa and Recovery Association.

2.2. Sittings. Decisions. Statements

New concerns with condition of agriculture

Moldova’s president has convoked a sitting on condition of agriculture and heard a report on state of things in the sector and crop forecasts. Generalizing the heard reports, the chief of state demanded joint actions to prepare the harvesting campaign, particularly necessary agricultural machines, ensure the agriculture with fuel. Vladimir Voronin stressed the importance of keeping enlarging the network of technological machines stations and consolidating farm land. As well, he ordered an inventory of existing stations (220). Voronin also underlined the necessity of speeding up the program on enlarging vineyards, calling for allowing the export of wine in bulk. Elsewhere, the chief of state indicated to the Ministry of Agriculture and Food Industry’s administration that the process of reorganization of scientific institutions in the area should be completed in line with previous decisions.

Discussions with bank representatives

During a meeting, the chief of state and bank representatives were informed about macroeconomic situation and positive signals in the area, as well as about situation on currency market. Vladimir Voronin stressed the importance of maintaining a dialogue between commercial banks and central regulatory authorities in the area, underlining the imperative of respecting NBM recommendations and decisions.

Concerns with VAT redemption

The chief of state has convoked a sitting to discuss the May 29, 2009 decision by the Chamber of Auditors concerning the findings of a control on fairness and legality of VAT redemption decisions made by the Main State Tax Service in 2008. It was noted that the fiscal evasion practiced by shadow firms is a serious problem for the budgetary system. Participants in talks considered factors which encourage the opening and operation of lots of shadow firms, illicit VAT redemption schemes, institutional faults, indicating the necessity of optimizing the work of the Main State Tax Inspectorate and other bodies which have tangencies with this area. The chief of state did not like the results of competent services and described as passive the actions taken to anticipate, discover, investigate and combat fiscal evasion schemes. In consequence, he asked competent authorities to mobilize their efforts, intensify the work of the State VAT Redemption Commission, improve the VAT payment and redemption mechanism, remedy shortcomings in activity of the Main State Tax Inspectorate and other control services. The Ministry of Information Development was asked to speed up the process of elaboration and enforcement of the electronic invoice and optimize the use of information technologies against fiscal evasion and doubtful deals relating to VAT redemption and payment.

Economic Policies

1. Macroeconomics

Concerning remittances and relationship with creditors…

According to recent analyses, the deep economic recession in the 1st quarter was also linked to the fall of remittances and labor migration, respectively many Moldovans who came back home complete the number of jobseekers. The unemployment rate has grown much for the first time in the last eight years, and there are first signals that the real wages are on the decline^[1]. The fall of remittances from migrants involve two basic factors: 1) the decline of consumption, imports, taxes etc. and 2) pressures on the domestic labour market (many nationals who lost their jobs abroad come back home) fuelled by a high unemployment rate. In addition, the decline of budget accumulations is a negative consequence of the fall of imports. As the indirect taxes especially VAT are the main income source to the state budget, they are expected to fall much in connection with the decline of consumption, and therefore, they endanger the implementation of social projects and fulfillment of budgetary commitments.

According to National Bank of Moldova (NBM) data, the banking system recorded remittances worth 227 million dollars from nationals working abroad, which is by 43 percent less than in late 2008 and by 29 percent less than in the 1^st quarter of 2008. However, if the fall of about 30 percent would have been maintained till the end of this year, Moldova would have by half a billion (0.5 billion dollars) less foreign currency inflows, and this is a serious decline. One could say that Russia would "rescue" us, meaning the promised 500-million-dollar credit, which would cover somehow the shortage of remittances. But one should not forget that this is a credit and the contracting, refunding and use conditions are an incognito for the public so far.

Of course, Moldova needs an external loan, as it lacks funding sources at present. It cannot be funded via bond issues at present, with institutional creditors such as IMF, EU or WB being the only option. However, the Government has a strong trump in hands: the IMF postponed the decision to release a credit for next autumn. The relationship with this international organisation will depend much on the conditions in which Russia will release the credit and the situation after the July 29 elections.

At the same time, one should not forget that Moldova and Tajikistan only had poverty reduction and economic growth programmes with IMF until now, while all other CIS member states have more advantageous bilateral programmes regarding conditions and refunding terms, as well as value. For example, Belarus has a stand-by programme worth 2.5 billion dollars, Ukraine – 16.4 billion dollars, while Romania, Poland and other ECE countries have much more flexible credit lines. This is one more proof of incoherence of applied policies and poor capacity to implement structural and institutional poverty reduction reforms, as well as economic caps compared with countries from the region.

2. Banking system

System set to "infamy pillar"…

According to NBM data, assets of Moldovan banks increased by about 1 percent overall in May, up to 37.8 billion lei (3.375 billion dollars), while the deposit portfolio rose by 0.5 percent, up to 25.3 billion lei (about 2.26 billion dollars). In all likelihood, the banking system is developing again, so that assets which dropped by about 3.5 percent in five months and deposits by 6.8 percent overall are now on the rise. Banks expected highest losses in the first five months after the capital inflow from accounts of individuals (-6.2 percent). The supply of people’s deposits turns over 15.5 billion lei and exceeds much the deposits of individuals which count for 5.6 billion lei. The credit portfolio dropped by 3.4 percent, down to about 24 billion lei^[2]. The quality of credits keeps worsening. Reductions for credit losses rose by 2 percent in May and by 20 percent this year, up to 1.44 billion lei. Thus, partners and clients of banks borrowed 1.9 billion lei, while overall assets of commercial banks are worth about 30.7 billion lei and tend to fall.

The liquidity of the banking system is high so far, respectively 30 percent, compared with the norm of up to 20 percent, while the capital sufficiency is 32 percent versus 12 percent. However, the quality of accounts from the system could be influenced (negatively) by bankruptcy of Investprivatbank (IPB). What happened with IPB is actually a consequence of irresponsibility or administrative negligence by leadership of this institution, which ventured to contract or release high-risk loans despite warnings by the National Bank of Moldova. According to NBM officials, the monetary authority has warned IPB a year ago in connection with unsteadiness of assets management, particularly of credit portfolio. On the other hand, the bank itself gave the first signals of impasse half a year ago, when it was paying interest rates of 24 percent for deposits in lei and 16 percent for deposits in foreign currency, while the average on system was over 20 percent and 13 percent respectively.

Therefore, those possessing elementary financial knowledge could intuit that the bank was facing an acute liquidity yet in November, and it was giving pretty high interests in order to attract resources. But the National Bank knew for sure that IPB was in a very difficult condition and should get involved emergently, while it dallied until March-April 2009, when all banks undergo an ordinary NBM control. It was too late. In fact, NBM relations with commercial banks proved that the central bank acts sometimes like a "witch doctor" who indicates the same treatment to all banks (reprimands, warnings, etc.), regardless of the source of financial problems and pain of the "patient", i.e. bank, as NBM is a bank of banks and the law obliges it to take the necessary measures. Even more, most of IPB assets went to mortgage business or more than 75 percent of the credit portfolio of the institution was made of mortgage loans. NBM knew well and should notify the bank to diversify its portfolio.

Certainly, the bankruptcy of IPB will make people angry while choosing a bank for their savings, particularly because many of them remember the stories of OguzBank, Intercapital or BancoSind from 1996–1998, and many people did not recover their deposits so far. The worst which could happen in this case would be the massive withdrawal of deposits in connection with panic, which is more probable in crisis times. The risk of such a situation consists both in losing deposits and jeopardizing the entire banking system, which normal functioning is vital for any economy. Coldly considering rumors and not lending oneself to an eventual panic of deponents, as banks’ operation is mainly based on people’s deposits is very important during financial crises. Becoming a prey to panic just worsens the situation.

3. Public funds

State treasury entering a deficit surely…

Incomes to the state budget of Moldova accounted for over 5.1 billion (more than 455 million dollars) in early June, which is by about 10 percent less than expected. Collected revenues have dropped by 10.5 percent compared with 2008. According to data by Ministry of Finance, more than 39 percent of the incomes came from the State Tax Service, 65.2 percent from the Customs Service, 70.8 million lei (by 5.3 percent more than the planned indicators) came from income taxes on entrepreneurship, 2.26 billion lei (-2.4 percent) from VAT on goods made in Moldova, 1.99 billion lei (by about 15 percent less) from VAT on imports, and more than 563 million lei (by about 7.5 percent less) from excises. Budgetary expenses amounted to 6.25 billion lei (558 million dollars) in January-May, over 23 percent less than expected, but by 1.3 percent more than in the same period of last year. Moldova operated external payments worth 31.5 million dollars, and more than 297 million lei went to the internal state debt.

4. Labour market

Wages stagnating…

Average wage of an employee in Moldova was about 2,746 (245 dollars) in May 2009. The average wage has grown by 8.2 percent and the real salary by 10 percent, compared with May 2008. According to NBS data, the average salary in budgetary sector accounted for 2,455 lei (219 dollars) and rose by about 20 percent, compared with the similar period of 2008. The average salary in the real sector accounted for about 2,914 lei (260 dollars) and rose by 4.5 percent compared with the similar period of last year.

Employees in financial sector earn the most so far, 5,577 lei on average in May. They are followed by employees of electricity, heating, gas and water providing enterprises who earned 4,676 lei on average, transportation and communication sector – 3,735 lei, extractive industry 3,423 lei, real estate companies 3,460 lei, and employees of public administration sector who earned 3,252 lei on average in May.

Lowest salaries were paid in agriculture, hunting and forestry – 1,322 lei, pisciculture 1,412 lei, entertainment, culture and sport 2,060 lei, education 2,134 lei, hotels and restaurants 2,175 lei. The average wage on national economy amounted to 2,642 lei (236 dollars) in January-May 2009, while authorities have promised a 300-dollar average salary for 2009.

Transdnistrian Problem

Smirnov not seeing anybody to discuss Transnistrian settlement

Despite optimistic reports by Moldovan authorities concerning the Transnistrian settlement prospects, especially after the June 22 visit to Moscow and meetings between incumbent President Vladimir Voronin and President Dmitri Medvedev and Premier Vladimir Putin, Transnistrian leader Igor Smirnov says that the reintegration of Moldova is impossible. Besides older propagandistic cliches, Smirnov brings new arguments to underlie his assessments – he does not see anybody to discuss the Transnistrian settlement because of the political destabilization in the Republic of Moldova, "as he will not discuss with an interim president." Transnistria will keep the strategic line on consolidation of independence and gradual approach to the Russian Federation.

Smirnov regards the June 21–22 Vienne consultations as useful to find some means for joining efforts against crime and trafficking in human beings and drugs.

Constitutional commission concerned with adjusting Transnistrian legislation to Russian laws

The constitutional commission set up by Smirnov keeps working even after the withdrawal of the "initiative of the 17" concerning the modification of Transnistrian constitution. Representatives of legislative and executive branches of Transnistrian authorities have overcome difficulties relating to functioning of the executive. According to Smirnov, the Transnistrian legislation should be harmonized with Russian laws on the basis of express stipulations of the Russian Constitution. At the same time, Smirnov insists that harmonization does not mean unification. In fact, it means trying to promote interests of influent groups under the cover of "harmonization".

Russian financial support to Transnistria

On June 26, Russia transferred 7.3 million dollars to the Supreme Soviet of Transnistria. These resources are part of the third tranche of "financial humanitarian aid" provided to Transnistria this year. The funds will go to pension additions, foodstuffs for some disadvantaged categories from certain institutions. According to the news agency Novy Region-2, this aid responds to the December 19, 2008 appeal by the Supreme Soviet of Transnistria to the Russian State Duma, which argues the necessity of a financial humanitarian aid "with the purpose to remedy negative trends of economy and ensure the social protection of people in need." The agency notes that Transnistria gets such a financial assistance from Russia for the third year.

Foreign Affairs

Bilateral cooperation

Republic of Moldova – Romania

The Moldovan-Romanian diplomatic relations are frozen so far, while the news conference on June 24, 2009 at which the incumbent president of Moldova, Vladimir Voronin, brought new accusations against Romania does not forecast any warming of these ties in the near future. Vladimir Voronin said that the Prosecutor-General’s Office holds evidence on Romania’s participation in the April 7, 2009 unrest. As well, he said that the visa requirements for Romanian citizens will be cancelled "immediately after the European Union will simplify the visa requirements for Moldovan citizens"^[1] and he will insist on this condition during his presidency. Later, in an interview with the radio station Voice of America, Vladimir Voronin has reiterated the accusations against Romania that the latter does not recognize Moldova’s statehood, stressing that Moldova does not ask Romania to sign a special border treaty, but one similar to those signed by Bucharest with other countries.

In his turn, Romania’s president told on June 25, 2009 a group of children from Transnistrian region at a Romanian summer camp that despite the hostile messages of Moldovan authorities, Romania recognizes the statehood of the Republic of Moldova, supports its territorial integrity and wishes Moldova to become an EU member.

Republic of Moldova – Russia

The Moldovan-Russian relations keep developing. The major event was the visit of the incumbent president of Moldova, Vladimir Voronin, to Moscow and the meeting with Russia’s President Dmitri Medvedev and Prime Minister Vladimir Putin. While on visit, Vladimir Voronin thanked the Russian Federation for its political support to Moldova after the post-electoral developments, inclusively in front of the European Union, while Russian officials reiterated their support for the actions taken by Moldovan authorities after elections. Concomitantly with the moral support, the Russian Federation was ready to provide a financial support to Moldova via a 500-million-dollar grant. At the same time, Vladimir Voronin was quoted as saying that Russia will also provide a 20-million-dollar grant for repairing of the Parliament building.

The results of the meeting between Moldovan Prime Minister Zinaida Grecianii and the first deputy prime minister of Russia, Igor Shuvalov, also indicates better Moldovan-Russian relations, as the two officials settled issues relating to liberalization of supplies of Moldovan agro-food products and wines to Russia.

Note by ADEPT: Opposition parties raised concern with the unclear contracting conditions for the Russian credit and asked Vladimir Voronin to reveal the crediting conditions and to orient the credit (if signing of the agreement with Russia accordingly to legal norms) to investments in infrastructure. The crediting conditions were not revealed so far, while negotiations between Moldovan and Russian Governments are underway. According to knowledgeable Russian sources (www.ng.ru), this credit could cover the Transnistrian debt for Russian gas.

Republic of Moldova – USA

In the period concerned, incumbent President Vladimir Voronin had a meeting with the USA ambassador to Moldova, Asif J. Chaudhry, and discussed progresses in implementing the MCC Preliminary Country Program and the perspective of signing the Compact agreement of the USA Millennium Challenge Corporation (once signed, this agreement will give green light to about 500 million dollars for road building, development of energy sector, transition to modern agriculture and development of primary health assistance in rural areas). The sides also tackled the forthcoming early elections, with the USA ambassador stressing the importance of free and fair elections and respect for the media freedom, which are necessary to strengthen the Moldovan democracy and improve Moldova’s external image.

Note by ADEPT: The same day, Deputy Prime Minister Iurie Rosca told a sitting of the national committee on combating trafficking in human beings that the Unites States denigrates Moldova by releasing wrong accounts on trafficking in persons and the Moldovan authorities will ask explanations from the US regarding these exaggerated data.

Multilateral cooperation

Republic of Moldova – Council of Europe

ECHR decisions

The European Court of Human Rights (ECHR) has passed decisions on the cases Gurgurov vs. Moldova and Buzilov vs. Moldova in the period concerned. In both cases it established the violation of Article 3 ECHR (prohibition of torture) after the ill-treatment of the applicants by police officers and the lack of an adequate investigation in this respect, and indicated the violation of the right to an effective appeal in the case of Gurgurov vs. Moldova. In both cases, Moldova will pay 75,000 Euros in non-pecuniary damages and 500 Euros in costs and expenses. (Source: www.echr.coe.int, www.lhr.md)

Results of the visit of PACE corpporteurs

On June 22, the corapporteurs of the Parliamentary Assembly of the Council of Europe (PACE), Josette Durrieu and Egidijus Vareikis, reported the results of their June 10, 2009 fact-collection visit to Moldova. According to the communication, the corapporteurs welcomed the amendments to the Electoral Code from June 16, though they do not respond to all concerns raised by PACE and Council of Europe (CoE), and invited the authorities to enact them exactly. As well, they recommended the resolution of all shortcomings related to electoral lists and voting by nationals from other countries. The corapporteurs insisted that the authorities should ensure all necessary conditions for the electoral campaign in line with European standards, inclusively by ensuring the access to the media, and recommended the PACE Bureau to deploy a large observance mission to the early parliamentary elections on July 29, 2009.

As regards the April 7–8, 2009 events, the corapporteurs asked the Prosecutor-General’s Office to start up investigations on the signaled violence and torture and report the findings to the CoE Monitoring Committee. The Monitoring Committee will keep watching the fulfillment of the April 29, 2009 PACE Resolution 1666.

Republic of Moldova – CIS

Chisinau hosted on June 19 the 42^nd Meeting of the CIS Economic Council, which brought together representatives of Moldova and delegates from Armenia, Azerbaijan, Belarus, Georgia, Kazakhstan, Kyrgyz Republic, Russia, Tajikistan and Ukraine. It discussed issues relating to cooperation of CIS member states in developing international transport corridors, energy systems, anticrisis actions.

Studies, Analyses, Comments

Presumption of guiltiness
Igor Botan, 30 June 2009

Incumbent President Vladimir Voronin dissolved the Parliament on June 15, 2009, decreeing early parliamentary elections for the 29th of July. The Party of Communists of the Republic of Moldova (PCRM) led by Vladimir Voronin has publicly promised to hold an aggressive and bitter campaign against the opposition at the early elections

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