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Democracy and governing in Moldova
e-journal, III year, no. 47, February 14 - March 6, 2005

Activity of public institutions

Government
Presidency Economic policies Transdnistrian conflict Elections 2005 Foreign affaires Studies, analyses, comments Post-election reflections by Igor Botan
Foreign deficits, inflation, exchange rate... by Iurie Gotisan

Activity of public institutions

Government

1.1 Reshuffles

Government designated Igor Corman, Ambassador of the Republic of Moldova to Germany, to serve also as Ambassador to Denmark and Norway based in Berlin.

1.2 Decisions

• On February 16 Government endorsed a draft law on modification and completion of the Constitution of the Republic of Moldova. Under the draft citizens would be entitled to appeal the rulings of the Supreme Court of Justice in Constitutional Court. Therefore, by amending articles 135 and 136 of the Constitution a national mechanism shall be set for controlling the human rights observance in the country. Constitutional Court judgements shall be considered as final. According to the Minister of Justice, Victoria Iftodi"establishing an appeal mechanism at the national level aims at filtering domestically appeals submitted to the ECHR". The draft law was developed by 35 deputies in the Parliament of the Republic of Moldova as a follow up to the President Voronin's initiative of June last year.
• The same day, Government approved a mechanism for bolstering labour force mobility. Unemployed persons who would be offered a job at the 50 km distance from their residence would be entitled to a single indemnity equal to an average salary per economy, while those who would chose to move to the locality where a job is offered would be entitled to a single indemnity equal to three average salaries per economy. Also, unemployed persons would be obliged to conclude a work contract for a 12 months period. If the aforesaid requirements are not met, the person employed would have to refund the indemnity received to the Agency for Labour Force.
• On February 23, the Steering Committee of the persons originating from Republic of Moldova and residing abroad was founded. It would function within the Government. Department of Interethnic Relations shall develop within 30 days the Regulation for the operation of Steering Committee. Curiously, the Steering Committee was established immediately after another Congress was held on February 19 in Moscow gathering Moldovan Diaspora in Russia. The latter was very critical of the Communist party led policies.
• Government ruled that members of the electoral bureaus of the polling stations and members of the district electoral councils, who did not suspend their position during electoral campaign, shall be entitled to a compensation worth 150 Lei. Also, members of the Central Electoral Commission shall get a 25% wage raise.

Presidency

2.1. Sessions of the Ministries

• Ministry of Education
  President Vladimir Voronin attended the session of the Ministry of Education. In his speech Mr. President pointed that obligatory primary education and jobs for fresh graduates should be high on the Ministry agenda. President also referred to the need of tailoring admission quotas to market demand. In a related note, Mr. Voronin stated that the notion of "patriotism" should be the cornerstone of the RM educational system. According to the President "In all the years since independence there was no patriotic education. After 16 years of political battles, we had ended up with 2% of population being Romanians according to the recent census. And those 2% were registered as Romanians only because of the students involved in questioning, who were appointed by different political parties, or due to the fact that old people knew nothing of what had they signed for".
• Ministry of Foreign Affairs
  The President also attended the annual session of the Ministry of Foreign Affairs where he reviewed the foreign policy for 2004 and set the goals for 2005.
  Among the achievements President cited the EU-RM Action Plan, which opened a new stage in Moldova's foreign policy. Reiterating the strategic goal of accession to EU, Vladimir Voronin pointed that Ministry of Foreign Affairs had to coordinated and monitor actions undertaken in this respect and that it should turn into "a projecting institute providing other governmental structures models of restructuring the country according to European standards".
  In view of enforcing the Action Plan in due time "or before the schedule", President endorsed the idea of establishing a parliamentary commission entrusted to deal with EU accession. Vladimir Voronin concluded that "reintegration of the country in line with international norms, that is abolishing secessionist regime, non-conditional withdrawal of Russian troops, securing Moldovan-Ukrainian borders should become along with accession to EU a top priority for our diplomacy".

2.2. Initiative

As a follow-up to the decree setting 2005 the year of local self-governing, President Voronin came up with the initiative of establishing a Ministry of Local Government. According to the President "such a ministry is necessary in order to coordinate the efforts undertaken by central and local government aimed at modernizing the country, /.../ in order to implement the wide-scale project Moldovan village that requires a single coordination centre for the transformations".

In this respect, President expressed his regret that "nowadays it is the Government Apparatus, Ministry of Justice, Parliament and many other structures are dealing with local government, which in the end creates confusion and a total lack of coordination".

President stated that such a ministry "would bolster consolidation of local democracy, would promote a consistent policy oriented towards raising standards in local government, adoption of European standards and approaches in relations between local government and other branches of central government".

2.3. Trip to Kiev

On March 1, Vladimir Voronin flew to Kiev to meet his Ukrainian counterpart, Viktor Iushcenko. During the visit the Two signed a joint declaration on Moldovan-Ukrainian cooperation, document specifying the similarity of the strategic goals of the two countries as regards accession to EU, promoting democratic reforms and market economy. The two parties undertook to bolster trade by bringing the legal framework in line with EU norms: free movement of people and free circulation of goods, capital and services.

In a related note, the parties pledged to cooperate on border control, fighting smuggling, illegal movement of people and smuggling of munitions and drugs.

The declaration reads that Republic of Moldova undertook to ratify in the first quarter of 2005 Provisory Regulation on the GUUAM Informational Bureau of July 20, 2002 and Agreement on setting up a Free Economic Zone between the GUUAM (an organisation created by Georgia, Ukraine, Uzbekistan, Azerbaijan, and Moldova) countries of July 20, 2002. Ukraine also undertook to ratify the Agreement in the first quarter of 2005. The document also reads that both RM and Ukraine saluted EU and US involvement as an observer in settlement of Transdniestrian conflict.

2.4. Meeting with Georgian President

Immediately after meeting Ukrainian President, on March 2 President Voronin met his Georgian counterpart, Mihail Saakashvili.

Analysts claim the two meetings on the eve of elections were not a coincidence, rather it was an attempt to show international community that President Voronin was on good terms with the pioneers of orange revolution in Ukraine and Georgia. The move was to boost the rating of the Communist President and on the other hand to dissociate orange revolution from the Moldovan opposition and thwart any "revolutionary" moves in Moldova.

Two documents were signed during the visit on the "Supremacy of Democratic Values" and Declaration on the 'Black Holes' in Europe. The former reaffirms the two countries' commitment to democratic values, including free and fair elections. It reads "No outside force should be allowed to impose its will on the people, no one should be allowed to influence the outcome of the elections and try to change the political course of the country through economic blackmail and all kinds of illegal operations." The document goes on to revitalizing GUUAM and turning it into a promoter of democracy, stability and security in the entire region. The document also reads "We trust that the new government of Moldova will come to power as a result of free and fair elections, not through external threats of economic sanctions and the attempts of corrupt clans to return to power with support from yesterday's masters."

The "Declaration on the 'Black Holes' in Europe" reiterates both countries' interest to eliminate "threats to international peace and security stemming from armed separatism" and "resolving the externally inspired protracted conflicts in both our countries." The document goes on "the speedy removal of the Russian forces represents the common interest of our countries and that of the entire region".

Economic policies

Prices

Inflation rate: registered 2% in February. The cumulative inflation for the first two months of the year (January - February) registered 3.2%. According to Statistics and Sociology Department consumer price index on food surged by 2.8%, non-food products by 0.6%, while tariffs on services by 2.4%.

Price hike on fuel. Many businessmen do not exclude a 5 to 10% price hike on oil (diesel oil, petrol) in the next couple of weeks. The eventual move comes as a result of a price hike on the world market. On the international markets oil is traded at 55 USD a barrel. Analysts say prices shot up because of bad weather over Europe that spurred the demand, but also because of speculations.

Representatives of "Importcompetrol" of Moldova say great many oil importers had drained their stocks of cheap diesel oil and petrol and started buying it for higher prices. Currently 1 l of diesel oil is traded at 6.85 Lei/litre (0.54 USD), albeit the cost of goods reached 7.1 Lei per litre (0.56 USD). Losses incurred in trading diesel are partly compensated by the higher revenues in selling petrol. According to the same source, currently the diesel is imported at 510-550 USD/tone, while petrol A 95 at 475 USD.

Lukoil Moldova officials say it is too early for a price hike, while in the near future it is inevitable. If prices on the international market continue to swell they would also swell on the domestic market, once the cheaper stocks are drained.

If so, price hike would definitely fuel inflation. This is quite risky as fuel is included in the price of many goods. For the state budget, price hike on fuel is not necessarily a bad thing as it would levy additional excises.

Last year the price hike on crude oil boosted by 30% the prices on oil products in RM. Currently diesel is traded at 6.75 - 6.85 Lei/litre (0.54 USD), petrol A 98 - 7.75 Lei (0.62 USD), A 95 - 7.55 Lei (0.6 USD), A 92 - 7.25 Lei (0.58 USD), A 76 - 6.9 lei (0.55 USD) at petrol stations.

Labor market

According to the Department for Statistics and Sociology (DSS), the salary on economy was 1,146.3 lei (91 dollars) on average last January, and rose by 20 percent compared with the similar period of 2004, but the real growth was seven percent due to a high inflation rate. DSS announced that salary in budgetary institutions was 870.4 lei and 1,306.7 lei in non-budgetary sector.

Employees of financial institutions were paid the most, 3,140 lei, followed by workers of companies working in energy and heating industry, gas, water - 1,911 lei, transportation and communication - 1,807 lei.

The lowest salary was paid to farmers - 487 lei or 42.5 percent of the average salary on economy, teachers earned 790 lei on average, while doctors and social assistants earned 903 lei. According to the Department for Statistics and Sociology, over 505,000 persons or 38.6 percent of the total of employees worked in agriculture sector in the 4th quarter of 2004, and another 19.5 percent in public administration, education, healthcare, and social assistance sectors.

Banking and insurance

Development of the bank system in Moldova was marked by positive tendencies last year the 1st-degree capital rose by 20.3 percent compared with 19.7 percent in 2003, up to 2,442,000,000 lei in late 2004.

In the context of consolidation of bank system, a new requirement of BNM was enforced on June 30 regarding the minimum limit of the 1st-degree capital. Thus, this requirement calls for a 40-million-leu level for banks holding Licence A, 80 million lei for Licence B, and 120 million lei for financial-bank institutions holding Licence C.

The total assets accounted for 13,313,200,000 lei on December 31, by 29.5 percent more than in early 2004. The tendency of growth of assets registered until now indicates the development of bank system and means their continued growth on account of inflows of deposits and new incomes.

All assets rose in their structure: cash grew by 34 percent up to 733.9 million lei, money owed by banks and BNM by 45.6 percent up to 3,206,100,000 lei, securities by 34.5 percent up to 969.2 million lei, total net credit portfolio by 25.3 percent up to 7,241,200,000 lei. The share of unfavourable credits in the total of credits was 6.8 percent on 2004 December 31 and rose by 0.4 percent compared with the similar period of 2003.

BNM officials note that incomes in bank system are stable and this fact reflects the efficiency of its general activity. The net revenue in 2004 amounted to 430.7 million and rose by 7.8 percent compared with 2003. Profitableness of assets and share capital for 2004 accounted for 3.8 percent and, respectively, 18.1 percent. Compared with late 2003, these indicators dropped by 0.6 percent and, respectively, by 1.6 percent, especially because of a faster growth of assets and share capital compared with rise of income.

Liquidity remains at a high level, reflecting the capacity of banks to honour both current, and long-term obligations. Evolution of deposits demonstrates in continuation the credibility of the bank system. Deposits of individuals rose by 44.4 percent in 2004 up to 4,857,300,000 lei, while deposits of businesses grew by 30.1 percent up to 462.4 million lei.

Foreign trade

According to data of the Department for Statistics and Sociology (DSS), Lohn production made up some 40 percent of Moldovan exports to the European Union in 2004.

The Moldovan textile exports turned over 115.4 million dollars, which is 38.8 percent of all supplies to the E.U. markets - mainly clothes. In general, Moldova exported cloth articles and accessories on basis of Lohn production contracts signed between Moldovan enterprises and partners from Western Europe.

The Lohn production has considerably extended in the past years and therefore the imports and exports rose. An increasing number of Moldovan light industries are manufacturing goods for Italy, Germany and other countries, from the raw materials delivered by clients. The largest Moldovan companies working on Lohn conditions are Ionel, Artima, Zorile, and Leather Factory.

The export of raw and processed leather and fur, and goods made from these to the E.U. turned over 63.7 million dollars, which represents 21.4 percent of all Moldovan exports. Other exports in 2004 featured vegetal products [29.9 million dollars], food and drinks including alcohol, and tobacco [25.5 million dollars], common metals and iron articles [11.7 million].

The Moldovan exports to the E.U. markets last year rose by 40.8 percent till 297.1 million dollars, while the imports accounted for 582.7 million dollars [+15.3%]. From E.U. markets, Moldova absorbed mainly hardware and equipment [131.6 million dollars], textiles and textile articles [84.7 million], chemical goods [60.0 million], vehicles and cars [40.3 million].

Moldova and the world

According to data of the CIS committee for Statistics, Moldova was on the last but one place in the Commonwealth of Independent States (CIS) in terms of investments in real estate last year. It was just Kyrgyzstan with a 3 percent growth to outweigh Moldova, which posted an 8 percent rise.

The growth of investment in real estate was highest in Azerbaijan, 36%; Ukraine, 35 percent for 11 months; Georgia 22% for 11 months; Belarus 20%; Armenia 17%; Kazakhstan and Russia 11%. The CIS Statistics Committee said that the average growth in all the CIS countries was 14 percent in 2004.

Investments in fixed capital in Moldova accounted for about 1,470 lei (118 dollars) per capita in 2004, including 20 percent from foreign sources. Also, investments in fixed capital accounted for 5,270 million lei in 2004. The Economics Ministry forecasts an 11-percent growth of investments in fixed capital for 2005 and a nine-percent rise for 2006.

*IFC - investments in fixed capital Sourse: Department of Statistics and Sociology

Transdnistrian conflict

About 8,000 Moldovan citizens residing in the Transnistrian region voted in the Moldovan parliamentary elections on 6 March, according to the preliminary data from the Central Electoral Commission (CEC). According to the CEC decision of 18 February regarding the method of voting of the Moldovan citizens from the Eastern districts of Moldova, these voted at nine polling stations located on the right bank of Nistru River. They were included in supplementary voter rolls and dropped their ballots into special ballot boxes. According to the preliminary CEC results, about 50% of the Transnistrian voters opted for the Bloc "Moldova Democrata", about 30% for the Communist Party, about 8% for the PCDP and about 6% for SDPM and the Bloc "Patria-Rodina" each.

The Coalition for Free and Fair Elections 2005 reported a number of problems related to the participation of Transnistrian voters in the elections. Thus, many of them were not informed properly about the place of the voting; the owners of Soviet passports which did not bear the mention "citizen of the Republic of Moldova", as well as the students residing in Varnita village, were allowed to vote at the discretion of the Chair of the precinct; multiple cases of the failure of poll workers to apply the stamp "voted" in the identity documents of the voters were registered. Moreover, due to the large turnout of Transnistrian voters, queues formed at some polling stations and many voters did not manage to vote.

The Union of Moldovans from Transnistria, a Transnistrian non-governmental organisation that organised the transportation of the Transnistrian voters to the polling stations on the right side of Nistru, accused the Moldovan authorities of obstructing the voting rights of the Moldovan citizens living in Transnistria, and claimed that out of the 14,800 that were provided with transportation, only some were let to cast their votes.

Earlier, following an address of the Bloc "Moldova Democrata", CEC conditioned the opening of polling stations in Transnistria with the observation by the Transnistrian authorities of a number of conditions that would have guaranteed a free and fair electoral process in the region. In his official reply, the head of the so-called Transnistrian foreign ministry, Valeri Litkai, qualified the CEC address as "yet another provocation on behalf of the Moldovan authorities launched for reasons" because the observation of the CEC conditions on the Transnistrian territory would have involved electoral spending from the budget of a "foreign country" and as such would have run counter to the electoral laws of Moldova. At the same time, Litkai called upon the CEC to ensure the access of Moldovan citizens residing in Transnistria to the polling stations in the "border" areas, including in the security area.

The official press and the so-called "civil society" from Tiraspol assumed an active part in the electoral campaign for the legislative elections in the Republic of Moldova on 6 March by launching a massive campaign against the ruling party and in particular its leader, President Voronin. Thus, three of "the key" non-governmental organisations in the region - the Union of Moldovans, the Union of Russian Communities and the Union of Ukrainians - created a so-called Committee for the Support of Democratic Elections in Moldova. Accusing President Voronin of a series of "inhumane actions" against the "Transnistrian people", such as the political and diplomatic isolation of Transnistria, the economic blockade and the blockade of the negotiations mechanism, the Committee has called upon the "Transnistrian civil society" to support "the democratic forces from the neighbour country", but has not specified which ones.

Elections 2005

On March 6, 2005 parliamentary elections were held in Moldova. According to the results released by CEC, only three contestants managed to pass the threshold of representation: Party of Communists of the Republic of Moldova gathered 716,336 votes (45.98%), Christian Democratic Peoples' Party - 141,341 votes (9.07%), and Moldova Democrata Bloc - 444,377 votes (28.53%).

For more information on parliamentary elections please visit www.elections2005.md.

Foreign affaires

1. Seventh meeting of the Cooperation Council EU-Moldova

On February 22, the Cooperation Council EU-Moldova held its seventh meeting in Brussels. The Cooperation Council was the occasion for signature by the EU and Moldova of a formal document launching the implementation of the previously agreed European Neighbourhood Policy (ENP) Action Plan (AP). Vasile Tarlev was the one to sign the document from the Moldovan side, while Mr Jean Asselborn, Deputy Prime Minister and Minister for Foreign Affairs and Immigration of Luxembourg from EU side.

2. Financial aid

EU and UNDP-Moldova decided to provide support for securing the RM borders as part of the Enhancing Border Control Management project. The key objective of the project is a substantial reduction of illegal migration and drug trafficking from and through Moldova towards the EU Member States as well as an increased awareness about the EU standards by governmental institutions involved in border control services. The project, with a total budget of 1 942 500 Euro and shall be implemented over one year.

Among the project beneficiaries are the Border Guards Department, Customs Department, Migration Department, Ministry of Foreign Affairs, Ministry of Home Affairs. Five joint control border crossing points - Criva-Mamaliga, Medveja-Zelionaia, Larga-Kelmenti, Briceni-Rososeni and Giurgiulesti-Reni - will be provided with specialized equipment, better infrastructure and training in the framework of the implementation of the joint control operations by the Moldovan and Ukrainian authorities.

According to Bruno Pouezat the project will contribute to developing an efficient border management system in Moldova. By attaining EU border control standards, it is hoped Moldova will meet the EU policy requirements in fighting against terrorism, organized crime and illegal migration.

Studies, analyses, comments

Post-election reflections
Igor Botan, 14 March 2005

Foreign deficits, inflation, exchange rate...
Iurie Gotisan, 14 March 2005