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moldova

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  MOLDOVA

REPUBLICAN REFERENCE

Area (sq.km)
33,700

Population
14,350,000

Principal
ethnic groups

Moldovans 64.5%
Ukrainians 13.8%
Russians 13.0%

Capital
Kishinev
(Chisinau)

Currency
Leu (plural: Lei)

President
Vladimir Voronin

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Background:
Formerly ruled by Romania, Moldova became part of the Soviet Union at the close of World War II. Although independent from the USSR since 1991, Russian forces have remained on Moldovan territory east of the Nistru (Dnister) River supporting the Slavic majority population, mostly Ukrainians and Russians, who have proclaimed a "Transnistria" republic. One of the poorest nations in Europe and plagued by a moribund economy, in 2001 Moldova became the first former Soviet state to elect a communist as its president.

Update No: 253

The Moldovans are undergoing a revolution in outlook. They have been traumatised by a long slide that saw their economy reduced to a third of its former size in ten years. This was largely due to factors outside the control of its leaders, the collapse of the USSR, the decline of the Russian and Ukrainian economies subsequently, the forlorn state of Romania next door. But the people are naturally restive.
Early last year they voted back the communists, who after all presided over the last period of comparative prosperity. They secured 50% of the vote for parliamentary elections in April, which involved a new president as well. The new man at the helm, Vladimir Voronin, is of Russian origin and speech from the breakaway TransDnestr, the so-called independent province, largely populated by Russians and Ukrainians. He is unabashedly pro-Russian.
He gets on well with Putin and wants to see Moldova join the Belarus - Russia Union. The technocrats in Moscow are wary of this idea, indeed of the union itself. For Russia to take on not just one, but two, basket case economies is not such a brilliant idea, however gratifying to Russian pride to be asked to do so.
Not too much should be made, therefore of a treaty of friendship and cooperation signed late last year between Russia and Moldova. Full of plans for extensive cooperation, little concrete was concluded. Russia will continue to subsidise Moldovan energy consumption, a hangover from Soviet times. Trade will continue on a flourishing basis. But full union is not on the agenda.
Moldova is cultivating its Western ties instead. Curiously, the US Administration and the EU have higher hopes of the ex-communists than of their predecessors. But it was the powerful communist rump in every parliament since independence that blocked every move to liberalise the economy, many of the opposition were already convinced.
The EBRD and IFC are extending US$50m to Moldova for energy projects. The Spanish firm, Uniyh Fenosa, has acquired three electricity companies in Moldova and, if successful, should attract other foreign concerns into the republic. There is nothing that would be more welcome than a surge of foreign investments, the country has one undoubted asset, the fertile soil of the black earth region, extending into Ukraine and southern Russia. Potentially it is a rich country, one day fit to be a member of the EU.

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FINANCIAL NEWS

Moldova plans to privatise telephone lines to pay off foreign debt


Moldova's government plans to privatise the national operator of telephone lines, the joint-stock company Moldtelekom, Economics Minister, Andrei Cucu, told ITAR-TASS News Agency recently.
"The money we can get from that sale is the only financial source for us to pay off our foreign debt. The government is considering a joint-venture on the basis of Moldtelekom. A potential investor is expected to pay cash for 51 per cent of the stocks," Cucu said.
He admitted that the Moldovan authorities had failed to privatise energy-distribution systems and the wineries Vismos and Nis-Struguras this year.
The country will not be able to pay off its foreign debt if the share of direct investment in its economy remains at the current 10 per cent level, Cucu indicated.

Moldovan government boasts economic growth in year-end report

The Moldovan government has made public a self-congratulatory report summarising its activity from May till December 2001, which predicts Moldova's economic growth at 5 per cent by the end of 2001, Basapress News Agency reported.
The Moldovan economy has registered the first fragile successes, with GDP reaching 3.8 per cent in the last nine months of 2001.
"The economic growth is the result of an increase in industrial output, successes registered in certain fields of agriculture, the processing industry, transport and services," says the report.
The rate of inflation since December 2000 stood at 4.3 per cent in November, down 13.2 percentage points on the same period the previous year. The lei/dollar exchange rate fluctuated during the year between 12.93 and 13.09 lei to the dollar, well below the forecast rate of 13.5 lei to the dollar.
"The increase in GDP, the reduction of the inflation rate and the relative stable exchange rate of the national currency are the basic indicators which confirm stability and gradual macroeconomic recovery," the Cabinet of Ministers said.
The government also noted that industrial output rose by 14 per cent and foreign trade by 35 per cent. "Moldova has paid special attention to the extension and deepening of multilateral cooperation within the CIS, making it one of the foreign policy priorities, the report" also says.
Crop output rose by 44 per cent with the output of wheat doubled, the output of sugar beet products up 10 per cent and fruit 23 per cent.
The report also says that in the last 11 months, the consolidated budget accrued 4.260 billion lei, that is 90.7 per cent of the projected amount of revenues, which registered 21 per cent growth compared to 2000.
The nominal monthly average wage in the 10 months of 2001 was up 29 per cent compared to the same period of last year.
The government wrote about the privatisation process and relations with international financial organisations, complaining that "the first tranche of the World Bank's SAC-III [structural adjustment] loan would be disbursed only in the 1st and 2nd quarter of 2002." The report does not mention any problems faced by the government in its eight months in office.
Some analysts say the report repeats the report on the cabinet's first 100 days, which was severely criticised by President Vladimir Voronin.

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FOOD & DRINK

Russia biggest importer of Moldovan food, alcohol


Russia last year was the biggest importer of Moldovan foodstuffs and alcoholic beverages, the Moldovan Ministry of Agriculture and Food Industry told ITAR-TASS News Agency recently.
Food and alcohol exports to Russia totalled US$167m, nearly half of the amount produced. Russia imported US$115m of alcohol, US$20m of tobacco, US$16m of canned products and US$4m of fruits and vegetables.
The list of other biggest importers of Moldovan foodstuffs includes Belarus, Ukraine, Romania, Croatia, Slovenia, Bosnia-Herzegovina and China.
Moldova's exports of farm produce last year were up 20 per cent on the year to US$350m.

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FOREIGN LOANS

EBRD President makes first visit to Moldova


The President of the European Bank for Reconstruction and Development, Jean Lemierre, arrived in Moldova 22nd January on a three day official visit, the first by an EBRD President, a press release from the Bank stated.
Mr Lemierre was to meet with President Vladimir Voronin, Prime Minister Vaile Tarlev and the First Deputy Prime minister, Minister of Economy and Reforms Andrei Cucu, as well as other senior government officials to affirm the EBRD's support for Moldova and encourage further progress in economic and structural reforms. Mr Lemierre will also meet with local business leaders. 
Mr Lemierre will highlight the importance of a sound investment climate to attracting foreign direct investment. In line with its new Country Strategy for Moldova, published late last year, Mr Lemierre will be exploring new opportunities to invest in the private sector, particularly agribusiness, small businesses and supporting privatisation.
In November 2001, the EBRD lent US$25m to three recently privatised Moldovan electricity companies, alongside the International Finance Corporation, the private sector arm of the World Bank Group. Retelele Electice Chisinau SA, Retelele Electrice Centru SA and Retelele Electrice Sud SA are majority owned by Union Fenosa, one of Spain's largest utility companies, and supply electricity to approximately 720,000 retail customers in Moldova. The investment supports an important foreign investor in Moldova and contributes to upgrading and enhancing the capacity and reliability of the national power grid.
To date, the EBRD has signed 24 investment projects worth a combined €204.7 million in Moldova's agriculture, energy, municipal utilities and banking sectors.
Mr Lemierre said Moldova has come a long way in establishing democracy and the foundations for sustained economic growth. But he noted that there is still a great deal more work to be done and the EBRD is eager to help.

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FOREIGN RELATIONS

Dudau: Russia to withdraw troops from Transdnestr


Moldovian Foreign Minister, Nicolae Dudau, said his country does not doubt Russia's total and on-time fulfilment of its commitments to withdraw its troops from Transdnestr. This conviction is inspired by the actions of Russia, which has pulled out and disposed of armaments and ammunition in Transdnestr ahead of time, Interfax News Agency quoted him as saying. 
Relations between Moldova and Russia are developing very actively, Dadau said. Moldova and Russia "have many interesting projects whose implementation will boost the development of relations between the two countries," he noted. As for foreign political tasks of Moldova, the minister said that membership in the European Union is a priority. "There is no contradiction between the Moldovian desire for integration with the EU and the strengthening of its relations with CIS (Commonwealth of Independent States) member countries," he was quoted as saying. On the contrary, regional cooperation is a condition of the successful progress towards European integration, he noted.

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