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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: 262 - (22/10/02)

Moldova has experienced dire times for more than a decade, seeing its economy collapse. It is now lower in the rankings than Albania, having the poorest economy in Europe, one third of its size in 1991.

IMF hopeful
It is hardly surprising if its people voted back the communists last year. The West has not been censorious about this, it being realised that a return of the communists is quite understandable in the circumstances. Indeed, the IMF and the EU are eager to work with the new government. The key figure here is Present Vladimir Voronin, head of the Communist Party.
The IMF is predicting GDP growth of 6% in 2002 and an inflation rate also of 6%. This would be the first substantial growth in a decade.
The IMF is also positive on the plans for the 2002 budget, as well as structural reforms. Of course being too carping at the outset of a government would not be diplomatic. But the IMF is genuinely hopeful that the new government means business. The way is being prepared to cut income taxes from 25% to 15% on average and to clarify legislation on business.

Normalisation of relations
2002 is the date when Russian soldiers were due to pull out of Moldova, that is TransDenestr, the Russian and Ukrainian enclave there on the left bank of the River Denestr. But the TransDenestr authorities have been doing their utmost to thwart this. They blocked the Russian arsenals and demanded US$100m in compensation from Russia.
The Organisation for Security and Cooperation in Europe (OSCE) is overseeing the process. The OSCE is likely to apply pressure successfully in the end, as Moscow and Chisnau exert joint pressure themselves.
The Moldovans are now in regular joint military exercises with the US. The TransDnestr leadership must be realising its isolation in the new post -9:11 world, devoted to the campaign against terrorism. Any attempt to start another war, as the civil war of 1991-92 in Moldova, would be disastrous for their standing in Russia. Moldova is now on the brink of becoming a more normal, if still very penurious, nation.

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ENERGY

Moldova joins CIS energy system

Parliament has ratified two agreements with CIS states in the energy field. These are the agreement on the transit of electricity within the CIS and the agreement on the parallel functioning of electricity grids in CIS states. According to the Energy Ministry, once these documents are ratified, Moldova's energy system will be more stable, ProTV has reported.
Iacob Timciuc, the energy minister said: "After ratifying the agreements, we will have access to the energy markets in the CIS states and conditions have been created to reduce the wholesale price for electricity. The procedures for granting mutual assistance in the event of accidents to systems, natural disasters etc."
The agreement on electricity transit will allow for the use of Moldovan high-tension cable networks to transport electricity from the CIS to Balkan states. The document on the parallel functioning of the electricity grids in CIS states will allow for the technical connection of the countries' electricity grids.
Nicolae Bondarciuc, head of the parliamentary commission for economy, industry, budget and finance said: "The commission for economy, industry, budget and finance accepts the conditions of the unlimited transit of electricity in Moldova for reasonable prices. At the same time, we want to mention that Azerbaijan, Turkmenistan and Uzbekistan haven't signed the agreement."
Earlier, some Moldovan experts said that if the Moldovan energy system is connected to the systems of the former Soviet states, the country would be isolated from the European electricity grids and will limit its access to electricity markets.

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FINANCIAL NEWS

IMF forecasts GDP growth, inflation rates

The International Monetary Fund has forecast GDP growth for 2002 in Moldova at 6% and inflation at 6%, Interfax News Agency quoted Castello-Branco, the fund's director for Moldova, as telling a news conference, commenting on the results of the mission's work in the country. She noted that the fund's members expressed a positive opinion on the Moldavian Finance Ministry's implementation of the 2002 budget, as well as structural reforms. She stressed that the ministry might face some budget-related problems in the fourth quarter of 2002. 
The IMF mission is also concerned that Moldova is not observing an increase in direct investment, which indicates that the country's investment climate is not favourable. IMF experts recommended that the government not only try to lower income tax, but also aim to create transparency in business, with efficient courts, tax bodies and controlling bodies. The IMF does not think Moldova currently has the most appropriate conditions for lowering the income tax to 15% from 25%, as the government proposes. 

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FOREIGN ECONOMIC RELATIONS

Chisinau, Warsaw examine measures to expand ties

Moldavian prime Minister, Vasile Tarlev, visited Poland on September 18th at the invitation of his Polish counterpart, Leszek Miller. Tarlev was also set to meet with Polish President, Alexander Kwasniewski, and top leaders of the Polish parliament, the Moldavian government press service said. They were expected to discuss the expansion of cooperation between the two countries. 
The agenda of the visit envisioned the signing of agreements on cooperation and mutual assistance in customs control, on economic, scientific and technical partnership in agriculture and the food industry, and on trade and economic cooperation with the province of Lodz. Tarlev was also expected to take part in a forum of Moldovan and Polish business people.

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TELECOMMNICATIONS

MGTS may buy controlling stake in Moldtelecom

Russian communications company, MGTS (Moscow City Telephone Network), could become the owner of 51 per cent of the shares in the Moldavian state communications enterprise, Moldtelecom. Interfax News Agency quoted Moldavian Prime Minister, Vasile Tarlev, in an interview as saying that the chances of MGTS as very high.
An expert group put together by the government has started to consider a technical offer from MGTS, the only bidder for the privatisation of 51 per cent of the state's shares in Moldtelecom. "The experts are supposed to submit their conclusion within a few days. If it is positive, a special commission will open up another envelope containing the financial offer by the bidder," the premier said. Tarlev recalled that the government estimates the full value of the company at US$100m. 
The price for the 51 per cent stake will be defined bearing in mind this sum and taking into account future investments and the observation of technical terms. It could amount of US$35m-40m. The government conditioned the privatisation on the development of all kinds of communications, including the expansion of telephone networks in rural areas. To make Moldtelecom more appealing, the government promised that the company will be granted a licence to provide mobile telephone services after privatisation. Thus, the new owner will become the third GSM operator in Moldova.

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