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Books on Moldova
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Update No: 319 - (26/07/07)
Luxembourg to the rescue
It is difficult to imagine two countries in Europe that are less alike than
Luxembourg and Moldova. The former is a Grand Duchy, with a hereditary ruler and
is the richest country on the continent by a long way, with only a third of a
million inhabitants, yet a per capita income of over US$300,000 on average,
which of course is extremely uneven, between the well-heeled bankers and the
like and the rest. The latter is the poorest country in Europe now, with an
impoverished population of small farmers and shopkeepers.
Luxembourg is one of the smallest countries of Europe, where over 200 banks are
working, and is the country with the greatest concentration of banks in the
European Union. At the same time, this country gives the highest minimum salary
in EU - 1,570 euros monthly. That would be a small fortune in Moldova.
Specialists from the Moldovan banking and financial fields will have the chance
to be trained by competent specialists from Luxembourg, among the best in the
world. President Vladimir Voronin and Deputy Premier, Foreign Affairs and
Immigration Minister of the Grand Duchy of Luxembourg Jean Asselborn, on an
official visit to Chisinau, discussed the above issue at a meeting in mid-July,
according to the presidential press service.
The head of the Luxembourg diplomacy referred to his country's intention to join
the Common European Union Visa Issuing Centre starting 1 January 2008, as well
as to support Moldova to train specialists in the banking and financial areas.
President Vladimir Voronin stressed the importance of the visit by the deputy
premier of Luxembourg to give an impetus to the Moldovan-Luxembourg dialogue in
diverse fields. The head of state also emphasized the significance of the
discussions held with the Luxembourg officials within his recent visit to the
Grand Duchy of Luxembourg, in order to deepen and extend both the bilateral
relations between the two states and the ones on the dimension of Moldova's
European integration.
For his part, Jean Asselborn appreciated the efficiency of the visit paid to
Chisinau. In this respect, Jean Asselborn highlighted the fact of signing the
convention between the Moldovan and Luxembourg governments on the avoidance of
double taxation and prevention of fiscal dodging as regards taxes on income and
property.
The Luxembourg official appreciated Moldova's intense cooperation with the
European Union (EU) within the Moldova-EU Action Plan. Jean Asselborn also said
that the development of the existing relations is both in Moldova's and in EU's
interest.
Referring to the Transnistria-related problems, the head of Luxembourg diplomacy
underlined the importance of continuing the negotiations in the 5+2 format, and
described this format as an ideal framework to bring a lasting solution to the
conflict.
The president appreciated the consistent dialogue which has been established
over the last two years between Moldova and EU, which allowed the implementation
of some new projects in the European practice, such as the setting up of the
Common EU Visa Issuing Centre and the organisation, through the EU Border
Assistance Mission, of the international monitoring at the Moldovan-Ukrainian
border, including its Transnistrian segment.
Vladimir Voronin reaffirmed the Moldovan authorities' intention to firmly follow
the course of Moldova's European integration, stressing that the support of
Luxembourg - an EU founder country - is very important for Moldova's advancement
towards achieving its European aspirations.
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PMR property reform seen as way to more economic freedom for poor
There is quite a different approach being tried in at least one key province
in Moldova, with one third of its economy in the old days, Transnistria. It is a
grass-roots-up rather than a top-folk-down programme which has had much to
recommend it whenever applied elsewhere. It is gratifying that Moldova should
now be regarded as a suitable laboratory for new ideas.
The backers of a new law on private property reforms see it as a way to boost
economic freedom. Aimed at giving the poor and rural population legal title to
their homes, it is based on a wealth creation roadmap by Hernando de Soto. The
Peruvian economist specifically had post-Soviet countries in mind when he
developed the plan. Curiously he is a former banker too, but a rather different
one from the gilded Luxembourgeois.
Now the Russian- and Ukrainian-inhabited enclave on the left bank of River
Dniestr, Pridnestrovie (its other name), is implementing his ideas. A new law
aimed at bringing private property into the hands of the poor is seen by its
backers as a way to give a boost to grassroots wealth-creation in Pridnestrovie.
It could lead to dramatic political developments too.
The key man behind the new rural property registration law is MP Mikhail Burla,
a Tiraspol-based economist and second-in-command of the opposition party,
Renewal, which is currently in control of parliament. It follows a
wealth-creation roadmap by Hernando de Soto, the former head of Peru's Central
Bank. This may yet come to be regarded as the blueprint of the enclave's
independence by giving it an alternative to being in the future merely a part of
an economically failed state with the poorest economy in Europe.
"Since the fall of the Berlin Wall in 1989, most developing and former
Soviet nations have tried to move towards some form of market economy. There has
been little success," says Hernando de Soto.
"This widespread failure has created bitter disappointment amongst the poor
and has provided an opening for opponents of reform, globalisation, and free
enterprise who charge that market economic systems bred widespread corruption, a
rise in crime, a new class of 'haves', and disrespect for the law."
Western thinkers have blamed this on everything from these countries' lack of
sellable assets to their inherently non-entrepreneurial "mindset."
However, the real problem is that such countries have yet to establish and
normalize the invisible network of laws that turns assets from "dead"
into "liquid" capital, believes Hernando de Soto, whose ideas have
influenced one of the latest laws from Pridnestrovie's parliament.
Praise from both Putin and Bush
In the West, standardized laws are in place to mortgage a house to raise
money for a new venture, permit the worth of a company to be broken up into so
many publicly tradable stocks, and make it possible to govern and appraise
property with agreed-upon rules that hold across neighbourhoods, towns, or
regions. This invisible infrastructure of "asset management" is the
missing ingredient to success with capitalism, insists de Soto. But even though
that link is primarily a legal one, he argues that the process of making it a
normalized component of a society is more a political - or attitude-changing -
challenge than anything else.
Hernando de Soto's proposal is to register poor peoples' assets, even if it's no
more than a tarpaper shack in a slum. Giving even the smallest title to property
gives people a leg up and something to propose as collateral for small loans.
His analysis of poverty says that when people have no title deeds to land or to
other properties that they possess, they have no access to credits or to
markets.
Praise for his proposal has come from across the political spectrum - from both
Vladimir Putin and George H. W. Bush.
Ronald Coase, winner of the Nobel Prize in economics, has called Hernando de
Soto's work "powerful and completely convincing" and de Soto has been
awarded with both the Milton Friedman Prize and with the Templeton Freedom
Prize.
In December of last year, The Economist gave him its Innovation Award for the
promotion of property rights and economic development.
One of the world's two most influential think tanks
Hernando de Soto, who used to run Peru's Central Bank, is an economist whose
specialty is the informal economy: The economy which is unregistered and
nominally outside government control. He is the president of Peru's Institute
for Liberty and Democracy (ILD), considered by The Economist as one of the two
most important think tanks in the world. Son of a Peruvian diplomat, he was
educated in Switzerland where he did post-graduate work at the Institut
Universitaire de Hautes Etudes Internationales in Geneva.
Two magazines, Time and Forbes, have both chosen Hernando de Soto as one of the
leading innovators in the world, and more than 20,000 readers of Prospect and
Foreign Policy ranked him as one of the world's top 13 "public
intellectuals."
Along with former U.S. Secretary of State Madeleine Albright, Hernando de Soto
is co-chair of the Commission on Legal Empowerment of the Poor which works under
the auspices of the United Nations Development Programme (UNDP).
His institute provides heads of state with a straightforward and non-ideological
explanation for why even the most well-intentioned market reforms will fail:
their nations lack a property law that is accessible to the poor and that allows
both physical and intellectual assets to be converted into capital.
"People go hungry because they haven't enough money to buy food, but also
because their capacity to grow it has been drastically reduced," says U.S.
political scientist Susan George of the Helsinki Process on Globalisation and
Democracy, which is run by the Ministry for Foreign Affairs of Finland to bring
in different stakeholders to promote development.
Link between economic freedom and wealth creation
The crucial role of these economic liberties for overall freedom - as well as
the wealth of nations - was recognized long ago by John Locke, David Hume, and
Adam Smith. Poor protection of economic freedom causes stagnation and poverty.
Economic freedom is especially important to the young, the new entrepreneurs,
and the economically and politically weak. Secure property titles and their
expedient and unbiased enforcement protect the weak, who rely on low transaction
costs to make use of their assets. Hernando de Soto has shown in numerous case
studies that the poor in the post-Soviet countries own much wealth. At the same
time, they cannot use their assets effectively until the government formalises
and protects their titles.
"If political interference with economic freedom is widely tolerated, it
will not only produce injustice, economic stagnation, political instability and
social conflict. It will also destroy popular support for both democratic
government and capitalism," says Wolfgang Kasper, a longtime Professor of
Economics at the Australian Defence Force Academy.
"For the entire Third World and the former Communist countries, de Soto's
calculation is that the total value of all the real estate held, but not legally
owned, by the poor is more than 20 times all direct foreign investment and more
than 90 times all the foreign aid," says Thomas Sowell, a senior fellow at
the Hoover Institution in the United States.
"The amount of wealth available within Third World countries themselves
vastly exceeds anything that the prosperous countries have given them or are
likely to give them," says Sowell, adding that this is a way to jumpstart
grassroots capitalism because "many American businesses were begun by
someone who borrowed the money to get started, using his home as
collateral."
Top
FOREIGN AGREEMENT
Agreement to share assistance with Lithuania
Lithuania would share its assistance obtained from the North European countries
with Moldova, Lithuanian Speaker, Viktoras Muntianas, recently said at a plenary
meeting of the Moldovan Parliament, Mold press reported.
A Lithuanian delegation, headed by Lithuanian Speaker, Viktoras Muntianas, paid
an official visit to Chisinau, which included meetings with Moldovan top
officials and the Lithuanian community in Moldova, as well as an excursion to
the cultural and historical compound, Orheiul Vechi.
The visiting Lithuanian official assured the Moldovan Members of Parliament that
"Lithuania is Moldova's partner which keeps on reminding the European
Union" about Moldova's problems and does it's utmost to settle them.
"The key to getting Moldova closer to the EU is in your country. You should
do your best for the full implementation of the Moldova-EU Action Plan and for
the transparent absorption of the EU's financial support," Muntianas was
quoted as saying.
The speaker of the Lithuanian Seimas stressed that in the near future,
"there are to be identified new ways for strengthening Moldova's relations
with the EU," after the Partnership and Cooperation Agreement expires in
2008. The Lithuanian official hailed Moldova's achievements in getting the EU
autonomous trade preferences, the signing of the agreements on simplifying the
EU visa regime and readmission and opening of the Common EU Visa Application
Centre in Chisinau.
Referring to the Transnistrian issue, Viktoras Muntianas was quoted as saying:
"Lithuania is sure that Russia should honour its commitments assumed at the
Istanbul Summit and withdraw its troops from Moldova's territory." Moldovan
Speaker Marian Lupu told journalists that jointly with his Lithuanian
counterpart, he considered a wide range of problems, among which the
inter-parliamentary dialogue. The speaker stressed that the dialogue improved
over the last two years. Lupu underlined that within the Lithuanian speaker's
visit, "there will be set a series of goals and priorities for the next
years."
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