Early Warning Report No 3 (2011) - Moldova

EARLY WARNING REPORT

Cornel CiureaLeonid LitraVeaceslav BerbecaAlexandru Fala

JANUARY - APRIL 2011

Institute for Development and Social Initiatives (IDIS) “Viitorul”

3EARLY WARNING REPORT

Institute for Development and Social Initiatives (IDIS) “Viitorul”

EARLY WARNING REPORT

January - April 2011

Cornel CiureaLeonid Litra

Veaceslav BerbecaAlexandru Fala

4 EARLY WARNING REPORT

This report was prepared with financial support offered by BTD (Balkan Trust for Democracy) and Think Tank Fund. Expressed opinions are those of authors. Neither the Administration of IDIS „Viitorul”, nor the Administrative Council of the Institute for Development and Social Initiatives „Viitorul” bears any responsibility for the estimates and opinions presented in the very publication. Any use of information or opinions of the author of

this Study should make a reference to IDIS „Viitorul”.

For any information related to this study, please contact the Institute for Development and Social Initiatives „Viitorul”, Product Coordinator: Cornel Ciurea.Address: MD-2005, Republic of Moldova, Chişinău, 10/1 Iacob Hancu str., IDIS „ViitorulTel: 37322-22-18-44, Fax: 37322-24-57-14e-mail: [email protected] and [email protected]© IDIS Viitorul, 2011


SUMMARY

1. Abstract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6

2. Cornel Ciurea „REVERSIBLE CRISES – A MAJOR OBSTACLE IN THE

REPUBLIC OF MOLDOVA WAY TO EUROPEAN INTEGRATION” . . . . . . . . . . . . . 7

3. Leonid Litra “HOW TO AVOID THE EU FATIGUE TOWARDS MOLDOVA?” . . . . . . 14

4. Alexandru Fala „ PRICES INCREASE IN THE REPUBLIC OF MOLDOVA –

REASONS, EVOLUTIONS AND RISKS” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

5. Veaceslav Berbeca “TELERADIO-MOLDOVA” COMPANY - BETWEEN

UNDERFUNDING AND QUALITY”. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23


ABSTRACT

In the fourth issue of the Crises Prevention Report we have addressed mainly subjects referring to the Republic of Moldova relationship with the European Union. Two policy bri-efs written by Cornel Ciurea and Leonid Litra were dedicated to this topic. They both refer to the difficulties the Republic of Moldova faces in meeting the commitments to the EU and describe the factors contributing to the fatigue on both sides. The analysis “Reversible crises – a major obstacle in the Republic of Moldova way to the EU” written by Cornel Ciurea is a synthesis of the most important crises, our country has recently passed through, and their unusual features leading to the emergence of a new phenomenon – reversible crises. These crises have a repetitive and endemic character and are triggered by delay strategies used by the Moldovan governments that are not interested in resolving them but in maintaining a state of balance within society.

The same issue of fatigue towards the integration processes is addressed by Leonid Litra in his study “How to avoid the EU fatigue towards Moldova?” The author speaks about a possible “ukrainization” of the Moldovan politics which stems from the lack of consensus within society concerning issues of general interest and a major political crisis intensifying the political instability. This process of “ukrainization” occurs in a political context with the dan-ger of seeing the EU attention shifting from Moldova to the northern Africa. The Republic of Moldova has to make sustainable efforts so that to preserve its status of a “success story” and not to be classified as a “failed success”.

In this report we address again the problem of public television financing. The resear-ch “Teleradio-Moldova Company – between quality and underfunding” analyzes the way the Teleradio-Moldova Company budget is elaborated and approved and examines the reasons for public broadcasting underfunding which difficultly lives up to the commercial channels competition. Veaceslav Berbeca, the author of this study, refers especially to the payment for the analog broadcasting services generously paid by the Company to the State Enterprise “Radiotelecomunicaţii” and historical debts ran up to this public institution.

Economic aspects related to price increases are analyzed by Alexandru Fala in his study “Prices increase in the Republic of Moldova – reasons, evolutions, risks”. The author speaks about the imbalanced character of the Republic of Moldova economy which makes the price fluctuations to encompass both objective aspects stemming from economic conjuncture and structural deficiencies and even the fraudulent activities. The author emphasizes the de-laying of structural reforms which maintain the situation where the unjustified components, like those caused by companies inefficient operating, especially the state ones or those where the state is the owner, or the use of non-competitive practices, will be included in prices and tariffs.


REVERSIBLE CRISES – A MAJOR OBSTA-CLE IN THE REPUBLIC OF MOLDOVA WAY TO EUROPEAN INTEGRATION

Cornel Ciurea

1. EMERGENCE OF A NEW TYPE OF CRISES – REVERSIBLE CRISES

The phenomenon of crises emergence in the Republic of Moldova in 2010 was dominated by the political factor. The bulk of events, labeled, justifiably or not, as crises bore the seal of this factor. As an example, might be mentioned the July floods that was a real challenge for the state’s structures capacity to face natural disasters. For the rest, we may ob-serve a coalescence of political, economic and social factors that gave birth to a plethora of crises of different length that solicited clearly defined and articulate reactions from the au-thorities. The wine crisis, the referendum, the allocation of subsidies and the conflict within the Alliance, the signing of the agreement con-cerning the border regime between Moldova and Romania and issues related to internal procedures, debates concerning monuments and historical dates are just some of special situations that required sustainable efforts and crisis management skills. Nevertheless, it is necessary to evaluate the potential to generate a crisis of the events that we usually describe as crises. A classical crisis is an extraordinary situation that dis-turbs the natural course of things triggering disorder and chaos and requiring the mak-ing of some decisions and undertaking some actions in a short period of time. Crises are non-linear phenomena that create bifurcation points and the multiplication of these points generates chaos. The mastering of the pro-cess of bifurcation reproduction involves the

taking of some decisions under conditions of maximum uncertainty and risk. During this period, the time passes more intensely and all the policymakers are under the influence of a huge pressure. In other words, the policymak-ers have to undertake actions in a crisis condi-tions under a permanent pressure. In the same time, in the Republic of Moldova we observe the phenomenon of “crawling”, circular and never-ending crises that we also name reversible. Unlike usual cri-ses that have a certain period of manifestation and require a radical intervention of policy-makers aiming at stopping them, these lengthy crises have the tendency to acquire a perma-nent character becoming a constant of the so-cial-political life in Moldova. Despite the ap-pearance of bifurcation points that periodically jeopardize the system, the policymakers do not undertake decisive actions able to eliminate dangers and stop the crisis but get constantly used to new realities and challenges, preferring to sail downstream. Thus, the crises are no lon-ger eliminated but “absorbed” by the system and managed in different ways, depending on the stage of manifestation. Today we cannot speak any more about the society like being a machine of solving transient crises but, on the contrary, like being a machine of multiplying the endemic crises of the same kind. So, the chaos induced into the system by the emer-gence of bifurcation points is no longer a fatal irritant against which the system mobilizes all its resources in order to chase it away but is more like an indispensable ingredient due to which the system cannot find peace and acti-vates its mechanisms. The general impression resulting from this permanent struggle be-tween the system and the crisis is that of a con-


tinuous animation and fulguration, phenom-ena which, because of appearance frequency, wear out the feelings of precaution and fear, exposing society to significant perils if some crises, whose effects will be difficult to defuse, emerge. 7 April 2009 is such a social explosion that was not anticipated in social systems that have irreversibly lost their immune system. Examples of this kind of permanent, crawling, rotating and endemic crises might be the disputes related to the Republic of Mol-dova Constitution with the obvious corollary of the impossibility to elect the country’s pres-ident, the process of investigating the events of the 7th of April, Moldovan-Romanian rela-tions, the wine crisis and the Moldovan wine blockade by Russia but also the slow, inert and deprived of a clear motivation negotiations with the European Union, negotiations that, however, cannot be interrupted. The most spectacular example of such a crisis freezing is the Transnistrian crisis which is named “fro-zen conflict”. The management manner of this conflict was taken over by the government and used in a number of cases of manifest or la-tent crises, the main tool being not as much the solving but the “crisis freezing”. The crisis freezing implies the endless delaying of tak-ing decisive decisions, the avoidance of any risk and, the most often, floating adrift hop-ing that things will get right by the force of circumstances. Each of the above-mentioned cases implies this set of bizarre behavior based on a certain lack of action of the competent authorities. An eloquent example, from this point of view, concerns the impossibility to amend the Constitution of the Republic of Moldova, a fact that involves a major political deadlock, political instability caused by the non-election of the state’s president, “sustaining the provi-sional ”and the recurrence of the anticipated elections. All the actions taken by the parlia-mentary political parties fall within the logic of delaying indefinitely – imitation of nego-tiations with political rivals when both parts do not have anything to offer, propaganda campaigns of accrediting the idea of rating in-crease in order to persuade the rivals to sur-render without fighting, speculations with the

constitutional vacuum and extremely biased interpretation of the Constitution in order to justify the provisional situation and make it last without changes. A natural outcome of this kind of behavior is the “freezing of the political crisis” and the impossibility to take any firm actions concerning diverse issues – Transnistria, European integration, economic reforms, the justice reform, repairing of sym-bol-buildings – Parliament and Presidency, etc. In the same time, all parties seem pleased with the situation of the political stalemate, being content with the “lesser evil”. The situ-ation does not degenerate in a rapid way due to both palliatives offered by the international institutions and the self-squelching of political actors who during crises do not apply aggres-sive strategies of self-destruction. The investigation of the 7th of April events is a reflection of a crisis triggered in 2009 that looks like turning into a Mexican syrup soap opera with a constantly postponed end. The repetitive creation of some redundant parliamentary commissions, extremely politi-cized and too little relevant for cases settle-ment parliamentary hearings, nontransparent investigations and controversial resignations accompanied by allegations make the political society recipe for mitigating the consequences of the 7th of April 2009. In fact, the strategy of delaying and freezing the situation is deter-mined by the progressive twisting of the spiral of the parliamentary political parties electoral behavior that, in order to get a greater number of votes, speculated abusively the 7th of April issue, offering very often hazardous and void interpretations. Subsequently, they entered a vicious circle being forced to save their face under conditions where the investigation find-ings did not comply with their arguments. Thus, the 7th of April issue is still on the cur-rent agenda and generates, intermittently, fierce political confrontations even if the in-vestigation does not reveal any supplementary information, being practically exhausted. The blockade of wine exports to Russia is a detective serial as well. In the framework of previous reports, we have underlined the fact that “the favorite government’s approach was to use soft technical and economic solutions,


on short term, and to delay the application of hard, consistent, political solutions”. Under these circumstances we can notice the absence of a clear governmental and specialized agen-cies strategy regarding the current crisis. This lack of strategy is determined by the circula-tion of contradictory messages. On the one hand, the government and the experts are en-gaged in a troublesome negotiation process with uncertain outcome. On the other hand, Moldovan authorities launch sometimes some critics at the Russian government that are very negatively received in Moscow and that inten-sify the Russia’s position intransigence. This duplicate message reflects the government’s indecisiveness regarding the path to follow in its relationships with Russia. Even if the main strategic line is that of negotiations, it is often distorted by an inconsistency in promoting this message, which is expressed by criticisms to Moscow. The recent information concern-ing the Belarus intention to stop wine exports to this country under Russia’s coercion is a new example of sliding into a vicious circle deter-mined by the obsessive preference to endlessly delay the undertaking of some decisive actions stemming from a clear strategy. The same delay strategy is used in rela-tion to the European Union. The likely signing of the Free Trade Agreement and the existence of an Action Plan with the EU concerning the visa liberalization regime request from author-ities decisive actions, especially in the condi-tions where they have to act under the pressure of a very close deadline. In spite of all this, we observe that, in some sectors, the reforms are starting to drag on even if the psychologi-cal background is a good one, owing to the European structures willingness. The Ministry of Interior is very slow in clarifying the key elements of the undertaken reform. The anti-discrimination law has soured the politicians’ faces, even if they laugh their heads off at dif-ferent TV shows, and it was easily put aside despite the urgent need to start vast debates on the topic within society. The provision of an adequate financial governmental assistance for the necessary reforms is a new flaw in the policy of promoting European reforms, causing nu-merous doubts regarding the central authori-

ties’ ability to keep pace with the announced changes. It seems that, despite the undertak-ing of ambitious purposes, the Moldovan au-thorities still have some reserves towards the European integration, a thing that leads to a resistance to the novelties whose only deter-mined exponent is the Ministry of Foreign Af-fairs. This reluctance to promote reforms in a determined and perseverant way is, somehow, the result of a lack of motivation, related to the absence of the integration guarantee but this fact does not cancel the retractable, cau-tious and slow style in implementing the com-mitments the government has undertaken. In this case, a crisis overlaps another one – the political instability being a clear impediment to mobilize the ministries energies in order to promote reforms. Thus, the reversible and repetitive cri-ses are a new phenomenon that is replacing the classical crises which could be resolved in a short time. The Moldovan government changes its behavior and does not get rapidly involved in order to put an end to the crisis. Even the management of the 7th of April pro-tests by the communist government indicates such a logic of delay – the order and law en-forcement agencies did not intervene immedi-ately but only after a while, making sure that there were no risks for a successful operation. This procrastination strategy is not necessarily determined by the government’s vulnerability even if the government with such a behavior can be named nothing else but weak. There are many external and internal factors molding the government’s behavior.

2. FACTORS DETERMINING THE REVERSIBLE CRISES

There are many factors contributing to the emergence of reversible crises. Many of them are beyond the control of the country’s policymakers and, because of this; the authori-ties have to mostly use an adapting behavior to crises induced by external factors. Under these circumstances, the government does not have the necessary tools to stop or prevent the emergence of repetitive crises and resorts to


strategies to postpone the application of clear solutions or public communication technolo-gies that conceal the issues prone to provoke crises. The first factor triggering crises of a permanent character refers to the global economy influences onto the Republic of Moldova. Moldova is a small state with lim-ited ability to live up to economic challenges coming from abroad. Dependent, to a vast extent, on the remittances from abroad, with a significant deficit of balance of payments, with a growing external debt and with con-stant bonds made to external partners, our country has a very restricted set of tools to prevent crises. Therefore, the economic and financial crises hit the republic of Moldova without our government’s ability to under-take decisive actions in order to block them. This situation of our borders porosity before external economic influences shows a certain integration degree of Moldovan economy in the global economic system which carries both positive and negative aspects. Secondly, the geopolitical factors play a significant role in triggering reversible cri-ses. The geopolitical influences do not have finality and are ceaselessly exercised in the way to keep the Republic of Moldova under permanent pressure. A crisis, like that of wine exports to Russia, cannot be solved in a nut-shell because the wine exports are used as an instrument within some political struggles. Also, the Transnistrian conflict has lasted so long because the external actors’ interests determine the outcomes in the Republic of Moldova. In this situation, the government has just to adapt to the created circumstances, imitating the intention to solve the crisis and involving in minor actions of resolving the conflicts. Thirdly, the government is a hostage of internal struggles in the Republic of Mol-dova. Domestic confrontation, a deeply di-vided society on ideological and ethnical cri-teria creates inherent bottlenecks preventing resolute actions aiming at resolving emerging crises. The issue of the state language that triggers, intermittently, fierce rivalries is an example of a reversible crisis with no chances

of improvement. An example of an ideologi-cal dispute is the process of adopting the Ed-ucation Code that is constantly delayed be-cause of irreconcilable disagreements between the main political forces. All these situations weaken the government’s ability to take ac-tion, turning it into a reactive and distribu-tive machine and not into one of anticipating and creative transformation of crises. Fourthly, the government is not in the position to react to all crises because the bulk of them are artificially induced, being an element of the political show promoted by the political parties. Nowadays, the crises are more like a mass media or entertainment is-sue, being created more for being circulated publicly and not resolved. This type of cri-ses that we can also name crises-soap bubbles are considered transient phenomena coming and leaving without affecting the society be-cause they are virtual creations designed by the communication experts minds. Examples of this kind of “artistic” creations are the crises that targeted the anti-mafia campaign against certain oligarchs in Moldova, the 9th of May parade in Moscow and the crisis of the communist regime victims monuments, Ghimpu’s decree regarding the 28th of June, the boycotting of the Parliament’s sessions by the Communist Party of the Republic of Moldova and the demand to resign for the interim President. Even if all these crises do not directly affect the governing activity, they shape a negative background discourag-ing prompt actions and reforms coherence. Moreover, these crises have the feature of re-peating themselves over time, being issues for heated debates that are resumed, from time to time, by the interested players. Therefore, more results conspire to perpetuate crises in the Republic of Moldova, a thing that can be explained by the central authorities’ feeble capacity to anticipate and respond. This ability to respond is deter-mined by the state’s vulnerability but also by the specific character of our region – a region with a high political and economic seismic character. At the regional level, we often have tense relationships with our neighbors, sepa-ratist regions on our territory, adequate geo-


political treatment of small and unimportant states. At the political level, we can observe that the Moldovan elite are orientated to-wards zero-sum games, being uncooperative and creating political crises – for instance the crisis of amending the Constitution. At the economic level, we have an economy based on remittances from abroad, dependent from the energy point of view, importing crises from other zones, not attractive for investors, with a negative trade balance, with unfavorable trade terms, with many debts and with sub-sistence agriculture, dependent on assistance from abroad. At the social level, we are affect-ed by an insufficient population growth, with an overburdened pension system and with an inefficient educational system that is not con-nected to the labor market. All these elements indicate a weak state’s capacity to cope with crises without referring to civil servants train-ing, an element that can, in some conditions, even not play any role when the state has a high degree of vulnerability. In conclusion, the cumulative effect of all above-mentioned factors triggers reversible crises. The emergence of these crises is deter-mined by the authorities’ preference for using palliatives in order to conceal the immediate consequences of crises and postponing the de-cisive intervention moment for an uncertain date. Thus, the main state’s strategy is not the fight against crises but an interminable delay in intervention timing. This thing may be ob-served not only in tough issues like the 7th of April investigation or the constitutional crisis but also in less crucial issues like the justice reform, the adoption of the new Education Code and the Ministry of Interior reform. Even the process of voting the budget falls within this logic – a series of successive crises mark the whole period of working on this fi-nancial document until the deadline is reached and, if it is not met, it might have devastat-ing consequences (for instances the stoppage of external financing). In the situation where the government is on the brink of disaster and after insignificant negotiations, the budget is adopted the last day, without any certainty that the main disputes triggering crises have been resolved. Such a political behavior, even

if it is explicable because of a multitude of fac-tors beyond the authorities’ control, allows the accumulation of diverse crises, often in a latent form, that periodically return.

3. THE ABILITY TO FORECAST AND PREVENT REVERSIBLE CRISES OF THE STATE ASPIRING TO JOIN THE EUROPEAN UNION

The classical crises are difficult to be predicted because they are events that emerge “unexpectedly” like a seism, breaking the nor-mal course of events and introducing, often in an unexplained manner, new elements, alien to the system. The commentators often find post-factum signs of these storms in the course of events prior to the crisis but these delayed explanations are always treated with suspi-cion because they lack anticipative ability. The collapse of the USSR, global financial crises, conflicts, revolutions, wars and governmental changes are examples of these non-anticipated crises that often have devastating effects on political and economic systems. In classical crises, even the most reputable forecasting in-stitutions might make mistakes. For instance, the IMF changed several times its forecasts for the 2009 year, its margin of error being more than 5% which is an enormous figure for the world economy. Another classical example of a failed forecast is that of the well-known Russian economist Andrei Ilarionov who was, for a long time, the economic adviser of the Russian President. In the summer of 2008 he declared that the USA will not plunge into re-cession and the world will not be affected by crisis. These statements were made when the USA had already been in recession for half a year (but, officially the beginning of recession was made public in November 2008). These failed forecasts are not the result of the lack of desire to forecast correctly the developments but because this thing is very hard to be done.


Conversely, the reversible crises seem to be easier to predict because of their repeti-tive and endemic character. Not being resolved till the end but just „put to sleep” for a certain period, the reversible crises threaten to emerge at any time from their semi-napping state. The governors eliminate these issues from their im-mediate agendas by finding some temporary solutions and prefer to forget about them for a while. Among these temporary or palliative solutions may be mentioned the imitation or the carrying out of some supplementary ne-gotiations, establishing some parliamentary commissions, reinterpreting the Constitution and the acts of referring to the Constitutional Court or passing new laws and replacing the old ones, presentation of some triumphant re-ports in situations where what is sought is to appease the supervisors and inspectors, post-poning the deadlines or, generally, the block-ade of the dialog. These juridical or diplomatic solutions do not address the essence of the problems that, usually, have an economic or political character and require a correspond-ing approach. So the problems treated in a superficial or hasty way have great chances to be again in the spotlight of the public and the governance after a certain period of time. This is the situation of the 7th of April investiga-tion, the presidential election, the wine ex-ports, the educational and home phone system optimization, the geographical indications and regional development issues. In all these cases it is relied on delaying solutions that imply ne-gotiations and laws interpretations but do not clarify the situation in the area and announce a new twisting of the reversible crisis spiral at a more advanced stage. That’s why, theoretically, it is impossi-ble to draw up a register of crises including do-mains under pressure but that are approached in a superficial way and abandoned for a cer-tain period of time. This exercise would al-low us to keep under control the problematic domains despite the fact that, certainly, such inventory would not allow to forecast exactly the moment the crises might erupt and their seriousness. Nevertheless, the political system is not that interested in such approaches. The reason is quite simple – the governments in

the Republic of Moldova are concerned with integrating the emerged crisis into the system and not resolving it. These crises are absorbed and become a perpetual concern for the gov-ernance, even if the seriousness, they are ap-proached with, depends on the political mo-ment imperative. Therefore, we can say that the reversible crises are never-ending crises because the system itself is not created to re-solve crises but to harmonize diverse interests in power. These interests have different points of view regarding the way to resolve a crisis and do not admit the application of clear-cut solutions. That’s why, the task of maintaining a system in a relative balance implies the fo-cus on balancing interests and not on resolving crises. Such an outlook could greatly compli-cate the fundamental goal of signing the As-sociation Agreement with the EU. The phi-losophy of signing such an agreement does not imply negotiations and conditions from the Republic of Moldova but exact compliance with the made commitments. The European approach requires a linear, straight and clear decisional process and a prompt implemen-tation of taken decisions. This is a process in which the delays and cancellations are regarded as a malevolent attempt to shun the commit-ments and not as an always renewed endeavor to ensure a consensus within the governing circles and between the power and the opposi-tion. The European ambition, to exclude the political aspect from the governmental mech-anism of taking and implementing decisions and to turn the adjustment to standards into a technical process, collides with the reality of a divided society that do not wish to eas-ily abandon its informal mechanisms ensuring the maintaining of balance. Such a philosophy comes into conflict with the way the govern-ing mechanism is perceived in the Republic of Moldova. It is a paradox that consensual and consociational instruments of ensuring the governing were elaborated in the post-war pe-riod in some European Union states like Bel-gium, Austria, etc. Nevertheless, the integra-tion effort requires from candidate states to annul many mechanisms of this kind in order


to prove the compatibility with the EU re-quirements. Crises and internal divisions are, therefore, “suspended” for a certain period needed for the harmonization interval, after which they may emerge again but this time in conditions where the state is already a EU member. Thus, the European integration pro-cess creates as well the necessary premises for the periodical emergence of reversible crises within the candidate states. Many of the states aspiring to join the EU resort to subterfuges in order to conceal, from the Commission, the internal contradictions and the existing struc-tural problems that will be revealed afterwards, when the state becomes a EU member. This was the case of Bulgaria and Romania but the same things happened to countries like France and Greece within the EU, when they wished to keep secret some statistical data concerning the financial situation of these countries. From this stems another strategy ap-plied by governments in their struggle against the reversible crises. Instead of anticipating and foreseeing crises, the authorities in dialog with the EU officials prefer to keep secret the most sensitive aspects generating crises and present the thinks in a positive light. The in-ternal conflicts are temporarily anaesthetized and the policymakers evince an attitude of a tenacious performer. Nevertheless, such a be-havior cannot last for long because of the ir-repressible character of the reversible crises that may be suspended but not canceled. The longer the integration period the smaller the governance chances to keep the confidentiality

and the evil spirit of crises in the bottle. For this reason, the European integration process started by the Republic of Moldova has great chances to be unsettled by its duration which will bring to light the multitude of latent crises that are not being almost at all discussed.

CONCLUSIONS

The reversible crises represent a con-stant of the governance seeking to harmonize contradictory interests, the goal of taking quick decisions being on the second plan. The above-listed delaying strategies of the prompt intervention during a crisis allow maintaining a situation of neither peace nor war in con-ditions where there are often irreconcilable contradictions within the society. However, such a style of governing is in contradiction to the pragmatic European approach requir-ing the cancelation of internal disputes and total compliance with the commitments in the framework of diverse documents signed with the EU. The lengthy period of negotiating an Association Agreement with the EU might, some day, wake up the “frozen” contradictions which would mean that political consider-ations will take precedence over technical and pragmatic ones. The danger of these evolutions (or involutions) is determined by the consocia-tional manner of governing, preferred by the Moldovan governance, but also by the partial lack of motivation implied by the European integration process for the Republic of Mol-dova.


HOW TO AVOID THE EU FATIGUE TOWARDS MOLDOVA?

Leonid LitraTwo years ago any political discussion in

Moldova or between the Moldova’s Western part-ners could be summarized to one question: Moldo-va quo vadis? Moldova was really at the crossroads. But nowadays it is perceived as the main success sto-ry within the Eastern Partnership. Indeed, Moldova has had remarkable achievements in the foreign policy since the AIE (Alliance for European Integra-tion) came to power. However, Moldova is not yet a success story but has the potential to become one. The greatest challenge facing Chisinau in terms of its leader status within the Eastern Partnership and of the EU trust is to meet the EU expectations by con-crete reforms. What the Republic of Moldova has to offer so far look more like beginnings of reforms than durable and consolidated reforms. But when the gap between the foreign policy successes and the modest progresses in the internal changes becomes too large, Moldova’s image as a success story can burst like a soap bubble. This risk is not inevitable but it still exists. Both Ukraine and Georgia have passed through this experience of bubble bursts.

In this context, the Republic of Moldova has to make considerable efforts in order to avoid a possible EU disappointment that could lead to fatigue. Ukraine and Georgia, as a result of revolu-tions, have passed through this cycle of “success sto-ry”, failure and disappointment. What is important for Moldova is to evade the Ukrainian scenario that could become possible because of two factors: con-stant political chaos and lack of reforms. If Moldova does not manage to boost and accelerate the reforms process by offering some concrete results there is a significant likelihood that in 2012 Moldova will en-counter the EU fatigue which, in turn, will cause a disinterest and will place Chisinau next to the for-mer success stories: Georgia and Ukraine.

REGIONAL CONTEXT

The greatest challenge facing Chisinau in terms of its leader status within the Eastern Partner-

ship and of the EU trust is to meet the EU expec-tations by concrete reforms and I refer here to the justice reform, the structures for implementing laws and the institutional capacity. The launching of the Eastern Partnership has offered a new dynamic to the region in the EU Eastern neighborhood. In the framework of this regional initiative, the Republic of Moldova has managed to successfully integrate, despite a not very friendly start expressed by the former president V. Voronin who concluded that the Eastern Partnership is the second CIS aiming at encircling Russia. 1 After the AIE came to power, the EU – the Republic of Moldova relationship nor-malized and exceeded the traditional framework. Moldova, after it had started approaching the EU, began being spoken about in other terms. If before the conferences and research headlines regarding Moldova were “Quo Vadis Moldova?” or “Moldova at the crossroads”, etc, now they have a positive tone and are rendered in a way proving the beginning of a success: “Moldova’s Breakthrough” or “Moldova – major European success in the EP?” 2.

There are other processes in the EU. On the background of an economic and financial crisis, the EU wants fewer commitments to the “third world” countries. In the same time, the 2004 and 2007 en-largements made the EU more cautious and added to the existing problems, in the context of the dis-crepancy between the “old Europe” and the “new Europe”. All these make Europe slower and more closed and as a proof we can bring the statements of some important European leaders concerning the multiculturalism failure3 but mainly it refers to the migration from the southern neighborhood, howev-

1 Voronin: Eastern Partnership is encircling Russia like a ring, 27/02/2009, Moldova.org, http://politicom.moldova.org/news/voronin-eastern-partnership-is-encircling-russia-like-a-ring-186084-eng.html 2 An example may be the study of Parmentier, Florent: Moldova, a Major European success for the Eastern Partnership? European Issue No 186, 22/11/2010, Robert Schumann Foundation, http://www.robert-schuman.eu/doc/questions_europe/qe-186-en.pdf 3 The last half a year, several leaders declared that multiculturalism is a failure because it did not manage to successfully integrate the im-migrants. Among them we can find: Angela Merkel, Nicolas Sarkozy, Da-vid Cameron, John Howard and Hose Maria Aznar. See Nicolas Sarkozy declares multiculturalism had failed, The Telegraph, 11/02/2011, http://www.telegraph.co.uk/news/worldnews/europe/france/8317497/Nicolas-Sarkozy-declares-multiculturalism-had-failed.html


er it includes the Eastern part as well. The term “en-largement fatigue” is as old as the EU itself dating at about the 1960’s when France used its veto to block Great Britain’s access to the European Community4. The term was used during history, being massively mentioned after the 2004 and 2007 enlargements5. Recently the same term is adjusted in order to be referred to the neighboring countries that are not of-ficially in the process of joining the EU but are in some sectors integrated in the EU.

In the above-mentioned conditions it is hard to impress the EU in order to offer more than it is prescribed in the most optimistic documents re-garding the Republic of Moldova as well. Neverthe-less, the Republic of Moldova has managed to gen-erate great expectations in the EU and also a leader sentiment among the Eastern Partnership countries. These expectations and successes were created when the Alliance for the European Integration came to power thanks to the change in the situation, espe-cially, in the area of human rights and mass media freedom and also owing to regional dynamic of the EP which proves an obvious worsening of demo-cratic standards.

In the above-described context, the greatest challenge facing Chisinau in terms of its leader status within the Eastern Partnership and of the EU trust is to meet the EU expectations by concrete reforms. What the Republic of Moldova has to offer so far look more like beginnings of reforms than reforms where it might state with certitude that it is in agree-ment with the EU requirements. In this context, the Republic of Moldova has to make considerable ef-forts in order to avoid a likely EU disappointment which could lead to fatigue.

UKRAINE 2005-2010: FROM SUCCESS STORY TO FAILURE

In the case of the Republic of Moldova the most relevant pattern to mold a scenario is certainly Ukraine. In spite of different geographical parame-ters and a more conspicuous politicization, Ukraine was the indisputable leader of the European Neigh-4 Beyond Enlargement Fatigue?, European Stability Initiative Series, http://www.esiweb.org/index.php?lang=en&id=156&document_ID=74 5 Forgue, David G.; Kehoskie, Nicole Schude: Enlargement Fatigue in the European Union, American Bar Association, http://www.barnes-richardson.com/files/tbl_s47Details%5CFileUpload265%5C126%5Cforgue_fatigue.pdf

borhood Policy after the 2004 Revolution. The po-litical forces that had come to power in Ukraine in 2004 constantly fluctuated politically without being able to offer tangible results except for those related to press freedom and human rights. Those 5 years of democratic governance in Ukraine were 5 years of political struggles of a maximum intensity as well. The content of the political struggle was expressed by a blocked Parliament, relationships between forces within the Alliance where the commitments were not complied with, by a justice reform that was officially supported by the Alliance but was not actually being implemented in practice. Moreover, the conflict became so exacerbated that it embraced the institutions as well – the government bills were not accepted by the Parliament. Finally, the EU – Ukraine relationships spoiled and a fatigue towards Ukraine took shape in the EU and meanwhile, the fatigue towards the EU appeared in Ukraine on the background of a pronounced Euro-skepticism6.

At the base of all problems that emerged in the Ukrainian political life was, first of all, a lack of consensus among the Alliance forces, and also, in a broader meaning, a lack of consensus within so-ciety regarding the reforms that had to be carried out, especially those related to the foreign policy. Just like in the case of Moldova, the disagreements focused on the most fundamental issues such as constitutional reform, which implied reducing the presidential powers whose Commission was severely criticized for being biased. In the same time, the struggle between the components of the Alliance which transferred to a struggle between institutions was very obvious. The best example would be the “decrees war” in which the second government of Iulia Timoshenko (2007-2009) received 881 direc-tives, instructions and requirements from the Presi-dency and its secretariat during the first 100 days in office, while the government of Victor Yanukovych received 231 during the same period7.

Undoubtedly, there was an enormous geo-political stake, described very well on both sides of the barricade in the articles of Andrew Wilson or Gleb Pavlovsky, much bigger than that in the Re-public of Moldova. The geopolitical stake did not consist only in keeping Ukraine within the Russia’s

6 Popescu, Nicu: (2009), “Ukraine fatigue” vs “EU fatigue”, Euobserv-er Blogs, 3/12/2009, http://blogs.euobserver.com/popescu/2009/12/03/ukraine-fatigue-vs-eu-fatigue/ 7 For a full description of power struggles in Ukraine see Gromadzki, Grzegorz; Movchan, Veronika et al., Beyond Colours: Assests and Lia-bilities of “Post-Orange” Ukraine, International Renaissance Foundation, Kyiv 2010, Stefan Batory Foundation, Warsaw 2010.


zone of influence but also in neutralizing the risk of an orange revolution that could have been fomented in Russia following the Ukrainian model. As for the Republic of Moldova, the geopolitical stake is per-ceived on the background of the fact that Chisinau is at the moment the only beginning of the EU suc-cess story in the eastern neighborhood and also on the background of a possible diplomatic conflict be-tween Romania and Ukraine8.

MOLDOVA’S “UKRAINIZATION” DANGER AND INTERNATIONAL CONJUNCTURE

In the Republic of Moldova is observed, a smaller size “Ukrainization” of politics. The con-text in which this term is used derives mainly from the political crisis triggered by the non-election of the head of the state but also from the numer-ous elections taking place. Since the 5th of April 2009 till present there have been 4 elections and the 5th is going to take place at the beginning of the summer of 2011, thus, during 2 years Mol-dova had 5 elections and could also have a refer-endum and anticipated elections. Despite a rather functional government, in the context of electoral campaigns and political struggles, some adopted decisions have a populist character and the minis-tries officials prefer to be less loyal because of the likelihood of power change, as an example we can bring the resistance in reforming the Ministry of Interior and in the justice. Like in the case of Ukraine, the biggest problem in the Republic of Moldova seems to be the lack of a consensus concerning the developing pattern that has to be adopted. In a larger context, there is a struggle between the Alliance and the Commu-nist party, the internal conflict within the Alliance and the society polarization in terms of the geo-political vector of Moldova, while the biggest risk are the interminable elections and, even if they are considered being democratic, they will not bring palpable changes in real terms for the popula-tion. Besides these aspects is observed a struggle between the state institutions as well which some-times have divided opinions about crucial issues; 8 Political analyst: Ukraine has to defeat Bucharest with its own weapons, 13/02/2011, http://www.romanialibera.ro/actuali-tate/europa/analist-politic-ucraina-trebuie-sa-bata-bucurestiul-cu-propriile-lui-arme-216597.html

these aspects being replicated from the party level to the level of the institutions led by the heads of these parties.

At the international level the situation is not better either. The protests wave hitting Egypt, Tunis, Oman, Syria, Jordan, Algeria, Libya, Bah-rain, Nepal and Iran shifts the EU attention to-wards these regions. Moreover, the EU sees in this wave of protests an opportunity to be seized in order to take some action in these countries. The European Parliament is already examining the review of the European Neighborhood Policy southern dimension9 and the crucial fact is that some important countries, including France and Spain, are already pleading for reducing the funds granted to the former Soviet countries and their redirection to the countries in the North Africa10. It is worthwhile mentioning that in this letter the Republic of Moldova was explicitly given as an example by stating that in the framework of the European Neighborhood Policy (2007-2013) Chisinau receives 25 EUR per capita while Egypt 1,8 EUR per capita which represents a dispropor-tionate and asymmetric policy that nowadays is “hard to be justified and supported.”

PR VS. RESULTS

The above-mentioned internal and exter-nal nuances create the necessary conditions for a possible EU fatigue towards the Republic of Mol-dova that will appear next year if Chisinau will not be able to offer concrete results in order to meet The EU expectations. The EU has very big expec-tations towards Moldova especially on the back-ground of the democracy decline in other Eastern Partnership countries and of the ascension in the south of the EU and in the Middle East11. The need for a leader state within the Eastern Partner-ship is not needed only in order to create a com-petition between the countries in the EU eastern neighborhood but also because of the justification of the European initiatives success in this direc-tion.9 European Parliament resolution on the review of the Euro-pean Neighborhood Policy – Southern Dimension, http://www.europarl.europa.eu/meetdocs/2009_2014/documents/afet/re/840/840978/840978en.pdf 10 Rettman, Andrew; France and Spain call to shift EU funds from east to south, 21/02/2011, http://euobserver.com/9/31843 11 Popescu, Nicu (2011): Of Eastern and Southern neighbors, EUobserver, 14/02/2011, http://blogs.euobserver.com/popes-cu/2011/02/14/on-eastern-southern-neighbours/


The avoidance of the EU fatigue is closely connected to Moldova’s capacity to offer palpable results in the domain of key reforms something more than just assurance that everything is going to be all right. For instance, the Ministry of Inte-rior reform is an issue that not only the EU is tired of but the Moldovan society as well. Although there is an understanding of the fact that carrying out reforms is not that easy and there are variables to be considered, however, states like Georgia and we do not refer now to the consolidation of au-thoritarianism, managed to reform the Ministry of Interior in a relatively short time with results appreciated by the EU partners. The same thing refers to the antidiscrimination law that strolls through different institutions but is not passed, fearing that this would decrease the popularity of that who would promote it. It is necessary to em-phasize that this is one of the conditions for the visa regime liberalization.

These aspects refer to the internal capac-ity of Moldova to successfully manage the process of adjustment to the EU standards. The Ministry of Foreign Affairs will no longer be able to “sell” successes if they do not really occur. Moreover, the part related to the foreign affairs of the Ministry of Foreign Affairs and European Integration has reached, roughly speaking, its maximal working capacity and this has to be appreciated. But as for the European integration part of the Ministry of Foreign Affairs and European Integration, it had poorer results. The interaction between these two dimensions is going on in a disproportioned man-ner, taking into account the fact that the Ministry of Foreign Affairs marketing is a good one and makes the European partners ready to buy Moldo-va’s “product” but, because of much more poorer results in terms of internal changes, the product that has already been successfully promoted is not ready to be sold. In this context, the initiative of some experts to establish a Minister or an Agency for European Integration12 might be a good op-portunity to arrange the matters the way to have a higher efficiency in coordinating the European Integration process.

12 Chirilă, Victor (2011): Victor Chirilă: "Thanks to our diplo-macy we have managed to persuade the EU to give us not only moral support to implement reforms but a substantial financial support as well", 21/01/2011, Europa.md, http://europa.md/stiri/show/8319/victor-chirila-datorita-diplomatiei-noastre-am-reusit-sa-convingem-ue-sa-ne-acorde-nu-doar-un-suport-moral-pen-tru-implementarea-reformelor-dar-si-un-mare-suport-financiar

CONCLUSIONS

What we need now are examples of leader institutions that would maintain the EU interest in Moldova alive. There are several institutions that have “started” like the National Center for Protection of Personal Data that could be served to lure the EU. Meanwhile, these insti-tutions are capable of offering only some more months of the EU attention and fascination. Cur-rently, the European route of Moldova has to be strengthened by the revival of some other institu-tions whose lack was felt during all these years. An example could be the Agency for Competition Protection that might improve the competition climate or the Court of Accounts whose investiga-tions have to be treated much more seriously than till now or the terms for preventive detention. These examples are connected with a very prob-lematic phenomenon for Moldova – corruption and, in a more precise sense, with the visa liberal-ization process. The intensity of offering new re-sults must comprise periods of 3-4 months which will make the EU “muse” permanently upon re-form results coming from Moldova. The greatest EU expectations are related to the justice reform that has not found so far a place in the praises ar-riving from Brussels. Eventually, if the results are late, the EU fatigue towards Moldova and its disgrace are inevi-table. Chisinau has, at present, a chance that it will not have for a long time. And the concrete results cannot be achieved if the political clashes within the Alliance will last because this party rivalry will lead to the Alliance for European Integration col-lapse and in such a case it does not matter who was right. The successes in terms of pluralism of opinions and democracy in Moldova are aspects that permitted to revive the dialog with the EU but they will not prove enough to maintain Brus-sels enthusiasm because in the end in order to en-sure the freedom of expression all you need is not to impede this right and even if you guarantee the exercising of this right it does not make you a re-former.


PRICES INCREASE IN MOLDOVA – REASONS, EVOLUTIONS AND RISKS

Alexandru Fala

The prices level represents one of the major economic challenges for any country. But this problem is especially painfully felt in developing countries. For the Republic of Mol-dova – a country with relatively low income lev-els, the price increases have a grave social effect. Meanwhile, the imbalanced character of the Moldovan economy makes the price evolutions encompass both objective aspects, derived from economic conjuncture and structural deficien-cies and even fraudulent activities. From the point of view of historical ten-dency, in 2010 the price increased as much as 2, 5 times compared to the 2000 year. In this we are comparable with Central and Eastern Eu-rope countries that registered the same increase during this period. But a more detailed analy-sis suggests that this is due to the fact that in 2001 and 2002 there was a reduced inflation rate of 9.6% and 5.2% in Moldova, while in the Central and Eastern Europe states there was a two-figure inflation rate. Subsequently, in our country, the prices registered a much higher in-crease rate than that of the Central and Eastern Europe countries, only the 2009 year being an exception.

The inflation will remain a constant chal-lenge for the Republic of Moldova and the price change for the energy will be a crucial factor for the future evolution of prices level. The Republic of Moldova is a small economy in which the im-ports have a huge share in the GDP (until 2009 imports exceeded 90% of GDP, in 2009 in the af-termath of the crisis this relation fell to 73.4% but in 2010 the old tendency revived), this making us extremely sensitive to external shocks connected with the price increase of imported goods. Thus an import price increase of 10% leads to a 5% in-flation rate increase in the Republic of Moldova13. But the most “receptive” our economy is to the imported energy price fluctuations which ensure the internal energy consumption in a proportion of 95%14. In the same time, the impact of diverse energy products price fluctuations on our econo-my is different. Thus, the national economy reacts the most sensitively to the gas price increases that accounts for more than half of the total imported energy.

13 The author estimates.14 Author’s calculations on the basis of data from: „The Repub-lic of Moldova energy balance. Statistical compilation. 2009”. Available at: http://www.statistica.md/public/files/publi-catii_electronice/balanta_energetica/BE_2010.pdf

Table 1. Price level evolutions in the Republic of Moldova in comparison with the Central and Eastern Europe countries

Average price increase rate in

2000-2002, in %


2003-2005, in %


2006-2008, in %

Annual average

inflation in 2009, in %

Annual average

inflation in 2010, in %

Central and Eastern Europe 22,1 6,3 7 4,7 5,2

The Republic of Moldova 7,4 12,1 12,5 0 7,4

Source: elaborated by the author on the basis of data from http://www.imf.org/external/data.htm#data


Graph 1. Fuel and energy imports structure, in %

Source: elaborated by the author on the basis of data from: „The Republic of Moldova energy balance. Sta-tistical compilation. 2009”.

The increase in the import gas price contributes to the increase in local tariffs which leads, in turn, to the rise in inflation. The gas tariffs raise determines the increase of production costs and the traders have to re-flect it in final prices, thus contributing to the rise of the inflation rate. The gas tariffs raise affects the entire industrial sector but the most affected are the companies that consume significant quantities of gas in their produc-tion process. Among them there are enter-prises from the energy sector and from areas like chemical industry, bricks manufacturing, fruits and vegetables preservation, etc. On the other hand, the increase of gas tariffs leads to a general increase of utilities prices for domestic consumers and an increase of price on goods and services provided by traders. The relation between the import price and the local average gas tariff is a direct one: a one lei increase of the gas import price leads to the increase of local av-erage gas tariff by 1.22 lei. The relation between the average gas tariff and the inflation rate is more complex but as a whole the tariff increase by more than 7% leads to a raise in the general level of prices15. The current increase of the gas tariff is caused, especially, by the increase of the gas purchasing price since the 1st of January 2011 by 11.7%: from $262.95/1000 cubic meters, included in the tariff in force since 18 May 15 Muntean, I., Fala, A., Republic of Moldova gas sector – neglected opportunities consequences, Public Policies Nr. 6, Institute for Development and Social Initiatives (IDIS) „Viitorul”, 2010, p. 20. Available at: http://www.viitorul.org/public/3050/ro/POLITICI_PUBLICE_6%20Gaz.pdf

2010 to $293.8/1000 cubic meters16. As a result of negotiations with “Moldova - Gaz” stock company, the ANRE decided to increase by 12.2% the average gas tariff. The current increase of the average gas tariff by 12.2% will determine a general raise of prices by 3.7%17.

The oil price increase has a more reduced influence on general level of prices:- in the production costs the transport

expenditures play a relatively small role and this makes the traders less sensitive to the increase in oil prices;

- the oil price raise can lead to an in-crease of the transport companies ser-vice prices.

The diesel price increase will determine the raise in food products prices. The expendi-tures on diesel have a large share in production costs related to agricultural activities of about 20-25%.

The current price increase in the die-sel and petrol retail selling price was caused by the import price increase of these products, an evolution determined by a significant increase in oil quotations on the Stock Exchange and in Platt’s prices on regional markets. From 15 June (when diesel and petrol prices changed last time) till 30 November 2010 the Platt’s petrol prices increased by 10.7% up to $775/ton and the diesel price by 10.6% reaching $741/ton. The direct influence of Platt’s prices on petroleum products import prices in our country is due to the fact that import prices of these products at the refineries are formed on the base of Platt’s prices18. On middle term there will be pressures on prices because of the need to adjust pro-duction costs tariffs. The task to reduce the energetic vulnerability has to focus on tariffs reform as well. In order to handle the energy sector challenges, the government’s recovery policies should concentrate on energy tariffs adjustment aiming at full costs recuperation19. However, the prices level also depends on factors indicating operation deficiencies of the national economy. A structural problem 16 http://www.anre.md/17 The author estimates.18 http://www.anre.md/news/index.php?vers=1&sm=41&ct=36819 Moldova: Policies notes for the Government, 2009, p. 75. Available at: http://www.gov.md/doc.php?l=ro&id=2769&idc=447


relates to the way the energy sector enterpris-es operate. On the other hand their activity is little transparent. This thing just fuels the opinion regarding poor operation of these en-terprises, characterized by an inefficient man-agement leading to additional costs that could have been avoided. As a result, consumers have to pay the costs of management inefficiency. Another factor of structural character is the lack of a competition environment in different sectors of the national economy. Al-though it has not been effectively proved, it is deemed that the petroleum products mar-ket functioning is far from that of a genuine competition. Both segments of the petroleum products market present a high degree of con-centration:

- the largest petrol importers are Lukoil-Moldova, Petrom-Moldova and Tirex-Petrol with a market share of 80.5%

- as for the diesel imports these compa-nies are the market leaders having alto-gether a market share of 75.5%.

This situation indicates several deficiencies related to the competition environment on this market.

The way the price increases occur raise some questions as well. The situation where the petroleum products price increases occur uniformly, at all liquid fuel filling stations, is suspicious. Such a state of affairs indicates a possible cartel agreement of the petroleum products importers. In this context, it is likely that the price changes on this market are not the consequence of objective economic evolu-tions but result from the negotiations of a lim-ited number of players. Another market considered to have a malfunctioning is that of pharmaceutical products. This market witnesses a steep price increase. Thus, the drugs prices raise has, by far, outstripped the general price increase level, expressed by the consumer price index.

Graph 2. Evolution of price increase index of drugs compared with the consumption price index

Source: elaborated by the author on the basis of data from: http://www.statistica.md/pageview.php?l=ro&idc=335&id=2344

The suspicion that these price increases are not justified and could even be the result of some fraudulent schemes determined the state’s active involvement in this market. Reg-ulation of the pharmaceutical market stems from a right approach but the technical aspects of implementing the government’s decisions were carried out with certain deficiencies. The way the drug prices are shaped is regulated by the “Government Decision on approving regulation of drugs and other phar-maceutical products prices” Nr. 603 dated 2 July 1997 that stipulates that a 40% supple-ment can be added to the trade price of the local producer or to the buying price of the producer from abroad where:

- up to 15% for wholesale traders im-porting and distributing drugs both imported and local;

- up to 25% for drug stores.

In order to fight the unjustified price increases, the Government issued “Decision Nr. 525 for the approval of regulation on the way the producer price for drugs is agreed upon and registered of 22.06.2010”. The De-cision Nr. 252 established the introduction of a “National Catalog of producer price for drugs” representing the official evidence regis-ter of producer prices. As a result of this Deci-sion, the drugs selling price in the drug stores must be calculated based on the producer price listed in the catalog.


According to Decision Nr. 252 the stocks of imported drugs and/or purchased and marketed after the 1st September 2010 are subject to be evaluated by traders at the prices listed in the National Catalog of prices. But the catalog was introduced only on 1st January 2011 and is filled in just in the proportion of 30%. On 17 December only 3100 drug names out of 12161 were included in it20. This gives the authorities decisions a retroactive charac-ter. It would have been fair that the drug stores reevaluate their prices just for the drugs pur-chased after the catalog had come into force and sell the drugs accumulated in their ware-houses before the date of introducing the cata-log at the old price. The authorities acted in an impropriate way delaying, for too long, the creation of the catalog and conducting an inef-ficient dialog with the pharmaceutical business representatives. Currently, the pharmaceutical companies have to review the price for the products in stock that had been bought before the catalog was introduced. Under these cir-cumstances many pharmacies, especially the small ones, operate at a loss. However, a part of guilt lies with the pharmacies as well, be-cause being aware of the new regulations they did not take any action to optimize the stocks. The same way the checks, carried out by the Center of Combating Economic Crimes and Corruption concerning the reevaluation of prices in accordance with the catalog, are quite inefficient. Currently, the controls are carried out at the retail selling points. The drug stores do not have large maneuvering space for break-ing the legal regulations and their activity can be easily supervised. As a whole, the commer-cial supplement, applied by the drug stores, do not exceed the legal regulations. The drugs have exaggerated prices before arriving at the drug stores that include just the legally admit-ted addition. The checks have to be orientated towards importers. Basically, some fraudulent schemes, used by importers, were considered to be responsible for drugs exaggerated prices but until now the appropriate bodies have not brought any concrete example in this sense. The category of drugs that will have a

20 http://aif.md/index.php/2011/01/19/tabletki-ot-zhadnosti/, http://forum.md/Themes/basarabia/499160/1/#18

reduced price will be rather small, the price de-crease for the most drugs will be insignificant and some drugs will be even more expensive. But the present regulations might contribute to the stabilization of prices thus making the future price raises on the pharmaceutical mar-ket smaller and more balanced. The current regulation will hit mainly small pharmacies. The losses because of the re-evaluation of drugs in stock will be particu-larly painful for the small private drug stores. On the pharmaceutical market the highest risk is the decrease in competition. The pharma-ceutical networks have clear advantages (their economic and financial capacities being larger) in their competition with small private drug stores. We can state that the current regulation has benefited the pharmaceutical networks be-cause it has severely hit the small pharmacies. From this point of view, what is needed in the future is to monitor the compliance with com-petition practices on this market.

EVOLUTIONS AND RISKS The prices will continue to be a constant chal-lenge for the Republic of Moldova. An impor-tant role in this process will be played by energy price. Being an energy importer, the Republic of Moldova will not be able to avoid the im-pact of unfavorable international energy prices on its national economy. The world economy is recovering and this will lead to an increase in the demand for energy products and, there-fore, to the energy products price increase. In this context, the Republic of Moldova will face in the future import energy price increases. Besides the energy price raise, caused by exogenous factors within the country, we might witness an increase in charges for utili-ties. It is very likely that, on middle term, the tariffs could be adjusted in order to cover the costs related to energy infrastructure function-ing.

Delays in structural reforms will preserve the situation when unjustified components like those caused by inefficient enterprises operation, especially the state ones or those


where the state is the owner or the use of non-competitive practices, will be included in pric-es and tariffs.

The risk of using non-competitive practices is rather high in national economy segments:

- the petroleum products market seems to be already infected by using non-competitive schemes;

- in the future on the pharmaceutical market the private drug stores will have difficulties in competing with the ex-isting drug stores networks that might use non-competitive instruments in or-der to gain competitive advantage.

The drug stores market regulations will not have a significant effect on reducing the prices but will create a premise for price sta-bilization. In the future, the price evolutions might be rather little and more balanced. The current price increase will not considerably influence the inflation tendency. Without some shocks like adverse weather conditions, the cold period price increase will be followed by inflation stabilization in spring and, subsequently, we will have a summer deflation (a seasonal effect caused by the in-creased offer of produce). It is very likely that the inflation rate for the 2011 year will be be-low 10%; the decreasing trend will continue and by the 2012 year the general price level will reach 6% (the inflation goal set by the Na-

tional Bank of Moldova for 2012). The social effect of price increases is very acute. Taking into account the low in-come level, the price raises are a huge risk af-fecting negatively the population living stan-dard.

RECOMMENDATIONS Bearing in mind the extreme vulner-ability of the national economy to energy im-ports, the Republic of Moldova has to direct its efforts to diversifying the energy supplying sources and increasing energy efficiency. The impossibility to avoid negative in-fluences of price increases on the society might be partly compensated by supporting finan-cially the population with a low income level. The need to intensify structural re-forms, especially by ensuring a competitive environment in all national economy sectors along with restructuring state companies. Promoting structural reforms must be the main and permanent issue on the agen-das of public institutions. Unfortunately, the Republic of Moldova government remembers about structural reforms only for short periods of time and, when the situation is more or less stable, forgets about them.


„TELERADIO-MOLDOVA”COMPANY BE-TWEEN UNDERFUNDING AND QUALITY

Veaceslav Berbeca

The Public National Broadcasting In-stitution “Teleradio-Moldova” Company (IPNA”TRM”) is a public broadcasting institu-tion with 98% coverage of the entire territory of the Republic of Moldova. Being a public ser-vice, the IPNA”TRM” has specific activity tasks and objectives compared to those of the private broadcasting companies.

The company is a public service estab-lished on public financial capital whose expendi-tures are mainly covered by the state budget. But in the last years, IPNA”TRM” faces underfund-ing from the state and this phenomenon might jeopardize the Company’s activity and reduce its ability to perform tasks stipulated by the article 51 of the Broadcasting Code of the Republic of Moldova.

On 16 August 2010, the Council of Ob-servers adopted the “Strategic development di-rections of the TRM for the 2010-2015 years” which sets out a number of strategic objectives for the public service21. The modernization of technical equipment is one of the major goals of this strategy because the technical devices of the TRM are depreciated by 67.7%22. The compa-nies manufacturing technical equipment do not produce any more the analog equipment used by the Company. The need to start using the digital equipment is dictated by the fact that the ana-log equipment is rather massive and those digital are more compact, mobile and advanced. The digital format offers more advantages for users: a large number of programs received free of charge which means lower costs; better quality broad-casts, reception by the mobiles. According to the “Strategic development directions of the TRM 21 The Decision of the IPNA”TRM” Council of Observers Nr. 189 dated 16.08.2010 regarding the Public National Broadcast-ing Company “Teleradio-Moldova” development for the 2010-2015 years.22 The Public National Broadcasting Company “Teleradio-Mol-dova”, Strategic directions of development for the 2010-2015 years

for the 2010-2015 years” the costs of acquiring the new technical equipment for the near future were assessed at more than € 12 million, a sum that will be difficult to gather from its own rev-enues23.

There are several reasons for the problem of “Teleradio-Moldova” Company underfunding like, for example, the economic crisis that affect-ed the Republic of Moldova in 2009. However, in general, the “Teleradio-Moldova” Company activity is affected by the existence of some faulty practices of collaboration between different insti-tutions in relation to the company.

First of all we refer to the insignificant role of the legislature in drafting and approving the institution budget. Article 64 paragraph (1) of the Broadcasting Code establishes that the “Par-liament guarantees the safe and appropriate fi-nancing of the Company activity”. Also, the Law Nr. 847-XIII of 24.05.96 concerning the budget-ary system and process establishes the procedure of drafting and adopting the budget law. Thus, in accordance with this law, the Parliament per-manent commissions examine the annual budget draft law, report on it for the Budget and Finance Committee and afterwards it is approved.

Obviously, as a whole, the Parliament role is vital in examining and approving the state budget. But as for the “Teleradio-Moldova” Company budget, the members of parliament are less responsive to this institution needs, ac-cepting, without large reserves, the Ministry of Finance provisions. In other words, the Republic of Moldova Parliament should pay special atten-tion not only to the Company’s promoted policy or its management but also to the amount of financial resources allocated for the Company’s activity. Otherwise, promoting values and prin-23 The Public National Broadcasting Company “Teleradio-Mol-dova”, Strategic directions of development for the 2010-2015 years


ciples, listed in the articles 50-54 of the Broad-casting Code, will remain just a rhetoric exercise with no practical implications. The Council of Observers attitude, in relation to this issue, is very eloquent. On 22 December 2010, in a decision, it asks the “Par-liament to elaborate and adopt a bill regarding the safe and appropriate financing of the “Telera-dio-Moldova” Company activity, in accordance with the Specifications, from the state budget subsidies”24. The state initially planned to al-locate the sum of 70874.2 thousand lei to the Company’s budget which added to the envis-aged Company commercial revenues of 32287.5 thousand lei make the figure of 103161.7 thou-sand lei. This amount, according to the Speci-fications for the 2011 year, is not enough for meeting the Company’s needs for broadcasting on 5 TV and Radio channels. Later, this sum al-located by the state to the “Teleradio-Moldova” Company was increased by 15 million lei and will reach, according to the Ministry of Finance data, 85874.2 thousand lei which represents the amount of 118161.7 thousand lei.24 The Decision of the Public National Broadcasting Com-pany “Teleradio-Moldova” Council of Observers Nr. 242 dated 22.12.2010 regarding the safe and appropriate financing of the Public National Broadcasting Company “Teleradio-Moldova” ac-tivity needs from the state budget subsidies.

As you can see from the table, the state subsidies picked up in 2009, when the sum of 90973.5 thousand lei was allocated. For the 2011 year, as it was stated above, the sum of 85874.2 thousand lei was planned even if, ini-tially, before the appearance of this study, the amount was of 70874.2 thousand lei. By com-parison, the own revenues of the “Teleradio-Moldova” Company increased from 15831.2 thousand lei in 2007 to 32287.5 thousand lei of own revenues expected to be gained in 2011. In other words, the own revenues of the “Teleradio-Moldova” Company doubled dur-ing the period under research. This means that the “Teleradio-Moldova” Company will have the largest budget in the last years if it man-ages to gain the own revenues of the expected amount by 8128.2 thousand lei more than in 2009 and by 23737.6 thousand lei more than in 2010.

Another problem affecting the “Telera-dio-Moldova” Company activity relates to the process of elaborating the “Teleradio-Moldova” Company budget, an event implying the direct participation of the Ministry of Finance. In spite of the legislative regulations of the Repub-lic of Moldova, the cooperation between the state institutions, particularly the Ministry of

The Public National Broadcasting Company “Teleradio-Moldova” budget for the 2007-2010 years

Indices by year Budgetary subsidies Commercial revenues The total budgetary subsidies and commercial revenues

2007 Revenues 62159,1 15831,2 77990,3

Expenditures 62159,1 15831,2 77990,3

2008Revenues 79996,7 13621,9 93618,6Expenditures 79996,7 13621,9 93618,6

2009Revenues 90973,5 19060,0 110033,5Expenditures 90973,5 19060,0 110033,5

2010Revenues 70 874,2 23 549,9 94 424,1Expenditures 70 874,2 23 549,9 94 424,1

2011 (the budget elaborated by IPNA TRM)

Revenues 140315,4 (Budgetary subsidies needed

according to the TRM estimates)

85874,2 *

32287,5 172602,9

Expenditures 140315,4 (Budgetary subsidies needed

according to the TRM estimates) 85874,2 *

32287,5 172602,9

The source: Ministry of Finance and the Economic Service of the “Teleradio-Moldova” Company* For the 2011 year the state is to allocate to the “Teleradio-Moldova” Company budget subsidies of 85874.2 thousand lei.


Finance and the “Teleradio-Moldova” Compa-ny, shaped a cooperation system leading to the fact that the “Teleradio-Moldova” Company is not treated on the same footing. According to article 58 letter b) of the Broadcasting Code, the Council of Observers “approves the Com-pany’s Specifications including the financial plan and the editorial policy statement”. The fi-nancial plan includes the budget bill, elaborated in accordance with article 64 which stipulates that the “Parliament guarantees safe and appro-priate financing of the company activity needs”, the budget lines of the “Teleradio-Moldova” Company activity being established as well. In other words, although the Company’s adminis-tration elaborates the budget and the Council of Observers the Specifications, including the Company budget, the Ministry of Finance sets up its own figures which, actually, do not take into account the “Teleradio-Moldova” Com-pany needs.

The effort of the Company and Coun-cil of Observers management to elaborate and adopt the “Teleradio-Moldova” Company bud-get looks like the “labor of Sisyphus” because the Ministry of Finance establishes the figure of financing the Company and does not take into account the financial parameters set by the Council of Observers. Such an approach ex-cludes the efficient communication between the institutions in terms of the “Teleradio-Moldo-va” Company needs. The cooperation between institutions while elaborating the broadcasting budget is reduced to the ceiling of budgetary subsidies set by the Ministry of Finance which undermines the spirit of law in this area. Prob-ably, the Ministry might not agree to the whole sum that is solicited but what is needed is co-ordination between institutions concerning the financial needs of the “Teleradio-Moldova” Company. The Company finds itself in the em-barrassing situation to ask the state for mon-ey in order to be able to work in satisfactory conditions. Moreover, we could speak about a state interference which might influence the Company’s editorial policies by subsidies rates, thus jeopardizing the autonomy of broadcasting public services25. 25 The Public National Broadcasting Company “Teleradio-Mol-dova”, Strategic directions of development for the 2010-2015 years

The Ministry of Finance representatives argue that their attitude stems from the fact that the state does not manage to meet the Com-pany’s huge financial demands. Moreover, in the conditions of the economic crisis, the bud-get allocations to the institutions, financed by the state, ware considerably decreased but not those to the public broadcasting, emphasize the finances representatives. Also, they maintain that the “Teleradio-Moldova” Company should optimize their expenditures. Other arguments relate to the fact that, in the last years, there were allocated large sums of 13977.1 thousand lei in 2008 and 23699.0 thousand lei in 2009 for capital expenditures26 but this money was used for purchasing analog technique.

The “Teleradio-Moldova” Company needs, according to the 2011 Specifications, additional 54441.2 thousand lei from the state budget which amounts to a budget of 172602.9 thousand lei27.

Finally, another problem refers to the fact that because of the shortage of financial re-sources, needed for the public broadcasting ser-vice activity, the latter runs up debts to the State Enterprise “Radiocomunicatii”. It provides the “Teleradio-Moldova” Company analog broad-casting services of TV and radio programs via terrestrial transmitters. In the money, allocat-ed by the state to the public, broadcasting are included the amounts to be paid to the State Enterprise “Radiocomunicatii. Probably, a solu-tion should be to take into account the amount needed to pay off the service provided by the State Enterprise “Radiocomunicatii” in the allo-cated budget. Currently, the “Teleradio-Moldo-va” Company has a debt of 22721.0 thousand lei to the State Enterprise “Radiocomunicatii” and out of it the amount of 11639.9 thousand lei is the rescheduled debt for the previous 2007-2009 years and 11081.1 thousand lei, the debt ran up in 2010 due to the insufficient approved budget subsidies28. And the resources allocated by the state do not imply financial possibilities of paying off this debt.26 Ministry of Finance27 The Decision of the Public National Broadcasting Com-pany “Teleradio-Moldova” Council of Observers Nr. 3 dated 19.01.2011 regarding the approval of the Public National Broad-casting Company “Teleradio-Moldova” Specifications for the 2011 year.28 Public National Broadcasting Company “Teleradio-Moldo-va”, 2011 Specifications.


CONCLUSIONS AND RECOMMENDATIONS:

1. The problems identified above are an impediment for the development of “Teleradio-Moldova” Company. The resources allocated by the state, along with the commercial revenues of the Company, are not sufficient for promot-ing the reforms stipulated in the docu-ment entitled “strategic directions of “Teleradio-Moldova” Company devel-opment for the 2010-2015 years” ap-proved by the Council of Observers on 16 August 2010.

2. The technological redesign of the “Tele-radio-Moldova” Company actually, means, the Company’s digitalization. The main goal of the “Teleradio-Moldo-va” Company, within the technological development strategy for 2010-2015, would mean the definite passage to the digital format. The quality of the pres-ent equipment is inferior compared to that digital. Also, the TV stations, all over Europe, are in a process of pass-ing to the digital format which means that the “Teleradio-Moldova” Company equipment might be incompatible with the European one.

3. It is impossible to modernize the TV stu-dios or to purchase modern technologic equipment for the company because of the financial resources shortage. As a re-sult of the tight budget, the “Teleradio-Moldova” Company staff cannot create new high quality products, being forced to repeat, in the broadcast schedule, cer-tain programs for several times a day or to broadcast archives programs. Such an approach has negative consequences for the public broadcasting schedule which loses ground to the private TV and ra-dio. The launch of new products, for in-stance “Radio Youth” could remain just a project.

4. Finally, because of financial problems, the “Teleradio-Moldova” Company will not be able to carry out its main tasks

arising from the Broadcasting Code. Being a public institution, it has a dif-ferent purpose than those private whose main principle of activity is to ensure high ratings. Because of underfunding the informative, cultural, educative and entertaining mission of the “Teleradio-Moldova” Company will not be realized in accordance with the objectives stipu-lated by the legislation.

5. It is important that the Parliament get involved in the process of elaborating the Company’s budget. The Parliament’s activity, in relation to the public broad-casting, should exceed the already insti-tutionalized practice of reacting or tak-ing attitude concerning the Company policy. In other words, the Parliament should take a more active part in mat-ters related to the Company’s technical and financial needs in order to assure its good functioning.

6. The state should take into account the Company’s proposals while elaborating the budget and its needs as well. In the current conditions, the Company’s role in elaborating and adopting its budget is a formal one because the state’s at-titude does not reflect the “Teleradio-Moldova” Company activity needs.

7. Another way, of resolving the “Tele-radio-Moldova” Company financial problem, would be the introduction of a subscription fee for the public broad-casting. This possibility is suggested by local and international experts29 and is offered as a solution in the “strategic di-rections of “Teleradio-Moldova” Com-pany development for the 2010-2015 years”. This measure might consolidate the institution financial capacity and its editorial independence from the politi-cal interference.

29 Sergiu Rusanovschi, institutional and mass media finance regulations aspects in the Republic of Moldova. Focus on Tele-radio-Moldova, Chişinău, IDIS „Viitorul” 2010, pp. 30-39


NOTE

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Early Warning Report No 3 (2011) - Moldova

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