Progress report “Moldova in the Eastern Neighborhood Policy 2005-2014

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Foto: Radio Free Europe Foto: Radio Free Europe
Publishing date: Tuesday, 16 June 2015
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Summary

During 2005-2014, Moldova saw important progress in terms of European integration - signing the Association Agreement, visa liberalization with EU, ensuring more respect for human rights, providing e-governance, IT sector and social services’ reform. However, major weaknesses remain in a number of sectors, particularly in fighting corruption, in the banking sector, implementation of EU quality standards and energy sector. Therefore, despite some progress, rampant corruption, politicization of public sphere and poor performance of public institutions indicate that in the last 10 years reforms have been promoted under external pressure, with little ownership and limited political will to reform.

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In the period 2005-2014, justice sector reform has seen important developments. It was substantially revised legal and regulatory framework, and new institutions have been established to ensure the implementation of laws. Despite these efforts, justice reform develops slowly, being hindered by lack of genuine political will to reform, politicization of the appointment process in justice system key functions, but also due to insufficient financial resources for the reform.

Preventing and combating corruption was addressed consistently in the policy documents from this period. Paradoxically, legislative and institutional efforts have not reduced corruption. On the contrary, corruption has increased, causing public discontent. This is determined by the high degree of political dependence of the anticorruption agencies.

The discrepancy between human rights and freedoms enshrined in the official legislative acts and an everyday practice continues. Even though efforts have been made in harmonizing the national legal framework, and at the moment Moldova has a solid legal framework for the promotion of human rights, there are significant gaps in the implementation process. Trafficking in persons, discrimination against minorities and a partially free press continues to be pressing problems. Difficulties in ensuring and respecting human rights are determined by the quality of Moldovan justice sector.

Under the European Neighborhood Policy in the period 2005-2014, it has been extended the internationalization of the Transnistrian settlement process by establishing negotiation format "5 + 2". It followed the decision to unify customs procedures at Moldovan-Ukrainian border on the Transnistrian segment. The launch of EUBAM as a measure of EU involvement in addressing the crisis attracted Moldova in the EU foreign and security policy. 2014 signing of EU-Moldova Association Agreement substantially changed the regional context of the Transnistrian settlement, creating conditions for involving Transnistrian region in the DCFTA processes and subsequent for the political settlement of the conflict.

Trade relations with other countries have experienced important progress due to commitments under the World Trade Organization and in particular to deepening trade relations with the EU. Thus, exports to the EU increased from EUR 440 million in 2005 to over EUR 1.1 billion in 2014, the Community Area becoming the main market for Moldovan products. Still, in order to further exploit the country's export capacity, additional efforts are needed to adopt EU quality standards.

It is worth to mention that opening a business in Moldova has become easier in the last nine years, due to the implementation of one-stop shops for enterprise registration and reducing the amount of documentation required. However, obtaining the permissive documents, especially construction permits and access to electricity, remain very problematic.

The Customs Service has undertaken steps to simplify and digitize customs operations, whereas the field of standardization and technical regulations was marked by the establishment of National Accreditation Center.

The social protection system was partially reformed structurally and institutionally, through the establishment of several institutions that are designed to facilitate better services and a fair application of regulations. However, the pension system still remains the biggest issue, and its reform is imperative in order to consolidate the sustainability of the system and improve the wellbeing of pensioners. 

In terms of employment, international agreements on migrants’ social protection have been signed with 14 countries, but not with Russia, which remains an important destination for Moldovan workers. Inside the country, the informal employment remains an important issue, a matter that has to be addressed by improving business conditions and tax regulations.

The field of industrial policy was marked by the adoption of several initiatives to support the SME sector, the construction of Iasi-Ungheni pipeline and signing a contract of natural gas sale between Moldova and Romania. However, negative aspects affecting the competitiveness of enterprises still persist, i.e. underdeveloped financial markets, corruption and weak public institutions.

Transport and roads saw significant progress with the reconstruction and rehabilitation of 450 km of roads. In addition, authorities and donors have pledged EUR 350 million worth of future infrastructure investments. Still, the transparency issues related to managing the Road Fund remain acute.

Substantial progress was observed in e-Governance and IT sector, where Moldovan e-Government Center has launched numerous online services that made it much easier to obtain public documents. IT and Telecommunications sector enjoyed market liberalization and improved business conditions, which led to a surge in computer’ and mobile phones’ usage penetration rate. However, the issue in this sector relate to competition and market fairness, particularly on the telecommunications market.

In terms of macroeconomic and macrofinancial policies, we appreciate Central Bank's transition to inflation targeting policy, set at the 5%, and the creation of BOOST database of public spending, which facilitated budgetary transparency. At the same time, major drawbacks relate to fiscal discipline, given that for years, the Government violates most of deadlines for presentation, publication and reporting of the National Public Budget.

Financial services market remains underdeveloped both in quality and size, with a digital infrastructure that is well below the modern standards, especially at the local stock exchange. In addition, the recent problems in the banking industry show that there are significant deficiencies in supervising the sector.

 

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This project is implemented by ADEPT and Expert-Grup with the support of the US Agency for International Development (USAID) through the East European Foundation and FHI 360. This event is possible thanks to the generous support of the American people through the US Agency for International Development (USAID). The opinions expressed are those of the authors and do not necessarily reflect the views of USAID, the US government, FHI 360 and / or East European Foundation.

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