Does Moldova Need Regional Development?

A regional development policy begins with the decision of a national government to provide additional support to less developed areas of a country. Everywhere in the world, even in the richest countries, disparities in the development levels of various regions exist. These disparities are generated by various geographic, historic, economic, social and cultural factors. The governments all over the world intervene to reduce these disparities by focusing additional resources and investments into these disadvantaged regions.

Development disparities among regions exist in Moldova as well, the most pronounced one being between Chisinau Municipality and the rest of the country. The Moldovan government has made the political commitment to support the less-developed regions via the regional development approach. This commitment is reflected in its key national policy documents, such as the Partnership and Cooperation Agreement (art. 67), Economic Growth and Poverty Reduction Strategy (ch.6.10), and Moldova-EU Action Plan (ch.22).

Beside an acute need for a regional development policy in Moldova, its mere existence can secure access to a great amount of international donor funds. Many donors, including EU, UK and Japan, are aware of the effectiveness of the regional development approach, and are willing to make significant financial contributions via a regional development institutional infrastructure.

Therefore, the next thing the Moldovan government must do is develop and implement the most appropriate regional development policy. Although efforts have been made during the last three years, the country cannot report any significant achievements. The recently created Ministry for Local Public Administration has been charged with this mandate. The world experience in regional development is huge, so everyone genuinely interested in regional development has the opportunity to learn from this pool of readily-available knowledge.

The Economics of a Language

The 31st of August is an official holiday in Moldova. It is supposed to celebrate 'our language.' In 1989, 'our language' was considered the Romanian language, the mother tongue of the Moldovans of Romanian descent (about 70% of Moldova's population). At that time, such celebration of the Romanian language complemented the national revival of the Republic of Moldova. The mother tongue of the majority people in the former Soviet Moldavia has been neglected for a very long time, therefore the joy of those Moldovans can be well understood. It was then when the Romanian language was declared the official state language.

Since then, obviously, the languages have not changed. My mother tongue continues to be Romanian. What has changed is the government, opinions and politics. For example, the current government prefers to call the same language Moldovan, and pays less attention to celebration of Our Language holiday. In a political realm, this is understandable.

What is less acceptable is the public cost of politicizing the language issue. After 15 years of independence, the number of those who cannot communicate in Romanian is relatively large.

From among all costs that the Moldovan government has transferred on to citizens (education, health, housing, etc.) those deriving from learning the state language should have been the least problematic and painful. But judging by the continuously large number of non-Romanian speaking citizens, the incentive to learn the language has been low. Instead of bearing the costs of communicating its policies to these citizens (e.g. translating all legal and normative acts, official documentation, government web-sites, on-line publications into Russian), as it has been doing for several years now, I think the government should defer these costs on to those citizens, thus creating the needed incentive to learn the state language.

Moldova is Celebrating its Independence Day

Today, 27th of August, Moldova is celebrating 15 years of independence. In 1991, the Moldovan government, supported by the majority of Moldovan citizens, proclaimed its independence from the Soviet Union. It is an important event, of which the scale and scope of today’s celebration is proof. The President of Moldova, together with other high-level officials, are inaugurating new streets, cutting ribbons for new constructions and sites, and making public speeches. On this day, it feels very good to be a Moldovan citizen in a free, independent and peaceful country. Long live Moldova!

Moldova's Future Remains Uncertain

Listening to various opinions about the same event/ situation might bring you closer to the truth. The report published by the International Crisis Group (ICG) "Moldova's Uncertain Future" http://www.crisisgroup.org/home/index.cfm?id=4340&f=1 contains an interesting analysis of recent initiatives to approach several Transnistrian-related problems. One is the EU Border Assistance Mission (EUBAM) launched in late 2005 to help curb smuggling along the Transnistrian segment of the Moldova-Ukraine frontier. Another one is Kiev’s implementation of a landmark customs regime to assist Moldova in regulating Transnistrian exports to reduce the ability of Transnistrian businesses to operate without Moldovan oversight.

The report finds that these measures have not forced Transnistria to make diplomatic concessions, as anticipated. ICG thinks that now "the best chance for moving toward a sustainable settlement is to convince the Transdniestrian business community that cooperating with Moldova is in its own interests. There is evidence that some business leaders are growing frustrated with Smirnov and may be willing to work with Chisinau."

Is Chisinau Ready for the Capital Market?

The development needs of Chisinau City are enormous. According to some estimates, total capital investment needs amount to about $3 billion for the next 13 years. This is a huge amount for the capital city of one of the poorest countries in Europe where the average hourly wage is 70 times lower than in Denmark. Some people prefer to label this estimate as “impossible” or “unreal,” and accept the status-quo. I prefer to approach this figure as a price tag for a better life in Chisinau. Then, the question is: can we afford a better life, and if yes, how?

This happens to be the central issue of a study I’m currently doing for Chisinau City. How can the City finance its development needs? According to the principles of fiscal theory, capital investments with a life cycle that spans across several generations of users should be financed equitably by taxpayers of each generation. It is not equitable for the current taxpayers to pay fully for the schools, roads, bridges that will be also used by future generations. This is the main idea behind municipal bonds: first, the City issues bonds to collect debt to build capital public goods, and then it repays the interest and principle of this debt over a longer period of time. As a result, users from subsequent generations share the cost of the public good from which they benefit.

Is Chisinau ready for this new practice? Not really. It has never issued municipal bonds. It lacks institutional capacity in this area. The current management of municipal finance (mainly budgetary revenues and expenditures) has many shortcomings. Fiscal policies are developed and lobbied at the national level. Nevertheless, Chisinau must start building these capacities and getting ready for entering the capital market. Hopes of becoming a modern European city cannot be supported by the revenues of the present generation alone.

Moldovan Wines: A Future Strategy

Moldovan winemakers are attempting to conquer the European market, particularly after Russia’s ban on import of Moldovan wines. Even if Russia would allow Moldovan wines back on its market, their image has already been seriously damaged. As always, every problem is an opportunity. Moldovan wines need to be re-invented. For instance, an improved image and increase competitive capacity might be outcomes of one consolidated brand. Instead of having hundreds brands (some of which are pretty stupid, e.g. A Nun’s Sin or A Monk’s Sinful Dream) our wines could enter new markets under one brand such as Moldovan Wines, suggests Denis Stirbu from KSB Partners.

This idea makes sense even more in the context of the ongoing reform in European winemaking. Because the wines of the New World (the Americas, Australia) are becoming more popular, presumably due to their simple and clear labels and brands, e.g. Merlot California, the European winemakers intend to do the same. Consequently, in 2007 French wines will reach their old and new customers under one brand, Sud de France.

When I lived in New York City, I could not find too many Moldovan wines in local wine stores. Yet, although I did find a couple of bottles, I did not buy them because I wasn’t really sure about their contents. Instead, I used to buy the Australian Yellow Tail Merlot or Cabernet. However, of all European wines, I prefer Italian. I hope one day I can add “and Moldovan.”

Moldova vs. Russia: Next Round

The biggest and most important event in terms of Moldova's foreign policy is the recent official meeting of the Moldovan President Voronin with the Russian President Putin that took place in Moscow. Its importance derives from the fact that the relations between these two countries have been tense for the last three years, since Moldova's refusal to sign the Kozak Memorandum prepared by Russia, and intended as a solution to the Transnistrian conflict. It should not be suprising that the Kozak Memorandum, as any other agreement prepared unilaterally by Russia for Moldova, given the present distribution of power, completely neglected Moldova's territorial integrity aspirations.

What this official meeting, first in the last three years, will bring about is still unclear. There are high hopes related to improved political and commercial relations with Russia. This meeting marks the beginning of a new phase in the political dialogue, and will most likely contribute to stabilization of Moldo-Russian relations. There is no other way. However, again and as always, it's up to the Moldovan government to act and negotiate strategically so as to obtain as much as it is realistically possible from this renewed relationship with Russia. The underlying disequilibrium of political and economic power between Moldova and Russia will never change, thus the best Moldova can do is to learn to take advantage of opportunities, be diplomatically nimble and smart, and continuously seek support from larger powers that have the ability to negotiate with Russia on more equal terms.