The Republic of Moldova in front of a unique chance to enter a new economic development stage

Info-Prim Neo commentary The beginning of May brought, besides holydays, a series of important events that had serious influences on the further macroeconomic strategies and evolutions in the Republic of Moldova: resuming the privatization process and recommencing the active program with IMF (a new three years agreement, worth 118,9 million USD was approved for the Republic of Moldova). The changes made within the privatization procedures, on the one hand, emphasize the general economic tendency – stressing liberalization and private property. Gradually, the state will maintain only the settlement tasks and ensuring the necessary conditions for the activity of the private capital. In this way, the state tries to spread the message that it will not be anymore a feared concurrent, personalized as public property companies, and could use discriminatory measures, but will ensure all the conditions for the free concurrence manifestation. However, in order to ensure the success of the privatization process, the Government must prove by facts not only by words that it is a serious partner which inspires trust. The abuse methods used previously by the Government, for example, forced nationalization, infringement of the local authorities’ properties, weakened its image, so at present its goodwill declarations are not understood properly. On the other had, the privatization process is resumed in a critical period for the industrial sector. The official evidence show that in the first trimester of the year the volume of industrial production decreased by 0,3% compared to the similar period of the last year, and separately, the decline constituted 3,4% comparing to March 2005. The main reason of this regress is the lack of investments for market modernization and promotion – the industrial sector is obsolete and stagnant, situation that is only maintaining the area alive nevertheless improper for creating a fast development and modernization trend. This handicap can be overcome only through major investments, fact that involves management innovations and promoting drafts. So, privatization can ensure the necessary inflow of investments in industry. All the same, once again, the Government did not yet create that investment environment which could transform Moldova into a sure target for foreign investors. As a conclusion, a transparent privatization process could mean also the modernization of the economy. The second event – a new agreement with IMF – involves, on the one hand a series of ambitious structural reforms. This time IMF will watch closely the Government in order to make it respect the taken obligations: economic growth, poverty reduction, improvement of the financial system, impelling the transition process. But this “watch over” could be the last one, because the Republic of Moldova passed already near the chances offered by IMF which withdrew its programs after it found out that the Government acts differently than declares. Continuing the old “traditions” could mean a definitive withdraw of the Fund and with it of the whole support of the international community. At the same time, if the Government will be able to fulfill the agreement it could get a series of major opportunities, inclusively in the area of foreign economic relationships. First of all, Moldova has a free trespass for initiating the rescheduling process of the debts through the means of the Paris Club. At the same time, the Government will have access to preferential foreign finance (for a period of 40 years with an interest of 0, 75% yearly). Therefore, indirectly, the Government will have the possibility to reschedule completely the external debt: it obtains preferential credits and has the possibility to use a big share of the incomes to give back the debts. As well, the described situation will allow improving the country’s rating, fact that will give the possibility to the private agents, especially to commercial banks to ask from the external market for cheaper sources on longer periods. The access of the banks to cheap and long-term extern resources will allow increasing the amount of investment credits in the national economy. In conclusion, resuming the program with IMF and fulfilling it successfully will create a better image abroad, which is a very good result for a small and opened economy as in the case of Moldova. In this context, the events from the beginning of May, combined with the ones that will follow, could be the unique chance for Moldova to start a new qualitative stage of economic development, priorities and state management mechanism change. In the years to come, the Government has to undertake many actions in order to economically bring in line Moldova with the standards of the geographic zone it belongs to and which it wants join – Eastern Europe, as part of the European Union.

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