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Export Promotion: on Paper
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Under the IMF trade restrictions classifications scheme, Moldova’s regime is rated “1” — the most liberal category. This is what is called “trade on paper”. But in Moldova there is also “trade in practice” that the state hampers through its ministries, departments and agencies by creating multiple barriers and traps — officially and unofficially, in order to feed the corruption. This has to be fought somehow. And the Government does that… on paper.
Recently, a grateful domestic producer discovered the following document in the “Monitorul Oficial al Republicii Moldova” (The Official Monitor of the Republic of Moldova), No. 41–145 of 11 July 2003:
Decree No. 72-p, 7 July 2003
Reaching sustainable economic growth depends on favourable investment climate that guarantees the lack of any official and unofficial obstacles to the activity of economic units engaged in export. With a view to fulfil this task and a more effective execution of the Decision of the Government of the Republic of Moldova No. 478 of 22 April 2003 “On the elimination of obstacles to the export of commodities”, ministries, departments and agencies are to take the necessary actions to facilitate exports and provide for the necessary support to economic units-exporters. The above-mentioned bodies and their employees are to guide their actions upon the norm that stipulates that decisions on export, price and its method, including purchase of commodities through the Commodity exchange, is reserved to economic units only.Prime-Minister of the Republic of Moldova
This masterpiece of the State Chancellery shows that even after 12 years of transition to market economy, when more than 85% of GDP is formed by the private sector, not all employees of ministries, departments and agencies realise that “decision on export, price and its method” does not belong to them, but to economic units! What did the previous decision of the Government stipulate in this regard? Quote:
Decision No. 478, 22 April 2003
On elimination of obstacles to export of commodities
With a view to achieve sustainable economic growth, facilitate export of domestic products through creation of favourable conditions for economic units, eliminate all technical obstacles to export, as well as to introduce some new restrictions of this kind, the Government decides:Prime-Minister of the Republic of Moldova
- Ministries and departments are prohibited to set any restrictions through departmental normative acts, inquiry of additional documents, besides those determined by normative acts regulating external trade, and establishment of indicative prices for export and other actions making export activity of domestic economic units more difficult.
- Central public administration bodies are to:
- revise departmental normative acts to bring them into accordance with requirements of the first paragraph of this decision and inform the Government about the actions made in 30 days;
- imperatively publish in the Monitorul Oficial the internal normative acts that affect negatively or regulate external trade regime, after preliminary co-ordination with the Ministry of Justice.
- Ministry of Economy is entrusted with the control over execution of the given decision.
So, the Government issued two decisions (identical by implication) on the same problem — overcoming bureaucratic barriers to export. These decisions, unfortunately, are not executed at all. Let us remember that not long ago, the Government approved Strategy for export promotion in 2002–2005 (Decision of the Government No. 80 of 29 January 2002). Its goal was to “enliven export and increase confidence of exporters to the policy of the state”.
And even still earlier (April 2001), there was the Programme of the Government that stated emotionally and clearly that export is the Moldovan economy’s driving force, the main source of budget incomes providing for payment under external debt and so on. However, all this exists only on paper…
The realities are that despite the fact that exports have been growing over the last three years, their volume in 2002 was only US$666 million — still 25.2% less than in 1997, and trade balance deficit (import exceeding export) accounted for US$414,2 million. Structure and geography of our exports have been changing slowly. Agriculture, food processing and textile products account for more than a half of all exports. Traditionally, due to the bilateral free trade agreement, Russia and other CIS countries remain the main importers of Moldovan products.
Despite better terms of trade with the European Union (in comparison with those with the CIS) Moldova’s turnover with this region is still modest. Thus, if share of the EU and CEE in Moldovan export was 21.2% in 1997, in 2002 it accounted for 37.8%; as regards import — 38.6% and 49.5% respectively. Growth of import to Moldova of European goods is preconditioned by the consumption growth. Return growth of export, though, is hindered by both low competitiveness of the Moldovan industry and large food and textile components of Moldovan export, which come up against the EU protectionism in these sectors.
Obstacles that state bureaucracy creates to export are multiple and diverse. In opinion of Ion Mushuc, the president of the “Timpul” business club, “image of entrepreneurs as enemies is being propagated in the society and, as a result, business activity decreases, business retreats into the shadow, many entrepreneurs begin to fear for the future of their business and the country”. The “Timpul” club came out on July 15 of this year with an appeal to the President Vladimir Voronin in which the entrepreneurs suggest the President to express his own attitude towards arbitrariness of the bureaucracy to legal business, create a permanent committee for protection of entrepreneurship within the Parliament, amend the Law on the Centre for Fighting Economic Crime and so bring it into accordance with the Constitution of the country and international legal norms.
It was July as well when the IMF resident representative, Edgardo Ruggiero, reminded that the IMF Executive Board would not release external financing to our country unless Moldova cancelled export restrictions and restored pre-shipment inspection.
Parliament Assembly of the Council of Europe has been also caring for promotion of our exports. The other day, it approved resolution “On Economic Development of Moldova: Plans and Perspectives” that recommends the country’s leadership to stimulate entrepreneurship, remove all export restrictions, implement informational technologies more widely in customs, tax administration, financial service and develop trade infrastructure — standardisation and testing systems, marketing, transport services and communications.
Thus, we are urged to practical actions to promote the export. This applies both to a more active utilisation of Moldova’s accession to the WTO, Stability Pact and Free Trade Area and elimination of formal and informal trade barriers within the country. As for the Government decisions “on elimination of obstacles to export”, such decisions are necessary, of course, but they have to be executed instead of being multiply cloned.