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Update No: 261 - (26/09/02)

The destitute Moldovans
The plight of the poor Moldovans can be shown by recent findings in comparable sociology. A study conducted by Gfk in 38 European nations shows that the Moldovans are the poorest on the continent, earning on average 223 Euro per year, or less than one per cent of the income of the Swiss. The average income per capita in Switzerland is 25,603 Euros.
Of course a Euro would go a lot further in Moldova than in Switzerland. But, if one assesses the situation in terms of purchasing power parity, Moldova is again easily last. According to the study, based on the solvency of the Germans, Moldovans can afford to buy only eight per cent of what Germans can buy.

Catastrophic transition process
No country in the FSU, indeed in the former communist world, has had a more disastrous process of transition. Even in Belarus, the country has held together and a special relationship to Russia guarantees cheap energy at subsidised prices and ready markets for shoddy goods. 
Moldova suffered a devastating war in 1991-1992 over the secessionist enclave, largely Russian and Ukrainian, of Trans-Dnestr, which is de facto independent. This is causing untold hardship because the enclave was the industrial heartland of Moldova in Soviet times, contributing one third of GDP. The economy has consequently contracted two-thirds since independence in 1991.
The problems were compounded by viciously venal figures in the ruling strata, whether in politics or the administration, who colluded in shady deals with mafia elements and scoundrels of every type in a new burgeoning private economy. The country's experience in the 1990s was not of the rise of liberal democracy, but that of liberal kleptocracy.
A degradation of social life took place. The mass of the population became desperate and crime became rampant, the abduction of young girls to service the sex industry of countries to the west a routine affair and people even began selling their vital body organs, kidneys and the like, to make money.

The return of the communists
In these circumstances it is hardly surprising if the population began to hanker for the return of Communism. The communists swept back to office in Moldova to join the Russia-Belarus Union. Even the Belarus model seemed preferable to their present lot and perhaps more attainable than the Western ideas touted by their predecessors.
At first the communists were greeted as a welcome relief. The Western interlocutors were supportive, realising the direness of the problems. President Vladimir Voronin's popularity soared to over 70%. His government introduced compulsory Russian for learning in schools once again, which set off an upheaval earlier this year, in which Romanian-speaking Moldovans, the clear majority, became vociferous.
The government climbed down. But the honeymoon is over. Russia has indicated its appreciation of the new regime's Russophilia, but hardly wants to subsidise a second basket-case economy after Belarus.

Corruption worsens
The West had welcomed the communists, hoping that at least the rampant corruption might be tamed by having a more idealistic team in charge. The immediate results have been disappointing. Experts of the Transparency International non-governmental organisation are pointing to a rise, not decline, in corruption in Moldova. The Corruption Perceptions Index (CPI) shows Moldova as having fallen from 3.1 points in 2001 to 2.1 points in 2002 on a 10-point scale, in which 10 points represents high cleanliness and zero the ultimate in corruption. Moldova is nearing the black hole of ultimate corruption. The researches are carried out among business people, risk analysts, foreign investors, etc. In one year Moldova has fallen from 64th to 93rd place on the international scale.
A year is a long time in politics, but not enough to change long-established practices. The government should not be written off prematurely; but it is already in a hole all right. 

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FINANCIAL NEWS

Foreign investment in Moldova at US$8.24m in January-June

In January-June, foreign companies invested US$8.24m in Moldova, Basa News Agency reported on 7th September, quoting the department of statistics and sociology. 
So far, US$382m has been invested in Moldova, the agency added.

Moldova earns least per capita in Europe

Moldova earns least per head of the population in Europe, a study conducted by GfK in 39 European nations showed. Moldavians are the poorest in the continent, earning on average 223 Euro per year, or less than one per cent of the Swiss income. The average income per capita in Switzerland is 25,603 Euro, BASA reported. 
Moldova is also the last in terms of the purchase capacity. According to the study, which is based on the solvency of the Germans, Moldovians can afford to buy eight per cent of what Germans buy.

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FOREIGN ECONOMIC RELATIONS

Chisinau eager to work with EurAsEc

Moldavian Deputy Economics Minister, Yelena Gorelova, said Chisinau is eager to cooperate with the Organisation for Economic Cooperation of Eurasion Countries, which groups Belarus, Kazakstan, Kyrgyzstan, Russia and Tajikistan. She was commenting on the authorities' intention to set up a commission for cooperation with EurAsEc. "Compared with various CIS structures we consider EurAsEc to be a 'more advanced community,'" RIA Novosti quoted Gorelova in an interview. 
"It has a more stringent mechanism of taking decisions, which enables their fairly rapid implementation. EurAsEc is totally outside politics, and is concerned solely with economics. Moreover, the goals of the community - a common customs territory and a common economic space with unified legislation - are close to Moldavia," the deputy minister emphasised. Moldova might alter its status of EurAsEc observer to that of a full member next May, Gorelova said.

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FOREIGN LOANS

Chisinau gets 1st tranche of World Bank SAC-III loan

Moldova has received the first US$10.6m tranche of a World Bank SAC-III loan, Interfax News Agency quoted the country's Finance Ministry as saying. The World Bank board in June approved allocation of the loan but its disbursal was postponed until Moldova selected a financial consultant for the privatisation of its two remaining state energy distribution companies: Red Nord and Red Nord Vest, and established a new energy tariff at 0.72 lei per kWh. Moldova implemented both these terms in August. It selected Deloitte & Touche as its financial consultant for the privatisation of the two energy companies. 
The SAC-III loan totals around US$30m. The credit will be granted in three tranches for 40 years, with a 10-year grace period at 0.75 per cent per year. 
The government of Moldova must implement various terms to receive the next tranche of the loan, including energy and agriculture reforms, continuing the privatisation process and the creation of a favourable investment climate. The World Bank has financed 15 projects in Moldova worth a total US$500m since 1992.

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MINERALS & METALS

Euralcom aluminium plant at hand

The Euralcom concern is considering possibility of organising in Moldova the large-scale production of aluminium parts to be used in the motorcar building industry, INFOTAG News Agency quoted Euralcom President, Aldo Ravaioli, as saying.
At a meeting with Ravaioli, Moldavian Prime Minister, Vasily Tarlev, reacted very positively to the Euralcom proposal to establish a modern facility with an annual turnover of 50-60m Euros. Ravaioli said Euralcom is considering Moldova as an alternative to Romania, where the concern is examining the possibility of building such an enterprise in Pitesti or Bucharest.
The cost of the aluminium plant is estimated at €20-25m. If the Moldavian government offers ready-built accommodation for the enterprise, output could be launched within 12-18 months. The facility will be employing 200-250. 

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TELECOMMUNICATIONS

New deadline for MoldTelecom sell-off

The government commission for the privatisation of Moldavian telecom company, MoldTelecom, has extended the deadline when the Moscow-based MGTS (Moskovskaya Gorodskaya Telefonnaya Sviaz) is due to present a final offer, BASA reports. 
The commission prolonged for the second time the deadline at the request of MGTS, which is the only company admitted in the second round of the contest after US syndicate ICS Global Telecom was denied participation in the second round. Commission members said then that it failed to present financial reports to demonstrate compliance with the rules of the tender. According to sources from the privatisation agency, MGTS asked the commission to prolong the deadline as it hopes to obtain the removal of certain conditions before the privatisation of MoldTelecom. In particular, MGTS declines to ensure a 25% of the Moldavian population with wire networks and to liberalise tariffs two years after the privatisation.

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