Weekly Magazine "Saptamîna"
Interview with Mr. Edgardo Ruggiero, Resident
Representative of the International Monetary Fund in Moldova:
"There are not so many examples in the world where governments decide
on who and where should invest"
Mr. Edgardo Ruggiero, the
context of our dialogue is marked by absence of financing from the International
Monetary Fund to the budget of the Republic of Moldova. With the risk of
repeating some previously made statements we would like you to tell us why
financial flows stopped to our country.
If you remember, in May, we
agreed once again on the assistance program, on some specific actions that could
be undertaken immediately after that. It should be noted that some of these
actions were going to be taken in January but they have not been implemented. As
a result, it has been decided on a fixed date to discuss lending to the
government of Moldova, provided that the government of the Republic of Moldova
will meet the early agreed conditions. One of these conditions was
implementation of the pre-shipment inspection. The second related to elimination
of restrictions on export, in particular on export of scrap metal.
about elimination of monopoly encouraged by the State in the field of scrap
Exactly. At that time, it has been agreed on all aspects related to the
implementation of the pre-shipment inspection and with the consent of the both
parties it had to lead to the reinstatement of the pre-shipment inspection of
goods. This is a totally new inspection, much more favorable to the importers
but which ultimately was not implemented.
Ruggiero, there are views that there is double pressure put on the Chisinau
government. First of all, there are international financial organizations with
the IMF not the least, that insist on the pre-shipment inspection of imported
goods and there are local businesses that do not want very much to have the
businesses under the scrutiny of some control authorities, including the
Do you mean
that local businesses would exercise pressure over the government?
In the whole world, businesses exercise pressure over the government. From this
perspective Moldova is no different than any other country. If we, however,
refer to how Moldova and other former Soviet Union countries are different from
other countries, it should be recognized there are much more businessmen in the
parliament than among the legislators of other countries. This is my
impression. Besides, Moldova is a small country and businessmen are quite close
to those in the government and parliament. They know each other and are in
you appreciate the investment climate in Moldova and the second part of the
question is, do you believe that settling the conflict between Chisinau and
UNION FENOSA Group is a true signal that the power reconsiders its attitude
towards the investment environment? We are referring to UNION FENOSA for the
simple reason that the relations between the government and Spanish investor was
going to represent a more general relation – between the government and foreign
are two questions that will need time to be answered. But I will answer briefly
starting with the first one.
When we say
UNION FENOSA, we mean one company. But we do not talk about defending only one
company. It is just that we sometime take one business entity as an example to
illustrate a certain state of affairs. This matter has to do more with the World
Bank, i.e. structural reforms in energy sector. However, if there is a case for
UNION FENOSA to lose the investments that it made, then the next step would be
for the Agency that insured the operations of UNION FENOSA Group – MIGA
(Multilateral Investment Guarantee Agency) – to pay significant amounts to UNION
FENOSA. This would in fact mean immediate stoppage of all the World Bank
financing activities to the Republic of Moldova. If you remember, USAID has
withdrawn for similar reasons i.e. for government’s involvement in the tariff
policy, $1.6 m dollars financing that it intended to provide.
Now I would
like to refer to the investment environment in general. First of all I would
like to show you a representative example vis-à-vis the situation in this field.
But first I need to say that the investors are coming to us and consult on the
problems that they face here. Here is a chart prepared under a Stability Pact
report that tracks the increase in investments in the South-Eastern Europe. This
chart includes nine countries that set specific tasks related to implementation
of some key reforms in order to attract foreign investments. According to this
chart, Moldova is on the last position in this area. The chart was prepared in
March 2003 and reflects the stage of implementation of some critical tasks for
the attraction of investments. Regarding the investment climate, I could give
other examples. When we talk about all components of a business – licensing,
certification, standardization – surveys show that enterprises are constrained
in their activities. Especially, when we talk about the regulatory environment,
it is believed that it is more restrictive in Moldova than in other NIS state.
Therefore, this means in general services and not only one business, such as
UNION FENOSA, or former owners of Farmaco company.
interventions in the last years in some sectors, in entities that have been
already privatized, are usually presented as attempts to make order where
certain violations have been noted. On the other hand, if looked from outside of
the government, these actions are qualified as attempts to redistribute property
that does not have many things in common with making order.
decision adopted by government adopted decision means in the end a
redistribution, including decisions related to taxation. However, it is
difficult for me to say what is happening in the field of privatization. If you
look carefully to the enterprises privatized through tender through 2001, a few
contracts have been cancelled in one way or another. By definition, formally,
this means a redistribution. After what happened, we need to analyze the legal
reasons of such decisions. If we are talking about legally justified reasons,
than no one can reproach anything. Regarding the enterprises privatized in 2002,
there are only few of these but they have not been privatized through a tender,
they have been privatized as a result of direct negotiations.
there was a government meeting in Chisinau with the foreign investors that are
present in Moldova. As far as we know, when offered to speak the investors kept
mainly silent. How do you think, why they neglected this opportunity to express
their views, objections, proposals?
this was a possibility to have a dialogue with the government. Obviously, if
there was no discussion, it means there is a problem, in terms of a dialogue
between the respective parties. May be the foreign investors are shy. Certainly,
the government is trying to understand the reasons why foreign investors did not
go into a discussion. It is as if you are meeting a friend of yours and ask him
to discuss, talk, while your friend does not show any intention to discuss. In
this case you should try again, to see what is the true reason.
be that they just do not have anyone to discuss with.
be. It might be or may be the foreign investors are simply not used to a
dialogue with the government. May be they just have been surprised by the
possibility that was offered to them. May be they thought that there were too
many people in this conference to talk about certain issues. There could be many
reasons. I am just trying to presume that if similar meetings would be organized
more often, than a dialogue could be accepted by all the parties.
said, this end of the year we will not have financing. It is also likely that
there will not be any assistance in the first half of 2004.
understand that you are referring to the Budget. This document developed for the
next year has some positive aspects, such as elimination of VAT exemptions but
there are at the same time provisions that present certain risks. I mean
proceeds from privatization. If things will work normally, clearly there should
not be any serious problems. The risk, however, is with the expected proceeds
from privatization but it is doubtful that there will be any significant
revenues. There should not be any hurry in reducing the corporate income tax.
Like others say, the situation is such that may be we should tighten the belt,
by reducing expenditures and increasing collections.
IMF mission will arrive to Chisinau in just a few days. It will be here for two
weeks, it will review the country’s economic and financial situation and will
initiate discussions with the government about the development strategy. Will
the respective assessments be at the basis of development of the new lending
program for Moldova or not?
working visit of the mission to Chisinau, we will prepare a report for the Board
of Directors that will meet in January to later decide about the next steps.
This could mean that another mission might come in February, March or April to
negotiate the new program.
say that the new mission wants to see how the State sees its role in the
country’s economy. What answer do you expect to this question?
We want the
government to present its vision about the government’s role in the economy.
There are not too many examples in the world where the government decides on who
should invest and where he should invest. Certain rules of the game need to be
established that will be in place for a certain period of time. These rules
should be clear, transparent and should not provide space for administrative
discretion, for example in customs or tax administration, in licensing activity.
There should be independent agencies, such as ANRE, agencies that establish
tariffs or adopt other decisions.
Pro-European option that was articulated a few days ago by Chisinau have any
chance to be implemented without the government to re-establish its relations
with the international financial organizations?
government will take certain measures to approach the European Union this would
automatically mean an earlier dialogue with the International Monetary Fund,
because the government would be adopting laws and regulations that are conducive
to a market economy.