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Changes in the economic policy?
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Observers indicate that Government activity, especially of its economic bloc, would significantly improve after Marian Lupu was appointed as a Minister of Economy. He has the knowledge and experience qualifying him for this position. He represents the so-called “technocrats”, skilled professionals for whom political orientation is of no great significance.
Nonetheless, Marian Lupu’s appointment is not an indicator of some crucial changes in the Government economic policy, but rather of his predecessors’ poor results. This was confirmed by the Minister himself in his interview to the governmental weekly “Moldova Suverana” on August 27 when stating that the priorities of the Ministry he was heading “are in line with the priorities outlined by the President of the country and his team in as far as the pro-active economic policy is concerned…”. The Minister referred to the priorities lying ahead: liberal environment for production and trade; favorable environment that would boost economy, and attracting foreign investments.
The aforesaid tasks have been on the incumbent governing’s agenda for the last two years. Noteworthy, in his address to the Parliament at the end of its first parliamentary session the President pointed that Republic of Moldova lacked a strategy and for it to happen economy liberalization was paramount. That address of summer 2001 greatly shocked the Communist majority faction, which had totally different tasks outlined in its political and electoral platform, namely building socialism and afterwards communism. From that moment on the President has been labeled as being “pragmatic”, meaning that in taking decisions the President neglects official documents of the party and is rather guided by the need to survive on the political scene and stay in power.
Those liberal metamorphoses of the President had been preceded by Republic of Moldova joining WTO and Stability Pact for Southeastern Europe, paved by the previous ruling. At that time those events were viewed as a rather heroic act from the President given that the party press continued to libel the said institutions as tools for promoting the interests of NATO and American imperialism.
Relations with international monetary organizations have developed along the same path, as IMF and WB were also libeled two years ago as tools of American imperialism. Gradually, acknowledging the fact that the country is lacking a development strategy has been replaced by acknowledging the need to develop an Economic Growth and Poverty Reduction Strategy (PRSP) in line with the WB recommendations. For PRSP to be properly implemented public administration should be modernized, stated President Voronin last year.
Former Minister of Economy, Stefan Odagiu, was responsible for the PRSP elaboration, which should have been completed by this March. The deadline hasn’t been met. On top of that, it is believed that Minister Odagiu wasn’t qualified enough to effectively negotiate with WB and IMF.
Therefore, one may say that Odagiu’s replacement with Marian Lupu was part of the plan to “modernize public administration”. The latter involves Cabinet reshuffle for which Deputy Minister, Vasile Iovv, was in charge. His track record already includes revising local public administration system implemented after this year local elections. Probably the governors realized that permanent reshuffle does no good to the state apparatus image. For instance the funds spent for revising public administration system would have sufficed by far for renovating the schools and raising the meager salaries of the public employees, as the trade unions demand.
That is why “modernization of the public administration” would resume only to changes in the structure of the Ministry of Economy, which according to the newly appointed Minister “should be tailored to the functional needs of regulating economy”.
Minister of Economy outlined in detail the actions to be undertaken in order to achieve the aforesaid. In particular “fiscal burden should be diminished for the business to get out of the shadow economy”. For this to happen “authorities’ actions should become credible”.
Interestingly enough, two years ago Prime Minister Tarlev said the very same things in his address to the businessmen congress. Nonetheless nothing has changed since. On the contrary, businessmen surveyed had even indicated that things worsened considerably lately. Moreover, businessmen repeatedly reported on increasing pressure from authorities, especially since the establishment of Department for Fighting Corruption and Organized Crime, which was overzealous lately in justifying its existence. On the other hand, for three years now Prime Minister Tarlev keeps announcing a campaign to fight smuggling of fuel. It’s not clear what keeps Prime Minister from enforcing such measures, especially as reportedly they might bring a billion MDL to the state budget.
Having said that, enhancing “authorities’ credibility” might become a long-term problem. Furthermore, potential investors know far to well how Moldovan authorities view strategic investors such as Union Fenosa and the like. On top of that, the recent nationalization of the “Dacia” hotel was very conclusive.
One of the top priorities identified by the newly appointed Minister is resume negotiations with IMF, as the suspension of its programs “hinders negotiations with Paris Club on restructuring the foreign debt”. According to the Minister, it would be extremely difficult to maintain macroeconomic stability, which requires “a consolidation of the central administration efforts and mobilization of internal resources”. Meanwhile, governors have identified two sources to cover its monetary needs — Central Bank loans and monetary emission without coverage. Financial analysts are already warning about the ever-growing inflation. As IMF ceased the funding, apparently authorities decided to settle their short-term problems without caring too much about impact they might have in the long run.
The new Minister is probably right when claiming that “we should not rush to complete the negotiations with IMF on the expense of the quality of the negotiated document, so that we might end up with issues and misunderstandings arising later on”, however it is probably too late already. He also stated that “negotiations with IMF should be tough on professional level and not on the psychological one”. This might lead us to believe that so far things had been done totally opposite. If so this should come as no surprise to anybody. The thing is that the President’s recent liberal pragmatism may not automatically annul the dogmatism of his fellow party comrades. The latter are characterized by an extremely inert force, which might as well act in the opposite direction to the course outlined by the new Minister of Economy.