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Conditions that the European Union imposed to Moldova before disbursing tranches of €100 million assistance

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On 23 November 2017, the Republic of Moldova signed the agreement with the European Union regarding the macro-financial assistance of 100 million euros: 40 million of grants and 60 million as a loan.

The so-called MFA was requested in August 2015 and in March 2016 by the Moldovan authorities. After long debates on the conditionality, the European Parliament, and the EU Council came to an agreement to offer Moldova the macro-financial assistance for 2 years and a half in three tranches, whose disbursement is conditioned by a certain list of criteria. According to the agreement, the European Commission will monitor the progress on key reforms together with the International Monetary Fund.

Technical criteria

Unlocking the first tranche of the macro-financial assistance will require Chișinău to implement 10 reforms in five different domains:

Public sector governance:

  • implementing the new reform strategy of the public administration;
  • ensuring the efficient functioning of the National Agency for Solving Contestations;
  • adopting the law on the state and municipal enterprises with the aim of increasing transparency and responsibility of the latter;
  • adopting the new law of the Court of Accounts and creating a Parliamentary Committee of Public Accounts.

Fight against corruption and money laundering:

  • adopting the law on preventing money laundering and combatting terrorism financing;
  • selection of the president and vice-president of the National Authority of Integrity by the Integrity Council;
  • ensuring the efficient functioning of the Agency for Recovering the Defrauded Goods by the Parliament through sufficient funding and personnel.

Reforms of the energy sector:

  • adopting a new Energy Law with the aim of consolidating the governance and regulation of the energy sector, including the independence of the National Agency for Reglementation in Energetics.

Business climate and DCFTA implementation:

  • implementing measures to reduce the administrative tasks needed to start and manage a business;
  • adopting the new law on the Customs Service.

Respect to multi-party system and the degree of implementation of the recommendations of the Venice Commission

According to ZdG.md, the agreement stipulates that the European Union will also take into the consideration the respect to efficient democratic mechanisms- a multi-party parliamentary system, rule of law, respect for human rights-, but also progress in improving liberal, independent and pluralist governance,  consolidation of the independence of the judiciary system and the implementation of the Association Agreement, including the Deep and Comprehensive Free Trade Area. A special focus is drawn upon the fact that the EU Commission and the External Action Service will also particularly monitor how the Moldovan authorities implement recommendations formulated by the Venice Commission and the OSCE/ODIHR in regard to the recent change of the electoral system.

If the Commission gives a negative evaluation to the work of the Moldovan Government, it reserves the right to stop the payment of the tranches until Moldova proves the respect of conditionality.

Currently studying International Relations at the University of Pécs, Hungary. Study focus: Transnistrian conflict settlement, Moldovan statehood, Moldovan democracy. Inquiries at [email protected]

Economy

Russia cancelled customs duties on imports of fruit, canned food and wine products from Moldova

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The Government of the Russian Federation approved the decision to cancel the customs duties on exports to Russia of the following Moldovan products: vegetables, fruits (apples, cherries, plums, nectarines, etc.), canned fruit and vegetables and wine products.

The announcement was made today by President Igor Dodon, on his Facebook page.

President Dodon said that this was made possible, thanks to the deal he had previously with Russian President Vladimir Putin.

The official said that this decision will certainly contribute to the significant increase in the export of Moldovan goods on the Russian market, the creation of jobs and the increase of the revenues to the budget.

“I express my gratitude to Mr. Vladimir Putin for the support given to the Moldovan people,” Igor Dodon said.

Reminder: At a press conference, the head of state mentioned that the customs duties set by the Russian side make our products less competitive in Russia.

Igor Dodon then said that we have a 6 euro cents per kilogram apple and that the extra cost per kilogram of apple exported by our producers to the Russian Federation is 1-2 lei. There are also taxes on vegetables, canned by 12%. Our winemakers pay a 12.5% duty on exporting our wines to the Russian market.

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Economy

4 Years of DCFTA. This is what has changed since Moldova signed the Association Agreement with the EU

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Four years ago, Moldova and the European Union signed the Association Agreement, which led to the creation of a Deep and Comprehensive Free Trade Area (DCFTA) between both parties. The opportunities offered by DCFTA in these years have allowed export growth and the creation of at least 15,000 new jobs in our country.

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To celebrate this anniversary, several regional businesses, business associations, and entrepreneurs met in Comrat. Businessmen from Gagauzia spoke about how the EU helped them to develop their business and what impact the implementation of DCFTA had on their work.

What is DCFTA, really?

In essence, the creation of a Deep and Comprehensive Free Trade Area was aimed at removing tariff and non-tariff barriers of trade between Moldova and the EU. According to an Expert-Grup analysis, after four years of DCFTA implementation, the European Union remains the most important and reliable trading partner for domestic producers.

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Entrepreneurs shared their experience at the event in Comrat

More than two-thirds of all Moldovan exports reach the EU and their net increase reached 367 million euros in the period 2015-2017. This increase led to the creation of at least 15,000 new jobs in our country. Expert-Grup specialists believe that in the absence of DCFTA, our state budget would have lost over 7 billion lei in revenue and the private sector would have lost at least 320 million euros in fixed capital investment.

  • 2/3 of exports ⇒ EU
  • ⇑ 367 million euros increase
  • 15,000 new jobs
  • ⇓ 7 billion lei from the budget – LOSSES AVAILABLE
  • ⇓ 320 million euros from the private sector – losses EVITA

“The potential of opportunities offered by DCFTA for Moldovan enterprises is yet to be fully explored. Free access to the European Union market gives companies the opportunity to grow, and we encourage them to make every effort to do this,” says Vasile Plămădeală, Trade Counselor at the EU Delegation in Moldova.

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Vasile Plămădeală, advisor to the EU Delegation in Moldova

“It is therefore essential that the Moldovan authorities support businesses in fully capitalizing on the benefits offered by DCFTA by creating better business conditions and implementing the necessary trade-related reforms,” he adds.

“What soldier does not want to be general?”

Ivan Cambur was of the same opinion, Executive Director of the Gagauzia Business Association “Next”. He says that DCFTA has so far been a positive experience for businessmen in Gagauzia. “Many companies in the region have received EU aid. I think this agreement provides a great incentive for young people to stay in their country and to invest. It is important that entrepreneurs with start-up ideas and the beginners are supported,” says Ivan Cambur.

He believes that in the last four years, entrepreneurs from Gagauzia and from the rest of the country have been able to find out how many financing opportunities exist and especially that they are accessible. In addition, people who have had the courage to set up a business have understood that there are real chances to reach international markets.

“What soldier does not want to be general? Many companies have not looked at their business as an international one, but lately they have begun to think and turn to outside markets. I notice that access to information has increased. During these years many study visits were organized abroad.”

Businesses from different regions of the country, present at the Comrat event, shared their experience of accessing European grants and using the opportunities offered by DCFTA. Larisa and Gheorghe Cerven, owners of a small vineyard in Vulcanesti, Gagauzia, tell the story of how they managed to reduce their energy bill thanks to a European grant. With the money they received, they bought and installed solar panels on the roof of their inn. “In addition, thanks to this support, we have managed to create five new jobs in winery and five other jobs in the tourist inn. Our workers are all inhabitants of Vulcanesti and now they can build a future home,” says Larisa Cerven.

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Larisa and Gheorghe Cerven, the owners of a small winery from Vulcanesti, Găgăuzia. PHOTO: Facebook

The potential of DCFTA has not been explored fully

Contrary to expectations, the biggest effects of trade liberalization with the EU were observed in the case of agri-food exports, although initially these products were not considered sufficiently competitive on the EU market. Thus, exports of agri-food increased by 44%, compared with the 11% increase in industrial exports, according to the Expert-Grup analysis.

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The free trade agreement also had more profound macroeconomic implications, boosting economic growth, budget revenues, imports and investment, and employment. Thus, the DCFTA’s contribution to growth in exports to the EU, estimated at 410 million dollars between 2015-2017, has boosted GDP growth by 7% or about 1.5 billion dollars.

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Economists say the potential of DCFTA has not yet been fully explored, especially since the first implementation period has been marked by the banking crisis, the political crisis, and the drought in 2015. “Therefore, in the years to come, the effects of DCFTA will be much more significant”, declared the Expert-Grup experts.

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Economy

Study results: Moldovan salaries cover not even a half of the costs needed for a decent life

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The Friedrich-Ebert-Stiftung Moldova Foundation, in partnership with the Clean Clothes Campaign and Platzforma have issued the results of the case study performed by them in the textile industry. The study titled “Living wages in the Republic of Moldova. Case study: textile industry” presented the concept of living wage by calculating how much money a worker in the textile industry and his family needs for a decent living.

The results of the case study are especially valuable for 3 main reasons: it is the first such kind of study in the Republic of Moldova. It includes a new term for the Moldovan society – the living wage, taken into consideration that the Moldovan government operates only with the terms of minimum and average wage in all national statistics. The conclusions of the study are applicable for any employee of any other sector of the economy, displaying a more realistic situation regarding the incomes and expenses of an average Moldovan citizen.

What is the difference between the minimum wage and the living wage?

According to Lilia Nenescu, an anthropologist and the co-author of the study, the living salary has never yet been calculated in Moldova. “Currently, we operate with other concepts such as minimum wage, average salary or the poverty threshold. Beside the fact that the living wage calculates the cost of living, this is also a guaranteed right by the Universal Declaration of Human Rights and the Constitution of our country, which states that citizens have the right to a decent living. The minimum calculated wage in the Republic of Moldova does not cover the expenses of a decent living,” reported Nenescu.

In comparison to the minimum wage that is set by the government and means the lowest wage an employer may legally pay its workers, the living wage is the amount of money calculated as being sufficient for an employee and his family to cover basic costs of living, being adjusted to the location, household size and to the inflation rate. Another important difference between these two concepts is that the minimum wage is always displayed as a gross amount, while the living wage – as a net amount, including a saving of 10% for unexpected expenses. Moreover, the living wage can be only in the monetary form, without any vouchers or goods as payment. “If the worker doesn’t receive his salary in the monetary form, he is not free to choose on what to spend it,” specified Lilia Nenescu.

Photo source: adevarul.ro

How was the living wage calculated?

For one month, the experts collected data on food prices from 10 workers from a village and 10 more workers from a city, in order to track the price fluctuations. Afterwards, they have developed a nutritious food basket of 3,000 calories, adapted to the local specificities, without including tobacco, alcohol or processed foods. “The participants noted down the price for each product as they paid. After collecting the data, we calculated the average price of the products. Based on these figures, the costs of a nutritional diet for a day were calculated. Subsequently, the food expenses for 30 days, for a family of 3 members were determined,” as the authors of the study explained. The same method was applied for the non-food expenses. By adding them up to the food expenses, the total amount of the living wage was obtained.

What is the conclusion of the study?

As the study results showed, there are seven basic categories of needs considered for the living wage: food, housing (rent, maintenance bills), health, education, culture, clothing and transport. The ratio between the food and non-food expenditure (clothing, maintenance bills, transport, etc.) is 43.9% to 56.1%. The living wage estimated by the authors of the study amounts to at least 12306.8 lei for urban zones and 11359.6 lei for the rural ones. “The minimum living wage in the textile industry in the Republic of Moldova should be at least 11833.2 lei,” deduced the study authors.

Therefore, the average gross salary in the textile industry in the Republic of Moldova in the third quarter of 2018 was 6 027 lei, whereas in the footwear industry it reached only 5242.8 lei, according to the National Statistical Bureau (NBS). That means a net average salary of 4776.86 and 4159.22 respectively for a person that has one child. It covers less than half of the minimum living wage calculated in the conducted study.

Moreover, the average living costs per person displayed on the NSB of Moldova correspond to an amount of 2437.5 lei for the third quarter of 2018. A closer analysis of the respective amount reveals that such expenses as rent are not included in the amount, therefore people in the Republic of Moldova are supposed to pay only for the maintenance and furnishing of their house, which represent a share of 22.8% of the total amount. Even more unrealistic seem the calculated costs for studies – 0.4% of the total amount, this cost being even lower than the cost of agreement – 1.7%. Thus, it becomes clear that the calculation of the minimum legal wage and of the estimation of living costs in the Republic of Moldova are subject to underestimation and don’t correspond to the real existing situation in the country.

Why is the living wage so important?

“We have studied the textile industry precisely because we are already part of an effort to improve working conditions in this area. Living wages are also an advocacy tool that we want to include in our efforts of raising the wages in this sector. It is necessary to measure living wages so that we can present these figures to the brands and show them what the real expenses of workers from countries like Moldova are,” mentioned the activist Vitalie Sprânceană, one of the authors of the study.

There is no official methodology in the Republic of Moldova of calculating a salary level that reflects real spending of a person or a family for a normal and decent life. The lack of a decent living salary means that many workers in different sectors of the economy are forced to work additionally for extra gain or to combine more jobs, as the Platzforma description of the project stated. Because Moldovans do not have enough money, they have a poorer menu, wear the same clothes for years and forget about vacation. “The priorities are the children’s education and the maintenance bills, all that remains is for food and lastly for clothes,” answered a pedestrian interviewed by TV8.

“Living salary is a new concept for the Republic of Moldova, where the minimum wage or average salary concepts are used. From the study, however, we understand that these notions do not even cover the costs of a decent living. This concept of living wage fits well into our mission and we will continue to promote it,” says Veaceslav Paladi, the Programs’ Coordinator at the Friedrich-Ebert-Stiftung Foundation in Moldova.

Featured photo: sputnik.md

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