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moldova

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  MOLDOVA

REPUBLICAN REFERENCE

Area (sq.km)
33,843

Population
4,431,570

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: 258 - (27/06/02)

The Moldovans have bucked the trend. Everywhere across Europe there has been a right-wing advance, notable now in France, while Socialists, as in Hungary or New Labourites as in UK, emulate right-wing ideas. But the Moldovans, frustrated by years of right-wing politicians who failed to deliver, voted back the communists last year.
They have now been in power for over a year and are even more popular than on election day, when the Communist Party won just over 50% of the seats, voting in a new president, Vladimir Voronin, as is the custom in Moldova. He has been largely a success explaining his 73% approval rating in the polls.

The Putin of Moldova?
Voronin has a harder job on his hands than any other leader in the former Soviet Union. The economy has crashed to one third of its size at independence in 1991. The collapse was accentuated by the de facto defection of Trans-Dnestr, itself with one third of the national economy, the base of much of the nation's industry
Some Moldovans yearn for a re-union with Romania, which in pre-war days possessed Bessarabia until it was rudely snatched by Stalin in 1940 (on an agreement with Hitler in the Nazi-Soviet Pact). Many took to the streets to demonstrate against the turn towards Russia and the Russian language which the Communists initiated earlier this year. The Romanians have enough on their plate without salvaging the basket-case of Moldova. So do the Russians. The idea of it joining the Russia-Belarus Union is still a pipedream, as indeed is the Union.

Economy stumbles
The economy is fitfully growing, GDP rising by 2.1% in 2000, by 4.5% in 2001 and prospectively by 3.5% in 2002. Foreign direct investment is derisory, US$100m in 2000, US$60m in 2001 and provisionally US$235m in 2002, something of an improvement. Moldova is cooperating with the international financial institutions, which it will need to do if more FDI is to be forthcoming, establishing clearer laws for business, a more open judiciary and a level playing field for all. Much remains to be done. 

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DEFENCE INDUSTRY

Moldovan defence plant sold to Russian company


The Moldovan privatization agency sold the former military industry, Topaz, to the Russian company Salyut, Basapress News Agency reported on 19th June. The talks, which started last May, ended with the signing of 92.94 per cent of the stake in Topaz for one million dollars. Workers and employees will receive US$50,000 in salary arrears. The Russian buyer is also committed to invest US$4m within the next two years.
Topaz is one of the largest Moldovan enterprises of the military industrial complex in the former Soviet Union. After conversion, it manufactured plastic items and electronic appliances, using only 20 per cent of its capacity in the past five years.

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FINANCIAL NEWS

Foreign capital markets may remain closed for Moldova for foreseeable future 

On June 6th, a week before Moldova was to repay its US$75m Eurobond, international Fitch IBCA agency issued a press release on the economic and financial situation in the republic. 
The document reads that Fitch is unable to confirm rumours that the government has been buying back the Eurobond in the secondary markets - perhaps as much as half of the face value - but it is unlikely that the country would have bought back the said debt if it did not intend to repay on June 13th. 
The 2002 budget plans allow for foreign debt servicing of some US$37m, roughly US$60m less than the government's contracted debt servicing for the year, the press release said. Fitch downgraded the sovereign ratings of the Republic of Moldova on two occasions in 2001, eventually moving to a foreign currency rating of 'CC' and a local currency rating of 'CCC', both with a Negative Outlook. 
The ratings currently remain unchanged. At this rating level, there is clearly a very strong chance of debt default materializing within a one-year timeframe. In the absence of multilateral funding, Fitch notes that the Treasury will be faced with a very large funding gap this year, which could be filled by restructuring a US$75m Eurobond, due to be repaid on June 13th. 

Moldova reports four-year privatisation statistics

Moldovan revenues from the privatisation of 71 state-owned companies in 1997-2000 totalled 418.46m lei, Moldovan news agency, Basapress, has reported, quoting the Capital newspaper. 
The new owners pledged to pay the companies' debts that amounted to a total of 262.7m lei. They also promised to invest 732.9m lei in the newly acquired companies, and 370.9m of this sum has already arrived in Moldova, the agency said.

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FOREIGN ECONOMIC COOPERATION

Voronin for Cooperation with Council of Europe and Integration into EU

President Vladimir Voronin considers cooperation with the Council of Europe and integration into the European Union as Moldova's priorities, Infotag News Agency has reported. He stated this when meeting with the representatives of the tripartite joint programme of the European Commission, Council of Europe and Moldova for consolidation of democracy stability in Moldova. 
The interlocutors discussed democracy development in this republic, and Moldova's commitments to the Council of Europe. The head of state confirmed the country's adherence to democratic values. 
Vladimir Voronin welcomed the Council of Europe's intention to open a permanent office in Chisinau. This, in his opinion, would enable the Council to objectively follow the situation in Moldova, and would become an important factor in consolidating the relations between Moldova and European organisations.

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TELECOMMUNICATIONS

Government calls tender for 51% of Moldtelecom

The Government commission for the privatisation of Moldova's national telecoms operator Moldtelecom has called an investment tender for a 51% stake in the company from June 7th to August 9th, a government source said. The commission is headed by Prime Minister, Vasile Tarlev. 
Potential bidders must provide financial reports for the past three years, and documents proving that the bidder is not under threat of liquidation. The bidding company must also provide evidence that it has experience in managing communications systems, has at least one million subscribers and annual turnover of at least US$150m. Documents for participation in the tender will be accepted until August 2nd. 
The commission also plans to recommend that the government consider granting Moldtelecom a licence to provide GSM-standard mobile phone services in order to make the company more attractive to potential investors. Moldova currently has two mobile operators, French-Moldovan company Voxtel and Turkish-Moldavian Moldcell. This will be the third tender for the privatisation of Moldtelecom. In 1997, OTE Telecom of Greece offered to pay US$46m for a 40% stake in the company, but the tender was called off because the government wanted at least US$90m. A second tender was shelved in 2000 due to the unfavourable situation on the telecommunications market.

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