Note 7

A Lesson of Russian
by Anatoly Gudim
 

So, we have now the first statistical data that endorse our fears as to how actions of Russia’s Gazprom (new prices for natural gas) and Rospotrebnadzor (wine export restrictions) would affect Moldovan economy. Natural gas makes up 80% within the country’s energy balance and wine products – up to 30% of our export. These are the two pain spots, vitally important for economic security of the country. 

Thus, according to the totals of the period from January to April of 2006 statistics notes: industrial recession (volume of production decreased by 5.9%, including food production – by 14%, winemaking – by 28%; production of electric power, machinery, furniture and clothes), as well as drop in transportation activity – transportation volume decreased by 21.6%. It is not excluded that, the totals of the first half of the year will evidence the failure of GDP growth rate, troubled tax proceeds from economic units to the state budget and weakening demand for bank credit resources. In the meantime, Moldova’s National bank urged all participants in the money market to refrain from speculations that would weaken rate of exchange of the national currency, believing that growing instability of the Moldovan lei and money market rush were unfounded and mainly caused by “wrongful and provocative publications of a series of mass communication media”. 

Nothing unexpected happened however. Moldova’s economic security has been constantly vulnerable since 1990. Due to the post-soviet inertia, its economy was bound to one country – friendly Russia as regards both import (24 – 30%) and export (51 – 60% in some years), which, according to theory and international practice, imposed risk. And this was exactly what experts from the UN and Leah Balcerowicz Center (CASE, Poland) talked about quite definitely while assessing consequences of the Russian financial crisis of 1998 for Moldovan economy (see www.cisr-md.org for analyses of 1998/1999). The actions of structural nature that the Moldovan government had to implement step by step were also mentioned: improvement of investment and business climate, expansion of export base, diversification of export outlets, search for alternative sources of energy, public administration reform, and, of course, overcoming the country’s split – settlement of the “Transnistria” problem. 

All of these are structural reforms, at the importance of which IMF and World Bank were – as well as the European Union is now – pointing. We agreed with them, but were constantly tardy with our actions. We changed much and imitated some. But now, after the actions of A. Miller and G. Onischenko, we will have to restructure the economy to save ourselves in an emergency mode of operation. 

We could hope to receive help “from the other direction” of course. And it has been already granted as a support of Moldova’s new, pro-European course: IMF resumed relations with Moldova (broken in summer of 2002), Paris Club of Creditors restructured our debts on-the-fly; financial support of the Moldovan state budget by World Bank and EU’s bodies is quite prospective. In addition, regional neighbors granted the Republic of Moldova so long-awaited status of a full member of the Pact for Stability in South-East Europe.  

At that, though, the Moldova’s prospect of becoming an associated EU member is – as before – very obscure. But the forthcoming accession of the neighboring Romania to the EU will create for Moldovan economic units and citizens some disillusioning realities. 

Nevertheless, the A. Miller – G. Onischenko action will do us good. First, everyone finally understood how hard the reality of independent existence of the Republic of Moldova was, and what the price of freedom was – a possibility to choose political destiny independently. 

Second, it became clear how topical the task to modernize the economy was – restructuring industry, reviving agriculture, innovations and new technologies, export base expansion, energy savings,  resting upon small and medium enterprises (as they are more flexible and less power-input-based), liberation of banking sector, involvement of regional initiatives oriented at self-government. 

But all this depends – which is third – on quality of governance, decentralization and rejection of authoritarianism that we are so accustomed to since soviet times, whose resources, though, have been already exhausted over 15 years of transformation of the country, economy and society (including the attempts to settle the issue of Transnistria, whose population and economic units should finally see some constructive signals that their interests – economic, social and spiritual – are taken into account).