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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: 275 - (01/12/03)

The Moldovans are finding themselves being irresistibly drawn back into the Russian fold. There is little they or the West can do about it.

Back to the Soviet Union ?
They voted for the communists in March two years ago, giving them an endorsement of over 50% in parliamentary elections. The parliament then elected their leader, Vladimir Voronin, as president.
It is hardly surprising if the communists, and they are exactly that, not former communists as in Romania next door, should be favouring a reunion of sorts with Russia. Moldova has historic ties with Russia, as it does with Romania. There are Russians aplenty, as well as Ukrainians, in the TransDnestr republic, which is formally part of Moldova. In fact secessionists there, under the thuggish leadership of their president, Igor Smirnoff, have been living in a sort of Soviet time warp for over a decade.
This may well be Moldova's own destiny now, if plans hatched in the autumn unfold. The Kremlin has forced on the Moldovans a new interpretation of their relationship with Russia. Far from removing troops from TransDnestr, as it has pledged to do under the supervision of the Organisation on Security and Cooperation In Europe (OSCE), it is reinforcing them. The base is being strengthened, which can have no conceivable military objective, but does have a geopolitical one all right. Big Brother is coming back.

The EU beckons ?
The Moldovans have no rosy ideas of the west by now. They know that unwary Moldovan girls risk being taken into prostitution rackets in Western cities, while there is a big, if grotesque, market for body parts there, supplied by desperate Moldovans.
The proposal to join the EU, nevertheless, appeals. Romania is due to join in 2007 and emulating their Romanian cousins is a more welcome idea to many than being engulfed by Russia.
Moldova will not go back on its quest to integrate with the European Union, President Vladimir Voronin told a recent session of the Council of Europe's Committee of Ministers. "Integration with the European Union remains a top priority for the country," he was quoted as saying. 
According to Voronin, Moldova's chairmanship in the Committee of Ministers of the council of Europe has significantly improved the country's image. "Truly democratic reforms have gained speed and numerous international standards have been introduced over the past six months," he said. "Experience in constructive cooperation with the council of Europe will be very helpful in reaching our future goals, above all, joining the European Union," Voronin said. "We know that the road to the EU is hard, but our resolve to integrate with this organisation will not waver," Voronin stresses, noting that the country's desire to join the EU will have a favourable impact on tackling the Transdenestrian issue.
But the EU is hardly likely to extend its frontiers anytime soon to include such a troublesome country, the poorest now in Europe after Albania.

But economy recovers
Just when many Moldovans are despairing, they are being told that the economy is thriving. GDP is going up by 6.8% this year, if official figures are to be believed. Industrial growth is evidently 19.3% on the same sources.
But this is in a country whose economy contracted to one third of its 1991 level in the 1990s. There is a lot of scope for further improvement there. This very fact of course explains the success of the communists and the enduring popularity of Voronin.
One key factor is the transfer from abroad of $149 million, some 20% of GDP. These funds are from Moldovans seeking a better life in the West. They are likely to encourage the exodus to continue.

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FINANCIAL NEWS

IMF ready to help Moldova draft economic growth strategy

The International Monetary Fund is ready to provide, jointly with other international donors, technical assistance and consultative support in the process of drafting an economic growth and poverty reduction strategy, the head of an IMF mission, David Owen, said during his meeting with Prime Minister Vasile Tarlev on 11th November, Moldova One TV has reported.
The two officials analysed what had been achieved, noted existing problems and possible ways to solve them. The results of the talks with the Chisinau officials will be presented to the IMF board of directors and will serve as a basis for negotiating a new cooperation programme with the IMF next summer.
The results of the two-week monitoring of Moldova's economic development were made public by the head of the IMF mission at a news conference.
At the news conference, IMF officials reviewed the development of the economic situation in Moldova. The talks focused on assessment of the macroeconomic situation, economic development indicators, the fulfilment of the budget and the fiscal policy. David Owen, the head of the IMF mission, mentioned the economic growth which has been registered in Moldova for a third year in a row, and an improvement in the investment climate. He welcomed the actions taken by the National Bank to keep inflation at the same level. At the same time, he said that it was important to promote an austere fiscal policy to support measures taken by the National Bank, given the fact that forecasts about loans which will be allocated next year and revenues expected from privatisation are too optimistic.
David Owen said: "At present, the inflation rate is about 17 per cent. The government and the National Bank should take measures to reduce it to 8 per cent. GDP increased by 6.6 per cent in the first six months of 2003, while the annual rate is about 6 per cent. According to forecasts for the next year, the growth will slow down and stay at the level of 5 per cent."
Speaking about budget deficit which could be registered in 2004, David Owen said it was important to take several specific steps, such as combating corruption, speeding privatisation up and liberalizing the trade regime.

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FOREIGN ECONOMIC RELATIONS

Voronin prepared to sign free trade agreement with Ukraine 

Moldovan President Vladimir Voronin is interested in signing a free trade agreement with Ukraine to promote a favourable investment climate between the two countries. He also hopes Ukrainian President Leonid Kuchma's official visit to Chisinau on November 13th-14th will help activate the two nations' political dialogue. 
The presidential press service quotes Voronin as making these remarks at a meeting with Ukraine's ambassador Petro Chalyi. 
The two discussed preparation for Kuchma's visit and the agenda of the upcoming talks, the press service reports. 
Voronin also called for resolving issues related to Moldovan assets in Ukraine and for the expansion of cross-border cooperation. 

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FOREIGN LOANS & AID

Russia to provide US$105m in aid to Moldova 

An ordinance on an agreement in which Russia will provide free aid to Moldova was passed at a Russian Cabinet meeting, Interfax News Agency has reported. 
The ordinance follows the bilateral Friendship and Cooperation Treaty of November 19th, 2001 and the April 7th, 2000 agreement between the Russian and Moldavian Cabinets on settling Moldova's debt to Russia. 
Under the new agreement, Russia will provide aid worth US$105m to Moldova in 2003 and 2004. 
The two sides had reached an understanding that up to US$5m of that amount would be used to partially repay Moldova's debt and up to US$100m to partially pay the debt incurred by the Moldovagas company to Russian gas monopoly, Gazprom, for gas supplies to Moldova's Transdnestrian region. 
Russia will remit the aid in proportion to the removal of Russian defence hardware from the Transdnestrian region. 
Under the agreement, Moldova must create favourable conditions for the removal of all Russian defence hardware from the Transdnestrian region in accordance with earlier understandings on the subject. 

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