index.1.jpg (3032 bytes) Note 9 – July 2003 

Export promotion: on paper
 by Anatol Gudim

Under IMF's trade restrictions classification scheme Moldova’s regime is rated “1” – the most liberal category. This is what is called “trade on paper”. But in Moldova there is also “trade in practice” that state hampers through its ministries, departments and agencies creating multiple barriers and traps – officially and unofficially in order to feed the corruption. And this has to be fought somehow. And the Government does that… on paper. 

Recently, a grateful domestic producer discovered the following document in the “Monitorul Oficial al Republicii Moldova”, #141-145 of July 11, 2003: 

Dsposition #72-d, July 7, 2003 

Achieving sustainable economic growth depends on the existence of a business environment that ensures that no informal barriers to the exporting economic agents exist. In order to achieve this objective as well as with a view to the most efficient implementation of the Government Decision No. 478, as of April 22, 2003 „As regards the exclusion of barriers to exports” all Ministries, Departments and Agencies will do their utmost to facilitate exports and ensure all necessary support to exporting economic agents. The above-mentioned institutions and their employees will use as guideline in their activity the fact that the decision whether or not to export, at what price, through which marketing channels, and whether or not to use the Commodity Exchange to purchase the goods to be exported, is entirely up to each economic agent.

Prime-Minister of the Republic of Moldova

This masterpiece of the State Chancellery shows that even after 12 years of transition to market economy, when more than 85% of GDP is formed by the private sector, not all employees of ministries, departments and agencies realize that “decision on export, price and its method” does not belong to them, but to economic units! What did the previous decision of the Government stipulate in this regard? Quote: 

Government decision #478, April 22, 2003

On elimination of obstacles to export of commodities 

With a view to achieve sustainable economic growth, facilitate export of domestic products through creation of favorable conditions for economic units, eliminate all technical obstacles to export, as well as to introduce some new restrictions of this kind, the Government decides:

1.      Ministries and departments are prohibited to set any restrictions through departmental normative acts, inquiry of additional documents, besides those determined by normative acts regulating external trade, and establishment of indicative prices for export and other actions making export activity of domestic economic units more difficult.

2.      Central public administration bodies are to:

• revise departmental normative acts to bring them into accordance with requirements of the first paragraph of this decision and inform the Government about the actions made in 30 days;

• publish internal normative acts in the Monitorul Oficial imperatively that affect negatively or regulate external trade regime, after preliminary coordination with the Ministry of Justice.

3.      Ministry of Economy is entrusted with control over execution of the given decision.

Prime-Minister of the Republic of Moldova 

So, the Government issued two decisions (identical by implication) on the same problem – overcoming bureaucratic barriers to export. These decisions, unfortunately, are not executed at all. Let us remember that not long ago, the Government approved Strategy for export promotion in 2002-2005 (Decision of the Government #80 of January 29, 2002). Its goal was to “enliven export and increase confidence of exporters to the policy of the state”. 

And even still earlier (April 2001), there was Programme of the Government that stated emotionally and clearly that export is the Moldovan economy’s driving force, the main source of budget incomes providing for payment under external debt and so on. However, all this exists only on paper… 

The realities are that despite export has been growing over the last three years, its volume in 2002 was only 666 mil USD – still 25.2% less than in 1997, and trade balance deficit (import exceeding export ) accounted for 414,2 mil USD. Structure and geography of our export have been changing slowly. Agriculture, food processing and textile products account for more than a half of the total export. Traditionally, due to the bilateral free trade agreement, Russia and other CIS countries remain to be main importers of Moldovan products. 

Despite better terms of trade with the EU (in comparison to those with the CIS) Moldova’s turnover with this region is still modest. Thus, if share of the EU and CEE in Moldovan export was 21.2% in 1997, in 2002 it accounted for 37.8%; as regards import – 38.6% and 49.5% respectively. Growth of import to Moldova of European goods is preconditioned by the consumption growth. Return growth of export, though, is hindered by both low competitiveness of the Moldovan industry and large food and textile components of Moldovan export, which come up against the EU protectionism in these sectors. 

Obstacles that state bureaucracy creates to export are multiple and diverse. In opinion of Ion Mushuc, the president of the “Timpul” business club, “image of entrepreneurs as enemies is being propagated in the society and, as a result, business activity decreases, business retreats into the shadow, many entrepreneurs begin to fear for the future of their business and the country”. The “Timpul” club came out on July 15 of this year with an appeal to the President V. Voronin: entrepreneurs suggest the President to express his own attitude towards arbitrariness of the bureaucracy to legal business, create a permanent committee for protection of entrepreneurship within the Parliament, amend the Law on the Center for Fighting Economic Crimes hence bringing it into accordance with the Constitution of the country and international legal norms. 

It was July as well when the IMF resident representative, Edgardo Ruggiero, reminded that the IMF Executive Board will not release external financing to our country unless Moldova cancels export restrictions and restores pre-shipment inspection. 

Parliament Assembly of the Council of Europe has been also caring for promotion of our export. The other day, it approved resolution “On economic development of Moldova: plans and perspectives” that recommends the country’s leadership to stimulate entrepreneurship, remove all export restrictions, implement informational technologies more widely in customs, tax administration, financial service and develop trade infrastructure – standardization and testing systems, marketing, transport services and communications. 

Thus, we are urged to practical actions to promote the export. This applies both to a more active utilization of Moldova’s accession to the WTO, Stability Pact and Free Trade Area and elimination of formal and informal trade barriers within the country. As for the Government decisions “on elimination of obstacles to export’, such decisions are necessary of course, but they have to be executed in stead of being multiple cloned.