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PLANUL NATIONAL DE DEZVOLTARE 2008-2011

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					                                                                                           Draft NDP/21.05.2007
                                                                                  Ministry of Economy and Trade


                    NATIONAL DEVELOPMENT PLAN 2008-2011
                              STRATEGY PAPER


INTRODUCTION1

The National Development Plan (NDP) 2008-2011 is the main domestic medium-term
strategic planning paper, which defines the objectives for the development of the Republic of
Moldova by the year 2011 and identifies the priority measures and actions to achieve these
objectives. The NDP serves as a unified tool for the integration of the current strategic
framework, for the alignment to the budgeting process (MTEF) and for the assimilation of
external technical and financial assistance. The Plan is intended to focus on several priorities
in order to ensure the targeting of available resources at achieving these objectives and
measures with a maximum impact on the economic and social development of the country.
The key objective of the NDP is to ensure a better quality of people’s life by consolidating
the basis for a robust, sustainable and inclusive economic growth. In this context, the spirit
and the vision of the NDP aspires to the approximation of the Republic of Moldova to
the European standards and, thus, to achieving the objective of European integration.
All the priority development areas set forth in the NDP are aimed at adjusting relevant
national policies to the European ones.
Currently, the Republic of Moldova avails of a series of papers of national importance that
establish both medium and long term policies, as well as a multitude of sector strategies
which are not consistent with the national policies. The experience of implementing papers of
national importance denotes that establishing a large series of dispersed priorities, with
limited financial resources, leads to a difficult implementation, and unsatisfactory results.
Thus, NDP is intended to focus the social awareness on a limited number of priorities and to
concentrate resources for their strict implementation
Initiatives that are part of the NDP and the Action Plan thereto, will be reflected in the budget
and the MTEF. Altogether, NDP and MTEF serve as a framework for the allocation of
resources in priority areas over several years, and for the retargeting of public expenditures at
achieving national objectives. The reconciliation of these two papers and a more effective
correlation of the planning and budgeting procedures is a continuous process.
Furthermore, in the context of the concurrent operation of a number of national papers, there
is a tantamount of regulations and guidelines governing the monitoring and reporting process
and which, while being unduly coordinated, make this process cumbersome and sometimes
even inefficient. Thus, the need emerges to simplify and increase efficiency of the monitoring
and reporting process in order to focus on evaluation of the implementation results. This
should also be a priority of the central and local administration reform.
In many European countries, the experience of which was analyzed, the National
Development Plan represents a specific instrument for the absorption of structural funds
provided by the EU and does not substitute the general development strategy of the country.
In case of Moldova, the purpose of NDP is different – the National Development Plan
represents a domestic umbrella-paper, which is intended to prioritize the Governmental

1
 The introduction is intended to clarify the overall scope and the role of the NDP. In the version that will be
presented to the Parliament for approval, the explanatory part will be included in the briefing note.


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polices and to establish a clear mechanism of their funding from both internal and external
sources.
The operationalization of the paper is based on the following principles:
      -     Participation – the document will be developed in consultation with all the
            stakeholders;
      -     Alignment of the existing national strategies and programmes to the national
            priorities – the paper will contain specific coherent objectives and will unify cross-
            sector approaches in the light of NDP priorities;
      -     Reiteration of external commitments - the paper will include actions and commitments
            agreed upon with the development partners.
National Development Plan reflects a dynamic approach to strategic planning. Thus, NDP has
tow components: 1) the strategy paper covers the tentative area of activities and is aimed at
identifying the way and the mechanism to achieve the set objectives; and 2) the action plan
outlines the specific tasks to achieve the set objectives. The strategy paper shall be revised
every four-five years, to confirm or modify the key objectives and areas. The action plan
shall be revised each year, by adding another year, as in the case of MTEF, so that this plan
evolves concurrently with achievements made over time. The implementation of the NDP
will be monitored and evaluated through and Annual Evaluation Report, which will reflect
last year developments and changes in the selected performance indicators.
The strategy paper is divided into the following sections:
      1.     Situational analysis
      2.     SWOT analysis
      3.     Strategic vision
      4.     Prerequisites for the achievement of NDP objectives
      5.     National medium term priorities
      6.     NDP Monitoring and evaluation
      7.     Annexes:
            Annex 1: Extended situational analysis
            Annex 2: Extended SWOT analysis
            Annex 3: Analysis of constraints
[The NDP action plan shall be prepared upon the finalization of the strategy paper.]



1. SITUATIONAL ANALYSIS2

Starting in 2000 Moldova’s economy got back on the growth track, reversing a decade of
ongoing decline and deterioration in the living standards. Due to political stability and
measures undertaken by the Government, the Republic of Moldova managed to maintain the
macroeconomic stability, to achieve economic growth and to reduce poverty.
The following major achievements over this period can be mentioned:
(i)       Ensuring macroeconomic stability. The real GDP increased by 5.9 per cent each year on
          average during 2000-2006, with a cumulative growth of 49.5 per cent versus 1999.
          Inflation stayed at a reasonable level, dropping from 18.4 per cent in 2000 down to 14.1
2
 Situational analysis, SWOT analysis and analysis of constraints lay the basis for the identification of medium
and long term priorities of the country. The analysis are inter alia substantiated in the Annual EGPRSP
Evaluation Reports and the EU-Moldova Action Plan Evaluation Reports.


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                                                                   Ministry of Economy and Trade

      per cent in 2006 (inflation rate at the year-end). The national currency exchange rate
      stayed stable, whereas the National Bank reserves considerably grew.
(ii) Reduction of foreign debt. The economic growth and the prudent management of debts
     contributed to the reduction of the total foreign debt in GDP from 121 per cent in 2000
     to 74 per cent in 2006.
(iii) Improvement of the public financial management. Measures undertaken to improve the
      tax policy lead to the extension of the tax base and the increase in the income share in
      GDP. Social sectors were granted priority in reallocation of resources.
(iv) Improvement of the business climate through structural reforms. Progress was made in
     terms of general perception of the regulatory framework, while simplifying the
     procedure for business registration, licensing, customs clearance, reducing the
     frequency and duration of controls.
(v) Poverty reduction. In 2001 – 2005, poverty indicators decreased by approximately 39
    p.p. for absolute poverty and 36 p.p. for extreme poverty. The state poverty reduction
    policy was primarily based on the implementation of the Economic Growth and Poverty
    Reduction. The robust growth was a major contribution to the improvement of the living
    standards.
(vi) Better quality of and enhanced access to education services. The Government made
     progress in reforming the general secondary education by improving the curriculum and
     revising the educational processes and techniques. Recently, Moldova acceded to the
     Bologna process.
(vii) Better quality of and enhanced access to health services. Following the health care
      reform, health insurance was implemented, primary health care was strengthened and
      the restructuring of the hospital services was initiated. The Government is determined to
      continue reforms in education and health care with a view of increasing the efficiency
      and the quality of services by implementing cost-effective measures and rehabilitating
      the social infrastructure.
Nevertheless, in the period of economic recovery, the domestic supply had a rather reserved
response to the growth of domestic and foreign demand. The economic capacity to generate
employment opportunities remained low, thus limiting the potential for the growth of
disposable income and leading to the acceleration of migration process. At the same time,
disparities between urban and rural areas increased.
The following interdependent economic and social problems, which are still faced by the
Republic of Moldova, can be mentioned:
(i)   Greater discrepancy between domestic demand and supply. Economic growth was
      determined by the growth of consumption, which was mainly satisfied from imports.
      The main determinant of the fast growth of consumption were remittances, which
      accounted for 35 per cent of GDP in 2006. The growth of the purchasing power was
      also due to the increase in pensions, salaries, benefits and compensations.
(ii) Higher external vulnerability. External vulnerability is strengthened by the external
     economic factors and a high level of concentration of exports by country and by
     product. For instance, the economic shocks experienced in 2006 (increase in prices for
     natural gas and administrative prohibition by some countries of imports from the
     Republic of Moldova, exports for some categories of products) lead to the slowdown of
     the economic growth (4 per cent in 2006 versus 7.4 per cent and 7.5 per cent in 2004



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                                                                                    Ministry of Economy and Trade

         and 2005, respectively), to the intensification of inflation processes and to a substantial
         increase in the trade deficit and the current account.
(iii) Low competitiveness of economy. The low competitiveness of economy both on the
      domestic and on the foreign market accounts for a considerable growth of imports and
      the modest development of exports. Low competitiveness also undermines opportunities
      to transform the economic growth pattern based on available natural resources,
      migrants’ remittances and the use of historical links with traditional markets, in a new
      qualitative pattern, based on the capacity of human resources to innovate and to develop
      production processes and on aggressive marketing.
(iv) Underdeveloped physical infrastructure. The outdated infrastructure is a major barrier
     for the attraction of investments and, respectively, for economic growth. Given the
     severe budgetary austerity lasting for almost a decade, the public investments for the
     support of the existing infrastructure and for the establishment of new facilities did not
     cover the needs.
(v) Greater disparities between urban and rural areas. Economic recovery over the last
    years was accompanied by greater disparities in the economical and social development
    of various regions of the country and in particular that of the capital city Chisinau and of
    towns and rural areas. Most towns and rural areas are still facing a poor economic
    situation, characterized by scarce investments, low and slightly diversified economic
    activity and labour migration.
(vi) High rate of migration. Deterioration of living standards, the lack of well-paid jobs, low
     economic activity in rural areas, high unemployment rate among youth are the main
     determinants of migration process. At the same time, youth migration becomes much
     easier upon the establishment of Moldovan diasporas in the main countries of
     destination, thus a high number of migrants provides more incentives for the new
     migrant flows.
(vii) Social insurance system with limited sustainability. The reform of the pension system
      launched in 1998 lead to a better financial situation based on the increase of the pension
      age and improved collection of payments. However, some long-term objectives were
      not met. The pension is still calculated on the basis of reported salaries and not on the
      basis of actual payments, which undermines the financial sustainability of the pension
      system, leads to unfair redistribution of resources between various groups of insured
      persons and determines a relatively small size of pensions.
(viii) Inefficient targeting of the social system. The available surveys show that social
       assistance is equally enjoyed by all the income quintiles and is not focused on the poor
       quintiles. Fragmentation and inefficient targeting of the social assistance system do not
       allow to expedite the reforms without a negative impact on the vulnerable groups of
       population.



2. SWOT ANALYSIS3

Key objective: Ensure a better quality of people’s life by consolidating the basis for a
robust, sustainable and inclusive economic growth.


3
    A detailed analysis of strengths, weaknesses, opportunities, and threats is presented in Annex 2.


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                                                                                             Draft NDP/21.05.2007
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Strengths:                                               Weaknesses:

Maintenance of macroeconomic stability in the            Unsettled Transnistrian conflict
context of fundamental changes
                                                         Distorted structure of production
Relatively developed and stable banking sector
                                                         Relatively high cost of capital
Relatively low cost of labour force in small towns and
                                                         Increasing shortage of qualified labour force, especially
rural areas
                                                         due to labour migration
Majority consensus on the European vector
                                                         Use of energy-intensive technologies and obsolete and
Access free of customs duties to EU markets on the       worn-out equipment
basis of GSP plus system, to South-East European
                                                         Insufficiently developed physical infrastructure
markets on the basis of CEFTA agreement, and to
CIS markets on the basis of free trade agreements        Unfavourable image of the Republic of Moldova on the
                                                         international arena and limited global visibility
Existence of a legal and fiscal framework, stimulating
investments                                              Insufficient administrative        capacities    of    public
                                                         administration
Qualified human potential in some economic areas
                                                         Inefficient legal system and persistence of corruption
                                                         Presence of administrative impediments in investment
                                                         activities
                                                         Inefficient orientation of social assistance
                                                         Excessive social and economic disparity between the
                                                         municipalities of Chisinau and Balti and the rest of the
                                                         localities

Opportunities:                                           Threats:

Sustainable economic growth in the commercial            Extension of the Transnistrian conflict
partner countries
                                                         Dependence of the national economy on external
Geographical proximity to the EU and large sales         factors
markets
                                                         Increase in the energy prices
Clear perspective of increased access to the EU
                                                         Diminution of the remittance flow
market on the basis of ATP (Autonomous Trade
Preferences)                                             Continuation of the exodus of qualified labour force
Increase in population’s purchasing power and            Negative demographic trends
diminution of poverty
                                                         Existing protectionist measures on the external markets
Existence of some categories of under-explored
natural resources and some unused spaces                 Increase in     population      inequality     and    regional
                                                         disparities
Entrance of some foreign financial institutions on the
                                                         Slow implementation of structural reforms
internal capital market
Availability of international financial organizations    Corruption worsening
and donor countries to provide financial and technical
assistance for country’s development                     Negative impact       of     the   development        on   the
Cooperation of the Republic of Moldova with              environment
regional and international security structures
Enlargement of communications and IT sector
Extension of service area
Opening of Giurgiulesti port and capitalization of
resultant benefits

Conclusions


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                                                                               Draft NDP/21.05.2007
                                                                      Ministry of Economy and Trade

The social, economic, and SWOT analyses reveal the existence of some internal and external
factors that favour /threaten the development of the country. Thus, the development of the
country over the last seven years can be characterized by the resumption of the economic
growth, maintenance of macroeconomic stability, significant reduction of poverty and
commencement of a series of structural reforms in areas of strategic importance. However,
these achievements have been attained on the background of a distorted production structure
(based on such sectors as agriculture and industry, currently characterized by low
productivity and use of outdated and energy-intensive technologies), a low level of internal
and external investments, worsening of trade balance deficit and massive exodus of qualified
labour force.
Generally, the Republic of Moldova may be characterized as a country with a small sales
market, limited capacities for manufacturing competitive products, extremely dependent on
several partner countries in respect to both exports and imports that now has the biggest share
in the supply on the domestic market. In addition, the existence of a legal and fiscal
framework, favourable for the development of private sector and attraction of investments
and qualified human potential in some economic areas is not enough if there are gaps in the
operation of the public administration and legal system, and, to a great extent, the image of
the country on the international arena is stigmatized due to the Transnistrian conflict.
The positive aspects in the development of the Republic of Moldova are conditioned by the
combined impact of the efforts made by the Government during the analyzed period, donors’
assistance and increase in the population’s purchasing power due to a great flow of
remittances sent into the country by Moldovan emigrants. At the same time, the negative
aspects are caused by the slow pace of economic reorganization that permitted, though, to
avoid great social disturbances, but it was not fast enough to change the economy structure
and the paradigm of the economic growth.
In this context, during 2008-2011 it will be necessary to ensure a development track, fully
based on the existing peculiarities of the country, efficiently turn to benefit the entire range of
indisputable opportunities, and prevent the appearance of any threats. Thus, the removal of
deficiencies and achievement of the main objectives of the Republic of Moldova shall rely on
capitalization of all existing opportunities, especially those related to the country's proximity
to the EU and availability of international financial organizations to provide mid-term
financial assistance to the country. Concurrently, it is important to use the country’s strengths
in order to reduce the exposure to potential risks, particularly those related to the
intensification of state's vulnerability, continuation of labour force exodus, increasing poverty
and population inequality.
Thus, on the basis of the analyses performed the following conclusions may be drawn
regarding Republic of Moldova’s mid-term priorities (the order does not indicate the priority,
all components being equally important). First, it is necessary to erect a democratic state
based on the rule of law, by making all possible efforts to strengthen the judiciary system,
prevent and fight corruption and strengthen the borders, mainly by enhancing the cooperation
between the Republic of Moldova and the regional and international security structures. A
vital element for the achievement of this objective is the settlement of Transnistrian
conflict by promoting a constructive ongoing dialog with all parties involved in this process.
Second, it is necessary to speed up the implementation of the initiated reforms and economy
reorganization aimed at ensuring the national economy competitiveness, particularly by
improving the business environment, supporting SME development and reviving the physical
infrastructure. In this context, it is necessary to reshape the structure of the national economy
and focus on the development of service area and extension of IT and communications


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sectors. It is imperatively necessary to design a sustainable model for economy development,
including for investment attraction, based not only on the relatively low costs of labour force,
which is not a steady factor, but also on the high qualifications of the labour force,
technological advancement and managerial innovation, and on a predictable, transparent, free
of administrative barriers business environment, supported by a consequent legal framework.
To diminish the dependence of national economy on external factors it is essential to
capitalize all opportunities related to the improvement of the domestic products’ quality,
replacement of imported products and diversification of imported energy sources. At the
same time, it is imperative to capitalize the whole range of natural resources and under-
explored spaces, enjoying mainly the benefits brought by the opening of the Giurgiulesti free
international port. In addition, it is important to ensure the access of enterprises, particularly
SME, to long-term financial resources, provided on favourable terms – fact that, to a great
extent, may be accomplished by facilitating the access of foreign commercial banks on the
domestic market and by developing the micro-finance sector.
Third, the human factor is considered to be one of the main strengths for country's
development. Reinforcement of human resources should be ensured by enhancing the
educational system, especially primary and vocational education, improving the coverage and
quality of medical services, making social protection efficient and providing new
employment opportunities. The policies oriented towards this area should take into account
the worsening of demographic indexes that leads to the negative natural growth and aging of
population, and as a result, to the increase in the number of dependent persons, which,
consequently, will put pressures on compulsory health insurance and state social insurance
budgets.
Fourth, a crucial element for Republic of Moldova’s progress is the balanced development
of all regions of the country. During the transition period the disparity between the
development of big cities, on the one hand, and rural areas and small towns, on the other, has
increased significantly. The regions’ development was also very different. Given this
situation, it is necessary to uniform the development of the regions and capitalize to the
utmost the potential of each particular region.



3. STRATEGIC VISION

The National Development Plan starts from the basic objective laid down in the Constitution
of the Republic of Moldova and namely, establishment of conditions adequate for improving
the quality of life. Moreover, the improvement of quality of life is a polyvalent factor,
consisting of a number of closely-related dimensions. On the personal level, this means a
healthy and educated person, able to exercise his/her fundamental rights and liberties,
positive about a decent old age – a person who wishes that he/she and his/her children live in
the Republic of Moldova. On the country level, this means a deep transformation and
modernization of the country and effective qualification for the accession to the EU.
In the long-term perspective, the National Development Plan regards the Republic of
Moldova as:
   a) a reintegrated state, which enjoys multilateral security guarantees (integrated into the
      European security architecture);




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                                                                                         Draft NDP/21.05.2007
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    b) a state where the political and election processes are carried out in accordance with
       the democratic procedure and where the right to freedom of expression is enforced
       and accepted by all political forces;
    c) a state, which by its modern judiciary system ensures all citizens’ equality before the
       law, whereas corruption is considerably reduced and cannot endanger the
       development and modernization of the country;
    d) a country, where the economic growth assures increased revenues for all social strata
       and promotes productive contribution of vulnerable groups to the economic
       development of the country;
    e) a country, free of poverty and vices characteristic to poor societies;
    f) a state, which creates conditions for the establishment and attraction of international
       competitive companies that find niches on the global market first of thanks to by the
       quality of their products;
    g) a country that shows a quick recovery of the gap in the technological development in
       comparison with the European countries;
    h) a country where the national economy is effectively integrated in the regional
       economic processes by modern and safe transport arteries;
    i) a state that guarantees qualitative educational and health care services for all citizens;
    j) a state where the educational system ensures employment of all young people through
       services adjusted to present-day labour force requirements;
    k) a state where the social insurance system is favourable for the demographic progress
       (secure birth and old age);
    l) a country where the economic growth is a process that covers all regions and
       communities;
    m) a country where the quality of life in rural areas comes close to that in urban areas,
       preserving at the same time the cultural values and traditions;
    n) a country, where the model of social and economic development does not endanger
       nature and environment and which contributes to the preservation of national and
       cross-border ecosystems;
    o) a country, whose international image improves dynamically and which turns into a
       welcome member of the European family.
Millennium Development Goals4
The agenda for country’s long-term development is partially reflected in the Millennium
Development Goals (MDG) up to 2015. The agenda drafted by the MDG stays valid further
on, but in order to make it pertinent and fully integrated within the national policies, the
MDG targets and indicators should be adjusted to a greater extent to the country’s reality than
during the initial adjustment process.
Most of MDG targets and indicators adopted in the Republic of Moldova in 2005 comply
with the international definitions. Nevertheless, during the MDG implementation period it

4
  During the implementation of Millennium Development Goals (MDG) it was proved that national targets and
indicators are not adjusted sufficiently to the country’s reality in order to be relevant. The development of the
National Development Plan (NDP) within a participatory process is the most appropriate framework for the
review of MDG targets and indicators.


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was found out that it is difficult to carry out a qualitative assessment of the results in this
area. In order to overcome the existing problems it is necessary to make some modifications
and adjustments of the objectives the Republic of Moldova aims to achieve. In this respect,
there arose the necessity to determine and adjust the monitoring indicators to the reality of the
Republic of Moldova, to establish the intermediary and final targets for a number of
assignments taking into account the real development perspectives.
1.     The first development objective on the national level – „Eradicate extreme poverty
and hunger” - aims at „Reducing by half, between 1997 and 2015, the number of people with
incomes below USD 2.15 per day (at PPP), establishing the reduction rate of this category of
people from 28.0 per cent in 2006 down to 23.0 per cent in 2010 and 18.0 per cent in 2015.
According to the international recommendations, in order to attain some measurable
performance it is essential to establish the exact targets for indicators achievement and
change the name of some indicators according to the real calculation method. In the
conditions of the Republic of Moldova where the fluctuations of seasonal incomes are very
high and a great share of the revenue earned from remittances and agricultural produce is
hard to estimate; consumption expenditures are still a more accurate indicator for the
determination of people's welfare. In this case, it is necessary to include the indicators
calculated based on expenditures, not incomes.
2.     In the educational area the objective “Achieve universal lower secondary education”
has to be achieved by increasing the net rate of inclusion into the primary education from
88.9 per cent in 2006 up to 93.8 per cent in 2010 and 100 per cent in 2015.
According to the calculation methodology for MDG, achievement of 100 per cent target from
the very beginning does not allow to consider the respective target achieved. In this
conditions, in order to stimulate the achievement of set targets it is imperative to adjust the
indicator to the international standards, comparing the children share who finalize their lower
secondary education to the number of children who are in the graduation age group, the real
target for the achievement of this indicator being of 90 per cent by 2010 and 95 per cent by
2015.
3.      The achievement of the objective "Promote gender equality and empower women"
has been supported by the progress made recently in the Republic of Moldova by approving
the legislation in the area and by promoting women into the social and economic life of the
country. At the same time, the set targets for this objective do not allow monitoring the
accomplishments in this respect. In this context, it is essential to set the precise targets for the
indicators already selected. There should be stressed the economic and political opportunities;
the indicators for monitoring all objectives depending on possibilities are to be segregated by
gender.
4.      MDG formulate the objective “Reduce child mortality” focused on the following
tasks: (i) reduction by two thirds, by 2015, of the mortality rate among children under 5 years
of age; (ii) diminution of mortality rate among children under 5 years of age from 15.0 in
2006 to 11.9 in 2010, and 8.4 in 2015; (iii) diminution of infantile mortality rate from 12.1 in
2006 to 9.6 in 2010, and 6.3 in 2015; (iv) increase the share of children under 2 years of age,
vaccinated against rubella up to 100 per cent beginning with 2006.
For the achievement of the respective objective and reaching an advanced level of accuracy
of official statistics it is necessary to use the international definition of live birth in the
process of progress indicator modification: “giving birth after 22 week and when the weight
exceeds 500 g”. In addition, the indicator shall be redefined so that the share of children
vaccinated against rubella when they are 1 year old reached the target of 99 per cent by 2015.


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5.     The objective “Improve maternal health” has the task to reduce by three fourths, by
2015, the maternal mortality coefficient by: (i) reduction of maternal mortality rate from 23.0
in 2006 to 21.0 in 2010 and 13.3 in 2015; (ii) provision of all maternities with qualified
medical staff beginning with 2006 (at present – 99 per cent).
The maternal mortality rate will monitored both with the help of studies and official data
aimed at identifying data inconsistency. The indicator “The rate of births assisted by qualified
medical staff" provides information about the real number of births assisted by qualified
medical staff, which at the same time serves as alternative indicator for people’s access to
health care services. There shall be established a precise target for the improvement of this
indicator achievement and reaching a higher degree of accuracy.
6.     The assignments set for the achievement of the objective “Combat HIV /AIDS,
tuberculosis and malaria” refer to: (i) stop by 2015 the spread and start the process for
HIV/AIDS occurrence reduction; (ii) stop by 2015 the spread and start the process for
tuberculosis and malaria incidence reduction.
In the context of the NDP, the respective assignments shall be accomplished by improving
the quality of life, in general, and medical services, in particular. At the same time, taking
into consideration the international trends, registered during the last years in this area, the
indicators related to prevention of HIV/AIDS spread have to be reformulated and the targets
specified.
The TB mortality will monitored both with the help of studies and official data aimed at
identifying data inconsistency. The assignment related to the situation on malaria will be
reformulated, setting the target of not allowing recording new cases of local malaria.
7.      In the area of “Ensure environmental stability” the assignments are oriented toward:
(i) integration of the principles of sustainable development in country's policies and
programmes and reduction of the degradation of natural resources; (ii) reduction by half, by
2015, of the number of persons without sustainable access to safe water sources;(iii)
reduction by half, by 2015, of the number of persons without access to the improved
sewerage and sanitation systems.
The next period, for the first assignment, the stated targets are to be redefined and adjusted to
present conditions and international terminology. Because the access to safe water sources
and sewerage is identified as one of the stringent issues of the country, the need of
investments and structural changes in the area is obvious. Thus, it is necessary to carry out
measures of redefining the water standard in order to allow a quick and efficient monitoring
of water quality in terms of cost, at the same time, taking into account the EU standards.
The proposed targets in area of access to sewerage and sanitation systems were not met by
2006, at present the respective indicator is only 30.6 per cent. Because the improvement of
sewerage and sanitation systems is more expensive then the improvement of water supply
systems, this might be the single indicator, where the achievement of a target will be difficult.
Under these conditions the target shall be redefined and a lower value shall be established,
using data of the Household Budget Surveys.
8.      Worldwide, “Develop a global partnership for development" aims at raising public
awareness and promoting activities of developed countries in order to open markets for the
goods from developing countries and to provide them debt reduction assistance and social-
economic development assistance. The targets set for the Republic of Moldova for this
objective have a very different relevance for general development, and the structure of targets
and indicators is different from other objectives within MDG. In this respect, the definition of
the targets and indicators is not clear enough, they mainly refer to the specific programmes


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                                                                               Draft NDP/21.05.2007
                                                                      Ministry of Economy and Trade

implemented by the Government and not to the assignments needed to achieve the objective.
Thus, to improve this objective it is necessary to eliminate a set of assignments and
indicators, establishing assignments and indicators that will show the progress of
international cooperation.
National mid-term priorities as a way to meet the long-term vision
It is necessary to meet the MDG targets and indicators, but not sufficient to achieve the long-
term vision. The achievement of MDGs, also of the proposed long-term objectives, can be
realized by consolidating the foundation for a solid, durable, and inclusive economic growth.
Starting by analyzing the present growth model, the enhancement of local economic
competitiveness and, respectively, its role in satisfying the internal and external demand,
stays the main task on the agenda. At the same time, to ensure an inclusive character of the
growth it is necessary to eliminate the regional disparities by promoting a development that
would stimulate the creation of well paid working places countrywide, thus raising the
incomes of the residents and offering an alternative for emigrants.
The identification of priorities is based on the analysis of socio-economic factors, SWOT
analysis, and recognition of the fact that the financial resources, reported to the amplitudes of
needs and opportunities, are scarce, so that a high level of their concentration is needed.
In this respect, the National Development Plan proposes five national mid-term priorities, in
order to achieve general objectives:
   ▪ Strengthen a modern democratic state, based on the principle of rule of law
   ▪ Settle the Transnistrian conflict and re-integrate the country
   ▪ Raise the national economic competitiveness
   ▪ Develop human resources, rise the employment level, and promote social
   inclusiveness
   ▪ Regional development
Ensuring macroeconomic stability and consolidating the capacities of local and central
public administration are the prerequisites for achieving all established priorities.
The prerequisites and national priorities, identified in the National Development Plan, cannot
be regarded detached – they intersect and complete each other. Thus, the qualitative human
resources contribute to the increase in competitiveness and vice versa. Combating corruption
affects positively both the business environment and the quality of education. The separation
by areas aims at organizing rationally the strategy paper, as well as simplifying the
implementation, monitoring, and evaluation, and does not represent an essential division. The
identified measures shall be implemented in tandem, and the achievement of an objective will
contribute to the achievement of others.



4. PREREQUISITES FOR THE ACHIEVEMENT OF NDP PRIORITIES

1. Ensuring macroeconomic stability
An essential prerequisite to sustainable and balanced economic growth is the ensuring of a
macroeconomic stability by means of steady and foreseeable monetary and fiscal policy.
Macroeconomic stability supplies people’s and economic entities’ confidence in the
sustainability of economic growth, thus stimulating them to augment their operation, increase


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the efficiency of production, make investments, including by profit reinvestments. Moreover,
macroeconomic stability is an important condition for an efficient implementation of social
policy and improvement of people’s living standard.
At the same time, the state of macroeconomic affairs is also influenced by that of the real
sector. An efficient functioning of the real sector contributes to preserving the
macroeconomic stability. On the contrary, an unbalanced and rigid structure of internal
production, low level of competition in economy and production can lead to macroeconomic
inconstancy.
Maintenance of macroeconomic stability is a necessary, but not sufficient requirement for a
balanced economic development. It is important to stir up economic reforms, provide real
support to existing enterprises oriented towards exports and stimulate the establishment of
new entities, including on the account of foreign investments, create conditions for regional
development, including by developing infrastructure, settling issues of ensuring local
establishments with funds, stimulate investments, etc.
Ensuring of macroeconomic stability is a primary condition for a successful implementation
of mid-term priorities provided for in the NDP. In this connection, the NDP will focus on
achieving the following outputs:
       (i)     diminish inflation rate
       (ii)    promote a flexible policy concerning the national currency exchange rate
       (iii)   stabilize the situation with the foreign debt
       (iv)    put into practice a balanced budgetary-fiscal policy
       (v)     correlate policy priorities with available resources and efficient management
               of public means
In accordance with the Law on the National Bank of Moldova, the provision for and
maintenance of price stability is the core objective of the NBM. In this regard, the National
Bank of Moldova will implement a prudent monetary policy to achieve its core objective.
The price stability will be ensured and maintained by using the full range of instruments of
the monetary policy availed by the National Bank of Moldova, which can be applied
depending on the status of the monetary market..
It is envisaged to implement a new monetary policy, and namely to implement the inflation
targeting system in the medium term. During 2008-2011, measures will be taken to prepare
and implement the new system.


The National Bank of Moldova will continue to maintain the floating regime of the exchange
rate and will promote a prudential foreign exchange policy consistent with its core objective
to ensure and maintain price stability.
Prevention of excessive increase in foreign debt will play an important role in ensuring
macroeconomic stability. As regards the foreign public debt, further stabilization of the
budgetary-fiscal system, observance of payment discipline, continuation of the process for
restructuring foreign debt and identification of possibilities to refinance multilateral debts
will ensure the accomplishment of such an objective. The state of things with the private
foreign debt will be stabilized as a result of improvement of trade balance and balance of
payments on the account of Moldovan economy competitiveness enhancement and ensuring
sustainable economic growth.
Main objectives in the budgetary-fiscal policy, highlighted in the NDP, are oriented towards:



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       -   establishment of a modern and effective system of finance management, that
           would envisage advanced abilities of making forecasts and earmarking resources
           in line with the priorities of the governmental policy, as well as introduction of
           modern practices for evaluating and analyzing outputs and performance as a result
           of using public finance
       -   stability of public finance in the long run, that would allow putting into place
           incentives for developing human potential, enhancing people’s living standard and
           spurring economic activity
       -   upswing of financial situation in regional development
One of the conditions for an essential improvement of the public finance management
process is the provision for an Integrated System of Public Finance Management, in which
one would apply the best international practices of public finance management, which, within
the framework of the NDP, would set up a sound basis for long-term budget stability and
creditworthiness, an efficient and fair system of interbudgetary relations, and an efficient
system of financial planning and control.
Another important condition for the development of public finance system in the following
years, as one of country’s social-economic policy instruments, is a balanced and coordinated
delimitation between the levels of budgetary system of commitments to expenditures and
revenues; establishment of legal and economic grounds for stirring local public
administration in forming its own budgetary expenditures and revenues, given the interests
and preferences of the local communities, in line with the provisions of the European Charter.
An indispensable condition to ensure financial stability of branches of economy is to set and
develop objectives, tasks and results to be achieved by each body within the system, this
allowing for the implementation of priorities and accomplishment of objectives outlined by
the state policy, as well as to work out measures to stimulate and sanction in order to achieve
objectives and tasks.
Creation of formalized, transparent and incorruptible procedures for making decisions
concerning the use of budgetary resources, including by making budgetary acquisitions, is the
last stage of mid-term improvement of the public finance policy.


2. Strengthening public administration capacities
Strengthening public administration capacities is a dynamic process that requires continuous
betterment. Ultimate change of emphases in the activity of public administration is a long-
lasting process that exceeds the term covered by the National Development Plan. The NDP
should, nevertheless, bestow this process a different, modern, connotation, that would allow
the Republic of Moldova to successfully pass through the transition process and should back
its integration efforts into the European values and structures.
Therefore, strengthening capacities of public administration is a prerequisite for a successful
implementation of the National Development Plan objectives. So far, not a clear-cut approach
in the reform of public administration has been identified, this being the subject for
intermittent changes. Or, regardless of period, implementation of country’s development
objectives can be ensured within modern and functional public administration, capable of
conforming itself with the European Union standards and of efficiently implementing the
Acquis Communautaire.
Although the last administrative-territorial reform deployed in 2003 led to the decrease in the
number of public officials, beginning with the year 2004 their number has been continuously


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going up. Concomitantly, numerous attempts to rationalize the number of public institutions
and civil servants in the central public administration too, did not contribute to its
effectiveness. Thus, at present there are 13137 civil servants operating at central level and
8025 operating at local level – the number being almost the same as in 2002. The average
monthly salary of a civil servant is about 2150 MDL (162 USD), being absolutely lower than
a salary paid in the majority of Central and South-Eastern European countries. Moreover, the
public administration in the Republic of Moldova has not been adjusted to up-to-date
requirements which envisage a proficient interaction between all levels of administration, a
professional and motivated civil service, offering an appropriate representation to citizens’
interests and needs.
The call for carrying out a complex reform of public administration derives from three
fundamental judgments:
            Economic. Promoting the reform by rationalizing the number of public
       institutions and civil servants will contribute to the cutting down of administrative
       costs and their channelling towards providing higher quality civil services.
            Social. The quality of the civil services provided to citizens will be improved,
       while the interaction between the civil society and administrative bodies will
       strengthen. Also, a better transparency of the decision making process will enhance
       society’s credibility of public authorities and will strengthen their cooperation in
       implementing programmes of national importance.
            Political. A public administration whose reform has been based upon the best
       international practices will contribute to the improvement of the image of the
       Republic of Moldova both inside the country, as well as abroad. Building of an
       efficient corruption free public administration with qualified personnel increases
       country’s chances of cooperation with and integration into European and international
       structures.
Synergy between the efficiency of the decision making process, activity of civil servants,
interaction between public institutions and correlation between strategic planning and
budgetary process will back and spur the implementation of the entire range of policies and
reforms promoted by the Government.
Central public administration
In the course of over one decade the central public administration (CPA) has been subject to
frequent changes, though of an inconsistent character, which did not lead to an essential
improvement of its efficiency. As a result, in 2005 the Government approved the Central
public administration reform strategy and its Implementation plan, which a priori provided
for carrying out a functional analysis of public authorities and bodies at the central level. The
process of assessing the functions, which finished by the end of 2006, was based upon the
principle of delimiting functions of developing sector policies from policy implementation
functions, as well as identifying overlaps of functions between various bodies of the central
public administration.
The further implementation of the central public administration reform is indispensable.
There are all the required premises for this: results of the functional analysis, followed by a
set of recommendations, technical and advisory support of country’s development partners,
as well as the large-scale consensus of the entire society regarding the call for this reform.
In this connection, the CPA reform in the mid-term should make an efficient use of all the
achievements and recommendations provided so far and orient towards the accomplishment
of the following objectives:


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   (i)     delimitation within the framework of central public administration of policy
           development functions from policy implementation functions
   (ii)    strengthening central public administration capacities of policy analysis,
           monitoring and evaluation, improvement of reporting system and decision making
           process, including by applying the “live” advise mechanism
   (iii)   establishment of a core of professional and motivated civil servants, observing
           professional ethics, and
   (iv)    creation of an efficient and sustainable interaction system between policy
           development and budgetary process
Given the fact that the Implementation plan for Central public administration reform strategy
will expire at the end of 2008 and since its elaboration the functional analysis revealed a
number of previously unknown aspects, it is required that a conceptual-regulatory framework
be developed in order to systematize and re-prioritize the set of actions for continuing the
accomplishment of the said reform. This document will take into account the best European
and international practices which proved their efficiency in case of other developing
countries.
A first step in this regard was the elaboration of the draft Law on central public
administration which regulates the principles of organization and functioning of the central
public administration system, as well as tasks, responsibilities and inter and intrainstitutional
relations within the CPA. This law, which is to be passed in 2007, will provide for a unique
framework for the operation of central public administration. The draft law provides for the
establishment at the ministry level of a position that would be responsible for the
administrative activity of the ministry, ensuring the liaison between the subdivisions within
the ministry and cooperation with specialty subdivisions within the Government Office.
Inclusion of this position will allow for a more efficient management of central public
administration, as well as for reducing the burden of management tasks the ministers have.
Throughout this period, a special attention will be paid to the functional reorganization of the
Government Office. Thus, for strengthening strategic planning and policy coordination
capacities of the Government, a consolidated Policy Analysis and Coordination Unit (PACU)
will be set up. In the mid-term, the PACU will methodologically promote and coordinate the
modernization of the entire system of strategic planning of Government activities,
improvement of the decision making process and will ensure a better correlation between the
set of priority actions and the framework of available resources.
Policy analysis, development and monitoring units have been established with a view to
strengthening ministries’ planning and analysis capacities in seven of them. In the mid-term,
it is envisaged to expand the number of units onto other ministries, alongside with enhancing
analytical capacities of the personnel which act therein. These units must ensure consistency
between strategic priorities and the mid-term expenditure framework. The personnel in these
units will benefit from training and continuous improvement and will be provided with up-to-
date equipment that will meet the needs of the performed activities.
At the same time, at present, the low level of motivation of civil servants does not leave room
for attracting and keeping qualified specialists within these bodies, particularly, and public
administration, in general. Or, professional and reliable personnel can be hired if there is
professional and material motivation. In this connection, in accordance with the Law on
remuneration in the budgetary sector, a remuneration system that provides for gradual
increase in budgetary area employees’, including civil servants’ salaries, will be implemented
during 2006 – 2010. Thus, in the mid term, efforts for the betterment of remuneration of civil
servants, both qualitatively, as well as quantitatively, will be made.


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With a view to spurring human resources management, a package of laws, that put forward
new approaches regarding the public service personnel policy: draft law on the public
position and the statutes of the civil servant and the Code of Conduct of a civil servant, has
been worked out. The draft law on the public position and the statutes of the civil servant sets
out three categories of public positions that are: 1. high civil servants 2. leading civil servants
and 3. executive civil servants. In conformity with the provisions of this law, civil servants
will be appointed to their positions on merit basis, given their professional qualities, while the
activity performed by civil servants will be assessed on the basis of a methodology approved
by the Government. This law provides for that by the year 2008, a mechanism for stimulating
civil servants for special merits and performances in their professional activity will be put
into place. Civil servants’ code of conduct prescribes the set of standard behaviour for public
administration. The implementation of this code will allow for an increase in accessibility and
transparency within major activities of public administration.
In order to increase personnel data management capacities, human resources management
units will be strengthened by establishing comprehensive job descriptions, with clear details
of tasks to be carried out. These services will keep a record of continuous personnel training
and improvement needs. There will be training programmes for public service worked out in
cooperation with civil service training institutions in specialized areas.
Beginning with the year 2007, for a better strategic planning process, one will apply new
rules for elaboration and unified requirements for the four types of policy papers (concept,
strategy, programme, and plan). Public administration authorities will have to take into
account the specifics attributed to each type of policy paper and work it out in line with the
established requirements, which necessitate a detailed analysis of an issue, offering of a
number of possible solution scenarios, impact analysis and consultation with third parties.
Also, the Government has worked out the methodology for the Regulatory Impact Analysis
(RIA) and for the monitoring of the efficiency of regulation acts which set the principles of
implementing RIA process in all the bodies of the central and local public administration
bodies. The RIA envisages the determination of the needs to pass draft regulatory acts on the
basis of cost-benefit analysis, as well as the need to amend or repeal the existing acts. The
RIA manual which is currently being finalized, will offer the set of rules and principles for a
successful promotion of the public administration reform, as well as of the regulatory
framework reform, whose implementation is of equal importance for the setting up of good
governance in the Republic of Moldova.
Local public administration
In comparison with the central level public administration, the local public administration has
less benefited from a strategic and definite approach that would strengthen activities of the
local authorities and would contribute to the improvement of the public services which they
provide. Thus, after the declaration of Moldova’s independence, the local administration has
undergone several diametrically opposed reforms. The last reform that has been carried out in
2003 allowed for an administrative-territorial configuration as to the principle during the
initial period following the independence of the Republic of Moldova. Nevertheless, this has
not added to the improvement of local public administration efficiency. Today, local public
administration bodies have limited capacities of efficient management of finance, local
patrimony and human resources. As a result, the quality of the public services provided is
below expectations.




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In this connection, alongside with the public administration reform at the central level, it is
required that the local public administration capacity is strengthened following the priority
directions below:
   (i)     delimitation of tasks and responsibilities between central and local authorities by
           increasing the local self-governance
   (ii)    increase of financial independence of the local public administration bodies
   (iii)   increase of economic independence of local public administration bodies and
           diversification of activities in rural areas
   (iv)    provide opportunities for local civil servants’ improvement within a consolidated
           system of training, re-qualification and professional refresher programmes, and
   (v)     regional development
In order to stir the efficiency of local public administration, the appropriate institutional and
legislative framework was put in place in 2006. Thus, the Ministry of Local Public
Administration was set up and a package of laws (the Law on local public administration in a
new reading, the Law on administrative decentralization and the Law on regional
development) was passed and came into effect at the beginning of 2007. In spite of the fact
that these laws have taken into account the European practice in this area, their correct
application is an indispensable condition for promoting local self-governance and
strengthening communities.
Given the said objectives, it is required to enhance the self-governance and the capacity of the
local public administrations, especially of the I level, in ensuring mayoralties with own
revenues, efficient resources management and to invigorate the development of economic
potential of the mayoralties. In the context of administrative decentralization, it is necessary
to work out an action plan that would set distinct implementation stages for the administrative
decentralization process in the Republic of Moldova. This will permit avoiding ambiguities
and overlaps in delegating competencies, clarifying the transfer of financial and material
resources, addressing, at the same time, the correlation between the transfer of competencies
and the necessary resources. After the legislation on the local public administration and on
administrative decentralization is passed, the revision of legislation on local public finance
will follow, setting a clear and simple formula of estimating interbudgetary transfers.
The activity of the local public authorities should be oriented towards meeting the needs of
local inhabitants by providing quality services and support in offering jobs. Due to limited
employment opportunities with an attractive remuneration a big part of country’s population
left abroad looking for a job in more advantageous conditions. At the same time, about 40 per
cent of the employed population is working in the agricultural sector. Thus, under the
conditions of developing outdated agriculture, whose reformation process has not come to an
end, local public authorities need to secure the regulation of land relations and the support of
employees in this unprofitable sector. Concomitantly, it is necessary to set up premises for
diversifying activities, especially in rural areas, including by organizing paid public works.
Also, community development, especially with reference to small-sized establishments, must
be supported by community integration into regions. It will be possible to make an
assessment of the economic potential of each community enclosed into the six regions,
delineated by the law on regional development, therefore ensuring their balanced
development by various identified means.
The need that the local public administration becomes flawlessly efficient and qualitative is
obvious. This can be achieved especially by investing into human capital and by training civil
servants. In this connection, the Government will ensure the implementation of the National



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strategy for training civil servants and local elected persons, worked out in line with the
recommendations of the Council of Europe. This strategy sets out the grounds for a
continuous training of civil servants and local elected persons from the local public
administration with a view to increasing their competence, performance and competitiveness.



5. NATIONAL MEDIUM TERM PRIORITIES

1. Strengthening democracy based on the rule of law principle
Strengthening democracy based on the rule of law principle foresees ensuring respect for the
human dignity, human rights and liberties, free development of human personality, justice
and political pluralism. This also includes ensuring equal treatment and opportunities for
every citizen. The existence of a predictable legal framework and a fair, transparent and
efficient judiciary is essential for the protection of citizens against arbitrary abuse of power
and illegal acts by individuals and private entities. The functioning of democratic institutions
and the application of the rule of law principle creates favourable conditions for inclusive and
sustainable growth.
Progress indicators
    Number of applications to the ECHR, including cases won by citizens
    Number of rulings by the ECHR enforced by the Government
    Improvement of the Corruption Perception Index
Objective
1.1 Strengthening democracy, observance of fundamental human rights and freedoms
1.2 Modernizing and increasing efficiency of the judiciary
1.3 Prevention and combating of corruption
1.4 Border control and ensuring legal order
Essential programmes and measures
1.1 Strengthening democracy, observance of fundamental human rights and freedoms
Rationale
Democracy can only become sustainable when individuals trust the decision making bodies
of the state and if the latter are serving the citizen and protect them against abuses. In this
framework, strengthening the judiciary may only be ensured by strengthening the institutions
that protect the rights of citizens, ensure respect for the right to freedom of expression
guaranteed by the Constitution and by increasing the transparency of the decision making
process and implementation of political decisions. Decreasing human trafficking and
prevention of ill-treatment and torture represent results of a functioning democratic system
where citizens are protected by the state.
Essential programmes and measures
(i) Ensuring respect for freedom of expression and cooperation with the civil society:
      Improving the implementation mechanism of participatory democracy, including by
       ensuring transparency of administrative acts and political decisions and
       communication with citizens;
      Supporting projects promoted by civil society relevant for the implementation of
       Acquis Communautaire and Government priority agenda;


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       Ensuring a transparent relationship between authorities and media institutions in
        accordance with the Council of Europe recommendations.
(ii) Increasing the role of Parliamentary Advocates (Ombudsmen):
       Increasing independence of Parliamentary Advocates by establishing a more complex
        procedure for the their dismissal;
       Introducing a public and transparent procedure for the selection and appointment of
        candidates for the position of Parliamentary Advocate, including by consultation with
        human rights organizations.
(iii) Prevention and combating human trafficking:
       Seizing all training opportunities in the field of prevention and combating of human
        trafficking;
       Regulating illegal migration, especially labour related by signing bilateral agreements
        regarding migration of labour force;
       Strengthening the capacities of the Centre to Combat Trafficking in Human Beings
(iv) Ensuring respect for the rights of detainees:
       Ensuring decent detention conditions for the convicted and persons in pre-trial
        detention;
       Building of arrest houses;
       Increasing training in the field of human rights for the police and penitentiary
        personnel;
       Improving the system of labour for detainees;
       Ensuring social reintegration for the convicted.
1.2 Modernizing and increasing efficiency of the judiciary
Rationale
One of the essential components of society and its progress is represented by the judiciary as
a totality of structures that contribute to the administration of justice. Modernizing and
increasing the efficiency of the judiciary (developing and implementation of reforms based
on ensuring impartiality of the judiciary, improving performance and credibility of judges,
increasing access to legal services) constitute priority actions that need to be undertaken by
the Republic of Moldova in order to reach these objectives.
Essential programmes and measures
(i) Guaranteeing effective independence of the judiciary:
        Developing a mechanism for an adequate funding of justice to ensure the financial
         independence of the judicial system;
        Building capacity and increasing the responsibility of the Higher Council of
         Magistrates;
        Amending the legislation regulating the activity of the judiciary to establish
         incompatibility between membership to the Higher Council of Magistrates and other
         activities, with the exception of didactic activity.
    
(ii) Ensuring free access to justice:




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         Reforming the state-guaranteed legal aid system by establishing objective criteria for
          the provision of aid and implementing a mechanism to ensure the transparency of
          the granted aid;
      Informing the citizens on the forms and conditions for the reception of free legal aid;
      Monitoring the quality of services provided within the state-guaranteed legal aid
          system.
(iii) Ensuring transparency and quality of justice;
      Ensuring citizens’ access to information on the activity of courts and case-law;
      Implementing the comprehensive judicial software programme and the automated
          system for random distribution of cases;
      Establishing a mechanism for the unification of jurisprudence to improve the quality
          of the administration of justice and justice credibility;
(iv) Improving efficiency and responsibility of the judiciary:
        Optimizing the legal proceedings with the aim to rationalize the hearing of cases and
          development of a relevant policy for the allocation of human resources.
        Implementing a monitoring system for the performance of judges and auxiliary
          personnel;
        Promotion of measures for alternative solution of litigations (mediation, arbitration)
          aimed at reducing the caseloads in courts.
             
(v) Consolidation of measures for implementation of court decisions:
        Development of a mechanism for financing expenditures for the enforcement of
         acts;
        Ensuring access of implementers through the computerized system to the necessary
         data base for the efficient development of tasks/activities;
        Active involvement and partition of creditors’ and debtors’ responsibilities in the
         process of judicial decisions’ implementation;
        Creation of the legislative and institutional framework for the implementation of the
         probation service.
(vi) Alignment of the legal framework with European standards:
        Costs and financial expenditures estimation for the implementation of the
         communitarian legislation and of consequence of actions for harmonizing national
         legislation to the communitarian one;
        Development and implementation of national annual plans of harmonizing of the
         Republic of Moldova legislation to the communitarian legislation.
(vii) Strengthening juvenile justice system:
        Assessment of the number of required personnel and buildings for the investigation
         and trial in the best conditions of cases involving children in conflict with the law or
         child victims;
        Improving legal framework in the field of protection of the rights of children by
         developing proposals to unify and simplify the rules and procedures and increasing
         the procedural safeguards for the children;




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        Creation of the required infrastructure for the good functioning of the juvenile
         justice system;
              Obtaining statistical data regarding children involved in legal proceedings
              Analyzing statistical data regarding children involved in legal proceedings
                 (investigation, sentenced and victims), desegregation by rayon
              Establishment of a centre responsible for the documentation and information
                 accessible for the professionals of the juvenile justice system.
1.3 Prevention and combating of corruption
Rationale
According to different studies and statistical data corruption remains to be a subject of main
concern for the people of Moldova, undermining the credibility of the state on the national
and international levels. The most vulnerable to corruption are considered to be the law
enforcement bodies, the judiciary, the health system, the education system, the fiscal system,
the customs and the local public administration bodies.
The different manifestation of corruption (excessive bureaucracy, protectionism, nepotism,
excessive state controls and regulations, unfair competition etc.) lead to negative social and
economic consequents for the development of the state.
Being a complex phenomenon determined by different causes (economic, legal, institution,
social, moral, etc.) corruption needs to have a multidimensional approach and a permanent
review of policies aimed at its diminution. The use of restrictive measures is not sufficient;
there is a great need for the combination of prevention and reactive measures.
Essential programmes and measures
(i) Improving the legal framework in the field of fighting corruption in accordance with
international standards and good practices:
             Development and approval/adoption of regulatory acts necessary to efficiently
              implement the provisions of the international conventions in the field, to which
              Republic of Moldova is a party (for example, the Penal Convention regarding
              Corruption, the Civil Convention regarding Corruption);
             Development and approval/adoption of the law on lobbyism;
             Continuation of the reform of the regulatory framework;
(ii) Strengthening the capacities to prevent and combat corruption:
             Initial and continuous training of judges, prosecutors, investigating officers,
              etc. at the National Judicial Institute and other similar institutions;
             Finalizing the division of competencies between authorities involved in
              combating corruption (especially the Centre to Combat Economic Crime and
              Corruption, Anti-corruption Prosecutor’s Office and the Ministry of Internal
              Affairs);
             Adequate technical endowment of the CCECC to investigate corruption cases;
             Increasing the salary level of public servants in relation with duties fulfilled.
(iii) Ensuring transparency of the activity of public institutions, access to information,
promotion of ethical standards:
             Establishing a mechanism for the implementation of the law on the financing
              of political parties and of electoral campaigns;


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             Creation of web pages for all public authorities and their permanent up-dating;
             Establishing a mechanism for the implementation of the law regarding
              transparency in decision making;
             Approval/adoption of ethical codes for judges, medical staff, etc.;
             Ensuring access to public interest information by placing information on web
              pages, publication and dissemination of relevant information material etc.;
             Ensuring fiscal transparency and annual publication of reports on the
              execution of budgets at the level of each agency and autonomous
              governmental authorities;
             Organizing periodic meetings with civil society, collaboration on different
              specific subjects.
(iv) Active involvement of the civil society and private sector in prevention of corruption,
creation of an atmosphere of non-tolerance for the corruption phenomenon:
             Development and adoption of the anti-corruption information and
              communication strategy;
             Participation of the public authorities in anti-corruption initiatives of the
              representatives of civil society;
             Development of investigative journalism;
             Development of hot-line practices.
(v) Development of international collaboration:
             Implementation of GRECO recommendations, developed as part of the second
              evaluation round (report as of 13 October 2006);
             Development of a plan of action to participate at the World Bank initiative in
              the field of prevention and combating corruption;
             Conclusion of cooperation agreements with other states regarding different
              aspects of combating corruption (for example, avoidance of double taxation
              and combating tax evasion);
             Fulfilling the programme of actions regarding the implementation of the
              Preliminary Country Plan of the Republic of Moldova in the framework of the
              “Millennium challenge account”.
1.4 Border control and ensuring legal order
Rationale
One indispensable element and a major condition to ensure the security of any country
constitute the supervision and control over the state border. For the Republic of Moldova this
aspect of the national security has acquired a special importance taking into account the
international tendencies of proliferation of migration, trans-border organized crime and
international terrorism. Currently the management of borders of the Republic of Moldova is
organized in accordance with the provisions of bilateral treaties and agreements with
neighbouring countries and the internal legislation of the Republic of Moldova. The transition
for the border guard troops to the Border Guard Service that is the professional authority in
the field of guarding and control of the state border may be considered as a first step in the
adjustment to the EU standards.
The creation of positive conditions for continuous development of social and economic
processes in the Republic of Moldova is directly connected with the consistent fight against


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crime and maintenance of the legal order. Ensuring an efficient activity of combating crime
and maintaining the legal order requires the implementation of policies that would primarily
aim at preventing crime by introducing advanced European standards.
Essential programmes and measures
(i)    Development of the state border management within all border sectors of the Republic
       of Moldova:
        Harmonization of the national legislation with international standards, especially of
         the European Union;
        Organization of joint-control at the Moldovan-Ukrainian state border crossing
         points;
        Continuation of cooperation with neighbouring countries to complete the process of
         demarcation of state border;
        Development of the infrastructure of check-points and endowment with state of the
         art technical equipment;
        Establishment of the professional training system for the human resources involved
         in the border guarding and control.
(ii)   Intensifying trans-border cooperation between the Republic of Moldova and the EU
       members as well as neighbouring countries:
        Development of regional cooperation between relevant law enforcement bodies
         (police, border guards, and customs).
(iii) Institutional restructuring and modernization of the public order system:
        Modernization of the management of public order activities at all levels of the
         system to increase the efficiency of police contribution to the prevention of crime
         and establishment of community and proximity police;
        Prevention of crime among juveniles by using a range of special measures and
         programmes for children and families, which live in a risky environment, that
         generates drug abuse or promotion of a criminal culture;
        Supporting efforts to prevent domestic violence;
        Improving the professional training and development of personnel for the law
         enforcement bodies, especially for the public order services.


2. Settlement of the Transnistrian conflict and reintegration of the country
Rationale
Solving the Transnistrian conflict on the basis of norms and principles of the International
rights, OECD standards and the fundamental approaches in the framework of the external
mechanisms of settlement, stipulate the implementation of the territorial, social and political
reintegration of the Republic of Moldova, through the reestablishment of the economic, legal
and social unique areas, and it represents one of the of the main conditions for the sustainable
development of the country, including the context of the European integration, of ensuring
the security in the region, of consolidation of democratic institutions, as well as ensuring the
stable economic and social stability.
The final settlement of the Transnistrian problem, representing one of the priority directions
in the development of the Republic of Moldova, is a scope which consolidates the activity of




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public authorities of the Republic of Moldova and requests a maximal concentration of
efforts of the entire civil society.
In the implementation process of the NDP is important to addresses this problem into a
broader context, with a larger involvement from the International community, and mainly the
European Union, including the Neighbouring European Policy.
The sustainable settlement of the Transnistrian problem involves the focussing the efforts on
two areas:
1. Political dimension
      Development of the special juridical status of the Transnistrian region of the Republic
       of Moldova, by respecting the independence, sovereignty and territorial integration, in
       the interaction with the International partners, in the framework of the existing
       mechanisms on the basis of a consensus of the actors involved.
      Approval of the political solution in the negotiation process in the format of „5+2”;
2. Social-economic dimension
      Reestablishment of the unique economic, legal and social areas, which stipulates the
       concentration of the efforts of all Central public authorities of the Republic of
       Moldova, their coordination with the objective to promote a consequent Government
       policy on the reintegration of the country.
      Development of complex integration policies (economic, social, educational, cultural,
       etc.) and extension of the programmes and existing strategies regarding the
       involvement of the citizens (in a broader sense – inhabitants) from the left bank of the
       Nistru river and guaranteeing to respect their rights, including the social, economic
       and cultural, etc.
In such a way, the harmonious combination of these two components – of internal and
external policy – constitutes the strategy in solving the Transnistrian conflict in medium term.
This means that this strategy is based on a consequent and balanced policy of all the branches
on State power. In this regards, the successful implementation of the internal component and
the consecutive promotion of the external message in the bilateral and multilateral dialogue
requires the consolidation of the positions of the political powers of the Republic of Moldova,
with the objective to promote and defend the interests of the Republic of Moldova, as well as
ensuring the continuity of the reintegration of the country. (in medium term). The declaration
of the Parliament of the Republic of Moldova regarding the political partnership for the
implementation of the objectives for the European integration and the unanimous approval of
the documents from June-July 2005 represent a fundamental decision and constitutes the
necessary tool for extension of the consensus at a national level.
The support of the reintegration policy from the part of the civil society plays a key role. The
extension of the existing dialogue with the Non Governmental Organisation (NGOs)
constitutes one of the major priorities of the Government. The positive experience of
cooperation between the Governmental institutions and the Parliament of the Republic of
Moldova with the NGOs will be institutionalised in the framework of implementation of the
NDP. Regarded from this perspective, the mid term strategy for solving the Transnistrian
conflict stipulates the conjunction of the efforts of the Executive and Legislative bodies for
attaining the final solution of the conflict.
The final settlement of the Transnistrian strife will be developed and approved in a
multilateral framework of negotiations by involving the parties and the International actors.


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The promotion of the solution is a complex process, which foresees the obtaining of a
consensus of the involved actors on the future perspectives statute of the Transnistrian region
as part of the Republic of Moldova and the delimitation of competences between the centre
and the region, as well as a set of guarantees: constitutional guarantees of the Transnistrian
statute and legal, economic and social guarantees for the population of the region.
In the same time, one of the priorities is to create favourable conditions for the settlement of
Transnistrian strife. Taking into consideration the favourable International conjuncture as a
necessary condition, the authorities of the Republic of Moldova suggest the following three
objectives, the realisation of which aims at covering the final political solution. These
objectives are in accordance with the stipulations of the Constitution of the Republic of
Moldova and are a component part of the current National legal and regulatory framework
(Law of the Republic of Moldova Nr. 173-XVI from 22.07.2005 on the basic provisions of
the special legal status of settlements on the left bank of Nistru river (Transnistria), The
decision of the Parliament of the Republic of Moldova nr. 117-XVI from 10.06.2005):
            Complex democratisation and development of the civil society on the basis of
             European values and of the International norms and standards, which have to
             include a range of measures focused on the creation and development of the
             democratic institutions and of an integral civil society on both banks of the river
             Nistru, with the participation of the International community to this process.
(i) The actions undertaken by the authorities of the Republic of Moldova for the realisation of
this objective is based on the stipulations of the Appeal of the Parliament of the Republic of
Moldova on the democratisation criteria for the Transnistrian zone of the Republic of
Moldova (approved by the Parliament of the Republic of Moldova decision nr. 117-XVI from
10.06.2005).
          Removal of obstacles for the free activity of political parties of the Republic of
           Moldova in the Transnistrian region;
          Removal of obstacles for the free activity of national and local mass-media in the
           Transnistrian region;
          Removal of obstacles for the free activity of NGOs and of civil society development
           in the Transnistrian region.
(ii) Demilitarisation and provision of security, as well as the implementation of a range of
measures on consolidation of trust. Actions of the Republic of Moldova authorities
undertaken for achieving this objective are being based on the provisions of the Republic of
Moldova Parliament Appeal on the principles and conditions of de-militarization of the
Transnistrian zone (approved by the Decision of the Parliament of the Republic of Moldova #
117-XVI from 06.10.2005).
      Changing the actual mechanism on peace keeping in a multinational mission with an
       International mandate;
      Finalisation of withdrawal of the troupes and ammunition of the Russian Federation
       from the territory of the Republic of Moldova according to the decisions of the OECD
       summit Istanbul (1999);
      Dissolution of the paramilitary groups in the Transnistrian region and creation on the
       territory of the Republic of Moldova of the unified military forces and border-guard
       troops;
      Undertaking the consolidation measures for maintaining the stability, security and to
       ensure the free movement of the citizens in the Security Zone and in the region.


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      Social-economic reintegration. Reestablishment of the unique economic, financial,
       customs and social system.
(iii) The progress made in this regards have to be consolidated in accordance with the
bilateral and International agreements of the Republic of Moldova.
      The implementation of the bilateral Moldovan-Ukrainian agreements                     and
       understandings regarding the external commerce and border security.
      The cooperation with the EU institutions, and mainly through the EU Mission of
       Assistance at the Moldovan-Ukrainian Border (EUBAM)
      The development of a flexible and efficient mechanism to offer social assistance
       according the current legislation for inhabitants of the Transnistrian region of the
       Republic of Moldova
      Creation of favourable conditions for the economic-commercial cooperation between
       the two banks of the river Nistru and eliminating the barriers for a free activity of the
       economic agents, development and implementation of the common projects oriented
       towards the rehabilitation and development of the infrastructure with the support of
       foreign donors.


3. Enhancing the National Economy Competitiveness.
A country competitiveness represents its capacity to establish and maintain institutional,
economic and infrastructure conditions, which would encourage/favour the
constitution/attraction and development of certain companies that produce goods and services
of higher quality and/or at prices lower than the external competitors. The competition
capacity reveals itself on both international and national markets, in comparison with
imported goods and services.
At present, the Republic of Moldova competitiveness is ensured basically by low labour costs
and by low costs of certain domestic raw-materials and reveals itself in the sectors that are
characterized by relatively small value added. This competitiveness model is specific for
many countries, which have less advanced level of economic development. At the same time,
taking into account the increase in domestic prices, the country external openness, intensive
emigration of citizens and the abundance of cheap labour forces in other countries, the
comparative advantages of our country determined by low costs would be more and more
eroded, while the technological gap in comparison with the developed countries would
deepen further. Therefore, it is necessary to ensure gradual transition of the Republic of
Moldova from competitiveness determined by cost-factor to competitiveness determined by
efficiency- and quality-factor and advancement of the economy towards branches with
relatively higher value added. Competitiveness based on efficiency and quality will become
the main sources of sustainable economic growth and development and of improved living
standards for the country citizens.
This competitive transition implies fundamental improvement of the business environment
promotion of small and medium enterprises, enhancement of corporative efficiency at the
company level and upgrading the physical infrastructure. The main result of these
improvements in the short-run would be strengthening the capacities of technological and
innovation absorption. In the long-run this would lead to strengthening the country own
capacities for technological and innovation development.
General goal within the priority.


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                                                                            Draft NDP/21.05.2007
                                                                   Ministry of Economy and Trade

Increasing the competitiveness on domestic and foreign markets by ensuring the country’s
transition from cost-based competitiveness to efficiency and quality-based competitiveness.
Progress Indicators:
    Labour productivity growth rate by sectors and branches of activity;
    Relative labour productivity in the Republic of Moldova (in comparison with similar
     indicators in the main countries-competitors from the region – Romania, Bulgaria,
     Latvia, Lithuania, Ukraine etc.);
    The gross value added breakdown by sectors and branches of activity;
    The ratio of final products to total exports;
    Growth of exports share in GDP;
    Share of science-intensive products in the total production;
    The growth rate of Moldovan exports on the main markets compared to the total
     increase of sales on the respective markets;
    The share of the main domestic products by the Moldovan market segments.
Objectives.
3.1 Improvement of business environment in order to intensify the investment activity
in economy;
3.2 Promotion of SMEs aimed at providing new opportunities and ensuring higher
capacity for conformation of the economic system;
3.3 Enhancement of enterprise efficiency in order to strengthen the endogenous
competitiveness factors from the core of the national economy;
3.4 Development of research and innovation
3.5 Development of physical infrastructure aimed at lowering the production costs.
Programmes and measures.
3.1 Improving the business environment.
Rationale.
Currently, the Moldovan economy is characterized by reduced labour productivity,
decapitalization, orientation towards low value added and slow pace of new job creation. In
order to overcome this situation it is necessary to undertake concrete actions in several
directions, the main strategic direction at the level of policies being the improvement of
business environment. Due to its insignificant attractiveness in terms of natural resources and
the size of the domestic market, the Republic of Moldova can attract foreign investments,
first of all, through more favourable institutional and political factors in comparison with
other countries from the region. Hence, speeding up the regulatory framework reform as a
priority action in this regard will contribute substantially to advancing the domestic and
foreign investments, to growth and rehabilitation of the economy capital reserve.
Basic Programmes and measures:
i) Continuing and expediting the business regulatory framework reform:
        Further simplification and optimization of the existing regulations related to
       business initiation, carrying out and closing down;
        Establishing „one-stop shops” in the activity of all public authorities;
        Creation and promotion of national electronic payment systems, which would
       allow for the payment of taxes and fees, and for goods and services by electronic
       means;



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        Performing a cost-benefit analysis (analysis of the Regulatory Impact) prior to the
       introduction of additional regulations;
        Periodical (triennial) analysis of the regulatory situation;
ii) Improving the infrastructure quality:
        Speeding up the adjustment process of the MSTQ system to the international one
       and setting up an adequate framework for evaluating the quality of domestic products;
        Strengthening the institutional capacities in the area of standardization,
       accreditation, conformity assurance, metrology and market surveillance and
       integration of relevant institutions into the European Structures (EA, CEN,
       CENELEC and ETSI).
        Identifying priority areas/products for the state support of re-equipping and upgrade
       of the laboratories for checking the quality of products;
        Re-equipping and preparing laboratories, which perform product tests, for their
       further accreditation by the EU structures;
        Expediting the process of converting the mandatory standards into voluntary
       standards and mandatory technical regulations;
        Developing and upgrading the national base of calibrators compatible with the European
       Union requirements;
        Developing the mechanism for consumer protection and building institutional
       capacities for its application.
iii) Expansion of exports of goods and services, especially on the EU markets:
        Identification of potential competitive advantage niches and development of
       guidelines of activities that generate large value added;
        Development of factoring and of other financial instruments for export boosting;
        Strengthening the trade relations within the regional co-operation initiatives, e.g.
       Stability Pact for the South-Eastern Europe, CEFTA, GUAM, CEMN, etc.);
        Taking advantage of the opportunities offered by the GSP+ System, Autonomous
       Trade Preferences and negotiating an Asymmetric Trade Agreement with the EU
       afterwards;
        Simplification and making more efficient the customs and administrative
       procedures aimed at mitigating the complexity and the timeframe necessary for
       carrying out import and export transactions;
        Consolidation of the legal and regulatory framework and of regulations specific for
       the information and communication technology in order to promote electronic
       economy and commerce.
iv) Attracting foreign investments, especially the foreign direct investments (FDIs):
        Boosting the bilateral direct activities and negotiations aimed at attracting the
       subsidiaries of certain large companies in the economy of the Republic of Moldova;
        Training of „first line” staff (Customs Service, Border Guard Service, Immigration
       Service, etc.) in the client-relation area;
        Promoting investment opportunities by providing access to Free/Trade Economic
       Zones, industrial and innovative parks to investors.
        Broadening the spectrum of investment objects that can build up the investment
       funds portfolio;
        Encouraging the establishment of public-private partnerships aimed at financing
       the investment projects.


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v) Observing the principles of fair competition:
           Development of a clear definition of the state assistance, of types of state assistance
          (subsidies, subventions, tax exemptions, etc.) and setting up precise rules for the state
          assistance policy;
           Gradual elimination of those subventions, which are not argued from the economic
          and financial point of view, in order to observe fair competition on the market;
           Restructuring, trading or liquidation of those companies that failed to achieve
          positive results from their operational activity;
           Avoiding the creation and functioning of monopoles, except for the natural ones.
vi) Reforming and stimulating the development of financial market:
           Application of universal principles related to the access of financial, banking and
          non-banking institutions, conforming to the “proper-and-adequate” tests, to the
          financial market of the Republic of Moldova;
           Adjustment/approximation of internal legislation on stock market to the EU
          specialized guidelines and IOSCO Standards;
           Building up and strengthening the capacities of the body empowered with
          regulating competences for the whole segment of financial non-banking services;
           Improving the capital market infrastructure through stimulating the establishment of
          new investment institutions, e.g. mutual and specialized investment funds, non-state
          pension funds, innovative and venture funds, insurance companies, underwriting
          companies, financial consulting organizations etc;
           Diversification of financial instruments/leverages and stimulating the issuance of
          securities, including bonds/debentures (both by commercial associations and by local
          public administration authorities).


3.2 Promoting Small and Medium Enterprises.
Rationale.
The small and medium enterprises (SMEs) constitute an important component to ensure
sustainable economic growth and generate new jobs; diversification and continuous
enlargement of the SMEs sector being one of the signs of economy viability. The history of
SMEs development in the Republic of Moldova displays a series of factors that encumber the
SMEs adequate development, i.e. reduced access of debutants to financial sources,
underdeveloped entrepreneurial culture and acerb competition on the European markets. In
this context, the general objective of this Component of the Strategy is to strengthen the
competitiveness of the existing SMEs and to stimulate the increase of their number.
Basic Programmes and measures:
i)       Facilitating the access of SMEs to financial resources:
          Establishing the Organization for Small and medium Enterprise Development,
           strengthening its institutional capacities, ensuring transparency and accountability in
           providing and using the funds;
          Development of risk capital system;
          Development of incentive schemes for investments in small and medium enterprises
           from the Republic of Moldova by the labour migrants, including training in terms of
           business promotion;



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      Encouraging the launch of long-term lending/credit schemes for small and medium
       enterprises, including the attraction of credit lines from international financial
       institutions and grants from foreign donors.
ii) Supporting the establishment and development of small and medium enterprises,
especially through enhanced access to information, education and consulting services:
      Strengthening the network of business service suppliers that render entrepreneurial
       consultancy and training;
      Integration of the small and medium enterprise component in regional development
       programmes;
      Using the informational and consultancy support schemes in the process of business
       launch, especially for such categories of population like women and youth;
      Building up and developing entrepreneurial abilities/skills within the vocational and
       specialized secondary education and improving the mechanism of continuous
       vocational education of specialists and adults.
iii) Enhancing the small and medium enterprises capacity to cope with competition pressure
on the European and internal markets:
      Encouraging the small and medium enterprises to implement management systems
       according to international standards ISO 9000 and 22000;
      Stimulating the companies to implement environment management systems
       compatible with the ISO 14000 or with the eco-management and environment audit
       schemes (EMAS);
      Determining the methods for evaluation and comparison of international
       competitiveness of the Republic of Moldova, including the small and medium
       enterprises, based on well-defined criteria and quantitative and qualitative
       indicators/measures;
      Encouraging training of small and medium enterprise managers in terms of export
       transactions, including international transfer of skills/experience and knowledge;
      Stimulating and acclaiming publicly those companies that are able to substitute the
       dominant imported products.
iv) Strengthening the public-private dialogue:
      Setting up a continuous dialogue between the Government and the national
       associations of entrepreneurs and small and medium enterprises, including the
       dialogue through the National Council of Small and medium Enterprises;
      Identification, along with the private sector, of approaches and incentive schemes for
       large enterprises aimed at contracting and sub-contracting small and medium
       enterprises from the strategic sectors with growth potential.
3.3 Enhancement of Enterprises Efficiency.
Rationale.
The core of a competitive economy comprises efficient companies capable to resist the
competitiveness of foreign competitors both on the domestic and external markets. The main
source of competitiveness is labour productivity, which, in its turn, relies on a series of
factors, the main factors being the following: 1) labour force qualification and health status,
and 2) managerial practices.
Basic Programmes and measures:
i) Improving the employees’ qualification and work conditions:


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                                                                     Ministry of Economy and Trade

      Updating the curriculum and equipping with modern devices for practical training
       within the vocational education and higher education systems, primarily, the technical
       and technological specialties;
      Improving the employees’ work conditions and safety within the companies;
      Encouraging good Employer-Employee relations and stimulating higher corporative
       social responsibility/commitment.
ii) Improving the managerial practices:
      Promoting the quality management principles and stimulating the process of quality
       management systems certification at the company level according to the international
       standards ISO 9000;
      Continuation of the public sector restructuring process, including privatization of
       inefficient public companies;
      Enhancing the managerial commitment/obligation towards shareholders and
       stockholders;
      Large scale promotion and implementation of modern business culture, including the
       principles of corporative social accountability/commitment in business activity.
3.4 Development of Research and Innovation
Rationale
Sustainable economy development, based on knowledge and innovation can be successful
only if it is ensured by a scientific support in achieving national priorities, which in its turn
implies creation of favourable conditions for scientific research extension for covering the
requirements of the economy in concrete research, in increasing the scientific efficiency
level. Because the innovation activity represents the determinant factor in ensuring
competitiveness at any level: enterprise, sector, region, country, creation of innovation
infrastructure and of innovation transfer becomes an imperative of national social-economic
development. One of the main forms of promoting state policy in the science and innovation
domain will be the state programs and the projects of technological transfer, which will be
selected and financed by annual public tender, on the bases of expertise, effectuated by
independent experts.
Essential programmes and measures:
i) Strengthening the capacity for innovation and technological upgrading:
        Creation and promotion of efficient mechanisms for advanced technologies’
         absorption;
        Optimization of science and innovation sphere by creating scientific clusters,
         scientific platforms and concentration of intellectual and technical-experimental
         potential on solving relevant problems of the national economy and research for the
         benefit of SMEs;
        Scientific institutions’ technical-material base consolidation;
      Strengthening the national research system, including incentives for participation of
       research and innovation organizations to research activities and integration into the
       main European and international research programmes (FP7, EUREKA, COST,
       GEANT, CRDF, STCU);
      Promoting research and innovation through scientific and technological parks and innovative
       incubators and through implementing the national and foreign scientific and technological
       research achievements in economic activity;
      Organizing scientific centres and laboratories of excellence;


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                                                                   Ministry of Economy and Trade

       Introducing indicators on innovation in the national system of statistics;
       Promoting the access to financial resources in technologically intensive areas,
        especially through alternative financial instruments („angels investors”, „capital
        seminal”, micro-credits etc.).
         Stabilization and development of the human scientific innovative and managerial
          potential, by creating legal and economic mechanisms of increasing researchers’
          motivation and of innovation and of facilitation of access to innovation
          infrastructure.
3.5 Development of physical infrastructure
3.5.1   Transport system
Rationale
The availability of a conveyance system is crucial for economic growth and free and rapid
circulation of goods and people. A liberalized trade regime may have little value for
economic development unless a sound access infrastructure is in place. An underdeveloped
conveyance infrastructure mitigates substantially the international competitiveness of
companies and the attractiveness of the respective country for potential investors. In order to
participate effectively to international trade, the Moldovan companies need a reliable and
modern infrastructure, integrated with the Pan-European circuit, which would offer reliable
competitive advantages (cost and time) for carrying out export/import transactions of raw
materials and finished goods. In order to take advantages of the geographical position, it is
necessary to upgrade the whole transport system of the Republic of Moldova. At present, the
conveyance infrastructure of the Republic of Moldova is out of any regional comparison.
Although the road density is almost at the level of the regional average, the density of paved
roads is far under this average. The railroad system, which also plays an important role, is
extended but out of date. Generally speaking, the infrastructure suffers from the lack of
investments that are necessary not for enlargement, but for maintenance. On average,
investments in the regional infrastructure reached the level of 8-10 per cent of GDP, while in
the Republic of Moldova investments make up less than 3 per cent of GDP.
Basic Programmes and measures:
i) Building up and maintaining a modern motor road system, reliable and connected to Pan-
European arterial highways:
    Reliability of the existing motor road network;
    Building up new main motor roads in compliance with the European standards of
      quality;
    Efficient connection of the main motor roads of the Republic of Moldova with the
      European Transportation networks and with the main motor roads of the regional
      economic partners (Romania and Ukraine);
    Implementing measures intended for enhanced security on the existing and newly-
      built motor roads so that the number of road accidents is lowered;
    Building up public-private partnerships aimed at developing the transportation
      infrastructure;
    Assessment of the motor road transportation impact over the environment and
      mitigating its ecological negative effects;
    Efficient prevention and control of corruption phenomenon in the state agencies of
      road regulation.
ii) Upgrading the railroad system:



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       Renovation of the existing railroads of primary importance;
       Considering the opportunity to construct certain trackways with European gauge to
        ensure facilitated access of Moldovan exports to the Romanian market;
       Upgrading the rolling-stock of passenger and good vehicles aimed at enhancing the
        quality, safety and rate/speed of services rendered;
       Assuring effective integration in the European Railroad System;
       Transforming the national railroad system in a regional hub by offering a broaden
        spectrum of connections and regional transits;
iii) Taking advantage of benefits generated by the construction of Giurgiulesti Port;
iv) Enhancing the safety and quality of services provided to passengers at Chisinau Airport
(recordation to ICAO requirements and to other international standards);
v) Enhancing the airport capacity in the Cargo segment through upgrading and transforming
an existing airport (airports) into a centre of logistics.
3.5.2   Power Engineering System
Rationale
The latest years have been marked by the price increase to energetic resources around the
world, making more difficult the access to these resources of countries in general, and of
companies in particular. In case of lack of internal energy resources, the authorities’ mission
is to ensure reliable supply of energy at prices acceptable by the consumers from Republic of
Moldova. In order to remain/become competitive, the companies from the Republic of
Moldova need stability in energy supply and prices foreseeable in the short run. At the same
time, the Republic of Moldova needs to diversify the suppliers – a statement that could be
accomplished through participation to a series of regional energy projects and through more
active co-operation with the European Union. The significant increase of prices for energy
resources implies a higher degree of implementation of energy-saving technologies or of
energy recovery sources. This, in its turn, needs to attract new technologies for energy-saving
and enhanced investments for research and innovations in this area.
Basic Programmes and measures:
i) Construction of new interconnection electric power grids of high voltage with the
neighbouring countries aimed at ensuring the country energetic safety and enhancing the
capacity of electric power transit (construction of LEA-400kV Balti-Suceava, LEA-330kV
Balti-Novodnestrovk, and LEA-110kV Falciu-Gotesti);
ii) Enhancing the internal capacities to produce electric power (reconstruction and
upgrading CET-2, Chisinau Municipality with the capacity increase to 440 MW, CET-1 to 90
MW and CET-Nord to 100 MW);
iii) Reconstruction and upgrading the electric power grids, which will contribute to the
reduction of losses, to non-stop supply of REDs and consumers with electric power;
iv) Enhancing and using in full the existing capacities of natural gas transit;
v) Integrating the national electric power system with the European System (UCTE);
vi) Developing the internal resources of alternative power;
vii) Attracting and implementing energy-saving technologies;
viii) Upgrading the thermal energy grid infrastructure;




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ix) Evaluating the economic and social impact of price increase on imported energy
resources and, upon need, building up certain efficient tools for subsidizing the import and
consumption of energy resources together with international financial institutions;
x) Expanding the natural gas networks and establishing the possibilities to interconnect the
republican system of gas supply (construction of a gas pipeline of national importance Balti-
Ungheni with pipeline branching towards Falesti, Singerei and Telenesti rayons).


4. Development of human resources, increasing the employment rate and promoting
   social inclusion
People represent the main source of the Republic of Moldova in its way towards
modernization. The human resources which are educated, healthy, have a high physical and
intellectual potential, capable of lifetime education and adaptable to economic changes are
essential for an economic growth model based on competitiveness, efficiency and quality.
The economic growth depends directly on labour productivity. Bigger capital investments
and technological modernization, although necessary, are not sufficient to obtain productivity
increases. Another indispensable condition is the improvement of human resources quality,
which eventually, implies structural increase and optimization of public and private
investments in the key sectors of human development, first of all, in education and health.
Well-paid jobs are the main mechanism that projects the economic growth over citizens’
prosperity. The model of the qualitatively new economic growth followed by the Republic of
Moldova will be characterized by the increase and diversification of economic occupations,
accessible and remunerated depending on personal qualification. One of the intensive factors
that will accelerate the economic growth and will ensure higher salaries will be the increase
of the number of occupations that implies advanced technological knowledge and skills. At
the same time, the economic growth will also be strengthened in an extensive way, first of all
through increasing the labour force employment rate.
Poverty and, as its consequence, the social exclusion represent major problems for the
Republic of Moldova, being also the main causes of human potential deterioration. These
phenomena could be fight only by achieving a strong economic growth, balanced from the
geographic point of view and with a high degree of social inclusion. However, keeping a
favourable social environment for economic development also requires more efficient
policies to ensure social protection of citizens which, from objective considerations, can not
participate to the generation of economic added value.
General goal within the priority
Efficient use and qualitative improvement of human resources of the Republic of Moldova in
order to ensure gradual transition from economic occupations with a low qualification level
to occupations requiring advanced knowledge and skills, increase of decorous work places,
poverty reduction and social inclusion.
Progress indicators
      Gross enrolment rate at different education levels;
      Results of pupils’ knowledge national and international tests;
      Enrolment rates of the mandatory health insurance system;
      Participation to lifetime education
      Maternal and infantile mortality rate;
      Net rate of increase the number of work places;


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         Rate of creating jobs in advanced technological sectors;
         Unemployment rate, ILO definition;
         Unemployment rate among young people, ILO definition;
         Poverty incidence;
         Gini coefficient of inequality of incomes;
Objectives
4.1   Improve quality of and increase access to education services;
4.2   Build a healthy society;
4.3   Increase the employment and qualification of labour force;
4.4   Ensure a better social protection and inclusion.
Programmes and measures
4.1 Improve quality of and increase access to education services
Rationale
Education plays an essential role in fighting poverty and ensuring a sustainable economic
growth. However, to benefit of this opportunity it is necessary to ensure fair access to
education services and their quality. Fair access is important for inclusion of all children and
young people in the education process, thus, providing them with equal chances to a decorous
level of life, adequate employment opportunities and participation in social life.
Concomitantly, an educated society is also a society with a higher social cohesion.
The quality of education services is important also from the perspective of competitive
human capital, capable of coping with present pressures of the labour market at the national,
regional or global level. Although registering important progress, the Republic of Moldova
has yet a lot to do to in terms of removing social inequities and increasing the quality of
education services. There exist a series of factors hindering the attainment of important
objectives related to this chapter: poverty, emigration, inefficient management of financial
resources and sub- investment in the educational system. To fight these adverse phenomena
will require innovatory actions, increasing the sector’s funding efficiency, diversification of
funding sources, to attract external financial resources, active participation in the regional
education processes and maximization of positive externalities as a result of some collateral
programmes implementation (for example, development of road network will allow
optimization of rural schools network and rapid and safe transportation of children from
small localities to the schools from big localities).
4.1.1 Increase the education quality in terms of strengthening the capacities to apply
knowledge into practice.
Essential programmes and measures
i) Strengthening the management of education institutions:
         Developing the autonomy and flexibility for the administration of education
          institutions in using the approved budgets;
         Modernizing the accreditation system for education institutions;
         Develop a efficient system for evaluating the quality of educational services.
ii) Developing the national education quality assurance system.
iii) Development of human resources and keeping teaching staff within the educational
           system:
         Modernizing/strengthening the pedagogical education;


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      Modernizing the system of training and attestation of the teaching staff;
   
      Increasing the financial, material and housing incentives (including the provision of
       land to build houses), and professional incentives (career promotion) for the young
       specialists, in particular in rural areas.
iv) Modernizing formal and non-formal study programmes. Increase professional training of
the labour force for a more competitive economy:
      Revitalizing vocational education of all levels by aligning the specializations offer to
       the labour market demands, infrastructure modernization (equipment, etc.);
      Improve the regulatory framework in order to increase the efficiency of activity of the
       teaching staff and exclude bureaucratic procedures of formal reporting and
       documentation on the teaching process;
      Establish private-public partnerships in view of establishing an efficient connexion
       between the economic agents and the vocational education institutions for the
       consolidation of the material resources and development of professional skills;
      Ensuring the academic mobility of teachers and students;
      Higher involvement of specialized NGOs in the educational process;
      Develop a system to validate knowledge obtained during non-formal educational
       programmes.
v) Technical and teaching equipment:
      Increase the level of providing the educational institutions with equipment and
       teaching materials;
      Ensure access and promote application of informational technologies in the
       educational process of different levels.
4.1.2 Increase access of children from poor families and children with special needs to
different levels of the public system of education.
Essential programmes and measures
i) Cartography of limited access to education phenomena:
      Evidence of children with limited access to education. In order to have a complete
       image of the problems of access to education and assessment of financial costs and
       administrative efforts it is needed a rigorous evidence of the number of children
       encountering problems of access at different education levels according to their
       geographical or regional position;
      Identify fundamental determinants of exclusion and their magnitude. In order to
       efficiently solve the problem related to access it is necessary to clearly understand first
       the sources of exclusion by categories of factors:
             health factors (child, parents);
             family factors (family structure, emigration, alcoholism, violence);
             economic factors (poverty);
             institutional factors (relationship with colleagues, teachers);
             community factors (lack of schools, shortage of professors, absence of access
               infrastructure).
ii) Fighting the phenomenon of child labour:
      Carry out a representative national survey in order to understand the nature, scope and
       consequences of child labour;


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      Inform and educate the problematical families on the economic and social
       consequences of an excessive involvement of children in work;
      Perform regular controls by the Labour Inspection (especially in the agricultural
       sector, non-organized commerce and constructions) to identify economic agents
       which use child labour;
      Harden the sanctions for involving minors in economic activities.
iii) Financial and material direct support of children from poor families and children with
special needs:
      Create and apply direct incentives addressed to poor children enrolled in primary
       education (school lunches, provision of textbooks and other necessary materials,
       footwear and clothes);
      Increase direct financial payments (social scholarships, etc.) for children from poor
       layers in order to increase the access to specialized secondary and higher education.
iv) Improve the education institutions network and development of access infrastructure:
      Provide transportation for children from rural areas to regional schools;
      Develop preschool system for children in rural areas in order to increase access to
       services provided at the preschool level;
      Implement „distance teaching” (distance learning) technologies for the continuous
       training of teachers, especially in villages that do not have an access infrastructure.
v) Develop a community mechanism for social assistance:
      Create some school inclusion mechanisms for children with insufficient parental
       supervision (for example, for children of emigrants these could include agreements
       between emigrating parents with the special established units of LPA, partly
       supported from incomes remitted by migrating parents);
      Involvement of NGOs in providing professional counselling services.
vi) Developing the regulatory framework and mechanism for the accounting of extra-
budgetary resources, provided as donations, including contributions of the Parents’
Associations and the targeting of these resources at raising the quality of education.
4.2. Build a healthy society
Rationale
Health itself represents a value for the human being, a necessary asset to achieve its creative
potential in a lifelong period. A healthy nation is able to face the economic shocks, natural
calamities and other challenges. Improvement of the nation’s health status should be pursued
taking into account that healthy and informed families give birth to healthy children. Raising
a healthy nation could be achieved by investing first of all in children – the first years of life
being of a crucial importance. When children are well feed and nursed in their first years of
life they have more chances to survive, to be healthy and to develop successfully.
Investments in young children originating from less favourable environments is a public
policy with a two-fold social and economic impact, which reduces inequality and ensures a
prosperous future of the country. Recent studies show that timely interventions in the case of
children from vulnerable environments can prevent further losses of human potential.
Besides, health has also an intrinsic economic value. Firstly, a healthy labour force is capable
of using their professional capacities with a maximum efficiency and be more competitive
when competing for an accessible work place. Secondly, the individual time allocated for
work during the year tends to increase along with the improvement of the employee’s health


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status. Finally, healthy citizens have a longer economic life and contribute more plenary to
nation’s economic development.
4.2.1 Improve the quality of health services by infrastructure optimization and efficient
use of resources, improvement of medical-sanitary units’ management and allocation of
saved resources for investments in cost-effective technologies, procurement of
equipment and improvement of professional competence.
Essential programmes and measures
i)   Human resource management for rational use of existent staff and adequate, diversified
     and performing production of staff in the health system:
        Providing rural regions with staff;
        Motivate and provide incentives for the health system staff;
        Improve policies on staff formation in medical and pharmaceutical education;
ii) Improve the quality of health care services and increase patients satisfaction:
        Develop and implement a system to ensure and improving the quality of health care
         services;
        Strengthen the accreditation system in the health system;
        Ensure the observation of patient’s rights;
        Technological and informational endowment by including medical-sanitary units in a
         unified information network.
iii) Promoting integrated health care and ensuring continuity of the health care services in
     solving population’s health problems:
        Increase PHC role and authority in the national health system, with priority emphasis
         on disease prevention measures;
        Strengthen emergency health care;
        Modernizing inpatient health services and creating Performance Centres;
        Establish and develop the medical component of the system of medical and social
         institutions created as a result of restructuring of hospital beds.
iv) Develop some priority domains of the health system with impact on public health and of
    strategic importance:
        Improve mother and child health in accordance with MDG, including the provision of
         counselling services in particular to patients from families with young children and
         socially vulnerable families by effective involvement of communities and local public
         authorities;
        Reduce the burden of non-transmissible diseases, and prevention of micronutrient-
         deficiency diseases (Ferum, Iodine);
        Strengthen the control over the communicable diseases, also by disease control
         programmes reflected in MDG (TB, HIV/AIDS and STD);
        Develop mental health services;
        Further strengthen the network of youth-friendly health services and ensure access of
         young people to information, education and communication in health problems;
        Launch anti-smoking and anti-alcohol national campaigns and a national campaign
         for the prevention of children’s traumas and accidents;
        Review the costing policy for tobacco products and alcoholic beverages by
         establishing a additional fees for commercial units (vice fee) for the sale of these



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       products, which should be allocated for the health system needs, aiming to fight
       against negative consequences (diseases) caused by tobacco products and beverages.
v) Optimizing expenditures in health care provider units without loosing from its efficiency
   or reducing the access:
      Reduce the expenditure weight of utilities by measures of energy-conservation,
       savings of water and electric power;
      Indenting the role of public-private partnership in providing health services.
      Consolidate the technical and material base of health care and medical education
       institutions.
4.2.2 Increase the access to health services by optimizing their economic costs and
extending the population enrolment rate in the mandatory health insurance system
   Essential programmes and measures
i) Health system financing and extending the coverage of poor population with mandatory
health insurances:
    Improve the health insurance system by ensuring a higher flexibility to the insurance
     system;
    Increase the percentage contribution share from salary and other incomes with at least
     0.5 percentage points every year till the average share of the countries in the region is
     reached by 2009;
    Extend the calculation base of the percentage contribution through identification of all
     population categories, economic agents and possible income sources liable to
     application of the insurance share, but being „in shadow”;
    Develop the voluntary health insurance (extra-package services).
ii) Increase the equity and transparency in resource allocation and citizen financial protection:
      Improve the equity in establishing and usage of financial resources for health services
      Increase the transparency in allocation and usage of financial resources.
iii) Extend the population coverage with mandatory health insurances in rural areas:
      Adequate information on mandatory health insurances for employers and employees
       in rural areas;
      Promotion of formal employment in the rural areas, through employment contract
       with social and health insurance contribution payment clauses;
      Decrease the mandatory health insurance premium in the rural areas.
4.3 Increase the employment rate by aligning the educational supply to the labour
market demand.
Rationale
Quality human resources continuous development represents a fundamental prerequisite for
long-term economic competitiveness and sustainable development. The negative trends
manifested during the last years in Moldova show a migratory character of the labour force.
This implies increase of social costs and threatens to turn into a serious constraint to the
economic growth in the future, its solving becoming thus an important task in increasing
work attractiveness in the country and restructuring the educational sector in order to ensure
the training of staff in compliance with the labour market demands.
   Essential programmes and measures


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i) Formation of an educated labour force, capable of maintaining competitiveness during
their active lifetime:
      Ensure a fair access to education for all citizens irrespective of their material situation,
       place of living, gender, ethnicity, etc.;
      Promotion of measures for increasing profitability of professors’ jobs, including also
       measures for returning of emigrants with experience in the respective field;
      Develop measures for reducing the school abandonment rate, especially in children
       from disadvantaged families and those of emigrants;
      Develop and promote a national policy for continuous professional education,
       including in the view of lifetime education in partnership with social partners;
      Adjust the system of professional training to the labour market needs;
      Authorization and monitoring of training services and centres for evaluation of non-
       formal education skills (also for adults).
ii) Develop the labour        market    to   allow    increase   of   chances    for   sustainable
employment/integration:
      Integrate medium- and long-term prognoses on the labour market and adjust education
       policies to them in order to anticipate the market needs;
      Identify and value all integration opportunities on the labour market;
      Promote geographic and sector mobility of the labour force;
      Modernizing and strengthening the administrative capacity of the National Agency for
       Labour Force Employment;
      Educate some skills of continuous education in students;
      Extend and simplify the system of facilities provided to employers for the
       promotion/stimulation of internships within enterprise and employment of young
       people;
      Establish a network for centres of professional counselling of youngsters;
      Improve the transition from school to the work place and promote entrepreneurship
       culture in education and training;
      Facilitate penetration of young people in the labour market by promoting partnerships
       in education and placement, in view of providing mediation services with regard to
       the labour market;
      Ensure fair access to vocational and professional studies for young people with
       handicaps.
4.4 Ensure a better social protection and inclusion.
Rationale
Poverty is one of the major factors that hinder human resource development. Persons who are
in a chronic poverty can not develop professional capacities, their health deteriorates rapidly
and they become less competitive as far as employment concerns. Therefore, chronically poor
people turn to be eliminated from the economic processes and be socially marginalized, and
their material situation does not improve even when economy achieves strong growths.
Eliminating discrimination from the labour market is a necessary condition to ensure a higher
social inclusion. Development of human resources implies also a social protection policy that,
in an efficient and targeted way, would help poor persons to escape from poverty trap. Taking
into account the very scarce public resources, these policies should be oriented mainly
towards poor persons, not persons with merits for state or society. Emphasis should be made




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on decentralization of services and deinstitutionalization of persons, which entails the
provision of a full range of qualitative community social services.
4.4.1 Ensure social inclusion through labour market.
     Essential programmes and measures
i) Preventing and eliminating discrimination on the labour market:
        Promoting solidarity and social non-discrimination principles amongst potential
         employers;
        Extend training and consultancy programmes of National Agency for Labour Force
         Employment over persons with disabilities, freed from detention places, former
         militaries, trafficked persons;
        Promotion of women in the occupational structure;
        Monitoring the observance of equality of chances in the economic and political
         sphere;
        Sanctioning employers for groundless salary disparities.
4.4.2 Offering new economic and social opportunities for vulnerable population groups,
including the improvement of efficiency and targeting of social assistance resources.
     Essential programmes and measures
i)   Modernization of the Social Assistance System:
        Social services system simplification (presently constituted of 18 types of social
         services) and introduction of system of granting social service based on testing of
         revenues and evaluation of applicants’ necessities;
        Consolidation of the national network of social assistants by instituting of a
         mechanism of initial and continuous formation of social assistants, including the
         development of a system of stimulants for social assistants and of APL for
         maintaining them;
        Monitoring of the volume of social assistance help granted to beneficiaries and
         implementation of the principles of „social inspection” for diminution of frauds in the
         system and evaluation of the quality of community social services;
        Separation of payments with reward character for special merits towards the state
         from social assistance delivery;
        Wider involvement of civil society in developing and implementing social protection
         policies (advocacy and social services delivery).
        Promotion of the de-institutionalization principle by developing and diversifying
         social and medical-social services in accordance with community requirements, and
         development of mechanisms of decentralization, securing and redirection of financial
         resources from residential institutions to community and family type services;
        Development of minimal quality standards for social assistance services and the
         development of the mechanism for evaluation and accreditation of the social services
         qualities on the bases of the national Catalogue of social services.
        Development of the competitive market of social services providers and the
         application of measures of subsidizing, purchasing or contracting of social services on
         behalf of the state.
        Development of the unique social assistance information system by application of
         information technologies and increase of the level of supply of social assistance
         institutions with methodological equipment and materials.



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ii) Mobilizing and transparent use of financial resources:
        Ensure financial transparency in using the social assistance resources, by yearly
         publication of detailed public reports regarding their pooling and use.
     
iii) Reform of the mechanism for the assessment and establishment of degree of disability
     and work capacity:
      Develop and apply the disability establishment system based on the assessment of the
         degree of loss of work capacity.
4.4.3 Improvement of social insurance policies, in particular, of the pension system
     Essential programmes and measures
i)   Strengthening the financial stability of the social insurance system:
      Grounding the social insurance policy on demographic and economic social prognoses
       on medium- and long term;
      Unifying the legal framework of the pension system, creating unified retirement
       conditions for all categories of pensioners, and implementing the principle of
       dependence between the pension size and contributions for each ensured person ;
      Implement the principle of personified evidence of contributions and develop the
       evidence segment for tax payers from the agrarian sector;
      Gradual redistribution of the contribution share paid by the employer and increase the
       contribution paid by employee;
      Ensure financial sustainability of the pension system, taking into account the
       emigration factor, including promotion of legal emigration and signing agreements of
       social protection with the main destination countries for Moldovan emigrants.
ii) Developing the private pension system:
        Design mechanisms for the development of the private pension system (professional
         and non-governmental funds).


5. Regional Development
One of the main objectives of the National Development Plan is to ensure a balanced regional
development. The Regional Development is focused on planning and implementation of a
balanced territorial socio-economic development in the whole country. This refers not only to
the developing polices of the underdeveloped regions, but also to those policies which will
focus on reducing the degree of extra solicitation of the urban infrastructure, the level of rural
and urban poverty, as well as for the long term, a more efficient integration of processes of
territorial development with those of economic planning, and mainly by a more efficient
utilization of the land inheritance/property.
Currently, there is a considerable discrepancy in the development of regions of the Republic
of Moldova. The most pronounced socio-economic discrepancy is registered between the
municipality of Chisinau and Balti and the rest of territorial-administrative units. In such a
way, these two municipalities benefit of the more developed infrastructure as well as a higher
standard of living, economic, cultural and scientific activities. The concentration of the
development factors in theses municipalities, and as a consequence, the marginalisation and
even exclusion of other localities which risk to persist in future, in case if there will be not



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identified a modality of the extension of the increase and development of the process in the
whole country.
The National Development Plan will support the regional development in a coordinated,
coherent and beneficial policy framework. In this regards the regional development will be
supported by more efficient policies and the implementation activities of the policy will be
focused on the following areas: territorial planning and territorial development,
decentralisation and reform of the Local Public Administration, data and information
management. To ensure an efficient development and increase of social-economic aspect in
the regions, the existence of a detailed and extensive programme in public investments - as an
integral part of the MTEF- comes as a sine qua non condition. In this regards, the Republic of
Moldova will initiate the consolidation process of financial resources being coordinated in
accordance with the expected outputs. Concurrently with the financial resources, an increased
attention will be paid to increasing the absorption capacities in the development regions,
specialisation of the associative sector (non governmental sector), as well as to the
consolidation of the capacities of the local public authorities in planning and implementation
activities.
The long term regional development policy will be focused on the balanced development of
the six regions of the country. In the same time, for the medium term (2007-2010) the
Government efforts will be directed to the consolidation of capacities and development
conditions in the North, Central and South regions. The regional development will involve
the impulsion of socio-economic development, creation of the urban regional centres and the
consolidation of the small towns, promotion of the social inclusion of the rural localities, as
well as the consolidation of the capacities of the local public authorities.
The regional development derivates from the national development priorities and ensuring
their implementation on the territorial level, including local and regional ones. In this way, by
focused and supported efforts, the National development policy will ensure the reduction of
existing discrepancy between the municipalities of Chisinau and Balti and the other localities
of the country. The table below presents the modality by which the sector policies will be
implemented at the territorial level through the regional approach.
General goal within the priority
Implementation of the balanced and sustainable socio-economic development in the whole
territory of the Republic of Moldova through the involvement in the processes of economic
development of the villages, small towns and urban centres from the regions to be developed.
Progress indicators
    The rate of growth of the agricultural and industrial productivity
    Growth of income from tourism services
    Increase the number of SMEs in towns and villages
    Amount of investments in the revival of villages
    The degree of accessibility of towns and villages (roads built and reconstructed)
    Increase of revenues collected in the territorial units
    Increase of the number of the companies included in trade clusters and chains
    Public utilities built in villages and towns
    Waste dumps equipped according to the European Union requirements
    The number of public utility enterprises with automated information management
     systems
    Number of LPA which have electronic governance systems
Objectives


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5.1 Consolidate the socio-economic growth and increase the competitiveness of
    development regions with a primary focus on North, Centre and South regions;
5.2 Creation of urban regional economic development centres, which will compliment
    the existing national urban centres (Chisinau and Balti) and consolidation of small
    towns;
5.3 Promotion of social inclusion and maintaining the social-economic relationships in
    rural areas;
5.4 Strengthening the capacities of the LPA and of the public service providers in the
    development regions.
5.5 Consolidation of measures of preventing environment pollution and efficient
    utilization of natural resources aimed at ensuring health and quality of life.
Programmes and actions
5.1. Consolidate the socio-economic growth and increase the competitiveness of
development regions with a primary focus on North, Centre and South regions
Rationale
The support of the balanced regional development will represent one of the essential
directions for development in the Republic of Moldova. The coordinated development
between the social activities, production, service delivery and of the infrastructure
implemented on the whole territory of the country will be based on the optimal utilisation of
the possibilities of development of the natural, ecologic resources, of the capacity of the
population and of the infrastructure. These development factors will be analysed and
presented as challenges for the development of each region in the regional development
strategies and in the operational plans.
Essential programmes and measures
i) Optimal utilisation of the natural, cultural and traditional patrimony in the development
process of the underdeveloped localities and the reduction of development risks:
      Reorganisation of utilisation of the agricultural land;
      Improvement of the fertility of the soil through promotion of some anti-erosion
       reforms ;
      Modernisation of agriculture, promotion of the processing industry and of the
       agricultural markets;
      Development of the capacities for the rendering profitable the tourism potential
       through identification and promotion of the reduced number of very competitive
       products and services (niche approach) and cooperation consolidation of the tourism
       sector with Romania and Ukraine.
ii) Development of a favourable climate for the consolidation of the SMEs sector, foreign
investments, export promotion and efficient investments in the development regions in
regards to reducing intra-regional discrepancy (In this case the relationship between the
socio-economic planning, development of the territory and utilisation of the land resources
plays an important role):
      Development of the economic infrastructure (economic zones, industrial parks,
       business incubators);
      Consolidation of the entrepreneurship in small towns and villages through facilitating
       the access to service (one-stop shops in the LPA, business information centres,
       networks for distribution and commercialisation of the products);



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      Marketing of the regional capacities concerning the foreign investments (info-centre,
       organisational services);
      Creation of the capacities for the control of the quality production processes and of the
       final products (Quality standards, ISO);
      Investments in the development of the industrial products for entering the foreign
       markets;
      Development of the capacities for the alternative energy resources (small electrical
       stations, bio-energy).
iii) Development of the inter-regional and cross border cooperation as well as the rendering
profitable of some efficient investments in the regions:
      Common and coordinated planning of the physical, economic and environmental
       infrastructure (between regions and cross border);
      Common administration of investment and common rivers;
      Administration of transport;
      Improvement of the relationships with the border regions (adjustment of the railway at
       the Romanian border);
      Cultural exchange with the neighbouring countries;
      Creation of common tourism offers.
5.2 Creation of urban regional economic development centres, which will compliment
the existing national urban centres (Chisinau and Balti) and consolidation of small
towns
Rationale
Selection of localities, which through a focused development, to be transformed in regional
centres, has to be based on their potential to stimulate the economic growth in the small
towns and villages which enter in the influence zone and also the transport network with
other regions of the country. In regards to the role of the regional centres, only a limited
number of locations have to be selected for this role, to ensure the necessary level of
concentration of resources and investments.
 Though the establishment and development of the regional centres will constitute the key-
element of the regional development in the implementation period of NDP, it does not mean
that development will be limited to these centres and their neighbouring areas. This approach
will contribute to the creation of a critical mass which will generate economic growth in other
target towns and in their larger zones of influence. On the territory of these zones it is
necessary to create a network of development centres (development hubs) of regional and/or
local importance. In each region, a number of small towns – smaller than the regional centre
– will start to be developed and will have the function of developing regional/local centres
which will focus on the economic development, supporting the development of the villages
and the neighbouring rural zones.
These towns have the potential to attract foreign investments and to develop the industrial
activities and the engineering services which serve the enterprises and companies located in
the urban centres. The investments in these towns - foreseen for their development as
localities for industries and small businesses – will represent a key-factor in promoting the
benefits of the National economic development in the whole country.
An efficient regional policy also relies on the potential of the small towns and villages in
respect of ensuring the fact that they are attractive as placement locations for commercial
activities, which would ensure working and living places. As a result, the implementation of


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the balanced regional development though the development centres will be complimented by
multi-sectoral policies, which will ensure that these centres benefit of the economic
development and that the local economic activity in these areas offer working places with
acceptable incomes.
For combining all these elements of the regional development policy and for realization of a
balanced economic development in accordance with the major principles of promotion of
economic competitiveness and sustainable development, the National strategy of territorial
development will have to cover the following:
    Identification of larger models of National territorial development and establishment
     of the indicative policies in regards to placement of the industrial enterprise, housing,
     agricultural territories, tourist and cultural roads;
    Development and presentation of the dynamic concepts of the Moldovan urban
     system, together with its relationships with the rural localities, which recognise and
     render profitable the existent economic and social interdependence.
In this way the strategy will also offer a basis for long term coordination and cooperation in
formulating policies and taking decisions regarding the major investment in the
infrastructure, including the public and private transport.
Essential programmes and measures
i)     Promotion of efficient tools for the facilitation of convergence, economic
development of the towns, as well as the consolidation of small towns:
      Restructuring and modernisation of the industrial sector as to allow the creation of
       clusters;
      Creation of the networks of towns based on common potential and interest
       development;
      Marketing of the brands and success stories of the towns.
ii)     Concentration of the financial capacities and resources for the implementation of the
projects in the social area, transport, public services and environment protection:
      The investments in the regional infrastructure will cover:
           Roads other than the National ones;
           Extension and improvement of the water supply and residual waters
              infrastructure (treatment plants, sewage plants, sewage and water systems)
           Gas supply;
           Waist management systems;
           Urban and rural public services;
           Communication systems;
           Regional ports and airports;
           Culture, sport and leisure activities.
5.3. Promotion of social inclusion and maintaining the social-economic relationships in
rural areas
Rationale
An efficient agriculture and a productive industrial sector play an important role in the rural
development, the prosperity of rural localities will be more and more determined by the
success of the enterprises, which are not involved in the exploitation of the natural resources.
It is evident that there will be a need to create synergies between the coordinated



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development of the urban localities and their neighbouring rural areas. The importance of this
fact is underlined in the regional development strategies, which will focus on the
consolidation of the rural sector through the direct investments in a series of specific areas.
Regarding the rural development the following things should be mentioned:
  a) Small and medium enterprises (SMEs) and micro-enterprises have a special role in the
     rural development.
  b) Agriculture will continue to remain essential for the rural economic development, and
     in many localities this represents the main available economic activity. Despite this, in
     the general context, the economic importance of the agriculture continues to decrease
     and the existent market regulation cause the situation when a large number of farmers
     do not manage to increase their incomes from the agricultural activity. In this way, the
     promotion of alternative sources of income from non-agricultural activities is
     extremely important in regards of extension of benefits from economic growth on the
     rural population.
  c) The success of rural economy depends on the ensuring the transport infrastructure and
     adequate environment. In case of rural zones, the rural roads represent the most
     important component of the road infrastructure from the point of view of rural
     inhabitants, because the local and rayon roads ensure the essential linkages between
     the rural localities, the network of National roads and regional development centres.
  d) The drinking water is an essential need for the population and as well as for the
     development of industrial and tourism sectors. The rural zones depend in great extent
     on the private sources of water, which as a rule are of a poor quality in comparison
     with the water from the public water supply systems.
  e) The quality of the environment built in small towns and villages is very important for
     the inhabitants from the point of view of their attractiveness regarding the living and
     working conditions as well as from the perspective of attracting investment in the
     industrial, tourism and services areas.
  f)
In this perspective, the white book for the rural development will include the following:
       a. A strong focus on the rural development policy in the cooperation with the line
       ministries;
       b. Regional approach of the development processes;
       c. Delivery of the services and infrastructure development;
       d. Sustainable economic development;
       e. Human resource development;
       f. A strong focus on reducing the level of poverty and social exclusion.
Essential programmes and measures
i) Introducing the tools for the rural development and prevention of migration from villages.
(Some instruments can be already identified in the NDP and mainly those which are related
to attracting investment in the rural areas with the objective to increase the level of
attractiveness as living places):
       The investments in the revival of the villages will reduce the migration of the
        population and as well will increase the tourism potential. Specific investments in
        tourism will be channelled to the areas which are remote from the main urban centres,
        and this will bring significant benefits in rural zones, while the cultural and
        recreational investments will increase the attractiveness of these zones for working
        and living;



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      Investments in the education and educational services will have equal benefits for
       rural and urban population;
      The investments for the promotion of the social inclusion will have as target
       beneficiaries the inhabitants of the rural and urban localities which suffer of absolute
       poverty. For example, the most vulnerable groups of population completely depend on
       the public transport in their day to day life. So, the investments in the public transport
       will facilitate the participation of this segment of population to the social and
       economic life;
      The investments in the area of water supply and energy resources also will improve
       the degree of accessibility of the rural areas.
      The rural and community development activities are stipulated in the regional
       development strategy and focuses on the following areas:
        - Support of entrepreneurship in the rural areas;
        - Modernisation of the agriculture and agro-food industry;
        - Focus on the quality of food products at the processing stage;
        -   Development of the support services for the rural business.
5.4 Strengthening the capacities of the LPA and of the public service providers in the
development regions.
Rationale
The consolidation of the capacities of the public authorities will be implemented
consequently in three areas: improvement of the legal and regulatory framework,
consolidation of the efficient institutional organisation and ensuring the supportive access to
the financial and human resources. In the process of consolidation of the capacities of the
local public authorities, it is very important to introduce the utilisation of the information and
communication technologies in the management of local public services to ensure a high
level of services delivered by the local administrations.
Programmes and measures:
(i) Creation of the necessary capacities in modern management of the public services:
      Implementation of the National training strategy of the public servants and of the local
       elected servants and creation of conditions for a new human resource management;
      Fiscal decentralisation and improvement of inter budgetary relationships for
       strengthening the financial capacity of the local public authorities for managing the
       public services.
      Promotion of the public-private partnership in the area of public services.
      Involvement of the civil society in the process of managing the public services.
      Utilisation of the informational technologies in the management of the public services
       and ensuring transparency.
      Promoting of innovative projects in the process of public services management.
 (ii) Creation of information management systems for supporting an efficient and transparent
governing process:
      Promotion of the public-private partnership in the area of public services.
      Implementation of the National strategy on creating an information society „e-
       Moldova”
      Establishment of the Infrastructure of the Spatial Geographic Data of the Republic of
       Moldova and integration in the international community.


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       Improvement of the quality of the decision process through the involvement of the
        consumers of the information services created.
5.5 Consolidation of measures of preventing environment pollution and efficient
utilization of natural resources aimed at ensuring health and quality of life.
Rationale
Sustainable development of the county and of the whole society is possible only by ensuring
certain qualitative environment factors which contribute to quality of life and population
health maintenance. Environment factors, like water, air and soil, on which quality of
products that we consume depend directly, exercises multiple actions over the health. On the
quality of environment depends not just health, but also and the level of life and the quality of
life.
Moldova is one of the countries with the biggest density of population in Europe, fact which
has significantly increased the level of natural environment transformation.
The environment factor with the biggest impact over health is water. Definite actions are
necessary for diminution of the negative impact of non-qualitative drinkable waters over the
health of population. Environment degradation from accumulation of all types of waist
represents the most aggressive factor which contributes as to the decrease of the quality of
health as well as to duration of population’s life. The volume of household and production
solid waists evacuated into the environment has essentially increased in the last decade, fact
connected to the lack of processing, neutralizing and elimination technologies, negatively
influencing the environment and the health of population.
For solving the environment problems, like the climate change, intensification of the
frequency of diverse natural hazards, diminution of the quality of water and air, waists
recycling and reduction of their impact over the environment and health, the mankind is
preoccupied at international, regional and national levels.
Essential programs and measures
iv) Efficient utilization of natural resources, maintenance of the quality of environment as a
factor that ensures maintenance of health and of quality of life:
      Prevention and reduction of natural resources degradation and efficiency of their
       utilization;
      Extension of protected natural areas and flora and fauna protection.
      State control improvement foe ensuring implementation of legislation in the domain
       of environment protection and sustainable utilization of natural resources;
      Modernization and efficiency of the national monitoring system on the state and
       evolution of hydro-meteorological conditions, including the natural hazards and of the
       quality of environment;
      Efficiency of energy consumption, promotion of regenerating energy and of purer
       production;
      Improvement of waists administration system, reduction of their impact and quantity;
      Multilateral collaboration on monitoring and protection of rivers Prut and Nistru
       basins (including administration of waters, fishing and irrigation).


6. NDP MONITORING AND EVALUATION




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In the framework of the National Development Plan there will be established a monitoring
and evaluation system, which will cover activities to be carried out during and after the
implementation of actions and measures and will define the level of implementation of the
NDP objectives.
The monitoring and evaluation of the National Development Plan implementation will be
done at the level of each strategic priority, by using a common system of quantitative and
qualitative indicators. The quality, efficiency and effectiveness of implemented activities will
reflect the way how the objectives and targets are being implemented. The analysis will also
evaluate the impact of implemented measures of the Action Plan.
The monitoring and evaluation process will provide a framework for:
      Comparing the implementation efforts with the initial goal and objectives;
      Determining the progress made in reaching the expected results;
      Identification of problems and barriers faced in the implementation process;
      Development of proposals to facilitate the achievement of the set objectives.
The monitoring and evaluation process will be done at the level of each central public
administration authority, by the analysis, monitoring and evaluation units, which will be
responsible for the day to day implementation of the NDP objectives, monitoring and revision
of the NDP Action Plan. In parallel with the development of the Action Plan there will be set
a number of performance indicators. There will be produced reports on the results of
monitoring and evaluation processes, their frequency will be determined at a later stage.
[This section will be developed upon the finalization of the strategy paper.]




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ANNEX 1: EXTENDED SITUATIONAL ANALYSIS

1. Geographic Trivia
The Republic of Moldova is located in the South-Eastern Europe (to the North-East of the
Black Sea, landlocked between Romania and Ukraine, between the river beds of Prut and
Nistru). The land surface area of the country, which stretches some 350 km north to south,
and is 150 km wide west to east, is 33,846 square km. The population of the Republic of
Moldova totals 4.1 million people5, with a density of population accounting for 121
inhabitants per square km.
The Republic of Moldova is a geographic space with very high degree of anthropogenic
harnessing of natural space. About 10 per cent of the country’s territory is occupied by
human settlements, i.e. one settlement at each 20 square km.
The total surface of land resources is 3.385 million ha, of which 1.952 million ha are farming
lands, including 1.659 million ha of arable lands, 242 thousand ha sown to perennial crops,
335 thousand ha of grasslands, and 9,807 thousand ha are pastures. Lands sown to forests and
other areas covered by forest vegetations account for 433 thousand ha. The chernozem
(humus) lands cover approximately 80 per cent of the country’s territory (2.5 mil. ha).
Administrative wise, the Republic of Moldova is made up of 1,679 communities, including
five municipalities (Chisinau, Balti, Tighina (Bender), Comrat, and Tiraspol), 60 cities, 39
settlements within towns (municipalities), 917 residential villages – villages where village
councils are located (communities), and 658 settlements within communities (except for the
residential villages).
2. Demographic Situation6
The 2004 census data are indicative of depopulation trends in the country, mostly caused by a
reduction in the birth rate, and by emigration. As of 1 January 2007 the stable population of
the country consisted of 3.58 million inhabitants. Between 1997 and 2006 the number of
population dropped by some 76.8 thousand people. The Republic of Moldova still is the
country with the lowest level of urbanization within Europe, with 41.3 per cent of people
living in urban settlements, and 58.7 per cent – in rural settlements. Approximately half of the
urban populace is living in the municipality of Chisinau. In terms of gender balance, men
account for 48 per cent, and women make up 52 per cent of the total number of population.
A review of population by age groups points to a growing demographic aging effect within the
society. The average age of the country’s population increased from 32.9 years in 1998 up to 35.6
years in 2007, putting Moldova in the group of countries with “adult” population. The decrease in
the birth rate resulted in absolute and relative reduction in the number of young people.
Compared to 1997, there is a decline from 25.6 per cent down to 18.1 per cent in the share of
population 0-14 years old, with the share of people over 65 years going from 9.3 per cent up to
10.2 per cent. The adult population (15–64 years old) accounts for 71.6 per cent of all people – an
upsurge of some 184.4 thousand people versus the situation at the beginning of 1997. There was
an increase in the proportion of age groups 15-34 and 45-59 years old within the adult population,
alongside a decrease in the shares of age groups 35-44 and 60-64 years respectively.


5
 Including the populace from Transnistria;
6
  The demographic review draws upon the data that don’t cover the left bank of the Nistru River and the
municipality of Tighina (Bender).


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The discrepancy in the age structure of population is more obvious when looked at by
regions, caused by territorial variations in the demographic phenomena and by migratory
flow of population. The proportion of the elderly is 1.4 times higher in rural areas than in
urban settings. Almost 12 per cent of the rural population is over 65 years, and the elderly
women account for 14 per cent of the total number of women living in rural settings. In urban
settings, the average age of the women populace is 2.9 years higher than that of the men
population, with the age gap reaching 3.3 years in rural areas.
The emigration of labour force, exacerbated specifically after the financial crisis occurred in
Russia, has continued at a high pace during the economic recovery period too. According to the
National Bureau for Statistics data, there have been approximately 334 thousand people reported
to have left the country for a job or in search of a job abroad in 2006, that is 21.1 per cent of the
total active working population 15 years and older. Two-thirds of those reported to have left are
men. The same proportion was noticed within people who have left from rural settings. Outward
migration is characterized by a massive outflow of people of reproductive age and economically
active. People belonging to the 20-29 years old age-group accounts for the biggest share of those
(40.3 per cent), followed by those aged 30 - 39 years old (22.1 per cent).
The reduction in the number of working population, and the increase in the average age of
employees from within the national economy, have resulted in complex consequences for the
country’s social and economic development, with direct impact upon the overall supply of
labour force, income distribution, public expenditure for social insurance, investments etc.
The ongoing aging of population will result in serious shortages in terms of the human capital
needed for a sustainable development of the country.
3. Economic and Social Situation
Starting in 2000 Moldova’s economy got back on the growth track, reversing a decade of
ongoing decline and deterioration in the living standards. The macroeconomic policy
measures taken within the framework of internal and external growth contributed towards the
halting of economic recession and ensured a steady growth in the gross domestic product.
The real GDP increased by 5.9 per cent each year on average during 2000-2006, with a
cumulative growth of 49.5 per cent versus 1999. The consumption of households accounted
for the main drive of the growth, funded mostly by the revenues generated by remittances
sent home from abroad (35 per cent of the GDP in 2006), coupled with a growth in internal
revenues (the real salary increased by circa 2.3 times during this period). Internal investments
in fixed capital have had a lesser contribution to the economic growth, an upsurge by 17 per
cent of the GDP on average.
Securing macroeconomic stability has played an important role in revitalizing and sustaining
the growth. The monetary policy provided for by the National Bank of Moldova (NBM)
targeted several objectives, including the decrease of inflation, maintaining a competitive
exchange rate for the national currency and accumulation of international reserves. The huge
flow of remittances put greater pressure on the national currency towards its deflation. Under
this circumstance, the NBM stepped in the currency markets in order to decrease the amount
of foreign currency, thus pumping up the country’s international reserves. The growth in
sterilization strides and the slowing down of the increase in the monetary basis led to the
offsetting of inflationist pressures.
The economic growth was coupled with a significant improvement in the fiscal situation.
There was a considerable growth in the national public budget revenues up to 41 per cent of
the GDP in 2006, and the state budget reported an average surplus of 0.2 per cent of GDP.
Indirect taxation accounted for most of the upsurge in revenues – the consumption taxes and



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import charges made up approximately 50 per cent of all revenues. A drop in the income
taxes paid by natural persons and legal entities kept these revenues at the level of 4-5 per cent
of GDP. The increase in revenues and decrease in costs for repaying the public debt allowed
for an increase in public spending earmarked for other priorities. The social sector benefited
the most from this growth (almost 90 per cent), accounting for 63 per cent of all spending in
2006. At the same time, the increase in consumption costs cut down the fiscal space for
public investments, and the high share of public revenues and costs in GDP, generally, is
indicative of rapid scaling up of the public sector – a situation that could limit the
perspectives for economic growth.
The economic growth and the prudent management of debts contributed towards a significant
improvement in foreign debt indicators. The total foreign debt to GDP ratio dropped from 121
per cent in 2000 down to 74 per cent in 2006. The public debt and the publicly guaranteed debt
were 26 per cent of GDP at the year-end in 2006 (versus 79 per cent of GDP in 2000). Moreover,
there was a moderate growth in direct foreign investments reported during the reference
timeframe. The total stock of direct foreign investments into the national economy accounted
USD 1,284 million, or USD 359 per capita, at the end of 2006 (versus USD 123 in 2000). The
amount of foreign investments, however, still is much smaller than in the countries from the
South-Eastern Europe and is not enough to ensure a sustainable development of economy.
The revitalization of economic growth was coupled with an increase in the external
vulnerability of economy and higher emphasis on certain discrepancies both at macro and
branch levels. The evolution of foreign trade featured a rapid growth of imports and a modest
performance of exports during the given timeframe – a situation which resulted in an ongoing
increase in the trade balance deficit from 23 per cent of GDP in 2000 up to 47 per cent in
2006. The current account deficit was on a rise too, although at a lower pace, due to massive
inflows of remittances. The external vulnerability is exacerbated by the narrow reliance of the
country exports and products. Despite a shift in the orientation of exports over the last years,
specifically towards the European Union markets, most of the exports still are targeting the
CIS countries anyway, and Russia, in particular. At the same time, about 45 per cent (in
2006) of Moldovan exports are farming products (including those from the processing
industry), and mostly – alcohol beverages.
The true size of external vulnerability of the country’s economy could be drawn from the
2006 trends. A doubling of natural gas prices and export restrictions on certain categories of
products resulted in a number of negative trends – the economic growth slowed down (4 per
cent), inflation went up (14.1 per cent at the year-end), whereas the trade deficit and the
current account deficit reported a considerable growth (34 per cent and 65 per cent,
respectively). These trends pose threats to the sustainability of progress to date and are tokens
of the low competitiveness of Moldovan companies on regional and world markets.
The economic recovery period is characterized by poor development of domestic supply and
low competitiveness on domestic and foreign markets. The development of the country’s
production sector during the given timeframe drew mostly upon the growth in the use of existing
capacity rather than building those up. Better productivity occurred against the background of a
slump in the labour force, mostly due to migration. The wearing out of these resources, which
are ensuring the growth of productivity, under the circumstance of few domestic and foreign
investments being made to complement and replenish the stock of capital in the economy, is a
paramount obstacle for the development of the country’s production sector.
In this vein, the evolution of the country’s real sector corroborates the concerns set out above.
The industry reported robust growth at the beginning of the economic recovery period
(cumulative growth was 69 per cent versus 1999), however, somewhat slowing down over


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the last years. Within the industry outputs decrease by 6.9 per cent in 2006 versus 2005 – a
situation explained particularly by imposing of restrictions on the Moldovan wine imports to
the Russian Federation and, as a result, a shrinking of the winemaking subsector. During the
economic recovery period, a high proportion of enterprises (50 per cent) operated in red,
whereas there was only an insignificant growth in the number of enterprises reporting profits
(by merely 4 per cent points (p.p.))
The economic growth continues to display strong geographic patterns, exacerbating
disparities in the social and economic development of the country. The municipality of
Chisinau accounted for half of the industrial outputs in 2006 and for 56 per cent of fixed
capital investments. Companies registered in Chisinau contributed towards almost 94 per cent
of the net financial outcomes reported within the economy in 2005, whereas those from Balti
provided for 7.3 per cent, and those registered in the districts – yielded merely 1.2 per cent.
Hence, in 2006 the highest average monthly salary was reported in the municipality of
Chisinau (MDL 2,218) and municipality of Balti (MDL 1,854.3). It was as low as about
MDL 1,000 in some districts of the country.
The development continued to be low-profile in the rural areas, due to a modest progress
accomplished in agriculture and below-par development of non-farming activities.
Agriculture continued to report low productivity and low compensation for work. The
marginal revenues of farmers are dictated by the limited nature of economic trade in most
farms (half of the revenues are in-kind), high prices of invested inputs, specifically for energy
resources, as well as the extremely low sale prices on final outputs. Moreover, the low
performance in agriculture is also caused by the limited access to funds, scarce investments,
deteriorating infrastructure, poor management and high vulnerability to natural disasters.
Given the share of agriculture in the GDP (15 per cent in 2006) and the number of people
employed in it (33 per cent of the total labour force in 2006), the low performance of this is
cutting down on the growth perspectives for the rest of the economy and is undermining the
poverty reduction strides.
To ensure the reduction in the vulnerability of Moldova to the shocks caused by foreign
prices on power by diversifying energy sources and by increasing the efficiency of the use of
those still is a major challenge. Recent skyrocketing of prices for energy resources has had a
serious impact upon the economy and the population alike. The direct effect resulted in
increasing trade and budget deficits. The increase in the purchase prices contributed directly
to the growth of costs on power, natural gas and oil products purchased by public facilities at
all levels (bringing the budget spending up by 0.5 per cent of GDP). The raise in prices for
energy, without providing for better social assistance system, has considerably added on to
the needs for public funding to support the system.
Maintaining scarce public investments throughout the entire transition period resulted in
deteriorating infrastructure, thus further cutting down any premises for the development of
domestic supply. The underdeveloped road infrastructure is exerting an important impact
upon the mobility of assets and people, particularly in rural areas. This is also an obstacle for
trade by imposing certain additional costs on both exporters and importers. The water supply
and sewer infrastructure has deteriorated all over the country and most of these utilities face
major financial issues, caused by low collection rates, tariffs lower than the real production
costs, and huge loss of water through leakage within the system. On top of it, almost 40 per
cent of the water pumped through the systems is not meeting the health criteria.
Hence, the data show that the growth achieved no new quality level over the last years. This has
created limited opportunities for employment within the country and, as such, has not tempered
enough the emigration phenomenon. On the contrary, the relatively low standards of living,


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lack of well-paid jobs, an economic activity down in rural areas, and the high unemployment
rate among youth, are all further fuelling the emigration. Most probably, even if the inflow of
remittances will continue to support the robust growth of consumption in the short run, this
model of growth will use up in the medium to long run outside a strong response on the side of
domestic supply. The shift in the growth paradigm turned to be a far-reaching and enduring
process, which still is a major challenge for the future development of the country.
The economic growth has made a significant contribution to improving the living standards. The
poverty indicators improved by approximately 39 p.p. for the absolute poverty and by 36 p.p. for
extreme poverty during 2001 – 2005. The absolute poverty reduction was reported in all
communities. Alongside the poverty rate, there was also a reduction in the inequalities, yet at a
lower pace. Starting in 2004, however, there was stagnation reported in the poverty reduction
strides, which is indicative of the economic growth benefiting not all groups of population.
As per the findings above, the economic growth and improvements in the fiscal situation
allowed that public spending be increased for the social sector. The growth of spending in
this sector has not always been accompanied by a proportionate improvement in the quality
of rendered services. There was mixed feelings about the progress accomplished in
improving the access and quality of education services over the last years. The enrolment rate
in preschool education underwent a significant growth from 38.5 per cent in 2000 up to 68.6
per cent in 2005, with significant discrepancy between rural and urban settings. As to the
mandatory general education, the net enrolment rate dropped from 93.5 per cent in 2000 to
87.8 per cent in 2005 for primary education facilities, and from 87.0 per cent in 2000 down to
86.8 per cent in 2005 for lower secondary education facilities. The lowest enrolment rate of
all was reported in vocational secondary education facilities (16 per cent)7.
The current formula used to earmark resources, including the low salaries of the teaching staff,
is limiting the possibility of school managers to more efficiently use the available resources and
is exerting a negative impact upon the quality of education at all levels. The decrease in the
number of school age children, making allowance that in many communities the schools’
projected capacity is already several times over the limits set for the number of students, is
conducive of unjustified costs. Furthermore, streamlining the school network still is viewed as
an obvious solution to improving the efficiency with which the resources are harnessed by
cutting down the proportion of non-teacher staff in the total number of employees, by lowering
the maintenance costs, and by bringing the student-to-teacher ratio in line with international
norms. The mapping of pre-university education facilities has been completed, following which
there will be a strategy developed to streamline the network of schools.
Progress has been reported in health reform implementation over the last years – a mandatory
health insurance system was put in place, restructuring of the hospital system was started up,
and the primary health care sector was strengthened. The public spending in the system
increased from 2.9 per cent in 2000 up to 4.8 per cent of GDP in 2006, whereas the total
spending within the system increased from 6.5 per cent up to 9.8 per cent of GDP
respectively. All these factors provided for reversal in the adverse trends from the previous
decade, thus resulting in better health indicators. The introduction of health insurance
improved the financial protection of the people, with almost 75 per cent of population being
covered with health insurance. Yet, there still are serious coverage problems in rural
communities and smaller towns. Even though the access improved, there still is considerable

7
 International methodology used when calculating the net enrolment rates is not providing for adjustments for the
children the age of which is not matching the level of education those are enrolled in (for instance, children 5-6
years of age attending the primary education tier, or 7-8 year-olds attending a kindergarten etc.) Hence, statistical
data on the net enrolment rate reflect the situation only in part, and should be considered with caution.


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room left for improving the quality of health care services.
Despite the public spending considerably going up for health, the sector’s efficiency just
partly improved. Although the hospital efficiency improved, its indicators still are among the
worst in the region. The sector is continuing to face the redundant capacity issue. The average
hospital bed occupancy rate was 66 per cent in 2005. Moreover, the financial sustainability of
the health care system is threatened by the low participation in and contributions payable to
the health insurance scheme on the part of the active population.
Despite the progress reported in the improvement of the financial situation in the pensions
system (by postponing the retirement age, improving collections), the reform initiated back in
1998 has not met its long-term objectives. The payment of pensions continues to be made
based on declared salaries and not depending on the contributions really paid, thus
undermining the financial sustainability of the pensions system, is conducive to inequitable
redistribution of resources among various categories of insured people, and is bringing about
relatively low pensions. Moreover, there is no comprehensive solution to the issue of farmers
participating in the pensions system. The average retirement pension was MDL 458.41 in
2006 –2.5 times that reported in 2000. This amount is narrowly wide the poverty threshold.
The replacement rate (amount of pension payment as a share of the last income) continued to
drop, tallying up 27.7 per cent at the end of 2006.
There is modest progress realized to date in social assistance system reform. The current
system is fragmented and is inefficiently targeting the poor. There was limited impact of the
public spending earmarked for social assistance over the last years (accounting for about 11.7
per cent of GDP in 2006): the available surveys show that the social assistance is benefiting
equally all income quintiles and is not focusing on the poorer quintiles. This is even more so
in the case of nominative compensations, which represent the biggest chunk of the social
insurance budget. Notwithstanding, the number of recipient categories within the nominative
compensation system didn’t go down during the reference period, but on the contrary,
expanded from 11 to 13.



ANNEX 2: EXTENDED SWOT ANALYSIS



Key objective: Ensure a better quality of people’s life by consolidating the basis for a
robust, sustainable and inclusive economic growth.
Strengths:                                      Weaknesses:
Keeping up relative macroeconomic stability Transnistrian strife not worked out
during some profound reforms                   Skewed structure of production
Relatively developed and stable banking sector Relatively high cost of capital
Relatively cheap labour force in smaller Growing deficit of skilled labour force, in
towns and rural settlements              particular owing to outbound migration of
Majority agreeing on the European vector manpower
Customs duty free access to EU markets Utilization of energy-intensive, morally and
based on the GSP Plus system, to the physically outdated, technologies
countries of South-Eastern Europe based on Underdeveloped physical infrastructure
the CEFTA agreement, and to CIS countries


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based on free trade agreements           Poor image of the Republic of Moldova
Legal and fiscal frameworks conducive to worldwide, and limited global visibility
investments                              Limited capacity of public administration
Skilled human resources in certain sectors of Inefficient judiciary system and persevering
economy                                       corruption
                                                 Administrative hurdles to attracting investments
                                                 Poor targeting of social assistance
                                                 Excessive social and economic gap between the
                                                 municipalities of Chisinau and Balti, and other
                                                 communities
Opportunities:                                   Threats:
Sustainable economic growth in trade partner Exacerbating Transnistrian conflict
countries                                       Reliance of national economy on external factors
Geographic proximity to EU and major trade Increasing prices for energy resources
markets
                                                Decreasing flow of remittances
Clear-cut perspectives for better access to the
EU markets based on ATP (autonomous trade Ongoing outflow of skilled labour abroad
preferences)                                    Negative demographic trends
Growing purchasing power of population Protectionist measures on foreign markets
and poverty reduction
                                                Growing inequalities among the populace and
Certain categories of natural resources are regional discrepancies
not exploited to full capacity and there are
unused spaces                                   Slow progress in structural reforms
Penetration of foreign banks on the domestic Growing corruption
banking markets
Willingness of international financial Adverse impact of development on environment
organizations and donor countries to provide
financial and technical assistance for country
development
Cooperation between the Republic of
Moldova and regional and international
security structures
Scaling up the sector of information
technologies and communications
Scaling up the scope of services
Opening the Giurgiulesti port and harnessing
the ensuing benefits

1. Strengths
Keeping up relative macroeconomic stability during some profound reforms The
performance of economy made it possible to overcome a period of ongoing economic decline
and poverty growth over the last seven years and to reach economic growth and improvement


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in the living standards. Thus, the cumulative growth of the GDP was 49.5 per cent during 2000-
2006. The national currency exchange rate stayed stable, whereas the National Bank reserves
considerably grew. The sizeable economic growth and the prudent limits of foreign crediting
led to the public revenues constantly growing and the public debt and the publicly guaranteed
debt as a proportion of GDP decreasing from 79 per cent in 2000 to 26 per cent in 2006.
Relatively developed and stable banking sector The stability indicators of the financial
sector are sustainable enough and, by and large, the Republic of Moldova is meeting the
criteria of the Basel Committee for an efficient banking supervision. In general, the banking
sector is characterized by growing revenues, capitalization and liquidity, as well as by few
non-performing assets. Moreover, the growing interest on the part of foreign banks to invest
in the banking sector of the Republic of Moldova is improving the internal and external
credibility to this sector.
Relatively cheap labour force in smaller towns and rural settlements The labour force is
relatively cheap in small towns and rural communities in the Republic of Moldova when
compared to other countries in the region. The average monthly salary in agriculture, which is
relevant for about 33 per cent of the country’s labour force, was MDL 915 in 2006. The
relatively low cost of manpower is one of the incentives to attract investments and promote
trade during a certain timeframe. However, one should take into account that our comparative
advantage due to lower costs will erode more and more as the time passes by, and the
technological gap between Moldova and developed countries might widen.
Majority agreeing on the European vector There was political and social consensus
crystallizing in the Republic of Moldova in recent years with respect to aiming the country’s
internal and foreign policy at European integration. According to the public opinion survey
conducted in November 2006 by the Public Policy Institute, should there be a referendum on
joining the European Union, as many as 68 per cent of people would vote for it.
Customs duty free access to EU markets based on the GSP plus system, to the countries
of South-Eastern Europe based on the CEFTA agreement, and to CIS countries based
on free trade agreements The gaining by the Republic of Moldova of access to the
Generalized System of Preferences (GSP Plus), as of 1 January 2006, is allowing free access
to the EU markets for about 9,200 tariff items out of the 10,200 items existing in the country.
Therefore, 2,000 items are made available to all third countries based upon the EU customs
tariff, and 7,200 items based upon GSP Plus, which only 15 countries could benefit from.
Getting the GSP Plus is a considerable improvement in the trade arrangements with the EU,
thus making it possible to increase the exports to the EU markets by 20 per cent in 2006. The
joining of the Republic of Moldova to the CEFTA (European Community Free Trade
Agreement) is an excellent framework to prepare for the joining to the EU and adherence to
European values, by opening up economies and by developing regional trades. Similarly, the
signing of free trade agreements with the CIS member states provides considerable
opportunities to widen the spectrum and import markets for the domestic products.
Legal and fiscal framework conducive to investments The legal and fiscal frameworks in the
Republic of Moldova are not creating obstacles for investments. Once the Law on Business
Investments was adopted in 2004, there were equal opportunities set up for local and foreign
investors alike. Moreover, the share of income taxes payable by legal entities was brought from
32 per cent in 1998 down to 15 per cent in 2006, whereas the tax legislation provides for
incentives promoting investments in various areas, such as: information technologies,
importing of production equipment for operating SME, subsidies for winegrowing etc.
Skilled human resources in certain sectors of economy By and large, considering the



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income levels reported by the population of the Republic of Moldova, the education they are
benefiting from is quite substantial. There is a quite high coverage with education services of
all types. The gross enrolment rates are 97 per cent and 93 per cent for the primary and lower
secondary education respectively. Although the education system in the Republic of Moldova
is not fully meeting the demands of domestic and foreign markets, the Republic of Moldova
is benefiting from skilled and trained human resources in certain areas (specifically, in
information technologies and communications, banking and financial services, health care
etc.) Moreover, most of the country’s population speak two languages and are prone to easily
assimilating foreign languages, providing the Republic of Moldova with additional
opportunities for education, employment and retraining both inside and outside the country.
2. Weaknesses
Transnistrian strife not worked out As long as the Transnistrian stalemate is not sorted out,
there will be low attractiveness for investments in the country, and social cohesion would be
difficult to achieve. Under the current circumstances, it is not possible to harness and use the
industrial potential of the country, which is mainly located on the left bank of the Nistru
River, thus limiting the country’s opportunities for developing branches other than those
pertaining to agriculture. Moreover, the smuggling of goods and illegal trade are pervasive
phenomena, whereas the frequent employment of re-export schemes through this region is
resulting in material loss to both the Republic of Moldova and neighbouring countries.
Skewed structure of production The economy of the Republic of Moldova did not manage
to ensure the balanced operation of all the economy’s sectors during transition. It was not
possible to revitalize industry, to improve the performance of agriculture and to set up a third
sustainable sector. As a result, the spectrum of products that the Republic of Moldova is
providing is very homogeneous and is not meeting the requirements imposed by foreign trade
markets. Thus, because of low competitiveness of Moldovan products, the geography for
exports export of the Republic of Moldova is poorly diversified, with about half of the
exports heading for CIS markets. Although another half is heading for the countries of the EU
and South-Eastern Europe, the spectrum of exported goods is poorly diversified, mostly made
up of farming products, alcohol beverages, and textiles.
Relatively high cost of capital Although justified by the high inflation over the last couple
of years, the high interest rates for loans (18 per cent for loans in national currency, and 11
per cent for loans in USD) limit the access of companies, in particular SME, to these financial
resources. The high interest rates are mostly explained by the high risk of the country.
Growing deficit of skilled labour force, in particular owing to outbound migration of
manpower The migration of labour force, which mostly scaled up during the second decade
of transition, contributed to the outbound flow of skilled manpower. According to the annual
survey of labour force conducted by the NBS, there were approximately 330 thousand
citizens of the Republic of Moldova emigrating abroad in 2006. Although the unemployment
rate is on a downward sloping trend in the Republic of Moldova, the growing number of
unemployed youth raises concerns.
Utilization of energy-intensive, morally and physically outdated, technologies Because of
the use of equipment and gear with substantial physical and moral wear-out, the energy
consumption is intensive in the Republic of Moldova, totalling about 3 times the respective
indicators reported in developed countries. Moreover, the heavy reliance of the economy, up
to 96 per cent, on imported energy resources, and the up-surging price for those, is an
additional burden for the production sector of the country.
Underdeveloped physical infrastructure In order to attract investments, it is required that


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an adequate physical infrastructure be put in place. This is mostly about roads. Up to 58 per
cent of the national roads and 75 per cent of the local roads are currently dilapidated and in
poor condition in the Republic of Moldova. At the same time, merely 34 per cent and 30 per
cent of the households have water supply and sewerage respectively; whereas the social
infrastructure is to a great extent outdated and is not meeting the current demands. This
results in high maintenance costs and waste of resources to the detriment of the needs to
develop the education, health care and social protection sectors for the population.
Poor image of the Republic of Moldova worldwide and limited global visibility Being a
small-size country, which declared its independence less than two decades ago, the Republic
of Moldova is not well-known worldwide. On top of this, globally, the information about the
Republic of Moldova was dominated by negative news and labelling pertinent to certain
issues that the country is facing, such as the poverty, corruption, Transnistrian standoff and
human being trafficking. This information was not consistently offset with positive images.
Limited capacity of public administration The existing capacity of public administration is
not adequate to provide quality public services. Despite quite a few people working in this
sector, the low salaries contributed towards low motivation and poor productivity. These, as
well as the inadequate outlining of the attributions and competencies of central and local
public administration authorities, and poor financial and economic independence of those,
undermine the capacity of public administration to render quality public services.
Inefficient judiciary system and persevering corruption Despite the strides made to reform
the justice system in the Republic of Moldova, it is characterized by judges having limited
access to the tools needed to take well-poised decisions, to international law sources, as well as
by the poor status of courts that would secure the access of the public to court rooms and to trial
procedures. These issues, coupled with a large number of judge decisions left unexecuted,
appeals to the European Court for Human Rights, and general appeals to justice (while the
number of judges is constant over time) are one more proof of inefficiency in the judiciary
system. Moreover, the limited transparency of relations in certain sectors, specifically in the
health care system and education, result in corruption still being one of the most substantial
hurdles to mount for the accomplishment of economic growth and poverty reduction objectives.
Administrative hurdles to attracting investments Despite developing a legislative
framework conducive to attracting investments and promoting the regulation framework
reforms, there still are administrative obstacles hindering the placement of investments in the
Republic of Moldova.
Poor targeting of social assistance The social assistance is the modality to support the
public in avoiding poverty and in improving their living standards. Although the benefits
targeting families with children are reckoned to be one of the most important and efficient
social assistance programmes, the impact of those payments upon the wellbeing of families
with children is unsubstantial, because of the small amount payable. As to the nominative
compensations paid on a category basis, which is assimilating circa 47 per cent of the social
assistance spending from the state budget, these present a number of drawbacks, including: i)
nominative compensations are not always targeting the poorest groups of population; ii) the
small share of nominative compensations are not solutions to the recipients’ problems; iii)
impossibility to evaluate the number of cash payments entering one or another family (there
could be more than one person within the family entitled to several compensations), thus
posing a threat of erring in the system – over-inclusion and exclusion.
Social and economic gap between the municipalities of Chisinau and Balti, and other
communities During the transition, there was a sharp increase in the contrast between urban



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and rural settlements. The country’s development still is polarized, the most developed in all
terms being the municipalities of Chisinau and Balti. Because of certain more vulnerable
communities, there is a considerable gap across regions encompassing those in terms of
revenues, labour force employment, access to health care and education services, and
providing those with physical and social infrastructure.
3. Opportunities
Sustainable economic growth in trade partner countries The Republic of Moldova, as
well as other countries, is relying significantly on the economic development of partner
countries. The economic growth in partner countries, which is preceded by growth in the
purchasing power of population and by prodigal development of economy’s various
branches, will make sure, ceteris paribus, that there is need for imported raw material and
products, which could be supplied by the Republic of Moldova.
Geographic proximity to EU and major trade markets The vicinity with EU – an
important political pole and the biggest trade market in the world, is providing the Republic
of Moldova with important advantages. Hence, within the framework of EU expansion to the
borders of the Republic of Moldova, it makes it possible to request an EU-associated member
state status, and become a plenipotentiary EU member state in the long run. By bordering the
EU, the Republic of Moldova benefited from a new system, GSP Plus, which allows the
access, at zero customs duty, for about 88 per cent of the Republic of Moldova exports to the
EU. Moreover, the Republic of Moldova could benefit from the ATP (autonomous trade
preferences) agreement, greater involvement of the EU in sorting out the Transnistrian
conflict, an easier visa regime for the citizens of the Republic of Moldova travelling in the
EU, as well as assistance provided within the framework of the New European
Neighbourhood and Partnership Instrument. Besides, once Romania and Bulgaria joined the
EU, these countries accepted EU norms and standards which are less attractive to investors.
The cost of labour force in those countries is growing up at sustainable pace and is exceeding
way off the cost of manpower in the Republic of Moldova. This situation is favourable to
attracting investors from those countries to the Republic of Moldova, specifically making
allowance for the geographic proximity and cultural and language similarities with those
countries. At the same time, the Republic of Moldova is geographically close to Russia, too –
one of the most important emerging markets. Any eventual investments made into physical
infrastructure, improvement of product competitiveness and better image of the country,
could provide the Republic of Moldova with opportunities to turn into a “regional hub”
between east and west.
Clear-cut perspectives for better access to the EU markets based on ATP The Republic
of Moldova is facing a big opportunity to get better access to the EU markets based on ATP
(autonomous trade preferences) in 2007. The signing of the ATP agreement would augment
the trade advantages that the Republic of Moldova is benefiting from based on the GSP Plus
system, and would scale up the free trade facilities over some products of importance to the
economy of the Republic of Moldova, such as alcohol beverages, sugar etc.
Growing purchasing power of population and poverty reduction The purchasing power of
population grew up in recent years. This is reflected in the increase of household consumption,
particularly due to the inflow of remittances in the Republic of Moldova, which accounted for
35 per cent of GDP in 2006. At the same time, there was an increase in salaries, and the annual
indexation of pensions made it possible to avoid the adverse impact of inflation. In the same
vein, the number of population below the absolute poverty threshold dropped by 38.7 per cent
points during 2000-2005. Besides, there was also a reduction in the number of people below the
poverty food threshold by some 36.1 per cent points. This allowed to cut down on the social


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exclusion and to scale up the access of population to health care and education services, thus
contributing to consolidating the human development in the Republic of Moldova.
Certain categories of natural resources are not exploited to full capacity and there are
unused spaces Moldova is holding a rich land patrimony and non-metal mineral reserves
which are not harnessed to full capacity. Although land areas sown to agriculture and forests
may not be purchased by foreign citizens, there is legal framework in place to ensure the
long-term leasing of those, thus facilitating their harnessing to full capacity.
Penetration of foreign banks on the domestic banking markets The entrance of several
foreign banks on to the banking markets of the Republic of Moldova (such as, Banco Veneto
of Italy in 2006, Raiffeisen of Austria in 2006, Societe Generale of France in 2007) will
improve competitiveness within the given sector and will bring about a drop in price of
capital. Therefore, the presence of international banks on the domestic markets is minimizing
the potential risks for foreign investors and is stimulating direct foreign investments.
Willingness of international financial organizations and donor countries to provide
financial and technical assistance for country development The decision taken by the
Consultative Group for the Republic of Moldova to provide financial assistance worth USD 1.2
billion for the next three years is an opportunity to support the country’s balance of payments
and to make investments in physical and social infrastructure, run public administration reforms
and regulatory framework reforms, as well as to prevent and fight corruption.
Cooperation between the Republic of Moldova and regional and international security
structures The provision for regional mechanisms for conciliation and development of cross-
country relations, the kinds of the Stability Pact for the South-East Europe, and the NATO
Partnership for Peace, is the best way for the Republic of Moldova to join to the international
efforts bent to create a single security system in the Euro-Atlantic region and to consolidate
stability in the world. In order to consolidate the border services of the Republic of Moldova
and Ukraine, and to consolidate the strides in working out the Transnistrian conflict, it is
timely to take advantage of the EUBAM mission, which will continue to operate, probably,
through the next years. At regional level, an opportunity would be share information through
the Regional Centre to Fight Cross-Border Crimes (SECI Centre), which has national contact
units in the member states, with a National Virtual Centre SECI/GUAM being located in the
Republic of Moldova, for that matter, to fight terrorism, organized crime, illegal drug
smuggling, and other kinds of serious delinquencies.
Scaling up the sector of information technologies and communications Although in
embryonic stage of its development, the sector of information technologies and
communications, reported a growth 6 times that of GDP, starting in 2000. The further scaling
up of the IT and communications sector will provide for accelerated flow of information,
facilitate the assimilation of new technologies, which in turn will have an impact upon
competitiveness in the Republic of Moldova.
Scaling up the scope of services The competitiveness of companies targeting domestics
markets and those exporting goods on international markets depends on the availability, cost
and quality of services on the domestic markets. This refers to financial, transport,
telecommunication services etc. Hence, the sustained growth in the share of services within
GDP, alongside the quality of those, will facilitate the operation of enterprises and will favour
economic growth.
Opening the Giurgiulesti port and harnessing the ensuing benefits The signing of an
investment agreement regarding the Free International Port “Giurgiulesti” provides room for
harnessing certain actions not taken previously, such as the construction and use of petroleum


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terminal objects, production of bioethanol and the construction on the Danube River of a port
for passengers and the handling of goods, which would allow to increase the amount of
investments on this territory in particular, as well as in the Republic of Moldova in general.
4. Threats
Exacerbating Transnistrian conflict Any delay in working out the Transnistrian conflict is
hurting the image of the country and is leading to considerable material loss, due to illegal
smuggling used in the given region. Besides, any exacerbation or worsening of situation
would generate instability with adverse effects on the national economy, and domestic and
foreign investments, as it also will compromise the chances of the Republic of Moldova to
joint the EU.
Reliance of national economy on external factors The economic performance in 2006,
going down due to the ban imposed by the Russian Federation on the imports of alcohol
beverages and meat, coupled with skyrocketing prices of energy resources, proved the
negative consequences of a country’s reliance on external factors. Any shift in the attitude
towards the Republic of Moldova on the side of partner countries may result in severe impact
upon the economic and social development of the country.
Increasing prices for energy resources Any eventual rise in prices of imported energy
resources would be an extraordinary blow, both to domestic producers and to the entire
population of the country.
Decreasing flow of remittances The flow of remittances, representing the main source of
strengthening of the purchasing power of households, has reported a steady increase in recent
years, reaching as much as 35 per cent of GDP in 2006. However, if compared to previous
years, the pace of growth in the inflow of remittances is going down. The migration abroad of
families of Moldovan workers may lead to a considerable depletion of the amount of
remittances sent home and a weakening domestic demand. In the medium term, this could be
devastating for a country such as the Republic of Moldova, which has not yet completed its
main reforms in economy and the social sector, and which yet has to build performance
sectors with solid capacity for economic growth.
Ongoing outflow of skilled labour abroad The ongoing outbound migration of labour force,
when citizens who left before are not coming back, may result in acute shortage of
manpower, and fewer contributions to the state social insurance fund, thus endangering the
sustainability of the country’s development in the medium and long run. Hence, there is risk
that the GDP will keep mostly being made up of remittances and not generated by the
production sectors of the country.
Negative demographic trends One-quarter of population of the Republic of Moldova
consisted of people 60 years old and over, and about 11 per cent being 80+ years old at the
end of 2005. In the same vein, there is a constant growth in the ageing coefficient of
population from 12.8 per cent in 1990 up to 13.4 per cent in 2005 over the last 15 years, with
upwards rising trends reported in the rural areas. The migration of labour force contributes
even more to the ageing of population. A survey conducted by the UN forecast that the
population of the Republic of Moldova will drop by 17 per cent by 2050. Also, estimates
have been made that the number of children 3-6 years of age will decrease by 9 per cent
during 2004-2009, 7-15 year-olds – by 24 per cent, and 16-18 year-olds – by 18 per cent, and
that the number of youth belonging to the age group of 19 - 24 year-olds will increase by
merely 6 per cent. This is a threat to the human potential of the country. The countries facing
the ageing of population and demographic declines are also facing a number of dilemmas
politics wise, including: the balance between adequate retirement and health care for the


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elderly, the ratio of people working and those of retirement age, participation in the labour
markets, possible supplanting of migrations and replacement of the immigrant population.
Protectionist measures existing on foreign markets Although the foreign markets to which
the Republic of Moldova is exporting its products are liberalized, frequently there are certain
protectionist measures imposed to protect the domestic producers. This is relevant
specifically to Ukraine and Russia, which are not members of the WTO, and tend to impose
certain protectionist measures affecting the foreign trade of the Republic of Moldova.
Growing inequalities among the populace and regional discrepancies Despite actions of
economic and social nature being taken in a bid to improve the overall wellbeing of people,
the inequalities across population groups, characterized in particular by considerable
discrepancy between incomes, may, anyhow, scale up. The uneven income across population
groups is amplifying poverty and social exclusion, and is one of the driving factors of
outbound flow of manpower. At the same time, the widening regional gaps in economic
performance may have a demoralizing effect on human development. This, as a result, may
further favour the out-migration of the populace from rural areas to urban settings and outside
the country.

Slow progress in structural reforms Vitalization of structural reforms is critical to
improving the performance and capacity to absorb the assistance from outside. Hence, the
slow implementation of structural reforms may endanger the future economic growth.
Moreover, there is a direct relationship between the granting of technical assistance and the
commitment to consistently promote reforms. Donor aid was always regarded as extremely
important for the Republic of Moldova, which is engaged in transition. Donors supported the
Government in its reform-prone strides and earmarked resources to those areas in which the
government had no means to invest money of its own. An eventual reduction of this aid may
occur, should the reforms slow down or reverse in the Republic of Moldova.
Growing corruption Alongside the inconsistent implementation of reforms, the exacerbating
corruption is compromising the trustworthiness of the government and is limiting the access
of vulnerable groups to public services. The rampant corruption may offset the potential
positive outcomes yielded by central public administration reforms, changes in the regulation
framework, the judiciary system reform and changes in other areas of national importance.
Adverse impact of development on environment Even if the impact of economy on the
environment is smaller, owing to the economic crisis during transition and deindustrialization
of the country, the situation with ecology in the country could not be described as a favourable
one. The quality of underground waters, drinking water and facilities for the biologic cleansing
of residual waters and sewerage systems are not satisfactory. Besides, there are more emissions
to the atmosphere from mobile sources, whereas the soils deteriorate due to intensive
exploitation of soils and the use of obsolete farming techniques. The worsening of the
environmental situation in the Republic of Moldova will result in a negative impact upon both
the health status of people and the global worming trends that all the humankind is facing.


ANNEX 3: ANALYSIS OF CONSTRAINTS

[Inserted will be a review of limitations conducted within the framework of the Millennium
Challenge programme.]




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