Books on Moldova
Leu (plural: Lei)
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
Update No: 277 - (01/02/04)
Moldovan President Vladimir Voronin has welcomed a plan proposed by Russia in November to resolve the dispute between Moldova and its secessionist region of TransDnestr. It calls for Moldova to become a demilitarised federation in which TransDnestr would have special status. The federation would recognize Russian and Romanian as official languages. The plan calls for the country to vote on a new constitution in October 2004.
RUssia presented the plan on November 17th to Moldova and TransDnestr and to fellow mediators Ukraine and the Organization for Security and Cooperation in Europe (OSCE).
Russian-speaking TransDnestr declared independence from then-Soviet Moldova in 1990. Moldovan forces and separatists fought a short war in 1992 that ended when Russian troops imposed a truce.
The two sides have yet to reach an agreement on the status of the region, where some 2,500 Russian soldiers are still based.
The Moldovans are doing better than in the 1990s economically, but not geopolitically.
To take the good news first, the economy is booming albeit from the base of being the poorest country in Europe. It is doing so on the back of a huge export boom, which saw exports rise by 24.9% in the first eight months of 2003, if official figures are to be believed.
GDP on the same reckoning went up by 6.8% last year. Industrial growth was 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.
One key factor is the transfers 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.
Back to the Soviet Union ?
In other respects things are not going too well. The Moldovans are finding themselves being irresistibly drawn back into the Russian fold. There is little they or the West can do about it.
This may well be Moldova's 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 Moldovans 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.
The EU beckons ?
The Moldovans have no rosy ideas of the West by now. 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, said at a session of the Council of Europe's Committee of Ministers. "Integration with the European Union remains a top priority for the country." 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 underlined, noting that the country's desire to join the EU will have a favourable impact on tackling the Transdnestrian issue.
But the EU is hardly likely to extend its frontiers any time soon to include such a troublesome country, the poorest now in Europe after Albania.
Fitch Ratings affirms foreign/local currency ratings
Fitch Ratings agency recently affirmed Moldova's long-term foreign and local currency ratings at B- and B, respectively. The short-term foreign currency rating of B was also affirmed. According to the Fitch statement, the outlook on the ratings remains stable, New Europe reported.
"Except for better-than-expected GDP growth, 2003 was another disappointing year for Moldova. The government has failed to accelerate structural reform and implement key IMF conditions. As a result, the bulk of official financing to the country remains suspended indefinitely," the Fitch report highlighted.
The agency noted that such a situation "is forcing the government to implement stringent budget cuts in order to meet its financing needs, and could result in a fresh accumulation of payment arrears, first to suppliers of goods and services but perhaps also on state pensions and wages."
The continued suspension of the IMF programme has also derailed attempts to enter debt-restructuring talks with the Paris Club, which accounts for roughly 20% of Moldova's external government debt. The IMF programme expired at the end of 2003, and while the authorities hope a new programme can be secured by the second half of 2004, this is by no means certain, according to Fitch.
The government seeks to maintain a tight fiscal policy in 2004, although preliminary plans look ambitious.
"Given high public financing needs due to a large debt amortisation burden, it is possible that payment arrears will be accumulated in 2004. The bulk of public external debt is owed to multilateral organisations, and is thus protected by their preferred creditor status," the agency's statement predicted.
Fitch noted however "other debt obligations could suffer. In the absence of IMF financing, the authorities might be obliged to accumulate further arrears on energy debts to Russia, and possibly to the Paris Club. It is also likely that the authorities will seek financing from the National Bank in order to stay current on their obligations."
Despite limited signs of an improvement in relations with multilaterals, the outlook on the ratings remains stable. The absence of international financing in 2004 and 2005 would pressurise public sector financing, but the authorities have some options, including deficit support from the National Bank, the report concluded
Russian company to build gas pipeline in Moldova
Russian pipeline construction company, Stroytransgaz, will construct in full the Krasnenkoye-Rashkovo gas pipeline in Moldova's breakaway republic of Dnestr, according to a contract signed with Dnestr's gas distribution company Tiraspoltransgaz, Stroytransgaz said in a statement on 6th January, Prime-TASS News Agency has reported.
Under the terms of the contract, the construction of a 219-mm, 30-kilometre-long pipeline is planned to start in late February and last seven months.
The pipeline's route envisages construction of two automatic gas distribution stations to provide further gas supplies to the northern parts of Dnestr, where some 50,000 people reside.
FOREIGN ECONOMIC RELATIONS
Moldovan president proposes free economic zones with China
President Vladimir Voronin met a delegation of Chinese experts in the setting up and functioning of free economic zones, Moldovan Radio has reported. The delegation arrived in Moldova after agreements reached during Voronin's state visit to China in February of this year.
Voronin proposed drafting a joint Moldovan-Chinese strategic programme for creating free economic zones in Moldova. The head of state said that the Moldovan-Chinese partnership in this area is the manifestation of friendship between the two peoples and of close ties that were established between the Moldovan and Chinese leaders.
"Trust in relations between our countries is the basis on which mutually beneficial economic cooperation, including creating free economic zones, can be developed," Voronin said.
The Chinese experts said during the visit they could see great prospects for the economic development of Moldova in general and of free economic zones in particular. The availability of a killed labour force, social stability and the sustainable economic growth that was ensured by the Moldovan authorities in the past few years were listed among the factors which would contribute to this.
During the meeting, the Chinese side showed interest in continuing cooperation to implement the Chinese model of creating free economic zones, which has proven its viability and extremely high effectiveness.
Moldova attracts US$15m of net foreign investment in Q3 of 2003
Moldova attracted foreign direct investments of US$18.84m in July-September, almost the same figure as in same period of 2002, according to the National Bank of Moldova.
The National Bank notes that capital outflow of US$4.07m was registered in the third quarter, so that net direct investment was US$14.77m, Basapress News Agency has reported.
Data provided by the central bank show that direct foreign investment of US$18.25m was put into Moldova in the second quarter, about US$6m less, and US$16.5m in the first quarter, more than US$8m less than the previous year.
According to experts, the decline in direct foreign investment into Moldova is also based on the negative foreign image resulting from difficulties currently faced by certain foreign investors in their relations with state bodies, as well as from cases of re-nationalization of some already privatised enterprises, to the detriment of foreign investors.
Moldova approves debt repayment plan
The government has approved a plan of repayment of guaranteed and direct foreign loans received by Moldova between 1991 and 2002. Sovereign debt restructuring is now being discussed at the bilateral level, Moldova One TV, Chisinau, reported.
The Moldovan government received direct foreign loans worth about US$1.156bn in 1991-02, and Moldovan companies received more than US$166m in loans guaranteed by the state. The Audit Chamber discovered that many loans have been misused and directed towards sustaining current spending levels.
For the first time ever, Moldova did not take out any foreign loans last year to cover its budget deficit. Finance Minister, Zinaida Greciani, said that under the new strategy foreign loans will be used only for investment projects.
At present, Moldova's direct foreign debt stands at more than US$700m. The debt owed by companies and guaranteed by the state is US$88m. In the absence of a deal with the International Monetary Fund (IMF) it is impossible to restructure Moldova's foreign debt through the Paris Club of creditors. This is why the government is holding talks with the donor countries at the bilateral level.
We have reached an agreement to extend the deadline for reimbursing [the debt owed] to Dresdner Bank and it has been ratified by parliament. We have already reached an agreement with the Romanian government and with the Italian government during the president's official visit to Italy in November 2003. We are holding talks with the Russian and Japanese governments. This work is permanently under way, regardless of whether we go to the Paris club or not, Greciani said.
Moldova will have to spend about 1.1bn lei [about US$82m] to serve its foreign debt in 2004. The IMF board of directors will examine the issue of signing a new agreement with our country.
FOREIGN LOANS & AID
Turkey to give US$20m to Moldova's Gagauzia in 2004
Turkey will continue to provide finance to Gagauzia, an autonomous republic in southern Moldova, in 2004. The news was announced at a meeting between deputies of the Turkish Majlis (parliament) led by the chairman of the parliamentary group for friendship with Moldova, Agah Kafkaz, and Gagauz governor, Gheorghe Tabunscic, Infotag News Agency has reported.
Infotag learnt at the governor's administration that the Majlis included US$20m of the promised second tranche for Gagauzia's water supply and also money for providing Gagauzia with humanitarian aid in the form of diesel fuel into the Turkish budget for 2004. The first tranche of US$15m was disbursed in 1998.
During the visit, the sides discussed opportunities of wine exports to Turkey and customs problems that arise when goods are imported.
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