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Trade Commissioner Malmström in Moldova: Our DCFTA is about the economy and trade, but also about improving the life of citizens

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During 6-7 November, the EU Commissioner for Trade, Cecilia Malmström, made a significant visit to the Republic of Moldova. The visit is to mark the three years anniversary of the Deep and Comprehensive Free Trade Agreement (DCFTA) between the European Union and Moldova.

On November 6th, the Trade Commissioner met with the European Business Association and representatives of civil society to talk about the experience of Moldovan businesses in their expansion on the European market and their adaption to  the EU standards:

“I am positive that this will improve over time, as operators learn to know the EU market better and adapt their products to market requirements. Business promotion and improved marketing skills to enter the EU market are the right solutions. We already see that the number of Moldovan companies exporting to the EU is increasing every year.

Malmström believes that the DCFTA helps Moldovan people improve their lives by setting high other societal values:

”Our DCFTA is about the economy and trade of course, but it is also about improving the lives of citizens. Fundamentally, it is about shared values such as democracy, human rights, the rule of law, and the fight against corruption. It is very much a tool to bring our peoples together – that’s actually the best part.”


Several trade issues were touched upon during the meetings with the Prime-Minister Pavel Filip and Economy Minister Octavian Calmîc. During a briefing with the Commissioner, Filip thanked the EU for support in the implementing the standards needed for DCFTA and for the Moldovan businesses.

Cecilia Malmstrom at the meeting with Pavel Filip, Prime Minister of the Republic of Moldova. Chisinau, Republic of Moldova.

On the other hand, the Moldovan official asked for an extension of the deadline for the implementation of the DCFTA in the Transnistrian region, but also for an increase of the export quotas, motivating it with a significantly increased interest of Moldovan interest in the European market. The question of animal products exports was also reportedly discussed between Commissioner Malmström and Minister Calmîc. Later, both launched a new 1,9 million euro project to increase awareness of businesses and consumers about the advantages of the DCFTA from 2017 till August 2019.

Cecilia Malmstrom Peter Michalko and Octavian Calmic at Launch of the DCFTA Communication Project. Chisinau, Republic of Moldova.

In her dialogue with the Parliament speaker and majority leader Andrian Candu, the Trade Commissioner was told about the “improvements in the business and investment climate”.

Cecilia Malmstrom and Adrian Candu, president of the Parliament of the Republic of Moldova. Chisinau, Republic of Moldova. on November 6, 2017.

As for a model Moldovan business oriented towards EU, Malmström chose to visit the fruits and nuts processing factory Monicol, which reportedly exports 95% of its total production to the European market.

A less visible meeting was the one with the President Igor Dodon, more than often critical of the DCFTA and the Association Agreement, as a whole. Talking to the EU Commissioner, Dodon allegedly suggested that the DCFTA should be revised with the aim of an asymmetrical commercial regime. The Moldovan President claimed that the export of agricultural products has a low prospect on the EU market, while the share of agricultural exports to Russia and CIS states constitutes 70%. The press-release of Commissioner Malmström does not mention any detail on the talks with Dodon.

Malmström and Dodon

The EU is Moldova’s main trading partner, accounting for approximately 64% of exports and almost 50% of imports. The DCFTA provisionally entered into force in September 2014.

Economy

IMF mission completes third review visit to Moldova, making $34,9 million ready for approval

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Source: gov.md

27 March 2018- A delegation of the International Monetary Fund ended its visit from March 15-27, concluding the third review of the current economic reform program of the Moldovan Government.

According to a press-release, the IMF mission and the Moldovan authorities reached an agreement on the review, acknowledging the progress in strengthening economic policies and addressing vulnerabilities in the financial sector. The IMF team led by Ben Kelmanson added that the economic growth must be sustained by continuous reforms:

Economic growth was strong in 2017, supported by robust domestic demand and a favorable external environment. These are expected to continue in 2018, and growth is projected to remain solid, at 3.8 percent. Sustained and determined efforts to rehabilitate the financial system – including by strengthening the governance and financial condition of banks, and enhancing regulatory and supervisory frameworks – are vital to maintaining financial stability, sustaining growth and job creation.

The IMF experts stressed that the Chișinău’s efforts should continue to focus on improving public investment and social spending, tax and customs reforms, and improving the efficiency of spending. Moreover, they recommended stricter conditions for the management of the energy sector:

Promoting greater transparency, predictability, and good governance in the energy sector remain a priority.

Kelmanson stated that the IMF Executive Board could consider the review on Moldova “as early as May”, which would possibly make 34,9 million USD available for the Moldovan Government.

Moldova’s three-year IMF program, approved on November 7, 2016, is supported by a loan of SDR 129.4 million (about US$176 million, or 75 percent of the Republic of Moldova’s quota), of which SDR 26 million (about US$35 million) have been already disbursed. Two-thirds of the loan is provided under the Extended Credit Facility, which carries a zero interest rate through 2018, a grace period of 5½ years, and a 10-year maturity. The rest of the loan is provided under the Extended Fund Facility, which carries an annual interest rate equal to the SDR basic rate of charge (currently 1.3 percent), and is repayable over 10 years with a 4½ -year grace period.

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Economy

The economy of the Republic of Moldova increased by 4.5% in 2017

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The economy of Moldova registered an increase of 4.5% in 2017 compared to 2016, the GDP exceeding 150 billion lei, according to the National Bureau of Statistics.

The most significant share in GDP growth was recorded by retail, maintenance and repair of motor vehicles and motorcycles, transport and storage, accommodation and catering – with a contribution of 1,3 points percentage of GDP growth.

For the years 2018-2020, the Ministry of Economy and Infrastructure forecasts an increase in the economy by 3-4%.

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Economy

Over 20 million US dollars from Moldova’s electricity bills ended up in offshore firms’ accounts// RISE

Over 20 million dollars from electricity invoices paid by Moldovan consumers have reached the accounts of offshore companies. The money was removed from the Victoriabank accounts of a company in Tiraspol that has been interfering with the supply of energy for several years in Moldova.

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RISE outlined the scheme by which the buffer company in the separatist region became the main electricity supplier overnight, earned millions of profits and hid them in tax havens.

Only around 20% of the country’s total electricity demand is produced on the territory of the Republic of Moldova on the right bank of the River Nistru. In recent years, the battle for Moldova’s electricity supply contract has usually been made between two regional players: a representative of the Ukrainian group DTEK, which is part of the business empire of Ukrainian billionaire Rinat Akhmetov, and the Cuciurgan plant, which is owned by the giant Inter RAO UES, controlled by the Russian state.

Source: MediaCenter (The Cuciurgan plant)

How EnergoKapital appeared in the scheme:

After the spring of 2014, when the Ministry of Economy announced that between April 1, 2014, and April 1, 2015, the Republic of Moldova bought electricity from DTEK Vostokenergo and from the Cuciurgan plant, due to the crisis in the Eastern Ukraine that degraded into an armed conflict, in autumn of 2014, DTEK has completely ceased delivery of energy to the Republic of Moldova. Consequently, DTEK’s contractual obligations were taken over by the Cuciurgan Power Plant.

At this point in the scheme, an intermediary appeared – the company EnergoKapital in Tiraspol, which was founded in October 2014, a few weeks before the DTEK ceased its deliveries. Founders of the company that emerged overnight were Bas-Market SA in Tiraspol, with offshore shareholders, and Ornamental Art Limited in Hong Kong.

In the following years, the EnergoKapital’s license was prolonged four times, with the left bank becoming the main electricity supplier in the Republic of Moldova. Thus, from the end of 2014 until the end of March 2017, EnergoKapital delivered energy worth about 400 million dollars to the consumers on the right bank of Nistru.

The offshore compromise

Victor Parlicov, the former director of the National Energy Reglementation Agency, claims that such schemes have happened in the past, but the emergence of EnergoKapital as an intermediary is also due to some misunderstandings between business partners in Chisinau, Tiraspol, and Moscow.

Former director of EnergoKapital in 2014-2016, Mihail Dobrov, now head of Dnestrenergo, an enterprise that manages Transnistrian energy transport networks, refused to speak on this subject.

Criminal law in Chișinău

The criminal scheme by which Moldova was supplied with electricity also came into view of the law enforcement bodies, the General Prosecutor’s Office, stating beforehand that the EnergoKapital intermediary figured in a criminal case. Vladimir Mosneaga, prosecutor at the Office for Combating Organized Crime and Special Causes, refused to rule on the file, suggesting that RISE should wait for the official response.

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