## _cr04395 — Economic Growth and Poverty Reduction Strategy Paper (EGPRSP) (selected sections)

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### Rationale, purpose and principles of the EGPRSP
- EGPRSP defined as the overarching medium-term policy framework for sustainable development and the basis for assistance strategies and state budgets for 2005 and 2006.
- Historical collapse and partial recovery:
  - GDP dropped by three times during the first ten years of independence.
  - Real income contracted by 72%.
  - Average pension in purchasing power declined by 75%.
  - From 2001–2003: GDP grew by 21.6% in real terms; monthly average wage increased by 71.2%; average monthly pension rose by 93%.
- Poverty context:
  - In 2002 over 40% of the population lived below the absolute poverty line.
  - Measured by GDP per capita: "US$542 in 2003".
  - Exodus of 35-40% of the economically active population abroad.
- Purposes and functions:
  - Provide strategic, systemic and participative vision for socioeconomic development.
  - Tool for continuous strategic planning, resource allocation, coordination of sectoral strategies, and donor assistance targeting.
  - Annual review required to adjust parameters.
- Guiding principles:
  - Poverty reduction requires unconditional Government and societal commitment.
  - Sustainable economic growth is fundamental for poverty reduction.
  - Priority focus on improving living standards and social protection, creating jobs for the poor, access to quality medical services, and building human capital.
  - Preconditions: maintain high rates of economic growth achieved in prior three years, integrate into regional/EU structures, build legal framework harmonized with European standards.
  - General design principles (a–e) preserved verbatim in document structure.

### Participation process, institutional framework and communications
- Participation approach:
  - EGPRSP results from a wide participatory process including (a) civil society, (b) poor, (c) business community, (d) central and local public authorities, (e) international donors.
  - Advantages: better understanding of poverty, improved government–society interaction, prioritization dialogue, better resource allocation, societal ownership.
- Institutional components:
  - Oversight: National Council for Sustainable Development and Poverty Reduction (NCSDPR), chaired by the President.
  - Executive: Interministerial Committee for Sustainable Development and Poverty Reduction (ICSDPR).
  - Participation Council (PC) established September 2002.
  - Grant Implementation Unit (GIU) (executive of PC) started 1 May 2003.
- Participation Plan (approved September 2003) — three stages:
  - (i) general information campaign and needs assessment;
  - (ii) participation in defining strategic objectives and policies;
  - (iii) mechanisms for stakeholders’ participation in implementation and monitoring.
- Activity and outreach:
  - Participation Plan implementation: 80 public events nationwide.
  - 25 round-tables in 23 localities with 890 participants (local level).
  - 32 national events (seminars, round-tables, workshops) with 1086 persons.
  - Total direct participants in EGPRSP public consultations: 2283 persons.
- Communication tools:
  - EGPRSP web page launched October 2003 (information in Romanian, English and Russian).
  - TV spot for three months; leaflets 10,000 copies; posters 3,000 copies.
  - Four bulletins, each circulation 77,200 copies, totaling 308,800 copies.
  - Youth essay contest “A solution for my country” — 560 essays; estimated mobilization of 2,500–3,000 active participants.

### Transformation crisis of the 1990s and recovery (key economic history)
- Crisis magnitude and duration:
  - Economic crisis lasted 10 years (1990–1999); GDP contracted by two thirds.
  - 1990-1996: continuous decline; capital investment fell to 15% of 1990 level.
  - 1996 budget deficit: 9.7% of GDP.
  - 1998-1999 shock: GDP fell by 10% (1998 crisis spillover); industry -25% (1998–1999), agriculture -20% (1998–1999).
  - Leu devaluation vs. dollar by 2.5 times between December 1997 and December 1999.
  - Inflation: 18.3% in 1998 and 43.7% in 1999.
  - 1999 levels: GDP 34% of 1989 level; industrial output 32%; agriculture 50%; investment in fixed capital 11% of 1989 level.
- Recovery 2000–2003:
  - From 2000 to 2003: GDP rose by 24,1%; industrial output rose by 54,1%; investments in fixed capital rose by 21,5%.
  - 2000-2002 structural notes: non-state sector share in GDP 75% in 2002; service sector almost 50% of GDP in 2000–2002.
- Main constraints:
  - Predominantly agrarian structure with insufficient processing industry.
  - Low saving and investment ratios.
  - Excessive dependency on labor migration (remittances).
  - Regional disparities: over 80% population live in regions receiving less than 20% of foreign investments; Gross Regional Product per person outside Chisinau only one third of capital.

### Social development outcomes (1999–2003) and demographic effects
- Social crisis markers (1999 nadir):
  - Average wage in real terms ≈ 25% of 1990 level.
  - Average pension ≈ 17% of 1990 level.
  - Unemployment (ILO methodology) reached 11.1%.
- Household income and wages (2000–2002):
  - Gross disposable household income real growth: 10.1% in 2000; 12.7% in 2001; 21.2% in 2002.
  - Average wages increased by almost 50% in 2000–2002.
  - Real average pension increased by almost 64% in 2001–2002.
  - State social expenditures rose: healthcare 2.9% of GDP → 3.6% of GDP (1999→2002); education 4.7% → 5.6% of GDP.
  - About 40% of medical services and over 30% of education services provided for payment.
- Key demographic and social indicators (selected series):
  - Number of permanent residents as of 1 January (thousands): 1997 = 3663.7; 2002 = 3627.8.
  - Births per 1,000 people: 1997 = 12.5 → 2002 = 9.9.
  - Deaths per 1,000 people: 1997 = 11.8 → 2002 = 11.6.
  - Average life expectancy (male): 1997 = 62.9 → 2002 = 64.4; (female) 1997 = 70.3 → 2002 = 71.7.
  - GDP per capita, USD: 1997 = 527.1; 1999 = 321.3; 2002 = 459.
  - Share of population with income below USD 2,15 PPP/day: 1999 = 70.8%; 2002 = 39.8%.
  - Unemployment (ILO methodology): 1999 = 11.1%; 2002 = 6.8%.

### Poverty diagnostics, indicators and profile (1998–2002)
- Data and methodological priorities:
  - Need census to improve Household Budget Survey (HBS) sampling.
  - Adopt official methodology for poverty line estimation and identification of the poor.
- Aggregate poverty dynamics:
  - From 1999 to 2002 poverty level fell by 45%.
  - Poverty incidence: 1999 over 70% → 2002 = 40.4% (poverty incidence values preserved).
  - Severe poverty fell by half between 1999 and 2002.
- Selected poverty indices (numeric series preserved):
  - Poverty Line (Lei p.c. per month): 1998 = 128.9; 1999 = 179.2; 2000 = 234.8; 2001 = 257.3; 2002 = 270.7.
  - Poverty Incidence: 1998 = 52.0; 1999 = 73.0; 2000 = 67.8; 2001 = 54.6; 2002 = 40.4.
  - Poverty Gap: 1998 = 19.5; 1999 = 32.3; 2000 = 27.0; 2001 = 19.3; 2002 = 12.4.
  - Poverty Severity: 1998 = 9.8; 1999 = 17.7; 2000 = 13.7; 2001 = 9.1; 2002 = 5.2.
  - Extreme Poverty Line (Lei p.c. per month): 1998 = 101.0; 1999 = 140.4; 2000 = 183.9; 2001 = 201.5; 2002 = 212.0.
  - Extreme Poverty Incidence: 1998 = 37.4; 1999 = 59.7; 2000 = 52.2; 2001 = 38.0; 2002 = 26.2.
  - International Line $2.15 PPP per day (Lei p.c per month): 1997 = 85.0; 2002 = 193.7.
  - Poverty incidence (international line): 1998 = 52.7; 1999 = 70.8; 2000 = 64.5; 2001 = 52.4; 2002 = 39.8.
- Poverty profile (2002 highlights):
  - Territorial: small towns poverty = 53.2%; rural = 45.1%; big cities = 16.5%.
  - Children: poverty among children in 2002 = 45.2%; rural child poverty = 50%.
  - Elderly: over 60 = 43.7%; aged 70–75 = 46.9%; over 75 = 52.1%.
  - Employment-linked: households with social transfers as main income: poverty incidence = 59.1%; unemployed poverty incidence = 54.5%.
  - Sectoral: agricultural hired labor poverty incidence = 56.0%; farmers = 47.3%.
- Income/consumption structure of the poor (2002):
  - Poor disposable income shares: hired labor = 25.3%; individual agricultural activity = 38.9%; social benefits = 24.0%; other transfers = 10.5%.
  - Poor consumption structure: food products = 75.8% of expenditures; housing/conveniences = 10.4%; health = 2.1%; education = 0.4%.

### Non-monetary poverty: health, education and subjective assessments
- Health (selected indicators):
  - Average life expectancy: 68.5 years (document summary).
  - Under-5 mortality rate: 18.3 per 1,000 live births.
  - Maternal mortality rate: 28 per 100,000 live births.
  - Access disparities: ratio of hospitalization days poor:non-poor = 1:11; poor hospitalization duration 9–13.5 times shorter.
- Education:
  - Persons without education and illiterates constitute 20% of the poor; primary and incomplete secondary comprise additional 42.6% — combined 61.8% of the poor.
  - Net enrolment ratio in rural areas: 0.10 versus urban 0.44.
  - University enrolments three times lower for the poor than non-poor.
- Subjective poverty perceptions (August 2002):
  - 61.2% of households consider themselves poor.
  - Main perceived signs: low income (78.3%), poor health (33.6%), insufficient nutrition (29.9%).
  - Coping strategies: ~90% in cities and >92% in rural areas count on external help (family, neighbors, private borrowing).

### EGPRSP objectives, MDG linkage and medium-term targets
- Long-term development objectives:
  - i) Sustainable socially-oriented development;
  - ii) Reintegration of the country;
  - iii) European integration.
- Medium-term objectives:
  - i) Sustainable and inclusive economic growth;
  - ii) Poverty and inequality reduction and increased participation of the poor;
  - iii) Human resources development.
- MDG-adapted numeric targets (2002 baseline → 2006 → 2010 → 2015 preserved):
  - Reduce persons below $2.15 PPP/day: 39.8% (2002) → 28.0% (2006) → 23.0% (2010) → 18.0% (2015).
  - Net enrollment in gymnasium: 88.0% (2002) → 88.9% (2006) → 93.8% (2010) → 100% (2015).
  - Under-5 mortality: 18.3 (2002) → 15.0 (2006) → 11.9 (2010) → 8.4 (2015) (per 1,000).
  - Infant mortality: 14.7 (2002) → 12.1 (2006) → 9.6 (2010) → 6.3 (2015) (per 1,000).
  - Measles vaccination (under 2): 99.2% (2002) → 100% beginning with 2006.
  - Maternal mortality: 28.0 (2002) → 23.0 (2006) → 21.0 (2010) → 13.3 (2015) (per 100,000).
  - HIV/AIDS incidence: 4.66 (2002) → 4.0 (2006) → 3,5 (2010) → 3,2 (2015) (per 100,000).
  - Population with sustainable access to improved water sources: 38.5% (2002) → 47.7% (2006) → 57.0% (2010) → 68.5% (2015).
  - Population with access to improved sanitation: 40.0% (2001) → 56.0% (2006) → 73.3% (2010) → 90.0% (2015).

### Macroeconomic baseline, medium-term forecast and risks (2004–2006)
- Recent macro trends:
  - GDP growth: steady increase 2000–2002; 6,3% in 2003.
  - Industrial sector growth: 7.7% in 2000 → 13.6% in 2003.
  - Agriculture volatile: -14.1% in 2003 (after +6.4% in 2001).
- Baseline forecasts (preserved numeric projections):
  - GDP growth: 6% in 2004 → annual increase of 5% in 2005 and 2006.
  - Industrial output: 12% in 2004 → average 10.5% annually in 2005–2006.
  - Services: +7% in 2004 → +6% annually in 2005–2007.
  - Agricultural output: +7.5% in 2004 → +4% in 2005 → +3% in 2006.
  - Exports: 14% in 2004 → 13% in 2005 → 12% in 2006.
  - Imports: 9% in 2004 → 7% in 2005 → 6% in 2006.
  - Capital investments: 13% in 2004 → 10% in 2005 → 9% in 2006.
- External sector and balance of payments (2003 snapshots and forecasts):
  - Trade balance deficit: 31.3% of GDP in 2003.
  - Remittances (official): 18.6% of GDP in 2003.
  - Current account deficit: around 10.8% of GDP in 2003.
  - Forecast current account deficit: 7.7% of GDP in 2004 → 3% of GDP in 2007.
  - NBM forecast trade balance deficit improvement: 27.6% of GDP in 2004 → 20.3% in 2007.
- Monetary policy stance (NBM program):
  - Inflation: rose to 15.7% in 2003; NBM objective reduce from 9% in 2004 to 5% in 2007.
  - Re-monetization target: M3 share of GDP rising from 31.2% in 2003 to 47.0% in 2007.
  - Commercial credit growth: +34.8% in 2004 with decrease to 19% in 2007.
  - Exchange rate outlook: anticipated Leu depreciation of 19.3% from December 2003 to December 2007.
- Fiscal outlook (consolidated public budget):
  - Revenues as share of GDP: 36.1% in 2004 → 35.6% in 2005 → 34.6% in 2006.
  - Expenditures as share of GDP: 36.5% in 2004 → 36.4% in 2005 → 35% in 2006.
  - Small annual budget surplus forecast: 0.3% in 2004 → 0,8% in 2005 → 0,4% in 2006.

### Fiscal policy and tax measures (2004–2006)
- Income tax changes and reliefs:
  - Personal income tax reliefs: Lei 3,600 in 2004 → Lei 3,960 in 2005 → Lei 4,500 in 2006.
  - Tax reliefs for supported persons: Lei 240 in 2004 → Lei 600 in 2005 → Lei 840 in 2006.
  - From 2005 proposed non-taxable: individual state social insurance contributions.
  - Personal income tax rates planned reductions by 2006:
    - annual income under Lei 16,200: 10% (2004) → 8% (2006).
    - annual income Lei 16,200 to 21,000: 15% (2004) → 13% (2006).
    - annual income > Lei 21,000: 22% (2004) → 18% (2006).
- Corporate income tax path:
  - 28% in 2001 → 20% in 2004 → planned 18% in 2005 → planned 15% in 2006.
- VAT and excises:
  - Maintain destination method; structure and value of VAT not modified; review VAT reliefs to retain only efficient/socially important exemptions.
- Social insurance and health contributions:
  - Overall state social insurance rate: 30% in 2004 → 29% in 2005 (distribution: 28% employer/2% employee in 2004; 27% employer/2% employee in 2005; 26% employer/3% employee in 2006).
  - Mandatory health insurance premium: 4% (2% employer, 2% employee); system extended nationwide starting 2004.
- Fiscal administration improvements:
  - Consolidate tax collection services; computerized risk-based taxpayer selection; electronic reporting via www.FISK.MD; taxpayer education.

### Public expenditure priorities, MTEF and costing (2004–2006)
- MTEF and financing:
  - Indicative totals (EGPRSP Total Costs, million Lei):
    - 2004: Activities under MTEF 948,3; Activities with unsecured funding 1195,8; Total 2144,1.
    - 2005: Activities under MTEF 1154,0; Activities with unsecured funding 2152,2; Total 3306,2.
    - 2006: Activities under MTEF 1114,1; Activities with unsecured funding 2664,8; Total 3778,9.
  - MTEF will finance approx. 44.2% (2004), 34.9% (2005) and 29.5% (2006); unsecured activities are candidates for donor financing.
- Public expenditure priorities 2004–2006:
  - Circa 66% socio-cultural expenditures (social protection 30%; education 20%; health 14%).
  - Emphasis on social transfers and salary expenditures to directly impact poverty reduction.
  - Salary system reform: Law to establish base salaries in budgetary sector and allowances for high ranked officials beginning 2005 until 2010.
- Indicative public expenditure nominal estimates:
  - Total public expenditures: Lei 9 billion in 2003 → Lei 13,5 billion in 2006.
- Donor financing trends and scenarios:
  - Donor commitments 2000–2003 averaged $30 million (≈ 90% credits).
  - Projected commitments for 2004: US$33 million in credits and US$2.3 million in grants.
  - Ministry of Finance optimistic scenario: around US$60 million in 2005 and US$67 million in 2006 commitments; projected disbursements for new financing around US$16 million in 2005 and US$37.5 million in 2006 (with US$11 million in 2005 and US$18 million in 2006 as budget support already included in MTEF ceilings).

### Public administration reform, governance and anticorruption
- Public administration weaknesses:
  - Central administration staff ≈ 8,500; local administration ≈ 6,500.
  - Problems: insufficient adaptation to market economy, selection/promotion inconsistency, low remuneration, over-regulation, low transparency.
- Reform objectives and principles:
  - Establish modern, efficient, impartial public administration aligned with European practice.
  - Principles: clear roles, delegation to local bodies/private sector, elimination of overlap, rational use of budget resources, separation of policy formulation from implementation, accountability and remuneration tied to performance.
- Strategic Plan actions and institutions:
  - Public Administration Reform Management Unit (supported by Inter-ministerial committee chaired by Prime Minister) to supervise preparation and implementation.
  - Strategic Plan to include pilot exercises, capacity building, job classification, selection and promotion systems, training systems and internal audit.
- Anticorruption (NACS) main provisions:
  - (a) minimization of regulation; (b) free access to information; (c) code of conduct; (d) conflict of interest rules; (e) declaration of incomes and monitoring; (f) promotion of coalitions; (g) communication channels and informer protection; (h) vigilance units; (i) random integrity testing.
- Priority anticorruption actions 2004–2006:
  - Reduce and simplify business regulations; public sector capacity consolidation; donor-assisted professional development; open discussions on medium-term institutional reform.

### Private sector development, trade and investment environment
- Private sector role and constraints:
  - Private sector share in GDP: 75% (2002 figure).
  - Main constraints: unstable legal/regulatory framework, excessive bureaucracy, inefficient fiscal administration, limited access to finance, weak marketing and managerial skills, corruption.
- Medium-term priorities:
  - Regulatory reform; competition development; corporate governance; SME support; external trade promotion; real estate cadastre creation.
- Specific measures:
  - Simplify business registration and post-registration procedures; reduce state controls; promote voluntary technical regulation and move toward EU/international practices.
  - Create National Competition Agency to concentrate anti-monopoly functions.
  - Corporate governance: prepare Corporate Administration Code; improve minority shareholder protection.
  - SME measures: regulatory simplification, microcredit development, information/consultancy network, business-incubators.
  - Trade measures: remove unjustified non-tariff barriers; simplify customs procedures; use preferential commitments (EU); develop export promotion tools and Export Credits Insurance and Guarantee Agency.
- Investment environment:
  - FDI inflows and indicators: FDI (USD million): 136,1; 147,1; 117,1; 43 (series as reported).
  - Finance sector: commercial banks assets/GDP: 29,1; 31,4; 35,1; 37,7 (series).
  - Medium-term tasks: improve legal guarantees, refrain from barriers, adjust fiscal regime; implement new Law on Investment in Entrepreneurship compatible with European standards.

### Infrastructure and sectoral priorities (energy, roads, water, telecom)
- Energy sector priorities:
  - Accelerated gasification; diversification of energy imports; liberalization of power/gas/heat markets; modern heating systems in 19 cities; energy conservation; increase in non-traditional energy share.
- Roads and transport:
  - To maintain public roads: estimated need USD 27 - 30 million annually; actual 1999–2003 spending USD 6.9 million per year (≈ 0.46% of GDP).
  - Priority actions 2004–2006: arrest degradation, create sustainable financing, regional projects, Chisinau–Giurgiulesti rehabilitation, negotiate with EBRD/WB/EIB for corridor rehabilitation (~400 km first stage).
- Water supply and sewerage:
  - 38.5% population with sustainable access to improved water sources (2002 baseline).
  - Priority actions: modernize systems in 156 localities, rehabilitate 93,300 rural wells, pilot groundwater treatment and mechanical/biological wastewater treatment, provide meters to all consumers, move toward cost-reflective tariffs.
- Telecommunications and ICT:
  - Fixed phone coverage: ~21.4 per 100 residents; mobile coverage 14 per 100.
  - Objectives: liberalize market, privatize MoldTelecom, draft laws on personal data, electronic documents and e-commerce, develop optic fiber networks, pilot collective access points and ICT for public authorities.

### Agriculture, rural development and land policy
- Agri-food sector context:
  - Agriculture and food industry ≈ 33% of GDP and ≈ 65% of exports.
  - Land privatization: approximately 2.8 million landholding titles issued (1998–2001).
  - Structural issues: fragmented land ownership, low productivity, limited finance, dependence on imported inputs.
- Policy priorities:
  - Promote land market development, land consolidation study with donor technical assistance, strengthen land ownership rights, support farm structures of market-determined scale, promote producer organizations, rural finance (RISP), and rural non-farm activities.
  - State Reserves for grain: limit to maximum level equivalent to one and a half month worth of human grain consumption.
- WTO and subsidy policy:
  - Moldova’s WTO commitments include a 20% reduction of subsidies by 2004; current domestic support uses 8% of allowed domestic support.

### Social protection, health and education reforms
- Healthcare:
  - Mandatory health insurance introduced nationwide on January 1, 2004; premium 4% of salary (2% employer / 2% employee).
  - MDG health targets for 2006 preserved (e.g., under-5 mortality to 15.0; infant mortality to 12.1; maternal mortality to 23.0 per 100,000).
  - Priority actions 2004–2006: regulatory framework, NHIC capacity, accreditation, integrated medical information system, monitoring and quality assurance, consolidation of medical institutions and focused investment in primary and emergency care.
- Education:
  - Education expenditures: 4.7% of GDP (1999) → 5.6% of GDP (2002).
  - Priority targets: net enrollment in secondary education to reach 88.9% by 2006.
  - Actions: optimize rural school network, redistribute resources toward primary/secondary, increase salaries and textbooks, state standards, curricula update, teacher training, ICT (presidential "SALT" program), school management information systems.
- Social insurance and assistance:
  - Social insurance constraints: financial instability; fragmentation; pensions small; social insurance contribution share issues.
  - Priority actions 2004–2006: computerized individual records, pension reforms (including for agricultural workers), improved forecasting, indexation mechanisms.
  - Social assistance: main shortcomings — poor targeting; 2002 poorest 20% received only 6.6% of social benefits (except pensions) while wealthiest 20% received 46.0%.
  - Actions: introduce means-testing, separate social assistance budget (2005–2006), single beneficiary database, diversify social services and deinstitutionalization measures, minimum quality standards for social services by 2005.

### Labor market, youth policy and migration
- Labor market situation:
  - Employment fell sharply in 1994–1999; limited recovery 2000–2002 (increase of 10,000 employed, 0.7%).
  - ILO unemployment: 11.1% in 1999 → 6.8% in 2002 (largely due to out-migration).
  - Youth unemployment high: ages 15–19 = 15.3% (2002); ages 20–24 = 15.1% (2002).
- Labor market measures:
  - Equipping National Agency for Labor Force Employment; create labor market information system; diversify mediation and retraining; centers for disabled persons; youth employment centers.
- Youth policy objectives:
  - Improve employment/self-employment prospects; increase access to education and health; develop institutional capacity for youth work; stimulate youth participation; facilitate information access.
- Migration measures:
  - Promote legal emigration frameworks; bilateral agreements for legalized work abroad; study migration impacts and create information systems.

### Monitoring, evaluation and institutional arrangements for EGPRSP
- Oversight and implementation:
  - EGPRSP National Council (headed by the President) to coordinate implementation, monitoring and annual update; approve annual plans and annual reports.
  - Ministry of Economy to coordinate monitoring and synthesize impact analysis.
- EGPRSP Implementation Monitoring Unit (EIMU) — main functions:
  - Develop annual implementation work plans; set final and intermediate targets and indicators; regular monitoring and aggregation of national data; provide capacity building; assess policy impacts and produce annual EGPRSP and MDG reports; maintain integrated database and web-based access.
- Monitoring Units (MUs):
  - Sectoral MUs in ministries/departments to monitor sector action plans, results and indicators; local coordination by municipal/raion economic directorates with community involvement.
- Data and statistics improvements:
  - Population Census envisaged for 2004; General Agricultural Census scheduled for 2006.
  - Implement new law on statistics; OECD equivalence scale used temporarily; improve HBS, labor force survey, disaggregation by sex/age/ethnicity and publish methodologies.
- Reporting and participatory forums:
  - Regional forums annually; Participation Council to ensure transparency and civil society monitoring.
- Box 4 funding and costing guidance:
  - Approximately 50% of priority actions have "nil" or "low" additional funding implications.
  - Prioritization criteria favor pro-poor, scalable and cost-effective measures.

### Costing aggregates and fiscal constraints (selected totals preserved)
- EGPRSP Total Costs (million Lei):
  - 2004 Total = 2144,1
  - 2005 Total = 3306,2
  - 2006 Total = 3778,9
- MTEF financing shares: 44.2% (2004); 34.9% (2005); 29.5% (2006).
- Sectoral indicative totals (select examples preserved):
  - Education aggregate totals: MTEF 14,790; Unsecured 111,520 (years and breakdowns provided in annexes).
  - Healthcare aggregate totals: MTEF 182,840; Unsecured 144,650 (detailed program line items in annexes).
  - Environment aggregate totals: MTEF 51,747; Unsecured 108,527 (detailed line items in annexes).
- General TOTAL entries (annex figures preserved):
  - TOTAL lines: 948,289; 1,153,987; 1,114,128 (with subsequent columns 1,087,068; 1,956,568; 2,422,586 as presented).
  - GENERAL TOTAL: 948,289; 1,153,987; 1,114,128; 1,195,775; 2,152,225; 2,664,845 (table entries preserved).

### Implementation risks and conditionality
- Key risks:
  - Limited experience in well-targeted policy implementation; weak coordination and analytical capacity in ministries.
  - Management and institutional upgrades may be hardest task; uneven regional market infrastructure development may produce unequal outcomes.
  - External debt and lack of external support may impede investment flows.
- Conditionalities and government actions:
  - Successful implementation depends on management changes, business and citizen support, and external donor support.
  - Government communication (June 7, 2004) indicates arragements to resume interest payments to bilateral creditors beginning July 1, 2004 as demonstration of goodwill and to support EGPRSP credibility.

*Source: _cr04395 — Excerpts and numeric series from the EGPRSP chapters and annexes provided.*

### 1.1 The need for the EGPRSP.............................................................................................

### 1.1 The need for the EGPRSP

### Rationale for an EGPRSP
- The Economic Growth and Poverty Reduction Strategy Paper (EGPRSP) is defined as the overarching policy framework for the sustainable development of the Republic of Moldova in the medium term, and as the basis for developing and implementing new assistance strategies by international financial organizations and donor countries, and for preparing the annual state budgets for 2005 and 2006.
- Historical collapse and social impact:
  - During the first ten years of independence, GDP dropped by three times.
  - The real income of the population contracted by 72%.
  - The average pension in terms of purchasing power declined by 75%.
- Partial recovery (2001–2003):
  - GDP grew by 21.6% in real terms.
  - The monthly average wage increased by 71.2%.
  - The average monthly pension rose by 93%.
  - Nevertheless, poverty remains a major concern.
- Poverty and demographic consequences:
  - In 2002 over 40% of the population lived below the absolute poverty line.
  - Poverty contributed to an exodus of 35-40% of the economically active population abroad.
  - Measured by GDP per capita (US$542 in 2003), the Republic of Moldova was the last but one among the ex-soviet countries, and the last among the countries of Central and South-Eastern Europe.
- Causes of the adverse outcome in the 1990s included:
  - (a) lack of a coherent, long term and comprehensive vision among the political class during the 1990s regarding the future of the country and of the economy;
  - (b) ineffectiveness of the economic and social policies adopted, and especially of the tools used for their implementation;
  - (c) the fast pace of economic reforms compared with the rate of institutional change and changes in social protection mechanisms;
  - (d) divergence between the economic priorities of the governing bodies of the ’90s and the social priorities of the majority of the population.

### Purposes and functions of the EGPRSP
- Consolidation and strategic planning:
  - Provide a strategic, systemic and participative vision for socioeconomic development.
  - Consolidate society around transparent medium-term objectives shared by the poor, business community and public administration.
  - Serve as a tool for continuous strategic planning, prioritization of strategic objectives, and implementation of related actions.
  - Annual review of the Strategy will be required to adjust parameters to changing realities.
- Resource allocation and coordination:
  - Tool for efficient and transparent allocation of available resources and for harmonizing medium and long-term objectives.
  - Framework for the coordination of sectoral strategies toward higher-level EGPRSP objectives.
  - Provides a thorough view of the country’s needs for international technical assistance and external resources, allowing effective allocation by international financial organizations and donors.
- Origins and preparatory steps:
  - First step: approval in October 2000 of the Interim Strategy for Poverty Reduction.
  - Updated version approved on April 24, 2002 (Government Decree No. 524).
  - According to that decree, line ministries developed sectoral strategies which formed the basis for the present EGPRSP version.

### Principles guiding EGPRSP development and implementation
- Government’s stance:
  - (i) poverty reduction is a special effort requiring a special arrangement and an unconditional commitment by the Government and by the entire society; and
  - (ii) sustainable economic growth is fundamental for poverty reduction.
- Priority focus (social orientation of Government economic policies):
  - Improve living standards and social protection of the poorest, including the system of social guarantees.
  - Create new job opportunities especially for the poor.
  - Provide access to good quality medical services.
  - Build high quality human capital through educational and scientific development.
- Preconditions for achieving objectives:
  - Maintain the high rates of economic growth achieved during the last three years.
  - Integrate domestic financial and human flows into regional, European and world structures.
  - Build a coherent and stable legal framework harmonized with European principles and standards, oriented toward creating a favorable entrepreneurial and investment climate.
- Inspiration from international commitments:
  - EGPRSP was inspired by the “United Nations Millennium Guidelines: Human Development – Objective of Prime Importance”, signed by the Republic of Moldova in New York in 2000 with 146 countries, reflecting commitment to liberty, equality, solidarity, tolerance, peace affirmation, human rights, and sustainable development.
- General design principles (quoted structure preserved):
  a) The objectives and the actions of the EGPRSP provide an inclusive and comprehensive vision on (i) economic and social issues faced by the country, especially by the most vulnerable groups, (ii) the ways to use the available resources for solving these problems;
  b) The EGPRSP promotes the fundamental aspirations of the Moldovan people for the next 15 years, aiming at harmonizing the medium term and the long term objectives;
  c) The EGPRSP actions focus on obtaining tangible results during the next 3 years, to improve the welfare of the population;
  d) It provides for the prioritization of objectives and actions to maximize the benefits from available resources, in order to: (i) ensure significant impact on the main vulnerable groups; (ii) lead to tangible results in the short term governed by the EGPRSP;
  e) It reflects in its objectives, measures and actions the desires, social interests and the capacities of the participants and key beneficiaries of the Strategy – the poor, business community and public administration at all levels - ensuring the full involvement of all mentioned groups in developing and implementing the EGPRSP, as well as in monitoring and evaluating its implementation process.
- Expected governance and participation effects:
  - Application of these principles will help ensure society’s commitment to EGPRSP objectives and should:
    - (i) contribute to improvement of governance, including assigning the Government responsible for EGPRSP implementation;
    - (ii) capitalize on relations with the country’s development partners;
    - (iii) stimulate wide and active participation of civil society in EGPRSP planning and implementation.
- International integration and competitiveness:
  - Government will promote strategic involvement in globalization processes and actions/measures for implementing the Copenhagen criteria, including building an efficient market economy and capacity to support competition and related obligations as an EU aspirant.
  - To ensure competitiveness on the world market, the country plans to capitalize on positive aspects of globalization and advantages offered by membership of the World Trade Organization and the Pact for Stability in the South-Eastern Europe.

*Source: _cr04395 - 1.1 The need for the EGPRSP*

### 21. It  is  of  vital  importance  for  the  Republic  of  Moldova  to  create,  through  a  deep  reform

### 21. It  is  of  vital  importance  for  the  Republic  of  Moldova  to  create,  through  a  deep  reform

### Participation process: purpose and high-level objectives
- Purpose: create a public administration system that is modern, responsible, predictable, transparent, and resistant to corruption.
- Rationale: Better governance and a more efficient public sector in partnership with civil society constitute the basis for the insurance of sustainable economic growth and the reduction of poverty.
- Implementation challenge: join together in partnership the efforts of public administration, civil society, the business community and international partners to achieve the common goal of improving the lives of the country’s people.

### II. THE PARTICIPATION PROCESS — Principles and objectives (Sections 23–26)
- The EGPRSP results from a wide participatory process involving:
  - (a) representatives of civil society, (b) poor, (c) representatives of the business community, (d) central and local public authorities, and (e) international donors.
- Advantages of the participatory approach:
  - i) A better understanding of the changing nature and distribution of poverty;
  - ii) An improvement in the interaction between the Government and society as a whole;
  - iii) A meaningful dialogue as regards the prioritization of public actions;
  - iv) Better allocation and use of resources;
  - v) Perception of the EGPRSP by the society as being conducive to improving the lives of people.
- Participation principles:
  - 1) Providing transparency and relevancy in promoting the views of state bodies and civil society;
  - 2) The documentation of the activities of all the forums – from the working groups up to the decision making and approval bodies – in order to ensure their coherence, continuity, responsibility and transparency;
  - 3) Making explicit the nature of the decisions, proposals, initiatives, requests etc. as regards their motivation and rationale;
  - 4) The accurate reporting and dissemination through the mass-media of the activity of participatory forums, and the positions promoted by different participants in preparing, discussing, implementing and monitoring EGPRSP.
- Process goals ensured by participation:
  - (a) the reflection of the interests and values of the EGPRSP target-groups;
  - (b) the transparency for the entire development-implementation process;
  - (c) the internal coherence of the content and process of the EGPRSP;
  - (d) the responsibility and commitment of participants for the EGPRSP actions.
- Additional outcome: the process enhances the status of the EGPRSP document as the intellectual property of the Republic of Moldova, belonging to public bodies and the whole society.

### Institutional framework of the participation process (Sections 27–36)
- DAIMES steps: development, adoption, implementation, monitoring and evaluation of the Strategy.
- Two major institutional components:
  - First component (preparation and development): Presidency, Parliament, Government, specialized agencies, opinion leaders, reference persons from civil society, business and scientific communities.
  - Second component (ensuring civil society participation): Participation Council for EGPRSP development (PC), established in September 2002; Government approved nominal constituency and guidelines.
- Oversight and executive bodies:
  - Oversight: National Council for Sustainable Development and Poverty Reduction (NCSDPR), chaired by the President, main coordinating body for strategic planning in social-economic policy.
  - Executive: Interministerial Committee for Sustainable Development and Poverty Reduction (ICSDPR), appointed as the executive body of the NCSDPR; its regulation: “…ensures the development, promotion and implementation of the National Plan for Sustainable Development and Poverty Reduction, of the Economic Growth and Poverty Reduction Strategy Paper, the Millennium Development Goals and of other strategic planning documents”.
- Participation Council membership: representatives of Parliament, the Presidency, Government, civil society (NGOs relevant to EGPRSP goals), business and scientific communities, international organizations operating in the Republic of Moldova and donors.
- Executive unit: EGPRSP development Grant Implementation Unit (GIU), started operating on 1 May 2003, assigned as the executive body of the Participatory Council; administers international trust funds to support EGPRSP development.
- Participation Plan (approved September 2003) — three stages:
  - (i) general information campaign and needs assessment;
  - (ii) participation in defining strategic objectives and specific policies to address the needs;
  - (iii) identification of mechanisms of stakeholders’ participation at the implementation and monitoring phase.
- Participation Plan implementation: 80 public events throughout the country using social communication instruments (national surveys, surveys focused on EGPRSP target-groups, group interviews, seminars, round tables, forums, informational campaigns, etc.).
- Facilitating Organization: selected through a transparent process (July-September 2003); Network of Nongovernmental Organizations active in the social area appointed; operates through the Forum of Women Organizations of the Republic of Moldova.
- Direct consultation of the poor: a sociologic agency selected through a transparent process performed a qualitative analysis of the poor.

### Communication strategy, web presence, and tools (Sections 37–48)
- Communication strategy aims:
  - (1) providing comprehensive information on all EGPRSP relevant aspects;
  - (2) contributing to the active involvement of stakeholders’ groups in the dialogue.
- Web presence: EGPRSP web page launched in October 2003 (http://www.scers.md/); allows stakeholders to access the latest version of the overall paper and sectoral strategies, timetable and location of public discussions, and summaries; information available in Romanian, English and Russian.
- Communication campaign main goals (Section 38):
  - Informing the public on the importance of public participation in EGPRSP development;
  - Encouraging public debates on the participatory development of the EGPRSP;
  - Promoting the participation of civil society to ensure wide ownership of the process.
- Media and outreach activities:
  - A media list comprising all media institutions and journalists was created for rapid communication.
  - A contest of materials on EGPRSP priority topics was announced to cooperate with journalists.
  - Public authorities reached: around all 900 mayoralties and local public authorities received envelopes with motivating messages and promotional publications edited by EGPRSP GIU.
  - NGOs: an electronic addresses database comprising over 800 addresses of non-governmental organizations and initiative groups; periodic information sent to NGOs, donors and media institutions.
- Youth engagement: national essay contest “A solution for my country” — 560 essays submitted; estimative calculation: each participating pupil involved at least 4 other persons; mobilized around 2500-3000 active participants.
- Promotional materials and media buys:
  - TV spot displayed for three months on national television (station with largest coverage).
  - Leaflets totaling 10,000 copies; posters totaling 3,000 copies.
  - Four publications of the bulletin in the official and Russian languages were published, each with a circulation of 77,200 copies, totaling 308,800 copies; distributed via raion newspapers and local publications from the left bank of river Nistru.
- Internet posting: versions of the strategy posted and accessible on www.scers.md in official, Russian and English languages; posting the English version appreciated by donors.
- Planned events: Participation Plan envisages organization of seminars, conferences, roundtables at national and local levels, press conferences and other social communication events, amounting to 80 events.

### Public consultations: local and national levels (Sections 49–55)
- Two components of participation in draft discussions:
  - i) Participation of ministerial officials to ensure common understanding of strategy priorities and sector goals; recognizes interdependency among sector components (example: access to health, education and social services in rural areas depends on infrastructure development and private sector investment).
  - ii) Participation of trade unions, non-governmental organizations, academic circles, donors, media, local public administration to ensure transparency and involvement in implementation, evaluation and monitoring.
- Local level consultations:
  - Total of 25 round-tables organized in 23 localities with 890 participants.
  - Participant composition:
    - raion and local public administrations: 24.3%;
    - entrepreneurs: 14.7%;
    - representatives of local NGOs: 20.1%;
    - trade-unions: 1.7%;
    - public institutions employees (schools, hospitals, policlinics, libraries, kindergarten, social assistance centers, higher education institutions, etc.): 23.8%;
    - local media: 4.8%;
    - socially vulnerable persons: 10.2%.
  - Round-tables dedicated to one sector strategy each; participants selected to maintain balanced representation including raion public administrations, mayoralties, NGOs, trade unions, media, private sector, public institutions, church representatives, higher education institutions, farmers, and other community organizations.
  - Line ministry representatives presented draft sectoral strategies and answered questions; sessions included group work and plenary presentations; overall discussion moderated by a team of trainers experienced in participatory activities.
- National level consultations:
  - Purpose: collect contributions and comments from professionally competent persons, think tanks, academic circles, international organizations, donors, and others.
  - National participants focused on motivation, problem identification, formulation of objectives, setting priorities and quality of monitoring indicators.
  - National events: 32 events (seminars, round-tables and workshops) with a total presence of 1086 persons.
  - National participant composition:
    - representatives of ministries/departments: 18.4%;
    - public institutions: 23.9%;
    - national NGOs: 21.2%;
    - media: 14.3%;
    - donors: 11.8%;
    - local public administration: 3.4%.

*Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2004/_cr04395.pdf*

### 56. Within  the  Participation  Council  meetings  and public discussions a number of donors

### _cr04395 - 56. Within  the  Participation  Council  meetings  and public discussions a number of donors

### Public consultation and participation process
- Donors contributed analysis and comprehensive comments for the EGPRSP during Participation Council meetings and public discussions; the synthesis group and sectoral working groups used these comments to improve the document.
- April 2004 National Forum organized by the Government of the Republic of Moldova to present the Economic Growth and Poverty Reduction Strategy:
  - Attendance totaled 307 persons, including the country’s leadership, representatives of the World Bank, IMF, UNDP and other international institutions, and representatives of civil society, business environment and academic community.
  - The pre-final draft of the Strategy was presented and discussed.
  - Interested parties submitted comments and proposals during public discussions; participants noted that part of proposals and recommendations were reflected in the draft but emphasized the need for continuing public debates.
- Following the National Forum, a series of national level workshops were organized to finalize strategy components with participation of key actors.
  - A large part of comments and proposals raised during public discussions were reflected in the final version of the EGPRSP.
  - An analysis will be performed to present explanations for incorporation or rejection of proposals and a list of proposals under consideration; this analysis will be presented to all interested parties to assess the level of participation.
  - The feedback mechanism is considered a pre-requisite for openness and motivation for continued participation during implementation, monitoring and evaluation stages (these stages are described in Chapter VIII of the Strategy).
- Total number of direct participants in EGPRSP public consultations reached 2283 persons; the total number of those involved indirectly is much higher.
- Follow-up actions upon approval of the document will include:
  - (i) The public presentation of EGPRSP components, and
  - (ii) The identification of ways and means to enhance the participation of the interested public in the strategy’s implementation stage.
  - All proposals will be included in the Partnership Matrix to serve as a basis for a sustainable partnership throughout implementation.

### The transformation and crisis of the 1990s — key findings
- Transition-specific challenges:
  - Reform required systemic change penetrating established institutional foundations.
  - Smaller, highly trade-dependent former Soviet republics (Moldova, Georgia, Armenia and Tajikistan) experienced GDP declines of two thirds immediately after independence, compared with up to one third or less in most other former Soviet countries.
- Post-independence context for Moldova:
  - Political, economic and social problems had to be resolved relying on domestic potential and resources amid social and economic crisis and radical economic transformation.
  - Contributing factors to transition costs included lack of experience with external shocks, crises in economy and social sectors, insufficient experience implementing reforms, unstable internal political situation, and territorial disintegration.
- Pre-independence integration and consequences:
  - Moldova’s economy was highly integrated into the USSR economy; lack of domestic energy resources, non-agricultural raw materials, machinery, equipment and components, and absence of Union-budget agrarian subsidies exacerbated vulnerability.
  - Break-up of the USSR led to collapse of established economic ties, obstacles to goods movement, and restricted access to emerging markets.
- Transnistria conflict:
  - Territorial disintegration broke internal economic ties and resulted in loss of control over a considerable part of energy and industrial sectors on the eastern border.
- Financial system and macroeconomic instability:
  - Transformation affected banking, monetary and payment systems; barter and non-payments grew, undermining financial stability.
  - Budget deficits contributed to rising inflation.
- Reform implementation and outcomes:
  - Rapid reforms included price liberalization, foreign trade and investment liberalization, opening of internal market, mass privatization, introduction of local currency in 1993, and formation of a new banking system.
  - Consequences for social development were not accurately predicted; low preparedness among population and economic agents, incomplete adjustments in reform measures, and frequent government changes impeded expected reform results.
- Ownership and agrarian reform issues:
  - Mass privatization based on patrimony bonds did not produce a new class of owners engaged in modernizing production; ownership rights were often vague and insufficiently protected.
  - Land privatization occurred without adequate state support or infrastructure services for agricultural producers, exacerbating problems of high labor intensity, low productivity, old technologies, small-scale commodity production, and weather dependency.
- Crisis magnitude and duration:
  - The economic crisis lasted 10 years (from 1990 to 1999), during which GDP contracted by two thirds.
  - 1990-1996: continuous decline across all sectors; industry and agriculture output fell by more than half; capital investment fell to only 15% of its 1990 level.
  - 1996 budget deficit accounted for 9.7% of GDP.
  - 1997: signs of recovery — agriculture output rose by 11,4%, GDP growth of 1.6%, inflation fell to 12%, budget deficit decreased.
  - 1998-1999: new crisis triggered by Russia’s 1998 crisis — GDP fell by 10%, industrial output fell by 25%, agricultural output by 20%; exports and imports slumped by almost 50%.
  - Leu devaluation vs. dollar by 2.5 times between December 1997 and December 1999 increased foreign debt servicing costs.
  - Inflation: consumer prices rose by 18.3% in 1998 and by 43.7% in 1999.
  - 1999 levels: GDP was 34% of 1989 level, industrial output 32%, agriculture 50%; investments in fixed capital were 11% of the 1989 level (almost a 10-fold cut).

### Economic growth, imbalances and constraints (2000–2003)
- Growth revival drivers (2000 onward):
  - Stabilization of eastern markets, primarily Russia.
  - Rising domestic demand due in part to increasing money inflows from labor migrants.
  - Restrictions on the growth of money supply which helped reduce inflation.
  - From 2000 to 2003:
    - GDP rose by 24,1%.
    - Industrial output rose by 54,1%.
    - Investments in fixed capital rose by 21,5%.
- Structural changes:
  - Non-state sector dominance: in 2002 its share in GDP was 75%.
    - Over 80% share in industrial manufacturing.
    - Over 95% in retail trade.
    - Almost 100% in the agrarian sector.
    - 54% in the sector of paid services.
  - Service sector accounted for almost 50% of GDP in 2000-2002.
- Main constraints and imbalances:
  - Predominantly agrarian structure with insufficient processing industry.
  - Low ratios of saving, accumulation of fixed capital and capital investment.
  - Excessive dependency of growth and domestic consumer demand on labor migration abroad.
  - Economic backwardness and large development gap between Chisinau and other regions.
- Sectoral imbalances and productivity:
  - In 2002 agriculture accounted for 21,0% of GDP and 49,6% of employment; industry accounted for 17,3% of GDP and 11,4% of employment.
  - Labor productivity: in 2002 gross value added per employee was 50% lower in agriculture than the economy average, and 72% lower than in industry.
  - Consequences: low incomes for farmers and agricultural workers and low tax revenues from agrarian sector, impeding poverty reduction in rural areas and investment in agricultural modernization.
- Savings, investment and foreign capital:
  - Gross savings were 17,1% of GDP in 2003.
  - Investment levels indicate fundamentals for stable and sustainable growth are lacking; growth largely based on improving obsolete equipment.
  - Fixed capital investments were only 4,7% higher than 1999 levels.
  - Investment concentration: about 70% of capital investment in processing, energy, gas and water supply, communication.
    - In processing industry, 60% of investments used for foodstuffs, alcoholic drinks, and tobacco products.
  - Foreign capital share in funding capital investments:
    - 37.2% in 1999.
    - 25.3% in 2000.
    - 19.5% in 2001.
    - 11.9% in 2002.
  - Declining foreign investment share indicates an unfavorable, unstable environment for investment.
- Demand-production desynchronization and external imbalances:
  - Final demand increased more than two-fold in 2000-2002, exceeding GDP growth; final consumption exceeded GDP by 1-3% annually.
  - Remittances of labor migrants: 8.5% of gross disposable household income in 1997, and 19.5% in 2002.
  - Trade deficit in 2002 amounted to 24.9% of GDP.
  - Foreign debt was 81.9% of GDP in 2002; large servicing needs limit resources for development.
- Regional disparities:
  - More than 80% of the population live in regions that receive less than 20% of foreign investments, account for less than 40% of exports, and have wage levels almost half those in the capital.
  - Gross Regional Product per person outside Chisinau is only one third of that in the capital.
  - Agriculture predominates (43%) in regional output — twice its share compared with the economy as a whole.
  - Share of services in regional economies is 37% versus 71% in the capital.
  - Regional budgets (excluding Chisinau region) receive subventions from the state budget and are primarily used for current expenditures rather than investment and development.

*Source: _cr04395 - 56. Within  the  Participation  Council  meetings  and public discussions a number of donors*

### 3.3 RESULTS OF SOCIAL DEVELOPMENT

### 3.3 RESULTS OF SOCIAL DEVELOPMENT

### Social crisis and demographic effects
- The social crisis of the 1990s was deeper and more dramatic than the economic crisis, involving large-scale release of labor, high inflation and falling real state expenditures for social needs.
- At the lowest point of the crisis (1999):
  - the average wage in real terms was only about 25% of the 1990 level,
  - the average pension about 17% of the 1990 level,
  - according to the International Labor Organization (ILO) methodology, the unemployment rate reached 11.1%.
- Demographic trends in the 1990s:
  - birth rate and life expectancy fell,
  - death rate rose,
  - from the mid 1990s the number of population began falling.
- Growth in the economy and in real incomes in 2000-2002 had not yet produced a tangible effect on demographic processes.

### Income, wages, pensions and social expenditures (2000–2002)
- Gross disposable household income (National Accounts) increased in real terms by:
  - 10.1% in 2000,
  - 12.7% in 2001,
  - 21.2% in 2002.
- Household gross disposable income growth rate was higher than GDP growth rate for 2000-2002.
- Average wages in 2000-2002:
  - practically all sectors showed growth in real wages,
  - average wages increased by almost 50%.
  - the fastest wage growth rates were in sectors with traditionally lowest wages: agriculture, education, and healthcare.
- Pensions:
  - Starting in 2001 there was a rise in pensions,
  - in 2001-2002 the real average pension increased by almost 64%.
- State social expenditures increased (1999 to 2002):
  - healthcare: from 2.9% of GDP to 3.6% of GDP,
  - education: from 4.7% of GDP to 5.6% of GDP.
- Access to social services remains limited because pre-crisis state financing levels have not been restored; a considerable part of services are provided for payment:
  - about 40% of medical services provided for payment,
  - over 30% of services in education provided for payment.

### Key social development indicators (selected series from Table 1)
- HUMAN REPRODUCTION
  - Number of permanent residents as of 1 January, thousands of people:
    - 1997: 3663.7
    - 1998: 3655.6
    - 1999: 3649.9
    - 2000: 3644.1
    - 2001: 3635.1
    - 2002: 3627.8
  - Population aging rate (individuals of 60 and over per 100 people):
    - 1997: 13.3
    - 1998: 13.5
    - 1999: 13.6
    - 2000: 13.6
    - 2001: 13.6
    - 2002: 13.9
  - Average life expectancy, years:
    - male:
      - 1997: 62.9
      - 1998: 64.0
      - 1999: 63.7
      - 2000: 63.9
      - 2001: 64.5
      - 2002: 64.4
    - female:
      - 1997: 70.3
      - 1998: 71.4
      - 1999: 71.0
      - 2000: 71.2
      - 2001: 71.7
      - 2002: 71.7
  - Births per 1,000 people:
    - 1997: 12.5
    - 1998: 11.3
    - 1999: 10.6
    - 2000: 10.2
    - 2001: 10.0
    - 2002: 9.9
  - Deaths per 1,000 people:
    - 1997: 11.8
    - 1998: 10.9
    - 1999: 11.3
    - 2000: 11.3
    - 2001: 11.0
    - 2002: 11.6
  - Rate of natural increase:
    - 1997: 0.7
    - 1998: 0.4
    - 1999: -0.7
    - 2000: -1.1
    - 2001: -1.0
    - 2002: -1.7
- INCOME OF POPULATION
  - GDP per capita, USD:
    - 1997: 527.1
    - 1998: 464.8
    - 1999: 321.3
    - 2000: 353.7
    - 2001: 408
    - 2002: 459
  - Share of population with income below USD 2,15 per day (by purchasing power parity), % *:
    - 1998: 52.7
    - 1999: 70.8
    - 2000: 64.5
    - 2001: 52.4
    - 2002: 39.8
  - Share of poorest population (I quintile group) in national consumption, %:
    - 1997: 5.8
    - 1998: 5.9
    - 1999: 6.2
    - 2000: 6.7
    - 2001: 6.6
    - 2002: 6.8
  - Average monthly nominal wage, USD:
    - 1997: 47.6
    - 1998: 46.5
    - 1999: 29.0
    - 2000: 32.8
    - 2001: 42.2
    - 2002: 51.0
  - Growth of real wages, as % of previous year:
    - 1997: 5.1
    - 1998: 5.8
    - 1999: -12.6
    - 2000: 2.2
    - 2001: 21.2
    - 2002: 21.0
- EMPLOYMENT AND LABOR MARKET
  - Number of employed in the economy, thousands of people:
    - 1997: 1646
    - 1998: 1642
    - 1999: 1495
    - 2000: 1515
    - 2001: 1499
    - 2002: 1505
  - Number of employed in agrarian sector, thousands people:
    - 1997: 684
    - 1998: 750
    - 1999: 731
    - 2000: 766
    - 2001: 764
    - 2002: 747
  - Number of hired labor, thousands of people:
    - 1997: 1104
    - 1998: 1003
    - 1999: 805
    - 2000: 697
    - 2001: 692
    - 2002: 685
  - Rate of officially registered unemployment, %:
    - 1997: 1.5
    - 1998: 1.9
    - 1999: 2.1
    - 2000: 2.1
    - 2001: 2.0
    - 2002: 1.9
  - Unemployment rate according to ILO methodology, %:
    - 1998: 9.2
    - 1999: 11.1
    - 2000: 8.5
    - 2001: 7.3
    - 2002: 6.8
- Source of table data: Department of Statistics and Sociology and (*) Policy and Poverty Monitoring Unit

### Employment, labor market and growth-employment disconnect
- The improvement in the economy in 2000-2002 was not accompanied by an adequate increase in employment and jobs.
  - The number of workers employed in the national economy rose by only 0.7% in 2000-2002.
  - The unemployment problem remained acute.
- The inconsistency between economic growth and employment growth is attributed to:
  - growth being more based on use of available fixed assets and economizing on the labor force to ensure price competitiveness,
  - rather than on a rise in investment and creation of additional jobs.

### Summary assessment and institutional challenges
- During the 1990s Moldovan governments responded to external shocks (break up of the Soviet Union, Russian financial crisis) and undertook reforms to liberalize the economy.
- Monetary policy succeeded in reducing inflation to a level providing a stable platform for private investment.
- Macroeconomic reform and economic restructuring have not yet generated anticipated benefits in growth and poverty reduction.
- One reason: governance systems and structures have not changed as quickly as the macro-economic setting.
  - Progress in creating an enabling environment for market-led growth and in delivering services effectively and efficiently has not been adequate.
  - Sustained economic progress depends on public administration and private sector reforms.
- Institutional situation: democratic modern economy elements are in place but are in an incipient stage of development. Social and economic improvements are perceived as slow and sometimes negligible; critical issues include making improvements visible and understood by stakeholders.

*Source: Department of Statistics and Sociology; Policy and Poverty Monitoring Unit; content as presented in the supplied chapter.*

### 105. For  the  more  accurate  poverty  diagnostics,  three  main  problems  must  be  solved.  The  first

### 105. For the more accurate poverty diagnostics, three main problems must be solved. The first

### Data and methodological improvements required
- Three main tasks to improve poverty diagnostics:
  - Improve the data base by:
    - conducting a census of the population to allow more representative sampling for the Household Budget Survey (HBS);
    - improving the filling in of diaries and questionnaires by respondents;
    - keeping complete records of consumption by households of previously accumulated stocks.
  - Adopt an official methodology for the estimation of the poverty line and the identification of the poor.
- Current data limitations: available information on poverty (poverty incidence, poverty gap and poverty severity indicators) is "insufficiently accurate and representative" because of database imperfections.
- Data sources used by the Poverty and Policy Monitoring Unit (PPMU) in addition to the HBS:
  - administrative records from mayoralties and central agencies (health, education, environment, unemployment, etc.);
  - other specialized surveys (regular: labor force survey, agricultural sector survey by DSS; occasional: surveys by different agencies and scientific institutes).
- Dissemination and accessibility:
  - HBS data are disseminated and accessible to interested data users including those outside government.
  - A multi-source integrated database under development by the PPMU will become accessible for poverty analysis.

### Poverty indicators and dynamics (2001–2002 and 1997–2002 trends)
- Drivers of improvement in 2001–2002:
  - growing economy and rising real incomes;
  - considerable rise in labor migration and associated private money transfers from abroad.
  - According to the National Accounts, income from labor migration increased in 2002 as compared to 1997 3.2 times, while the nominal value of the national wage bill rose 2.4 times.
- Aggregate changes 1999–2002:
  - From 1999 to 2002 poverty level fell by 45%.
  - Poverty incidence in 2002 was below 50%, whereas in 1999 it was over 70% for both sources.
  - Severe poverty fell by half.
  - The poverty gap registered a sharp fall of more than 100%, as well as poverty severity by a similar amount.
- Key indices (selected values from Table 3, all values are in % unless otherwise stated):
  - Poverty Line (Lei p.c. per month): 1998 = 128.9; 1999 = 179.2; 2000 = 234.8; 2001 = 257.3; 2002 = 270.7.
  - Poverty Incidence: 1998 = 52.0; 1999 = 73.0; 2000 = 67.8; 2001 = 54.6; 2002 = 40.4.
  - Poverty Gap: 1998 = 19.5; 1999 = 32.3; 2000 = 27.0; 2001 = 19.3; 2002 = 12.4.
  - Poverty Severity: 1998 = 9.8; 1999 = 17.7; 2000 = 13.7; 2001 = 9.1; 2002 = 5.2.
  - Extreme Poverty Line (Lei p.c. per month): 1998 = 101.0; 1999 = 140.4; 2000 = 183.9; 2001 = 201.5; 2002 = 212.0.
  - Extreme Poverty Incidence: 1998 = 37.4; 1999 = 59.7; 2000 = 52.2; 2001 = 38.0; 2002 = 26.2.
  - Extreme Poverty Gap: 1998 = 12.4; 1999 = 22.7; 2000 = 17.6; 2001 = 11.6; 2002 = 6.6.
  - Extreme Poverty Severity: 1998 = 5.9; 1999 = 11.4; 2000 = 8.2; 2001 = 5.1; 2002 = 2.4.
  - International Line $2.15 PPP per day (value in Lei p.c per month): 1997 = 85.0; 1998 = 91.6; 1999 = 127.6; 2000 = 167.5; 2001 = 183.9; 2002 = 193.7.
  - Poverty incidence (international line): 1998 = 52.7; 1999 = 70.8; 2000 = 64.5; 2001 = 52.4; 2002 = 39.8.
- Conclusion: Negative social consequences of the Russian financial crisis (sharp growth of poverty incidence, poverty gap and severity) have been overcome; poverty after the 1998–1999 “shock” has returned to its starting point, but incidence, gap and severity remain unacceptably high.

### Poverty and inequality
- Perception and drivers:
  - In the perception of the poor, inequality is a major component of poverty.
  - Factors increasing inequality: liberalization and withdrawal of subsidies, 1990s economic crisis, mass privatization and property redistribution, employment reduction, increasing differentiation in remuneration, diminished role of the state in redistribution, emergence of entrepreneurs and self-employed, growing informal sector and corruption, weak social policy, degradation of regional economies.
- Inequality measures and distribution (values preserved as presented):
  - Income Gini coefficient: rose since 1990 and reached 0.44 in the late 90s; in 2000–2002 it fell slightly to 0.42.
  - Consumption Gini: decreased slightly from 0.39 in 1998 to 0.36 in 2002 (noting data incompatibility pre-1997 vs. post-1997).
  - Share of total income by quintiles (selected figures from Table 4):
    - Quintile I (poorest 20%): e.g., 1997 = 4.3; 1998 = 3.9; 1999 = 5.9; 2000 = 4.5; 2001 = 6.3; 2002 = 4.6 (table contains multiple year entries).
    - Quintile V (wealthiest 20%): e.g., 1997 = 48.7; 1998 = 48.8; 1999 = 46.2; 2000 = 49.0; 2001 = 46.5; 2002 = 48.0 (table contains multiple year entries).
  - The least wealthy 20% accounted for less then 5% of total income; the wealthiest 20% accounted for almost 50%. Incomes of the wealthiest families are 10 times higher than those of the least well to do.
- Role of social programs:
  - State programs for social assistance do not yet have a positive impact on inequality reduction because of inadequate targeting.
  - In 2002 the least wealthy 20% received only 6.6% of total social transfers (less pensions), whereas the wealthiest 20% obtained 46.0%.
- Distribution of income from social benefits by quintiles in 2002 (Table 5, percent):
  - Disposable income – total: Quintile I = 5.4; II = 10.7; III = 15.5; IV = 22.2; V = 46.2; Total = 100.0.
  - Social transfers and allowances, pensions: I = 6.9; II = 15.4; III = 23.7; IV = 27.8; V = 26.2; Total = 100.0.
  - Social transfers and allowances without pensions: I = 6.6; II = 9.2; III = 13.5; IV = 24.7; V = 46.0; Total = 100.0.
  - Allowances for mothers with many children and other child allowances: I = 28.4; II = 26.5; III = 15.0; IV = 15.1; V = 15.0; Total = 100.0.
  - Compensations to participants of WWII and their widows: I = 0.0; II = 0.7; III = 5.6; IV = 24.9; V = 68.8; Total = 100.0.
  - Compensations for utilities and fuel payment: I = 4.5; II = 8.4; III = 18.9; IV = 28.6; V = 39.6; Total = 100.0.
  - Social transfers and allowances without child allowances and nominative compensations: I = 3.2; II = 6.8; III = 5.7; IV = 21.4; V = 62.9; Total = 100.0.
  - Social non-monetary and humanitarian assistance: I = 4.3; II = 1.9; III = 5.0; IV = 22.4; V = 66.4; Total = 100.0.

### Poverty profile and main reasons for poverty
- Structural drivers of poverty:
  - Low labor productivity in the agrarian sector, weakness of regional economies, increased dependence on the working population due to mass unemployment and aging, low pensions and social benefits, substantial differentiation in salaries and wages by sector.
- Territorial distribution of poverty:
  - Small towns poverty level = 53.2%.
  - Rural areas poverty level = 45.1%.
  - Big cities poverty level = 16.5%.
  - Explanation: small towns were often monostructural and suffered closures/lay-offs; rural poverty linked to declining terms of trade for agricultural products and low labor productivity; large cities retained comparative advantages and diversified economies.
- Age and household composition:
  - Poverty among children in 2002 = 45.2%; children in all age groups have higher poverty incidence than the republic average.
  - Rural child poverty = 50%.
  - Elderly poverty: over 60 = 43.7%; aged 70–75 = 46.9%; over 75 = 52.1%.
  - In 2002 the pension was only 29.9% of the official minimum cost of living and 21.5% of the average monthly salary.
- Employment status and poverty:
  - Households whose main source of income is social transfers: poverty incidence = 59.1%.
  - Unemployed poverty incidence = 54.5%.
  - Seasonal workers and part-timers poverty incidence = 46.5%.
- Sectoral incidence:
  - Agricultural hired labor poverty incidence = 56.0%.
  - Farmers poverty incidence = 47.3%.
- Education and poverty:
  - Poverty level among households headed by people with unfinished secondary education = 49.4%.
  - Poverty level for those with no education = 59.2%.
  - Households with unfinished secondary or no education account for 36.1% of all households.
  - Households headed by university graduates: 13.3% are poor.

### Income and consumption expenditures of the poor (2002)
- Structure of disposable income of poor households (Table 6, as % of total):
  - Poor (total = 100.0): hired labor = 25.3; individual agricultural activity = 38.9; individual non-agricultural activity = 1.1; ownerships = 0.2; social benefits = 24.0; other transfers = 10.5.
  - Extremely poor (total = 100.0): hired labor = 24.7; individual agricultural activity = 40.2; individual non-agricultural activity = 0.9; ownerships = 0.1; social benefits = 24.1; other transfers = 10.0.
  - Not poor (total = 100.0): hired labor = 40.1; individual agricultural activity = 27.6; individual non-agricultural activity = 3.0; ownerships = 0.2; social benefits = 11.9; other transfers = 17.2.
- Key observations:
  - Agricultural income of the poor accounts for 39.8% of disposable income.
  - 79.2% of poor rural families have land plots intended for farming activity.
  - Income from hired labor accounts for only 25.3% of disposable income of poor families; for the non-poor employment is the most important source.
  - Social benefits share in poor households' income = 24.0%.
  - "Other transfers" (including remittances) are 10.5% of disposable income of poor households; other sources (e.g., National Bank) indicate remittances may be much higher.
- Structure of consumption expenditures of the poor (Table 7, % of total):
  - Poor (total = 100.0): food products = 75.8; alcoholic drinks, tobacco = 4.6; clothes and footwear = 2.6; housing and conveniences = 10.4; health = 2.1; transportation and communication = 2.3; education = 0.4; other goods and services = 1.8.
  - Extremely poor (total = 100.0): food products = 77.4; alcoholic drinks, tobacco = 4.3; clothes and footwear = 2.2; housing and conveniences = 10.2; health = 1.8; transportation and communication = 1.9; education = 0.4; other goods and services = 1.8.
  - Not poor (total = 100.0): food products = 54.5; alcoholic drinks, tobacco = 3.4; clothes and footwear = 9.4; housing and conveniences = 15.8; health = 4.4; transportation and communication = 5.5; education = 1.6; other goods and services = 5.4.
- Implications:
  - Food dominates poor household consumption (75.8%); rural families often produce half the food they consume.
  - Poor households have low access to clothes and footwear (2.6%), health (2.1%), transport and communication (2.3%), education (0.4%).
  - Expenditures for upkeep of houses = 10.4% and are sensitive to tariff policy; tariff policy significantly affects the structure of expenditures of the poor and their access to other goods and services.

*Source: PPMU based on HBS and related data as presented in the content unit.*

### 4.7 NON-MONETARY POVERTY

### _cr04395 - 4.7 NON-MONETARY POVERTY

### Health
- Average life expectancy in Moldova is 68.5 years.
- Under 5 mortality rate is 18.3 per 1,000 live births.
- Maternal mortality rate is 28 per 100,000 live births.
- Access disparities:
  - Ratio of hospitalization days for poor and non-poor is 1:11.
  - Average duration of hospitalization per year is 9-13.5 times shorter for the poor compared with the non-poor.
  - Financial constraints are more severe in rural than in urban areas.
  - Access to health services worsens as household size increases and household level decreases.
  - Education level of the household head affects access to health services; lower education correlates with reduced access.

### Education
- Education and poverty correlation:
  - Persons without education and illiterates constitute 20% of the poor.
  - Those with primary and incomplete secondary are a further 42.6% of the poor.
  - Together these groups comprise 61.8% of the poor.
  - For the non-poor these two groups comprise 38.2%.
- Net enrolment and access:
  - The non-poor have higher net enrolment at all levels, especially at higher levels.
  - Enrolments at university level education are three times lower for the poor than for the non-poor.
  - Net enrolment ratio in rural areas is 0.10 compared with 0.44 in urban areas.
  - Among poor households, the enrolment ratio of youngsters from poor urban households is seven times higher than for poor rural households.

### Subjective poverty assessments (Opinions of Poverty Phenomenon, August 2002)
- Self-perception of poverty:
  - 61.2% of households consider themselves poor.
  - The majority define poverty similarly regardless of residence or self-assessment.
- Most significant signs of poverty (respondents):
  - Low income: 78.3% of respondents.
  - Poor health: 33.6%.
  - Insufficient nutrition: 29.9%.
  - Many also associate poverty with bad housing conditions and low economic security.
- Urban/rural perceptions:
  - Of urban households, 68.6% consider low incomes the main reason for poverty.
  - 73% of rural households consider low incomes the main reason for poverty.
  - Worsening health, job loss, and inability to find a job are cited risk factors.
- Views on inequality and prospects:
  - 50% of urban and rural respondents pointed out increasing inequality in money distribution over the previous 3 – 5 years.
  - For food consumption, housing conditions, access to medicines and educational services, reported increases in inequality range from 35 to 48% in urban areas and from 22 to 43% in rural areas.
  - Every third household expects a fall in its well-being.
  - Only every seventh urban family and every twentieth rural family anticipates improvements in material living conditions.
- Coping strategies in critical financial situations (households that consider themselves poor):
  - Almost 90% in cities and more than 92% in rural areas count on help from outside.
  - Biggest hopes: financial aid from immediate family.
  - Second: assistance from neighbors, friends and co-workers.
  - Third: private borrowing.
  - Much smaller numbers count on support from social protection authorities, local public administration bodies, public organizations, and the church.
- Trends in income sources for low income households (bottom quintile):
  - Share of income from "other (private) transfers":
    - 1998: 13.70
    - 1999: 15.07
    - 2000: 19.93
    - 2001: 11.91
    - 2002: 13.45
  - Share of income from social benefits:
    - 1998: 8.73
    - 1999: 7.03
    - 2000: 12.26
    - 2001: 20.11
    - 2002: 21.69
  - Interpretation:
    - Private transfers showed a decreasing trend since 2000.
    - Share of income from social transfers increased significantly mostly due to changes made in 2000 (introduction of new benefits for utilities “targeted compensations” and increased level of pension and child benefit payments).
    - The level of these benefits remained insufficient to help poor households escape poverty.

### EGPRSP objectives and priorities (long-term and medium-term)
- Long-term development objectives derived from Moldova’s Constitution and Government Program “Revival of the economy-Revival of the country”:
  - i) Sustainable socially-oriented development;
  - ii) The reintegration of the country;
  - iii) European integration.
- Principles for sustainable economic and social development:
  - Improved political and economic governance: popular participation, rule of law, human rights, sound economic management and macroeconomic stability.
  - Private sector development: private ownership, liberalized pricing and trade, deregulation, promotion of competition.
  - Modified role for government: ensure political framework for efficient delivery of goods and services; regulation for natural monopolies and public health and safety; increased independence of providers in healthcare and education (center to monitor); insure equitable distribution of growth benefits.
- Millennium Development Goals emphasized:
  - i) to eradicate extreme poverty and hunger;
  - ii) to achieve universal access to primary education;
  - iii) to promote gender equality and empower women;
  - iv) to reduce child mortality;
  - v) to improve maternal health;
  - vi) to combat HIV/AIDS, malaria and other diseases;
  - vii) to ensure environmental sustainability;
  - viii) to build a global partnership for development.
- Reintegration priorities:
  - Political settlement and development and approval of the new Constitution.
  - Long term constructive dialogue between sides and assistance from guarantor countries and OSCE.
  - Economic reintegration via formation of a common economic zone to eliminate internal barriers and facilitate free movement of goods, capital and people, and to integrate banking systems.
- European integration:
  - Relations based on the Partnership and Cooperation Agreement enacted in 1998.
  - Agreement provides for gradual harmonisation of national legislation with European legislation in trade, business, customs, banking, tax and social systems, and infrastructure.
  - An Action Plan to develop provisions of the Partnership and Cooperation Agreement will be prepared and approved in the first half of 2004.

### Medium-term objectives and priorities
- Principal medium-term objectives:
  - i) Sustainable and inclusive economic growth;
  - ii) Poverty and inequality reduction, and increased participation of the poor in economic development;
  - iii) Human resources development.
- Sustainable and inclusive economic growth—diagnosis and targets:
  - Current growth is largely remittance-based and consumption-led, attracting imports, widening the trade balance, and contributing to inflation.
  - Problems: unbalanced economic structure, monostructural exports, low investments in fixed capital.
  - Strategy to shift toward investment- and export-led growth, using remittances as potential development finance and encouraging investment in small and medium enterprises.
  - Need to mobilize new sources of growth by attracting significant investment in processing industry and infrastructure.
  - Improve business and investment climate through stable, transparent, and efficient regulation, competition, and support for small- and medium-sized business.
  - Improve infrastructure (roads, water supplies, heating, electricity and gas, and telecommunications) to reduce regional imbalances.
  - Annual economic growth targets estimated feasible:
    - between 5 -10% are feasible,
    - 5% growth per annum being a moderate scenario,
    - and 8-10% being an optimistic scenario.
- Poverty and inequality reduction:
  - Aim to improve living conditions of the poor via better targeted social protection, facilitating access to social services, developing small business, creating additional jobs, and assisting socially vulnerable groups in employment.
- Human resources development:
  - Human resources development is both a factor and result of growth.
  - Current underuse due to high unemployment and low wages leading to degradation of human resources.
  - Poor have extremely limited access to quality health care and education.
  - Medium-term expectation: considerable improvement in quality of medical and educational services and in access for the poor.
- Priority policy areas where limited resources can be used most efficiently:
  - i) private sector;
  - ii) public administration;
  - iii) social protection;
  - iv) health care and education;
  - v) infrastructure;
  - vi) regional development;
  - vii) environment.

### EGPRSP and Millennium Development Goals linkage
- The Strategy sets specific relevant tasks and indicators adapted to Moldova’s development conditions.
- Selected indicators are included in the EGPRSP monitoring system.
- The indicators system will be refined and extended during EGPRSP implementation to improve monitoring of results, objectives and tasks set in the EGPRSP and Millennium Development Goals.

*Source: _cr04395 - 4.7 NON-MONETARY POVERTY*

### 162. The  successful  implementation  of  the  EGPRSP  over  the  period  2004-2006  will  be  clearly

### 162. The  successful  implementation  of  the  EGPRSP  over  the  period  2004-2006  will  be  clearly

### MDG-adapted targets and indicative milestones (2002 baseline and targets for 2006, 2010, 2015)
- Reduce by half the proportion of persons with daily income below 2,15 USD (evaluated at Purchasing Power Parity) over the period 1997-2015:
  - 39.8% in 2002 → 28.0% in 2006 → 23.0% in 2010 → 18.0% in 2015
- Ensure equal opportunities for all children to study in gymnasiums:
  - net enrollment in gymnasium education: 88.0% in 2002 → 88.9% in 2006 → 93.8% in 2010 → 100% in 2015
- Reduce by 2/3 the under-5 mortality rate over the period 1990-2015:
  - under-5 mortality rate: 18.3 (per 1000 children) in 2002 → 15.0 in 2006 → 11.9 in 2010 → 8.4 in 2015
  - infant mortality rate: 14.7 (per 1000 new-born) in 2002 → 12.1 in 2006 → 9.6 in 2010 → 6.3 in 2015
  - measles vaccination (children under 2 years): 99.2% in 2002 → 100% beginning with 2006
- Reduce the maternal mortality rate by ¾ over the period 1990–2015:
  - maternal mortality rate: 28.0 (per 100.000 births) in 2002 → 23.0 in 2006 → 21.0 in 2010 → 13.3 in 2015
  - births assisted by qualified medical personnel: 99% (current) → ensure 100% beginning with 2006
- Arrest and reverse by 2015 the spread of HIV/AIDS:
  - HIV/AIDS incidence: 4.66 (per 100.000 persons) in 2002 → 4.0 in 2006 → 3,5 in 2010 → 3,2 in 2015
  - HIV incidence among population aged 15-24: 6,0 in 2002 → 4.9 in 2006 → 4.2 in 2010 → 4.0 in 2015
- Arrest and reverse by 2015 the spread of TBC and malaria:
  - TBC-associated mortality rate: 15.8 (per 100.000 persons) in 2002 → 12.0 in 2010 → 7.0 in 2015
- Integrate sustainable development principles and reduce loss of environmental resources:
  - forest area share: 10.3% in 2002 → 11.0% in 2006 → 12.1% in 2010 → 13.2% in 2015
  - protected areas for biodiversity: 1.96% in 2002 → 2.1% in 2006 → 2.2% in 2010 → 2.4 % in 2015
- Reduce by half the number of persons without sustainable access to improved water sources by 2015:
  - population with sustainable access to improved water sources: 38.5% in 2002 → 47.7% in 2006 → 57.0% in 2010 → 68.5% in 2015
  - population with access to improved sanitation: 40.0% in 2001 → 56.0% in 2006 → 73.3% in 2010 → 90.0% in 2015

### Macroeconomic situation analysis (recent trends and imbalances)
- GDP and sectoral growth (selected observations):
  - GDP growth: steady increase between 2000-2002; 6,3% in 2003
  - Industrial sector: 7.7% in 2000 → 13.6% in 2003
  - Agriculture: -3.3% in 2000; +6.4% in 2001; +3.4% in 2002; -14.1% in 2003
- Investment and trade:
  - investment in fixed capital growth: 11% per year in 2001 and 2002; 16% in 2003
  - investment level: about 14% of GDP in 2003
  - exports: +1.7% in 2000; +22.7% in 2003
  - imports: +32.4% in 2000; +15% in 2001; +16.3% in 2002; +35.1% in 2003
  - result: persistent trade deficit; trade balance twice as high in 2003 versus 2000

### Policy objective (medium-term)
- Orient policy to ensure stable conditions for continuing sustainable economic growth and poverty reduction.
- Main medium-term objectives:
  - reduce inflation to support business, investment, and protect real incomes,
  - maintain a flexible exchange rate policy to support external economic activity,
  - stabilize external debt and improve debt management to decrease external risk,
  - undertake budgetary-fiscal policy to ensure balanced evolution in incomes and expenditures.

### Medium-term macroeconomic forecast and assumptions
- Key assumptions:
  - GDP growth increasingly driven by industrial production, services, export growth, and fixed capital investment;
  - successful implementation of economic and structural policies to improve business environment, develop advanced-technology industry and services, attract investment, restructure and modernize enterprises, promote exports and import substitution, and improve enterprise management.
- Forecasts and baseline scenario:
  - GDP growth: 6% in 2004 → annual increase of 5% in the next two years (2005-2006)
  - industrial output growth: 12% in 2004 → average 10.5% annually in 2005-2006
  - services volume: +7% in 2004 → +6% annually in 2005-2007
  - agricultural output: +7.5% in 2004 → +4% in 2005 → +3% in 2006 (noting high unpredictability)
  - export growth: 14% in 2004 → 13% in 2005 → 12% in 2006
  - import growth: 9 % in 2004 → 7% in 2005 → 6% in 2006
  - capital investments growth: 13% in 2004 → 10% in 2005 → 9% in 2006
- Risks noted:
  - investment growth could be lower due to unpredictability of foreign investment and comparatively high bank credit terms.

### Monetary policy stance and projections (NBM program)
- Context and recent developments:
  - inflation rose to 15.7% in 2003, driven by rising grain and flour prices, administratively raised tariffs for natural gas and energy, transport and communication services, and increased money transfers from Moldovans working abroad.
  - monetary mass increased by 30.7% at the end of 2003 due to expanded foreign currency purchases by the NBM.
- NBM medium-term objectives:
  - reduce inflation from 9% in 2004 to 5% in 2007 (monitor inflationary processes);
  - gradual re-monetization: M3 share of GDP rising from 31.2% in 2003 to 47.0% in 2007;
  - moderate growth of commercial credit: +34.8% in 2004 with subsequent decrease in growth to 19% in 2007.
- Exchange rate policy orientations:
  - continuation of a floating exchange rate determined by supply and demand and economic conditions;
  - intervene to mitigate excessive exchange rate fluctuations;
  - maintain international reserves at adequate levels and invest foreign currency assets in secure and liquid instruments.
- Exchange rate outlook:
  - anticipated moderate downward trend in the Leu’s exchange rate: decrease of the Leu by 19.3% from December 2003 to December 2007.

### External sector, reserves, and balance of payments
- 2003 external position and pressures:
  - trade balance deficit: 31.3% of GDP in 2003
  - remittances from labor migrants: 18.6% of GDP in 2003 (officially registered)
  - current account deficit: around 10.8% of GDP in 2003
  - first-time recent deficit on the financial account in addition to current account deficit; international reserves fell below equivalent of three months of imports
  - unregistered remittances via non-bank channels noted as significant
- NBM forecast for 2004-2007:
  - trade balance deficit: from 27.6% of GDP in 2004 → 20.3% of GDP in 2007 (improvement)
  - money transfers from labor migrants: on average about 17% of GDP annually
  - gradual decrease in current account deficit: 7.7% of GDP in 2004 → 3% of GDP in 2007

### Public debt and fiscal outlook
- State Debt Administration Strategy (2004-2007) main directions:
  - enhance payment discipline for service and repayment of accumulated state debts;
  - attract credit resources consistent with repayment capacity and efficient use;
  - ensure transparency in placement and use of attracted resources;
  - further restructuring of foreign debt on a bilateral basis and seek refinancing opportunities for multilateral obligations.
- Fiscal stance and projections (consolidated public budget):
  - revenues as share of GDP: 36.1% in 2004 → 35.6% in 2005 → 34.6% in 2006 (insignificant decrease)
  - expenditures as share of GDP: 36.5% in 2004 → 36.4% in 2005 → 35% in 2006 (vary insignificantly)
  - small annual budget surplus forecast: 0.3% in 2004 → 0,8% in 2005 → 0,4% in 2006

### Fiscal policy measures and tax reforms (2004-2006)
- Fiscal policy medium- and long-term objectives:
  - ensure stability and predictability of public revenues, especially tax collections for full coverage of budgetary obligations;
  - ensure fiscal equity, stability and transparency of fiscal legislation;
  - stimulate economic activity, encourage small business development, attract external and domestic investment, and create new workplaces.
- Implementation approaches:
  - improve structure of tax rates to reduce tax burden and broaden fiscal base;
  - reduce fiscal exemptions, retaining only those targeted at efficient economic growth and poverty reduction;
  - increase efficiency of fiscal administration.
- Income tax and personal relief adjustments:
  - gradual increase in personal income tax relief: Lei 3,600 in 2004 → Lei 3,960 in 2005 → Lei 4,500 in 2006
  - increase tax reliefs for supported persons: Lei 240 in 2004 → Lei 600 in 2005 → Lei 840 in 2006
  - from 2005 proposed non-taxable income sources: individual state social insurance contributions
- Personal income tax rate reductions (planned by 2006):
  - annual income under Lei 16,200: rate drops from 10% in 2004 → 8% in 2006
  - annual income Lei 16,200 to 21,000: rate decreases from 15% in 2004 → 13% in 2006
  - annual income larger than Lei 21,000: rate decreases from 22% in 2004 → 18% in 2006
- Intended effects:
  - decrease financial burden on population incomes, stimulate entrepreneurship, and encourage formalization to increase tax collections.

*Source: Excerpt from the EGPRSP strategy text (sections 162–192).*

### 193. In  order  to  continue  reducing  the  fiscal  burden  and  uncloak  taxpayers  that  activate  in  the

### _cr04395 - 193. In  order  to  continue  reducing  the  fiscal  burden  and  uncloak  taxpayers  that  activate  in  the

### Tax policy reforms (2001–2006)
- Corporate income tax rate reductions:
  - 28% in 2001
  - 20% in 2004
  - planned 18% in 2005
  - planned 15% in 2006
- Objective: broaden the fiscal base by legalizing income generated in the informal economy; implement rate reductions together with measures of fiscal discipline enhancement.
- Income tax relief to be maintained during 2004-2006 to encourage investment, job creation, and SME development, especially in agriculture.
- Legislative amendments planned to improve the tax mechanism for non-residents conducting business in the Republic of Moldova.

### Value Added Tax and excises
- VAT:
  - Maintain the destination method of VAT calculation for all countries and for agents with no fiscal relations with the budgetary system.
  - The structure and value of VAT will not be modified.
  - Review VAT payment fiscal reliefs to retain only those that are economically efficient or have an increased social role.
- Excises (2004-2006):
  - Maintain destination method of excises calculation for exported goods.
  - The list of goods subject to excises and the level of excises share will not be modified.

### Real estate and local taxes
- Real estate tax:
  - Progress in decentralization of real estate tax administration depends on designing a National Cadastral System.
  - During the EGPRSP reference period, develop and implement the Program of real estate goods evaluation; tax base to be market value once evaluation complete.
  - Until completion, apply tax according to year 2003 registered practice.
- Local taxes:
  - Beginning with 2005, implement new chapter on “Local taxes” in the Fiscal Code to simplify local tax encashment and offer local public authorities possibilities to raise local budgets incomes.

### Social insurance, pensions, and health insurance contributions
- State social insurance contributions (gradual redistribution and overall rate reductions):
  - Overall rate: 30% in 2004 and 29% in 2005 (planned reduction).
  - 2004 distribution: 28% paid by the employer and 2% by the employee.
  - 2005 distribution: 27% paid by the employer and 2% by the employee.
  - 2006 distribution: 26% paid by the employer and 3% by the employee.
- Pension system reform for those working in agriculture (planned for 2005-2006):
  - Move from contributions based on land owned and its quality to contributions based on income for owners employed under individual work contracts.
  - For owners working their land individually, move to a fixed contribution basis.
- Mandatory health insurance (2004-2006):
  - Medical insurance premium maintained at 4%, of which 2% paid by the employer from the salary fund and 2% by the employee.
  - Starting with 2004, the system extended to cover the whole country.

### Fiscal administration improvements
- Planned measures to improve and increase fiscal administration efficiency:
  i) Improvement in tax collection mechanism:
    - Consolidate taxes and local taxes collection services.
    - Concentrate Principal State Fiscal Inspectorate efforts on more efficient collection of other state revenues.
    - Implement automated record-keeping systems for petroleum and alcohol products.
  ii) Increase efficiency of control methods and coordinate control activities:
    - Continue computerized selection of taxpayers for risk-based verification.
    - Intensify control based on analysis of fiscal and financial reports and other sources without leaving the office to establish precision of tax diminution by economic agents.
  iii) Computerization of fiscal procedures:
    - Develop and implement an information system and taxpayers notification mechanism.
    - Present reports in electronic format to the Principal State Fiscal Inspectorate and provide taxpayer self-service through the web site www.FISK.MD.
    - Develop concept, mechanism and organization of an informational system for providing state and local public bodies with fiscal information.
    - Improve interface mechanisms with other departments’ information systems.
  iv) Popularization of fiscal legislation and taxpayer education through programs and advertising spots to promote voluntary tax compliance.
- Expected outcomes: raise fiscal management efficiency, reduce subjectivism in fiscal management, enable more operative application of fiscal administration levers.

### Public expenditure policy and medium-term fiscal outlook
- MTEF forecasts: Government will face an acute lack of financial means over the next three years due to the need to honor external commitments; this requires restrictive budgetary policy emphasizing rationalization, efficiency, and reallocation to top-priority programs with substantial impact on economic growth and poverty alleviation.
- Preliminary estimates of total public expenditures:
  - Lei 9 billion in 2003
  - Lei 13,5 billion in 2006
- Note: Despite nominal increases, the weight of public expenditures in GDP has diminishing tendencies due to decrease in weight of revenues in GDP.
- Expenditures of health insurance funds and state social insurance budget expected to grow more rapidly than consolidated budget expenditures due to policy measures and projected salary fund growth.
- Public expenditure priorities to emphasize social transfers and salary expenditures because of direct impact on poverty reduction:
  - Increase transfers through state social insurance and implement pension indexation mechanisms.
  - Increase quantum of nominative allowances and compensations; rationalize number of beneficiaries of social assistance.
- Salary system reform:
  - Implement Law on establishing base salaries in the budgetary sector and allowances for high ranked officials starting with 2005 until 2010; to be approved in 2004.
  - New salary system to ensure equitable salary levels based on qualification, responsibility, work complexity and individual professional performance; implemented in context of public sector reform and staff optimization.
- Resource allocation (2003-2006) based on sector expenditure programs and MTEF analysis.
- Structure of 2004 discretionary public expenditures:
  - Circa 66% socio-cultural expenditures:
    - social protection – 30%
    - education – 20%
    - health protection – 14%
  - Circa 18% general public services, public order and national security.
  - Circa 13% expenditures on infrastructure and national economy branches.
- Allocation priorities and sectoral factors in MTEF:
  - Intensify control over administrative expenditures within state services, defense, public order and law.
  - Rationalize education system; direct additional allowances for alimentary norms in pre-school and boarding-school institutions; increase stipends by circa 20%.
  - Increase cost of medical services package under mandatory health insurance and broaden categories insured by the state.
  - Ensure more efficient targeting of expenditures for social protection to provide:
    - (i) greater equity in the pension system;
    - (ii) restructuring social assistance programs emphasizing eligibility criteria based on income and poverty level;
    - (iii) reform of labor market services.
  - Target real sector expenditures to support agriculture and rural development, public roads infrastructure and energy complex.
  - Adjust expenditures for investment projects according to EGPRSP priorities as projects finalize or start.
- Treatment of externally financed investment projects and extra-budgetary funds:
  - Treat these as integral parts of the general public expenditures framework by sectors to ensure complexity in budgetary planning, increase transparency, and gradually decrease out-of-budget operations.
- Fiscal stance: Given limited growth prospects for public financial resources for the medium term, prudent economic and budgetary-fiscal management is needed to achieve modest public expenditure increases and attract support from international financial bodies.

### Public sector reform — public administration situation, objectives and strategy
- Administrative staffing and structure:
  - About 8,500 employees in central public administration.
  - Around 6,500 in local administration.
  - Central administration consists of 16 ministries, 14 departments with autonomous budget and accountability, and over 20 agencies, services, centers and extra-ministerial and extra-departmental inspectorates.
  - In summer 2003, former administrative structure based on 10 judets replaced by 32 regions to increase capacity of local public bodies.
- Key weaknesses of public administration:
  (i) insufficient functional and institutional adaptation to market economy transition; limited use of strategic approaches beyond the MTEF;
  (ii) selection and promotion methods not sufficiently consistent with efficient administration and high quality policy development;
  (iii) insufficient capacities for modern management methods;
  (iv) low level of work remuneration negatively impacts motivation and efficiency of state employees;
  (v) over-regulation complicates efficient administration, impedes private sector activity, contributes to corruption, and undermines trust in public bodies;
  (vi) current tax collection framework does not ensure full and fair contribution of all potential taxpayers, increasing burden on honest taxpayers;
  (vii) macroeconomic, sector and regional policies are not sufficiently based on analytic studies;
  (viii) low level of openness and transparency in public administration decision making.
- Problems in local public administration medium-term:
  (i) imperfection of legal framework and mechanisms for economic and fiscal decentralization;
  (ii) lack of clear separation of functions and responsibilities between central and local public administrations;
  (iii) insufficient professional level of local administration personnel;
  (iv) imperfect training and retraining system for managers and local administration employees;
  (v) insufficient consultation of local public administration on drafting and applying laws and regulations;
  (vi) insufficient computer facilities and information technologies;
  (vii) lack of access to the intergovernmental data base of the Council of Europe regarding local administration.
- Objective:
  - Establish a modern, efficient public administration system that strengthens democratic processes and the market economy, is impartial and non-political, and whose principles and operation correspond to best European practice.
- Long-term strategy and guiding principles:
  - Subordinate public administration to the state's role as facilitator of democracy and the market economy; public administration includes organizations, regulations, management systems and principles of public bodies functioning.
  - Strategic aims correlated with Economic Growth and Poverty Reduction Strategy: (i) improve political and economic governance; (ii) develop the private sector; (iii) modify role of public bodies to increase efficiency of administration, service delivery, regulation and equitable distribution of economic growth benefits.
  - Guiding principles include:
    (i) clear definitions of core roles and functions of public administration;
    (ii) reasonable delegation to local public administration bodies and the private sector of competences and responsibilities for provision of goods and services;
    (iii) elimination of overlapping and duplication of functions between public administration bodies;
    (iv) rational use of scarce budget resources and concentration on priority areas;
    (v) unified approaches to functional, structural and organizational reforms;
    (vi) separation of policy development and implementation, regulatory and service delivery functions;
    (vii) rationalization of accountability and management systems to avoid wide spans of managerial responsibility;
    (viii) establishment of a remuneration scheme to consolidate managerial capacities and personnel competences;
    (ix) harmonization to EU and Council of Europe standards of public administration.

*Source: _cr04395 - 193. In  order  to  continue  reducing  the  fiscal  burden  and  uncloak  taxpayers  that  activate  in  the — PDF content provided.*

### 221. The central public administration reform strategy will concentrate on:

### _cr04395 - 221. The central public administration reform strategy will concentrate on:

### Central public administration reform strategy (scope and principles)
- Primary concentrations (paragraph 221):
  - (i) increasing the efficiency of public administration at central level;
  - (ii) improving the decision making process and its strategic approach;
  - (iii) increasing  efficiency  by  developing  capacity  of  the  institutional  and  human  resource development system;
  - (iv) improving the interaction between public administration and civil society.

- Local public administration decentralization priorities (paragraph 222):
  - (i) improvement of legislation for local autonomy and self-government;
  - (ii) clear delimitation of functions and responsibilities between central and local public administrations;
  - (iii) increase  of  the  fiscal  and  economic  independence  of  local  public  administration  bodies;
  - (iv) increase  of  the  efficiency  (openness  and  record-keeping)  of  the  activity  of  local  public administration bodies.

- Principles for professional development and human resources (paragraph 223):
  - (i) competitive   and   transparent   selection,   recruitment   and   promotion   of   employees;
  - (ii) development of job descriptions based on the revised role and functions of public administration bodies;
  - (iii) professional    development    of    public    servants    through    continuous    improvement and systematic in-service training;
  - (iv) annual performance testing and evaluations;
  - (v) establishment  of  an  adequate  remuneration  system,  which,  in  perspective,  will be based on performance;
  - (vi) minimization of political pressures on the activity of public servants.

- Enhancing interaction with civil society (paragraphs 224–226):
  - Increased access for civil society, non-government organizations, associations, independent media and the population to public administration activities through electronic distribution of information, Internet and mass media.
  - Public hearings and discussions on important policy matters, with greater transparency about public spending and social protection.
  - Establishment of permanent consultation groups including public administration, local authorities, public and non-commercial organizations to summarize and disseminate social partnership and local self-government experience.
  - Local public administration bodies encouraged to explain public policies and activities through the press, TV and radio.

### Priority Actions 2004-2006 (Strategic Plan development and implementation)
- Conceptual foundation and Strategic Plan (paragraphs 227–236):
  - Priority: preparation of a Strategic Plan based on a complex assessment of roles, responsibilities, functions and activities of central and local public administration compared with those adequate to a modern democracy and market economy.
  - Assessment approach (paragraph 228):
    - Functional and organizational review of ministry and departmental responsibilities as set down in official documents (laws and regulations).
    - Comparison with administration systems and practices developed by EU accession countries with similar parameters of size and population to provide the basis for restructuring and streamlining.
  - Reform formulation (paragraph 229):
    - Proposals for reform and restructuring following the assessment, aligned with long-term strategy principles, highlighting measures for public administration to develop and execute core functions in a modern democracy and market economy.
  - Core functions focus (paragraph 230):
    - Policy formulation, setting regulatory systems and monitoring of public service delivery.
    - Direct government regulatory activity would be limited.
  - Strategic Plan content and implementation features (paragraph 231):
    - Will include priority actions, implementation, reporting and monitoring procedures, execution schedules and resources.
    - Based on general methodology and common principles for internal reorganization and reform of ministries and departments.
    - Self-reorganization implemented through pilot exercises and supported financially to allow ministries and departments to hire experts for consultations.
  - Management and oversight (paragraph 232):
    - Preparation and assessment supervised by the Public Administration Reform Management Unit.
    - Unit directly supported by and accountable to an Inter-ministerial committee chaired by the Prime Minister.
    - Unit might provide centralized human resource development and execute functions of administrative personnel manager.
  - Capacity-building stipulations (paragraph 233) — Strategic Plan to contain stipulations for:
    - an organization model for a continuous public service, made out of professionals with management and analytical skills;
    - legal framework covering the organization of public administration, the public services, administrative procedures, accessibility and transparency of official state information, public procurement, budget management, and publication by public bodies of annual performance reports.;
    - management systems, procedures and practices for public administration;
    - an effective public service job classification and grading system that would reflect skills requirements;
    - a transparent competitive selection, recruitment and promotion system for the public service;
    - an efficient remuneration system that will contribute to the attraction and retention of professionals in the public service, will recognize and motivate activity performance;
    - introducing public service accountability through implementing a personnel performance management system (regular performance appraisal linked to remuneration and career);
    - a training system to support the reforms in public administration e.g. establishing the internal audit function, developing capacities for strategic planning, and a system that enables civil servants to develop their skills according to the needs of the public service.
    - The new Public Administration Reform Management Unit should determine the field of inclusion and content of the training in the light of reform needs.
  - The Strategic Plan preparation would take account of previous work funded by TACIS and the World Bank (paragraph 234).

- Tasks for decentralization implementation (paragraph 235):
  - implementation of a favorable legal and institutional environment aligned with European standards and the European Charter of Local Autonomy;
  - review of transfer of functions system to local government based on subsidiarity and separation of competence;
  - determination of procedure for transfer of functions and delegation of powers and mechanisms of responsibility for implementation;
  - review of legal framework and measures to raise local budget revenues to guarantee long term sustainability and financial independence; review and improvement of local budget development and approval processes with strict supervision of public finances use;
  - development of simple and accessible regulations, rules and procedures for local public administration functioning, including improved management systems and procedures for analyzing economic and social development, municipal asset management, and the budget process;
  - providing opportunities for professional development of local administration employees within a state system of training, retraining and skill raising; study possibilities for ensuring their social and legal protection;
  - disseminating advanced experience in social partnership and efficient use of local resources;
  - ensuring transparency and improving accountability of local public administration for managing delivery of public services, improving the business environment, and use of property and finances.
- Strategic Plan development requires a general review of legal and institutional framework based on complex coordinated studies with donor technical assistance (paragraph 236).

### Public Finance Management (problems, objectives, and medium-term tasks)
- Identified problems in public finance management during transition (paragraph 237):
  - (i) a fragmented legal and regulatory framework,
  - (ii) insufficient approach and reflection of sector and inter-sector priorities in resource allocation,
  - (iii) the limited scope of treasury system coverage and drawbacks in accounting and reporting in the budgetary system,
  - (iv) weak and outdated information systems and technologies,
  - (v) inadequate control systems.

- Long-term objective (paragraph 239):
  - Building of an efficient and sustainable financial management system based on modern instruments and mechanisms, adjusted to European standards.

- Main medium term tasks (paragraph 239):
  - improving public finance allocation methodology by applying modern practices of budget drafting;
  - consolidating the financial discipline by developing the treasury system and improving budget execution procedures;
  - improving public debt management methods and mechanisms in order to minimize servicing costs;
  - improving fiscal administration and increasing the efficiency of financial control;
  - rationalizing and optimizing budgetary management by creating an integrated financial management information system;
  - harmonizing the budgetary and fiscal legal and regulatory framework with European Union requirements and standards.

- MTEF and EGPRSP relationship (paragraphs 240–241 and Box 2):
  - Continued development of the Medium Term Expenditures Framework (MTEF) as an instrument of strategic budget planning to align budgets with programs and performance.
  - MTEF development focus (paragraph 240):
    - (i) the improvement of the quality of projections by using the macro-financial forecast model,
    - (ii) the consolidation and deepening of sector and inter-sector analyses by extending strategic expenditures plans beyond education, health and social protection,
    - (iii) the improvement of setting sector expenditures ceilings by emphasizing strategic priorities in resources allocation policy.
  - Box 2 — General objectives pursued through MTEF:
    - i) improvement of macroeconomic and fiscal forecasting by developing an inclusive and objective framework of resources;
    - ii) orientating the distribution of methods to inter-sector and intra-sector policies’ support;
    - iii) enhancing budgetary planning possibilities by adopting a medium term multi-year perspective;
    - iv) identifying and emphasizing main problems in public finance management, in order to establish this area’s strategic reform actions, necessary to improve its effectiveness and efficiency;
    - v) strengthening the responsibility of public authorities for the efficient allocation and use of public resources.
  - Clarification: MTEF and EGPRSP are directly correlated but distinct; EGPRSP sets baseline policies and priorities, MTEF offers medium term public finance framework. EGPRSP also an instrument for negotiating donor financing for priorities not covered in MTEF, conditioned on donor assessment. Correlation must be based on accurate and objective predictions of external financing.

- Budget execution and treasury improvements (paragraphs 242–244):
  - Medium term priorities to improve budget execution:
    - (i) consolidation and development of the treasury system;
    - (ii) improvement of public sector accounting.
  - Treasury consolidation actions: re-equipping and upgrading existing technologies to develop a performance information system for the state treasury to create a single information space between all budget process participants at central and local levels (paragraph 242).
  - Public sector accounting reform concept: develop a single normative framework regulating accounting and national standards of budgetary accounting; review reporting formats on budget execution for all budget levels to supply relevant information for financial analysis (paragraph 243).
  - Integration of state social insurance budget and health insurance funds into a single budgetary classification system and operation through the treasury system to improve quality and promptness of financial reports (paragraph 244).

- Public debt management (paragraph 245):
  - Improve legal and regulatory framework to harmonize with international requirements and apply new tools and special financial operations in state debt area.
  - Improve negotiations with external creditors for debt restructuring and distribute information related to issue and circulation of state securities.
  - Special attention to development of technical and strategic analysis and risk management capacities in state debt management, including through the update of the DFMAS debt management application.

- Financial control and internal audit (paragraph 246):
  - Emphasize strict definition of control functions among different control bodies and ensure efficient cooperation to exclude overlapping and duplication.
  - Ensure efficient planning and coordination of controls and develop a strategy for public sector internal audit.

- Integrated public finance management information system (paragraphs 247–248):
  - Proposal to create an integrated public finance management information system to improve budget financial management over medium and long terms.
  - Implementation actions (paragraph 248):
    - i) creation of a single information space among subdivisions of the Ministry of Finance and among these and local level subdivisions: local treasuries and fiscal services, financial directorates of second level local administrative-territorial units and the Balti municipality, with the Customs Department and its subordinated bodies;
    - ii) creation of a single information environment with budget executors (ministries, departments, public institutions) for state budget preparation and execution, and creation of reports on budget execution in real-time, using Internet technologies and authorized access of information users to this process.

*Source: _cr04395 - 221. The central public administration reform strategy will concentrate on:*

### 249. Actions  will  also  be  taken  to  adapt  the  legal  and  regulatory  framework  to  European  Union

### _cr04395 - 249. Actions  will  also  be  taken  to  adapt  the  legal  and  regulatory  framework  to  European  Union

### Budgetary-fiscal legal and regulatory adaptation (2004-2006)
- Planned actions during 2004-2006:
  - i) finalize the Fiscal Code by drafting and promoting its title on local taxes, natural resources use payment, customs taxes and other incomes;
  - ii) improve and systematize legislation on banking system and process;
  - iii) review and approve the Budgetary Classification (new version) according to updated international standards;
  - iv) improve legal and regulatory provisions for public sector accounting record-keeping and the development of a single budgetary system plan of accounts.

### Integrated Financial Management System (Box 3)
- Present shortcomings of the Ministry of Finances’ information system:
  - fragmented structure;
  - old programming language;
  - limited information processing possibilities;
  - use of the telecommunications network in exchange of information.
- Consequences of treasury system implementation:
  - increased volume of information accumulated and stored on the Central Treasury and territorial treasury servers;
  - difficulty ensuring necessary level of information security and satisfactory information processing productivity.
- Objectives and ensured functions of the new integrated financial management system:
  - (i) correct and timely circulation of documents among budgetary process participants;
  - (ii) real time reception of accounting balances and other financial accountability reports for the purpose of operative administration of the budgetary cycle and its execution process;
  - (iii) real-time authorized access to the informational system’s data of reports’ users;
  - (iv) organization of automatic real-time accounting and book-keeping in financial bodies, mayoralties and budgetary institutions.
- Implementation considerations:
  - significant activity and costs mean the integrated financial management system can only be implemented with donors’ financial assistance dedicated to procurement of required software and technical re-equipment, upgrading telecommunications systems, and personnel training.

### Capacity development for public finance management
- Precondition for proposed objectives:
  - development of analytical and institutional capacities within the Ministry of Finance, its subdivisions, and central and local public authorities involved in public finance management.
- Planned human capital measures:
  - develop a vast training and retraining program in public finance management staff;
  - develop budget strategic planning and analysis capacities;
  - develop debt risks analysis and management capacities;
  - retrain audit and financial control staff;
  - train information technology specialists to support the single financial management information system.

### Strengthening the Judicial System — Situation analysis
- Timeline and legal foundations:
  - judicial and legal reforms launched in 1994 following adoption of the Judiciary and Legal Reform Concept document;
  - adoption of the Constitution (separate chapter dedicated to judiciary authority) followed by laws: Law on the Constitutional Court, Law on judiciary organization, Law on the status of judges, Law on the Supreme Council of the Magistrate, Law on the disciplinary college and the disciplinary responsibility of judges.
- Constitutional principles cited:
  - Art. 114: justice is an exclusive attribute of the state; provision of justice in the name of the law (Art.114);
  - right to defense (art.26);
  - presumption of innocence (Art.21);
  - equality of citizens in front of the law and public authorities (Art.16);
  - prohibition of extraordinary courts (Art.115);
  - independence and immovability of judges and their obedience only to the law (Art.116);
  - guarantee of the right to appeal (Art.119).
- Institutional developments:
  - Constitutional Court created as the only authority of constitutional jurisdiction;
  - establishment of specialized courts – economic and military courts – leading to specialization of judges;
  - creation of a new department under the Ministry of Justice responsible for enforcement of court decisions not involving deprivation of freedom and other authorities’ decisions (reported to have led to an insignificant improvement).
- Emerging problems and reform adjustments:
  - by Law nr.1471-XV of November 21, 2002, constitutional modification excluded one tier in court organization to simplify structure;
  - Parliament adoption on May 8, 2003, of Law nr.191-XV established mechanism for practical implementation of the new courts system.
- Codes adopted or in progress:
  - adopted: criminal, civil, criminal procedure, civil procedure;
  - being finalized: new executive code and administrative offences code.
- Systemic concerns:
  - reformed judiciary after 1996 has begun to represent a barrier to the constitutional right to free access to justice;
  - insufficient financing of judicial bodies;
  - inadequate management of courts;
  - non-insurance of the principle of equality of the parties in a trial;
  - lack of information;
  - need to ensure recruitment of qualified judges, prosecutors, attorneys, notaries, court clerks, etc.;
  - prisons: rising number of inmates and period of conviction, overpopulation, detention conditions described as inhuman and degrading;
  - large number of non-executed legal decisions;
  - mediation currently applied only in criminal cases; need to develop alternative dispute resolution to reduce litigation costs and court caseload.

### Strengthening the Judicial System — Objectives and long-term strategy
- Ultimate goal:
  - To revise the legal and institutional frameworks to establish the rule of law and a modern market economy.
- Long-term strategic priorities:
  - Improvement of the quality of the drafting of legislative and support acts in general, especially those regarding economic development;
  - Development of the legal education system;
  - Development of the legal services market and respecting the rights of legal services consumers (implementing quality standards);
  - Execution of courts decisions.
- Legislative drafting improvements:
  - ensure coherence across legal acts;
  - define goals to defend individual interests and liberties, ensure access to justice, attract and promote investments, deregulate, and adjust national legislation to the legislation of the Council of Europe and European Union;
  - initiate a legal framework impact evaluation mechanism with evaluation indicators to consolidate legal security for economic agents and foreign investors.
- Institutional and education reforms:
  - create the National Institute of Justice (subordinated presently to the Ministry of Justice) on the basis of the Center for training and retraining of staff from the Ministry of Justice and General Prosecutor’s Office system to ensure continuous training and form new staff in the justice area;
  - create a unified judicial management administration structure within the Ministry of Justice to replace dispersed structures;
  - begin reform of legal education at the university level to ensure high and uniform standards of legal training and morality, align faculty training with market economy demands, and promote legal knowledge to reduce legal nihilism.
- Access to justice measures:
  - guarantee necessary legal assistance in trials and define categories of beneficiaries and types of assistance;
  - review legal charges (costs of experts, state taxes, attorney fees, etc) to create mechanisms for establishing real and adequate costs;
  - ensure public access to legal information sources (electronic regulatory databases, informational materials, development of the Republican Center of Legal Information under the Ministry of Justice).
- Enforcement of decisions:
  - evaluate performance and modalities of the current enforcement system for court decisions.

### Strengthening the Judicial System — Priority actions for 2004-2006
- The legal framework:
  - Review of the framework, as well as the standards of developing regulations in the area of justice;
  - Establishing an evaluation mechanism for the legal framework’s impact on social and economic processes, establishing a number of evaluation indicators.
- Access to justice:
  - Developing and implementing policies and subsequent laws in the area of legal assistance guaranteed by the state;
  - Developing mechanisms for offering free-of-charge legal assistance for socially-vulnerable persons;
  - Ensure frequent application of alternative disputes resolution ways, including mediation and arbitration (courts of arbitration);
  - Review of the possibilities for reduction of legal costs;
  - Creation of necessary conditions for ensuring the access of the general public to legal information.
- The judicial system:
  - Undertaking studies and evaluations aimed at different aspects of the organization and functioning of justice, from the aspect of protection of individual rights and perspective of sustainable economic development;
  - Improving institutional capacities and adequate organization of legal personnel, performance evaluation;
  - Provision of access to performance equipment and information technologies.
- Development of the legal education system:
  - Review of legal education standards;
  - Optimization of education and training curricula;
  - Initiation and development of the legal knowledge promotion.
- Effective enforcement of court decisions:
  - Evaluate the performance and the modalities of the current system of enforcement of court decisions.

### Fighting Corruption — Situation analysis
- Definition and drivers:
  - Corruption broadly defined as abuse of public office;
  - exists at all levels and is fueled by opportunities and incentives created by the governance system;
  - poor public sector wages contribute to driving corruption at lower levels of public administration;
  - practice of buying work places further entrenches corruption within state institutions.
- Impacts:
  - business activity most affected; costs to enterprises are large and direct and indirect costs (hiring security personnel) exceed benefits;
  - corruption disproportionately affects enterprises navigating licensing and inspection and affects the rural poor involved in trade;
  - entrenchment of corruption accompanied by expansion of the unofficial economy and worsening of public services.
- Perception and sectors most affected:
  - According to surveys by Transparency International, Moldova ranks 102 out of 133 countries from the study;
  - business representatives cite customs, fiscal authorities and the police among most corrupted sectors;
  - civil society representatives cite education and health sectors among most corrupted.

### Fighting Corruption — Objective and long-term strategy
- Objective:
  - To eliminate corruption with the main emphasis on removing bureaucratic barriers to entrepreneurial activities that provide the main opportunities for corruption.
- Long-term strategy and institutional measures:
  - Removal of corruption expected to stimulate economic activity, making Moldova more attractive to foreign investors, increase private sector incomes, improve budgetary resource collection efficiency, enable better remuneration of civil servants, and improve quality of services for social, health care and education policies.
  - The Center for Fighting Economic Crimes and Corruption is formally mandated to fight corruption and will be made responsible for drafting and implementation of a National Strategy for Corruption Prevention and Fighting (NACS);
  - NACS aimed at isolating underlying causes of corruption, the most affected structures and organizations, and evaluating corruption in the context of public sector institutional reform;
  - The Court of Accounts will play an important role in identifying cases and causes of corruption.

*IMF staff report excerpt.*

### 281. The main provisions of the NACS will be:

### _cr04395 - 281. The main provisions of the NACS will be:

### Main provisions of the NACS
- (a) minimization of regulation;
- (b) free access to information;
- (c) elaboration of the code of conduct, to which institutions will adhere to eliminate corruption;
- (d) conflict of interest rules prohibiting participation in decision making whenever private interests may be present in the performance of public duties;
- (e) declaration of incomes by public office holders and their effective monitoring;
- (f) promotion of coalitions among groups with similar interests for preventing corruption;
- (g) creating communication channels that will allow the population to inform public bodies on cases of corruption and protection of informers;
- (h) establishment of vigilance units;
- (i) random integrity testing on those in responsible positions.

### Control systems, public administration reform, and priority actions (2004-2006)
- Control systems in ministries and departments will be strengthened to make existing rules and regulations more effective.
- Greater reliance on informational technologies, public sector reform, and training of legislators and civil servants will form an integral part of the NACS.
- Priority actions:
  - A medium term priority will be to reduce and simplify regulations that apply to business and enterprises; this will be primarily addressed through the EGPRSP private sector development strategy.
  - Implement a public sector capacity consolidation project focused on professional development and capacity building, based on the EGPRSP public administration reform strategy, with donors’ assistance.
  - Engage in open discussions involving the state, civil society, and development partners on a medium-term institutional reform agenda.

### Private sector development: context and main constraints
- The private sector became the driving force in the economy; medium term socio-economic development depends on stable and favorable conditions for private sector development, including reduction of administrative restrictions and barriers.
- Main constraints facing the sector:
  - an unstable legal and regulatory framework;
  - excessive bureaucracy reflected in the large number of permits, licenses and other authorizations, resulting in additional costs in registering and developing private businesses;
  - excessive tutelage of control bodies;
  - inefficient fiscal administration;
  - insufficient working capital and limited access to financial resources;
  - difficult access to domestic and external markets and weak marketing services;
  - low level of managerial abilities, a business culture which is not yet fully developed along with limited access to information and consulting services;
  - persistence of corruption.

### Medium-term priorities for improving the business environment
- Focus areas:
  - (i) reform of the regulatory framework;
  - (ii) development and protection of competition;
  - (iii) rationalization of corporate management;
  - (iv) support and development of Small and Medium Enterprises (SME);
  - (v) promotion of external trade;
  - (vi) improvement of investment environment;
  - (vii) creation of real estate cadastre.
- Most reforms are legislative and administrative in nature and entail limited financial costs.

### Regulatory framework reform
- The existing regulatory framework adversely affects economic development and particularly constrains SMEs and investment.
- Government will promote regulatory reform emphasizing a shift from excessive regulation to assessing and monitoring regulatory impact on business.
- Initial focus by the Ministry of Economy:
  - (i) simplifying and rationalizing business registration and post-registration procedures, reducing public sector involvement in permits, licenses and similar processes;
  - (ii) reducing the number of all state controls and reorienting them to facilitate tax collection and provide training/educational and consulting support;
  - (iii) increasing the efficiency of paid services rendered by public authorities by setting tariffs at the level of costs incurred and providing free services that do not imply additional expenses;
  - (iv) rationalizing fiscal policies and procedures, especially for SMEs.
- Support measures will improve voluntary technical regulation and standards, moving towards EU and international practices to facilitate products conformity assessment; products conformity assessment and conversion from mandatory to voluntary standards are highlighted in the draft EU/Moldova Action Plan.

### Products conformity assessment and accreditation
- Conformity assessment is based on accreditation and assurance systems provided through separate functional and institutional systems.
- Accreditation criteria: impartiality, confidentiality, responsibility for taken decisions, and adherence to own quality standards.
- Objectives and measures the Ministry of Economy will pursue:
  - (i) improving methodological basis and procedures for assurance of products conformity and accreditation according to international/European criteria and practices;
  - (ii) enhancing producer’s responsibility by establishing legal provisions alongside producers’ conformity declaration procedures;
  - (iii) de-monopolizing the conformity assurance procedure;
  - (iv) promoting voluntary application of standards by developing technical regulations in accordance with international/European standards;
  - (v) creating adequate conditions for the introduction of ISO 9000 quality and ISO 14000 environment management systems;
  - (vi) improving the accreditation and products conformity assurance systems’ activity to promote efficient integration of Moldova’s products into the international system;
  - (vii) creating conditions to promote mutual recognition of conformity certificates/declarations at the international level.
- Note: establishment of the conformity assessment system is at its early stages.

### Competition promotion and protection
- Competition policy principles:
  - (i) the right of economic agents to benefit from competition within the law and the rules of correct and honest conduct of business;
  - (ii) the non-admissibility of limiting competition, abusing a dominant market position, and infringing on the legitimate rights of consumers;
  - (iii) the obligation of central and local public authorities to contribute to the development and protection of competition.
- Current situation: unsatisfactory, partly due to lack of coherent policy and dispersion of anti-monopoly functions across many state organizations.
- Creation of the National Competition Agency:
  - Will assume anti-monopoly functions including in natural monopolies, concentrating anti-monopoly/deregulation functions into one body to ensure uniform application of principles and practices.
  - Development of new competition laws (including on natural monopolies, holdings, and financial services) will expand markets where anti-monopoly policy is applied.
  - Business regulation by national and local authorities will aim to provide incentives to encourage competition, reduce costs and protect consumers’ rights.
  - The National Agency will create a web page to publish special studies and information materials to ensure transparency.
  - Agency activity will provide equitable conditions for all market participants and align with obligations including those undertaken with Moldova’s WTO membership.

### Optimization and improvement of corporate management
- Corporate sector profile:
  - Corporations comprise 2.6 % of all companies, employ 25.7 % of the total number of employees, and generate 34.8 % of net sales.
- Constraints to corporate development:
  - i. low ratio of foreign investments in company capital; investing in Moldovan companies perceived as risky;
  - ii. lack of banking resources in financial structure due to weak legislation and inefficiency of corporate management;
  - iii. lack of protection of minority shareholders’ rights;
  - iv. weak management responsibility and lack of a corporate administration code;
  - v. weak mobilization of domestic savings for investment;
  - vi. insufficient protection of investors, lack of transparency and insufficient objective information regarding corporations and the stock exchange market.
- Organizational problems include lack of information and incentives for good corporate governance; insufficient familiarity of legal, judicial and public entities’ personnel with corporate regulatory methods; absence of traditions in corporate behavior; and insufficient analysis of corporate sector problems.
- Objectives of corporate management policy:
  - i. creation of transparent and stable relations based on rules of corporate culture;
  - ii. promotion of efficient corporate management through elimination of administrative restrictions;
  - iii. strengthening competitiveness of Moldovan corporations and competition among them;
  - iv. creation of a domestic corporate structure compatible with international corporate systems;
  - v. contribution to the elimination of corruption.
- Medium term actions:
  - i) preparing the Corporate Administration Code in compliance with international and European principles;
  - ii) improving the present legal framework and the mechanism for its implementation;
  - iii) assuring coherence of the legal and procedural framework with the judicial branches;
  - (vi) creating a competitive market environment;
  - (v) undertaking constructive dialogue between public and private sectors to balance Government and business community interests, including corporate participants.

### Support and development of Small and Medium Enterprises (SME)
- Importance of SMEs:
  - SMEs employ 29% of the overall number of employees and account for around 30% of national sales.
  - From the total number of profit making companies, 85% are small companies, of which 60% are micro-enterprises.
  - In 2003, small trading companies covered 45% of total national sales and accounted for 96% of all trading companies.
  - Small enterprises account for 87% of all industrial enterprises and employ 21% of salaried staff.
- SME constraints:
  - (i) incoherence of policies and lack of a state strategy regarding SMEs;
  - (ii) significant administrative barriers (registration, authorization, licensing, large number of controls based on applying penalties, inefficient leasing/rental relations’ regulation, etc.);
  - (iii) excessive fiscal burden and a system requiring accounting reports which are cumbersome and expensive;
  - (iv) difficult access to finance and lack of efficient state support at the initial stage of developing a business;
  - (v) reduced possibilities to insure loans with collateral, combined with high interest rates at commercial banks, and lack of credit guarantee funds;
  - (vi) lack of informational and consulting support to develop entrepreneurship abilities, especially at the regional level;
  - (vii) weak qualification of personnel from small enterprises combined with a low level of preparedness of management and a business culture which is less than fully developed.
- Objectives for SME development:
  - (i) increase SMEs’ contribution to economic growth;
  - (ii) strengthen SME role in job creation and poverty reduction.
- Planned measures:
  - Regulatory reform including simplification of procedures for approvals, authorizations, certificates and licenses and integration of these activities into one office (OSSO).
  - Promote development of SME sector and cooperation with organisations representing SME interests at national and local levels.
  - Ministry of Economy medium-term policies will:
    - i) review and improve legal and institutional SME framework to facilitate creation and development, promoting SME concept in line with best international practice;
    - ii) facilitate SME access to finance via development of microcredit organizations, more efficient use of state and donor financial resources, and creation of conditions for development of risk capital funds to support access to long term financing;
    - iii) improve SME access to information and consultancy services, develop entrepreneurship initiative, and promote exchange of experience through a national network of informational-consulting Centers and business-incubators with local authority participation and technical assistance;
    - iv) prepare qualified personnel for SMEs and promote business culture development through emphasis on economic education of young people.

### Promotion of external trade
- Trade development is vital for economic growth; Moldova has a liberal trade regime for exports and imports.
- Trade balance has shown a persistent significant deficit: between 1995-2003, the trade deficit fluctuated between 6.6% to 31.3% of the country’s GDP.
- Reform priorities include diversification of trade partners and promotion of higher value-added exports.
- WTO accession provides the framework for trade policy development; Moldova undertook commitments on economic, fiscal, customs, intellectual property rights protection, standardization and technical barriers, and veterinary and phyto-sanitary measures.

*Source: _cr04395 - 281. The main provisions of the NACS will be:*

### 313. With the objective of promoting external trade, the following will be undertaken:

### _cr04395 - 313. With the objective of promoting external trade, the following will be undertaken:

### Promoting external trade (policy measures)
- Review the trade regulatory and legal framework for assuring its stability, accessibility and predictability. (paragraph 313 (i))
- Remove existing unjustified non-tariff barriers, and avoid the non-introduction of new ones. (paragraph 313 (ii))
- Rationalize regulatory procedures to reduce to a minimum “entry/exit” costs for commercial activities and facilitate international commercial transactions. (paragraph 313 (iii))
- Sustain efforts to penetrate external markets. (paragraph 313 (iv))
- Optimize customs’ administration for trade. (paragraph 313 (v))

### Medium-term trade strategy and specific measures
- Analyze and evaluate, jointly with the National Bank of Moldova and financial institutions, the factors that can improve the balance of trade and accelerate the growth of Moldova’s export industries, while engaging in systematic consultation with the private sector and professional business organizations. (paragraph 314 i)
- Publicize international treaties to which Moldova is party in the field of trade and economic cooperation to promote national capital interests through multilateral and bi-lateral trade tools. (paragraph 314 ii)
- Use preferential commitments provided by the EU and other developed countries, and analyze/identify existing or potential areas of comparative advantage. (paragraph 314 iii)
- Increase efficiency of Moldova’s participation in multilateral negotiations within the WTO; negotiate with the EU a preferential commercial arrangement; increase active participation in the regional free trade zone with beneficiaries of the Stability Pact for the South-Eastern Europe; renegotiate free-trade agreements with Romania and the Russian Federation. (paragraph 314 iv)
- Develop the legal and institutional framework for the services sector according to provisions of the appropriate WTO agreement. (paragraph 314 v)
- Collect, categorize and disseminate information regarding conditions for local goods and services required for accessing international markets. (paragraph 314 vi)
- Develop modern information systems to enhance visibility of export trade opportunities, especially for SMEs. (paragraph 314 vii)
- Use modern export-promotion tools, including: (paragraph 314 viii)
  - Partial support through public resources for local exporters’ participation in fairs, exhibitions and international economic missions.
  - Providing resources for promotion and support of Moldovan exports from special funds created for this purpose.
  - Simplifying and standardizing documentation and reducing the costs of customs’ formalities, including accession to international covenants (the ATA convention) to facilitate temporary exits/introductions of products for fairs, exhibitions, forums, etc.
  - Reducing administrative barriers for exporting: enhancing the procedure of VAT refunds and excises on export, refund of customs duties, reviewing the term and procedure for currency repatriation subject to products/sectors.
  - Implementing specialized training programs in the export area (marketing, sales development, strategic planning, export financing etc.).
  - Creating the Export Credits Insurance and Guarantee Agency to lessen commercial and political risks and facilitate commercial operations, and develop export infrastructure.
- Encourage SMEs to create export alliances to consolidate and facilitate access to external markets, new technologies and capital. (paragraph 314 ix)
- Increase efficiency of Embassies and Commercial Representations abroad to promote domestic products, assist export companies, and provide comprehensive information to potential importers; pay particular attention to the Customs Service and its role in facilitating trade through a transparent, rules-based customs clearance system. (paragraph 315)

### Customs Service strategy and medium-term priorities
- Strategic objectives for Customs Service reform: (paragraph 316)
  - Reduce the fiscal role and emphasize regulatory functions to facilitate trade flows.
  - More efficient application of legislation through consolidation of institutional capacities.
  - More efficient control over prohibited, dangerous, and poor-quality goods to protect society and the environment.
  - Rationalize the import tax collection system and strengthen procedures to prevent and combat fraud in customs transactions.
  - Improve provision of public services.
  - Sustain efforts to eliminate corruption.
- Medium term priority actions: (paragraph 317)
  i. Revise customs legislation pertaining to economic agents and develop open and transparent cooperation with the commercial sector.  
  ii. Identify and apply appropriate practices, especially in audit and risk assessment, and improve relevant procedures.  
  iii. Introduce an irregularities prevention system, especially through quick information checks at customs points.  
  iv. Standardize customs procedures and controls and develop operational statistics to facilitate commercial exchange.  
  v. Unify the tariff classification system in cooperation with relevant institutions to improve customs assessment.  
  vi. Develop information and communication systems to ensure continuous access of economic agents to customs and review possibilities for promoting the creation of the electronic customs environment.  
  vii. Develop professional training and re-training with a focus on motivations that will lead to eliminating corruption.  
  viii. Establish a customs administration performance evaluation system.

### Improving the Investment Environment (situation and objectives)
- Investments are vital for restructuring the economy and introducing technologies conducive to sustained growth in productivity, profitability, income and employment. (paragraph 318)
- Investment levels remain extremely low despite a slightly improving trend since 2001; investment activity varies significantly across sectors, with major shares directed to food and wine industries, energy and communications. (paragraph 318)
- Foreign direct investment (FDI) trends: (paragraph 319)
  - Inflow of FDI reduced significantly to 6.8% of GDP in 2002, compared with 10-10.5  % of the GDP in 2000-2001.
  - FDI attracted in 2002 is 2.6 times lower than money transfers from migrants employed abroad.
  - Total amount of per capita foreign investments between 1993-2002 amounts to around USD 198 annually, compared with annual inflows of USD 444 for South East Europe and USD 1,958 for East and Central European countries.
  - Conclusion: Moldova does not meet criteria needed to attract foreign capital, especially versus countries engaged in EU integration.
- Medium-term task: significantly improve investment climate to accelerate domestic and foreign private sector investment expenditures; primary state policy objectives are maintenance of macro-economic stability and promotion of public sector and regulatory reforms. (paragraph 320)
- Medium-term policies to introduce qualitative improvements: (paragraph 321)
  (i) Improve legislation on guarantees and protection of rights of investors and creditors, and protection of industrial and intellectual property rights.  
  (ii) Refrain from creating barriers to investment activities and eliminate existing impediments on a case-by-case basis.  
  (iii) Improve and adjust the country’s fiscal regime towards local and foreign investors.
- Implementing the new Law on Investment in Entrepreneurship, compatible with European legislative standards, will permit formation of more favorable conditions and stable legal guarantees for investment activities. (paragraph 322)

### Ministry of Economy — priority actions to improve investment climate
- Continue privatization of public assets, including adjacent terrains, to use assets more efficiently and attract investors. (paragraph 323 i)
- Modify fiscal legislation to improve incentives for local and foreign investors. (paragraph 323 ii)
- Develop regional infrastructure to improve investments at the regional level. (paragraph 323 iii)
- Support infrastructural and institutional development of the financial market to consolidate the financial sector’s role in mobilization and circulation of investment resources and reduce investment risks. (paragraph 323 iv)
- Engage in permanent dialogue with investor community and business representatives to address problems and improve the investment climate. (paragraph 323 v)
- Develop instruments and mechanisms to stimulate banks to offer long term loans and attract population savings, including transfers of people employed abroad, to support investment activity. (paragraph 323 vi)
- Create an efficient system for dissemination of information to foreign and local investors about investment opportunities in Moldova. (paragraph 323 vii)

### Building the Real Estate Cadastre — objectives, achievements, and medium-term actions
- Purposes of the real estate cadastre: promote ownership and security of tenure; facilitate real estate market operation; support land privatization and urban planning; encourage private sector development and investment; implement new assessment and taxation systems; promote efficient land administration. Implemented per State Program approved in October 1998. (paragraph 324)
- Land privatization progress: (paragraph 325)
  - Over 1998 – 2001 the process of farmland allocation into private ownership was completed with approximately 2.8 million landholding titles issued.
  - During 1999 – 2003 cadastral surveys were performed in approximately 500 communities (30% of the total) with about 500  000 landholding titles issued for household plots.
- Registration of real estate: (paragraph 326)
  - Total number of properties estimated at 5,7 million, including 3.0 million agricultural parcels, 2.4 million properties within communities (intravillan), and 0.4 million separate premises.
  - The First Cadastre Project (1999 – 2003) identified and registered approximately 4.2 million real properties, including 2.9 million agricultural parcels, 0.9 million properties within localities and gardens, and 0.3 million separate premises.
- Real estate market support and indicators: (paragraph 327)
  - Real estate transactions increased by a factor of 6.5 (23.000 transactions in 1999 compared to 150.000 in 2003).
  - Number of mortgages secured with real estate increased by 10 times (from 1000 registered mortgages in 1999 to 10.000 in 2003).
- Support for new property assessment and taxation system: (paragraph 328)
  - Appraisal for taxation to be performed in accordance with the Action Program approved by Government Decision in June 2003 to ground the new taxation system.
- Cadastre support for rural development and urban planning: facilitates land consolidation, correction of planning errors, supports urban planning and real estate taxation. (paragraph 329)
- Poverty-related aspects: cadastre protects property rights through free land titles and property registration, assisting the poor in raising capital by mortgaging real estate and improving living conditions. (paragraph 330)
- Main medium-term cadastre objectives: (paragraph 331)
  - Improve the unified national system of real estate registration.
  - Complete land privatization to facilitate real estate market development.
  - Implement the new system of mass appraisal for taxation.
  - Ensure financial and institutional sustainability of national cadastre.
- Medium-term key actions: (paragraph 332)
  i. Final drafting of laws and regulations covering property registration aimed at supporting the real estate market.  
  ii. Complete transfer of parcels into private ownership.  
  iii. Primary mass registering of properties and assets therein.  
  iv. Complete appraisal of (a) all apartments and individual residential houses in urban areas and (b) commercial, industrial and manufacturing properties, for taxation purposes.  
  v. Reorganize cadastre bodies and create a specialized cadastre company.  
  vi. Create an integrated information system of cadastre and make it available to different users.  
  vii. Provide public information and training staff.

### Finance sector — situation analysis, objectives and priority actions
- Financial sector development is needed to meet demands for quality financial services and infrastructure and to ensure efficient implementation of state economic and social policies. (paragraph 333)
- Banking sector: (paragraph 334)
  - The banking sector is the most developed segment with its 16 commercial banks.
  - From 2000-2003 the ratio of bank resources to GDP rose from 29.1% at the end of 2000 to 37.7% at the end of 2003.
  - The amount of deposits for this period rose 2.8 times.
  - Lending to the economy by banks remains relatively small – in 2003 it was 22% of GDP.
- NBM monetary program envisages continued growth in economy crediting by commercial banks; crediting growth expected to continue ahead of GDP growth, increasing role of bank credit in supporting economic growth. Need better coordination of monetary and economic policies between NBM and Government and coordination of actions to improve credit terms, preserve banking stability, and minimize bank risks. (paragraph 335)
- NBM measures for stable banking system development: (paragraph 336)
  - Further consolidation of banks’ capital by raising minimum capital requirements.
  - Improvement of supervision and regulation of banking activity.
  - Development of internal bank audit systems to reduce risks.
  - Ensure transparency of information on banking sector activity.
- Microcredit and small borrower context: (paragraph 337)
  - Opportunities for borrowing from banks are limited due to collateral difficulties and banks’ lack of interest in small borrowers because of high administration and control costs.
  - About 500 savings and loan associations established and developing with international support; average loan size about USD 300 per loan, with limited variety of services.
- Priorities for development of citizens’ savings and loan associations: (paragraph 338)
  i) Institutional development and transformation into professional micro-financing institutions offering a wide service spectrum.  
  ii) Larger attraction of members’ saving deposits.  
  iii) Consolidation and strengthening of financial stability through capitalization sufficient to cover undertaken risks.  
  iv) Development of internal control to prevent and control risks.  
  v) Consolidation of regulatory and supervision capacities and continuous efficient supervision to protect depositors’ interests and prevent system risks.  
  vi) Establishment of the guarantee fund for deposits in the micro-financing system.

*Source: _cr04395 - 313. With the objective of promoting external trade, the following will be undertaken:*

### 339. There  are  around  50  companies  in  the  insurance  market  of  Moldova.  Though  demand  for

### _cr04395 - 339. There  are  around  50  companies  in  the  insurance  market  of  Moldova.  Though  demand  for

### Insurance market: situation and required measures
- Findings:
  - "There are around 50 companies in the insurance market of Moldova."
  - Demand for insurance services is growing, but the insurance segment is "rather poorly developed."
  - "Insurance premiums account for only 1% of GDP."
  - Financial potential for insurance companies in terms of coverage of big losses, as well as their investment opportunities, is insufficient.
- Policy measures to implement:
  - "consolidate the insurance market by increasing the minimal charter capital of insurance organizations;"
  - "rationalize the process of regulation and supervision, in order to comply with liquidity requirements of insurance companies;"
  - "permanent monitoring of the financial state of insurance organizations."

### Stock market: situation, obstacles, and priorities
- Findings and statistics:
  - "The Republic of Moldova’s stock market is developing slowly."
  - "At the moment there are 109 professional participants in it."
  - "The State Securities Register has 3,342 registered joint stock companies, with securities issued by them accounting for 72% of GDP."
  - "At the end of 2002, capitalization on the stock market exchange was 24% of GDP, and for the corporate market was 68%."
  - After a sharp decline in activity in 2000 the stock market is gradually recovering, but "the total number of registered issues and transactions in 2003 was less than in 2000."
- Main obstacles to development:
  - low market liquidity;
  - insufficient foreign and domestic investments;
  - falling number and volume of securities issues;
  - unsatisfactory corporate management.
  - Causes include: low financial and economic activity of issuers, low level of development of financial instruments, limited financial resources of the population, low return on securities, and absence of an effective system for informing investors and public.
  - Additional problem: activity of investment funds established in the period of patrimony bond privatization (the number of their shareholders at the end 2003 totaled 1.5 million), and trust companies.
- Medium-term role and main focus areas:
  - "In the medium term, the role of the stock market in the attraction of investment and efficient capital movement must significantly increase."
  - Main focus tasks:
    - i) "optimizing the mechanisms for the attraction of investment through the stock market;"
    - ii) "raising the level of protection of rights and interests of investors and shareholders;"
    - iii) "increasing stock market transparency."
- Priority actions:
  - i) "improve the legal and regulatory framework for the development of new investment institutions;"
  - ii) "create conditions for the implementation of new financial instruments;"
  - iii) "implement the national informational system on the securities market;"
  - iv) "simplify the procedures used in making emissions and market transactions;"
  - v) "optimize mechanisms of control and supervision of the activity of participants in the securities market."

### Industry: situation analysis, objectives, and priority actions 2004-2006
- Situation Analysis:
  - Need to restructure economy to overcome dependency on agriculture with low productivity; industry key for productive jobs and incomes.
  - "Throughout the 90s the industry remained in a deep crisis, and the volume of industrial production decreased by almost three times."
  - "During 2000-2003 high industrial production growth rates were recorded following the recession that took place in 1998-1999."
  - "At present the private sector is dominant in the industrial sector with a share of 92% in total production, while enterprises with foreign capital enterprises account fro 26%."
  - "The processing industry’s share in GDP is of only 15.7%, and the number of employees accounts for only 9.4% of total employment."
  - Structure not sufficiently diversified: in 2002 production of food and drinks accounted for 50% of the sector; investments in food and drinks enterprises were around 62% of total processing industry investments in 2002.
  - Machinery and equipment producers accounted for less than 6% of production amount and less than 3% of investment in the processing industry in 2002.
  - Chronic lack of investment caused considerable degradation of fixed assets (depreciation in a number of enterprises reaching 80-90%).
  - Geographic concentration: capital accounts for around 60% of total industrial production; regional backwardness tied to insufficient regional industrial development.
  - Transition did not uniformly bring organizational and corporate management changes; some restructuring and privatization processes not fully completed.
  - "Policy co-ordination among public institutions is weak." Responsibility for sectoral policies divided among three ministries.
- Medium-term objectives:
  - "the sustainable increase in industrial output and its contribution to economic growth and employment;"
  - "the diversification of industrial production based on the development of branches that are not directly linked with processing raw agricultural material;"
  - "the quality improvement of industrial production activity components (such as management, product competitiveness, and the technology used);"
  - "the accelerated development of industrial production in regions to contribute to the recovery of regional economies and the reduction of poverty in territories."
- Long Term Strategy:
  - Develop a clear and efficient state industrial policy promoting investment and innovation, coordinated across ministries and local authorities, and aligned with regional and external trade policies and regulatory reform to promote private sector activity.
- Priority Actions 2004-2006:
  - i) "accelerating the privatization and restructuring processes for industrial enterprises, including bankruptcy procedures of inefficient and insolvent enterprises;"
  - ii) "drafting and implementing development programs for certain industrial sectors in order to attract investments and identification and implementation of concrete measures to increase investment attractiveness of sectors and enterprises;"
  - iii) "creating the necessary legal base for the creation of industrial parks and the encouragement of technological innovations to support production based on advanced technologies;"
  - iv) "providing legislative support to the industrial capital consolidation process, and the formation and development of different forms of associations;"
  - v) "developing the infrastructure of industrial production, export promotion, of provision of information and consulting services;"
  - vi) "developing the program of implementing integrated systems of quality management, adjusted to international standards requirements;"
  - vii) "examine, together with the Ministry of Finance and the Ministry of Economy, possibilities for creating an Industrial Investment Bank with joint private and state capital."

### Research and innovation: situation, objectives, and priority strategy
- Situation Analysis:
  - Innovation required for modernization; technological gap to advanced countries increasing due to low innovational activity.
  - "The share of budget expenditures for science in relation to GDP has decreased from 0.76% in 1991 to 0.2% in 2002."
  - Comparative financing levels cited: "Japan – 3.6%, USA – 2.84%, Germany – 2.29%, France – 2.18%," and other formerly command economies: "Czech Republic – 1.26%, Hungary – 1.1%, Ukraine – 1.1%, Russia – 0.85%, Romania – 0.54%."
  - Technical-material base of research institutions outdated. "Over the period 2000-2002 the number of research-development institutions decreased from 83 to 76 units, and the number of scientific researchers dropped by 22%."
  - Share of designing, building, technology and producing experimental articles/samples in total scientific work decreased from 36.6% to 20.1% during 2000-2001.
  - Innovational infrastructure and technological transfer largely destroyed; many large enterprises that realized the innovational cycle in the 90s have been liquidated or ceased due to financial insufficiency.
  - Intellectual potential largely idle and degrading.
  - Government adopted legislative acts and strategic documents including those related to the Academy of Sciences of Moldova, state policy in research-development, state policy for innovation and technological transfer, Strategic Priorities of research-development for 2004-2010, and Strategy for development of the national system of protection and use of intellectual property objects until 2010.
- Objectives:
  - i) "raising the level of research-development;"
  - ii) "efficiently using technological-scientific results in the economy;"
  - iii) "developing the innovational sector based on selling research-development works and their results;"
  - iv) "making use of the existing intellectual potential from the area of research and innovations, as well as further increasing of this potential."
- Priority Strategy and Actions:
  - i) "harmonization of national legislation in the area of intellectual property protection with stipulations of international agreements and conventions, to which Moldova is a signatory, and strengthening the control and responsibility for illegal use of intellectual property objects;"
  - ii) "developing legal and organizational measures for transfer of rights over intellectual property, constituted from budgetary means, to organizations that possess this work;"
  - iii) "developing the legal and normative base and organizing attestations for state scientific research institutions, reorganizing or liquidating institutions that have lost their scientific potential and do not have sufficient human and technical-material resources;"
  - iv) "completing an inventory of state scientific research institutions patrimony, selling unused goods and using the proceeds for the improvement of the research technical-material base;"
  - v) "developing and adopting a legal base for regulating the creation and functioning of modern infrastructure of research and innovations, including specialized financial institutions, funds and agencies, innovational parks, and business-incubators;"
  - vi) "extending and modernizing the system of statistical record-keeping indices of research and innovational activities and inventory of intellectual property objectives, innovational programs and projects;"
  - vii) "implementing mechanisms for reducing the risk associated with the development and implementation of innovations;"
  - viii) "improving procedures of amortization and taxation of intellectual property objects and other results of innovational activity, evaluation and inclusion of these objects in the statutory capital of legal entities;"
  - ix) "developing certain legal and organizational measures for the development of leasing for modern unique equipment and devices for scientific purpose, used to realize scientific research and to implement innovational programs and projects;"
  - x) "creating a unique electronic data base that would ensure the registration of innovations, intellectual property objects, as well as the performance of technological expertise and of know-how for patenting purposes;"
  - xi) "training and re-training of innovation specialists, by providing support from the state for these activities to higher education institutions;"
  - xii) "improving study programs in the area of higher and post-graduate education according to European and international standards of staff training for research and innovations."
- Small enterprise support measures:
  - i) "the implementation of mechanisms for transmitting, or making available in preferential conditions, public patrimony and/or land for creating small innovational enterprises;"
  - ii) "the usage of special crediting regimes for innovational activities performed within small enterprises;"
  - iii) "the implementation of a special taxation regime for small innovational enterprises."

### Energy sector: situation, objectives, long-term strategy, and regional cooperation
- Situation Analysis:
  - Energy sector reforms face difficulties; almost complete absence of primary energy resources: "98% of consumed energy resources are imported."
  - The main fuel is natural gas ("80%").
  - Major problems include inappropriate technical and financial structures, and insufficiently effective organization of energy supply and consumption.
  - Manifestations:
    - i) "high depreciation levels of energy equipment and power lines (up to 70%); complete degradation of heating systems (only in 17 cities out of 42 have working heating supply systems);"
    - ii) "low utilization coefficient of technical-industrial equipment and high voltage electricity network with a trend of falling consumption of power, heat energy and natural gas;"
    - iii) "high level of energy losses (the electricity losses amount up to 53%);"
    - iv) "large debts of the population, economic agents and budgetary institutions for consumed energy due to their low paying capacity;"
    - v) "absence of an efficient reporting system for energy resources consumed;"
    - vi) "reduced access of population to the main fuel source – natural gas (only 35% of localities are connected to the gas network)."
- Objectives:
  - "The objectives of the medium-term energy policy are to enhance energy security of the country and to create an environment for efficient and stable development of the sector."
- Long Term Strategy (sector-specific measures):
  - Power engineering sector:
    - i) "continuous development of the energy market and promotion of competition;"
    - ii) "enhancement of reliability of power supplies by connecting internal networks to regional and international networks;"
    - iii) "combating thefts of power by means of regulatory enforcement and introduction of special measures."
  - Thermal energy sector:
    - i) "providing all consumers with individual meters;"
    - ii) "promoting actions for energy conservation, reduction of losses during delivery and consumption;"
    - iii) "implementing the program for modernization and decentralization of heating system of inhabited localities."
  - Gas supply sector:
    - i) "development of the system of gas main and distribution pipelines in accordance with the Republic of Moldova’s Gasification Program;"
    - ii) "introduction of the National Reporting System for imports and transit of natural gas."
- Regional and international cooperation:
  - i) "participation in the energy activities and programs/projects of international structures interested in the development and coordination of regional energy policies;"
  - ii) "bilateral and multilateral cooperation with the countries of the region with the aim of the creation of the efficient and transparent regional energy market;"
  - iii) "elaboration of an Action Plan for the country’s participation in the regional energy market of the South-Eastern Europe."
- "Priority Actions 2004-2006" are indicated for implementation.

*Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2004/_cr04395.pdf*

### 366. The priorities for the medium-term development of the energy sector are:

### _cr04395 - 366. The priorities for the medium-term development of the energy sector are:

### Energy sector — priorities
- accelerated gasification of the country; 
- diversification of imports of energy resources and liberalization of power, natural gas and heat energy markets; 
- implementation of a modern heating systems in 19 cities – raion centers; 
- improvement of the market infrastructure and enhancement of commercial discipline in the energy sector (decentralization of apartment blocks’ heating systems); 
- increase in the efficiency of the operation of all energy sectors and promotion of energy conservation measures.

### Energy sector — measures to implement priorities
- adjusting long term energy sector development programs to the provisions of the Republic of Moldova’s Energy Development Concept until 2010. The energy programs will be coordinated with the general strategy of the republic’s economic and social development;  
- restructuring the energy sector; attracting private capital, including through privatization;  
- attracting external financial means, including grants, for the promotion of gasification and renovation of localities heating systems’ programs; 
- improving the regulatory framework for the functioning of the energy sector to ensure conditions for the development of the energy market and creation of a competitive environment;  
- improving the level of payments from households, business and public sector for consumed energy resources, including through the implementation of an efficient policy for social protection of most vulnerable groups of the population;  
- raising the share of non-traditional sources of energy (such as solar, wind, biogas).

### Roads and Transport — Situation Analysis
- Transport promotes national and international trade and improves access to workplaces, education, health care and other services; efficient transport infrastructure reduces transport costs and has large positive externalities.  
- To maintain the public roads network in their existing technical state, around USD 27 - 30 million are needed annually. Over the period 1999-2003 only USD 6.9 million, or approximately 0.46 percent of GDP, was spent annually on the repair and maintenance of roads.  
- Out of the full length of 3,325 km of national roads, 2,885 km have passed their economic life span, of which over 900 km are in a very bad technical condition.  
- Local roads network: total 6,137 km; 2,781 km are paved roads, 579 km are unpaved roads, and out of 2,777 km of modern covered roads, 2,253 km have exceeded their economic life (of which 2000 km are in a bad technical condition).  
- Over 40 localities have weak access to the public transport network and can become isolated in adverse weather. Currently, 26 sections of national roads and 79 sections of local roads, totaling 13.5 km, are affected by landslides. There are 14 damaged bridges on the public roads network.  
- Estimated Vehicle Operation Costs (VOC) in 2002: road users spend at least USD 25-30 million annually. International estimates: every dollar spent to improve roads saves road users between USD 3 to 5 every year. Maintenance at current state requires almost four times more finance than currently available.  
- Rail: Calea Ferata din Moldova (CFM) is a state-owned integrated natural monopoly. On January 1st 2003 the railway network accounted for 2,6 km per 10 thousands inhabitants. Total length of rail lines is of 2172 km, of which 1121 km are currently in use, including 1107 km with large gauge (1520 mm). The CFM network has no electrified lines.  
- Capital repairs in 2002: 43.6 km undertaken vs. normative requirement around 80 km annually. Modernization to European standards (e.g., increase train speed to up to 160 km/h, electrification, rolling stock renewal) is hampered by lack of finance.  
- CFM performance: under Memorandum Agreement with the Council of Creditors (signed August 2000), passenger traffic stabilized at 355 thousands passengers-km and merchandise increased up to 2751.4 net tones-km during 2000-2002.

### Roads and Transport — Objectives (medium term)
- i) To improve access to economic and social services through rehabilitation of roads and rail roads, as well as extend the national and local roads network;  
- ii) To raise the efficiency and quality of transportation services by developing and modernizing the transport infrastructure, by capitalizing on opportunities offered by membership of the Stability Pact for South-Eastern Europe and cross-border cooperation within euro-regions;  
- iii) To improve security and safety in transport activities and ensure environment protection;  
- iv) To facilitate international trade and economic activities by integrating arterial roads and railways into the European system and into international transport corridor systems.

### Roads and Transport — Priority Actions 2004-2006 (roads)
- design and implementation of a program of works for arresting the degradation process of the road network, increasing the volume of light periodic maintenance works (bitumen treatment, bitumen single-layer covers, in “situ” recycling of degraded asphalt cover, etc);  
- creation of a sustainable and transparent system of finances accumulation, management and use, in order to ensure continuous maintenance of roads network;  
- implementation of regional projects, including through contracting external credits and grants to improve access to markets and social services for the rural population;  
- implementation of modern systems of road condition technical evaluation and the rationalization of maintenance and repair priorities;  
- implementation, within the Stability Pact for South-Eastern Europe, of the Chisinau-Giurguilesti road rehabilitation project;  
- initiation of negotiations with international financial organizations (EBRD, WB, EIB) regarding contracting in advantageous conditions loans for the rehabilitation of national roads (with the priority of pan-European Corridors) and the beginning of rehabilitation works of roads included in the first stage of rehabilitation (covering around 400 km).

### Roads and Transport — Priority Measures (rail)
- rehabilitation of the railroad network to the level of projected and safety parameters, through maintaining capital repair cycles of railroad infrastructure depending on wear (covering around 80 km of railroad annually);  
- implementation until 1 August 2005 of the conditions of the Memorandum Agreement between the Council of Creditors and CFM, regarding the enterprise financial situation;  
- the phased payment of CFM debts towards the rail roads of Russia;  
- realization of the existing CFM Restructuring Plan, by separating the management of rail infrastructure from the management of transport services;  
- divestment of socio-cultural and communal possessions and auxiliary enterprises from the CFM structure;  
- introduction of an information system for international train schedules;  
- renovation of the passenger rail carriages and diesel trains fleet;  
- development of necessary investment projects and the attraction of investments for their realization.

### Water Supply and Sewerage — Situation Analysis
- Over the past ten years the water supply and sewerage sectors have increasingly degraded. Currently, over 50% of the population use drinking water that does not comply with sanitary norms.  
- Between 1970 and 1980, 1038 central water supply and sewerage systems were built in 1,533 localities; most pipeline networks need replacement and modernization. Losses of drinking water average 30% (while in some localities are up to 70%). The efficiency of the ‘well-pump’ system is 40-50%, leading to overspending on power by 15 - 20%. Power costs average 34% of operational expenses. Water treatment equipment needs renovation and repair.  
- Only 17% of rural residents have access to centralized water supply. Around 67% of rural water supply pipelines do not meet hygienic requirements and are in unsatisfactory condition. More than 80% of wells and 50% of springs are unfit as drinking water sources. Existing wastewater treatment systems are not operational.  
- Tariffs for water supply and sewerage do not cover financial resources needed to maintain and develop sector enterprises; low payment capacity and discipline increase debts and aggravate the sector’s financial position.

### Water Supply and Sewerage — Objectives
- i) to increase access to drinking water sources and to improve water supply and sewerage service quality;  
- ii) to improve environmental protection and the protection of water supply from pollution and depletion;  
- iii) to save water and energy resources;  
- iv) to rationalize tariffs for water supply and sewerage services.  
- Targets: increase ratio of population with sustainable access to improved water sources from 38.5% in 2002 to 68.5% in 2006 (Millennium Development Goal 10); increase ratio of population with access to improved sewerage from 40.0% in 2001 to 90.0% in 2006 (Millennium Development Goal 11).

### Water Supply and Sewerage — Strategy and Priority Actions
- To improve services and increase consumers:  
  - develop and modernize water supply and sewerage systems in 156 localities;  
  - rehabilitate of 93,300 rural wells;  
  - develop and introduce pilot projects for ground water treatment with elimination of nitrates and sulphates by biological methods;  
  - introduce a pilot project for mechanical and biological wastewater treatment.  
- Environmental protection and water saving:  
  - improve routine monitoring of the level and quality of ground water, and improve assessment of groundwater usage;  
  - prepare and implement a set of measures for efficient surface water drainage;  
  - restore and establish new water protection areas, river bank water protection belts and sanitary zones.  
- Tariff policy:  
  - provide water consumption meters to all consumers;  
  - prepare a uniform methodology of tariff computation and review possibilities for differentiated tariffs and moving towards real cost recovery;  
  - ensure transparency when resetting tariffs through publicity campaigns;  
  - improve the legal and normative framework of consumer–supplier relations concerning water supply, toughen requirements vis-à-vis debtors, and increase the level of payment for consumed water.  
- Legislative and regulatory improvements:  
  - bring existing legislation, standards and regulations on water supply and sewerage in line with European and international standards;  
  - improve legal and regulatory framework to attract private capital in the form of concessions, rents, trust management, and joint ventures, including privatization of central water supply and sewerage systems;  
  - implement services of technical audit of water supply and sewerage systems.

### Telecommunications and Information Technologies — Situation Analysis
- No communities without access to fixed telecommunication network, but 597 localities have no payphones and 235 have no telephones in public places. Level of access to fixed telephone system in rural areas is only 12.6%. About 10 % of the country’s population has no access to the three TV stations with national coverage.  
- Average phone coverage is of the order of 21.4 fixed phones per hundred residents; mobile phone coverage has reached 14 phones per 100 residents. Share of optic fiber lines in long-distance lines is approximately 50%; share of digital telephone exchanges in total capacity of automatic telephone exchanges is about 52% (lower in rural areas).  
- Access to ICT infrastructure in Moldova is 2 times lower than in Russia and 6 times lower than in Estonia.  
- Main constraints: monopoly of state enterprise "MoldTelecom" and cross-subsidy tariffs; lack of resources for sector development; weakness of legal framework relating to use of information technologies; incomplete compliance of national telecommunication rules with free market requirements.  
- Government actions: National Telecommunications Policy prepared; National Agency on Regulation of Telecommunications and IT Issues created; MoldTelecom started re-balancing tariffs; National Numbering Plan introduced.

### Telecommunications and Information Technologies — Objectives
- to improve the quality and access for consumers to information and telecommunication services;  
- to liberalize the telecommunications market;  
- to create the preconditions for the establishment of the information society;  
- to develop international cooperation in the field of telecommunications and information technologies.

### Telecommunications and Information Technologies — Strategy and Priority Actions
- harmonize national legislation, special rules, regulations and procedures with the standards of the EU, WTO and the European Conference of Postal and Telecommunications Administrations;  
- draft and adopt laws on the “protection of personal data”, on “circulation of electronic documents and digital signature”, and on “electronic commerce and electronic contracts”;  
- develop networks (including optic fiber networks) and upgrade telecommunication systems based on private investment;  
- increase the transit traffic through national networks;  
- finalize the introduction of the National Numbering Plan;  
- finalize the re-balancing of MoldTelecom tariffs and facilitate the access of the poor population to its services;  
- privatize MoldTelecom;  
- consider possibilities for introducing a minimum service package, affordable to all consumer categories, and offering a mechanism for the financial compensations for operators (Universal Service and Universal Service Fund);  
- draft the National Strategy “Information society technologies for development”;  
- develop and introduce a pilot project for the creation of seven collective access points on the basis of post offices, schools, libraries, etc.;  
- develop a program for introduction of ICT for public authorities to increase the efficiency and transparency of public administration.

*Source: _cr04395 - 366. The priorities for the medium-term development of the energy sector are:*

### 395. Priorities   areas   for   the   development   of   international   cooperation   in   the   field   of

### 395. Priorities   areas   for   the   development   of   international   cooperation   in   the   field   of

### Telecommunications and information technologies
- Priority areas for development of international cooperation:
  - participation in the EU programs for the development of an information society;
  - cooperation with the countries in the region.

### Housing — Situation Analysis
- Households waiting for housing or improvement:
  - 82,000 families listed for receiving a dwelling or housing improvement (of which 81,100 in urban areas and 900 in rural areas).
- Housing stock and construction trends:
  - In urban areas more than 30% of the available housing were built 35-40 years ago.
  - Over the last decade, the housing stock has deteriorated significantly and the living conditions of the majority of the population, especially of the poor, have worsened.
  - In 2002 the number of new constructions decreased by more than three times, while major repairs decreased by 1.5 times, compared to 1995.
  - The incidence and quality of minor repairs of buildings and dwellings has also decreased.
- Main causes of deterioration:
  - impossibility to finance housing construction and repairing from state and local budgets;
  - insufficient readiness of the population to maintain their dwelling places in conditions of market economy;
  - accompanied by:
    - i. a rapid increase in the costs of construction, repairs and building materials;
    - ii. the termination of state budget financed constructions and the reduction in public financing for capital and current repairs of the public housing fund;
    - iii. lack of financial resources among the population, in particular among vulnerable groups;
    - iv. ineffective use of current legislation on condominiums and housing fund;
    - v. lack of a legal framework on mortgage crediting in housing;
    - vi. lack of a legal framework for “social housing”.
- Additional sectoral risks and needs:
  - Over 130 buildings (especially dwellings) under threat of floods and flooding and over 150 thousand under threat of landslides.
  - Building resistance deteriorated as a result of seismic activity in 1976 – 1992.
  - Need for additional expenditures to increase life span of buildings and to ensure safety against dangerous geological impacts complicates the situation.
- Government responses and institutions:
  - Adoption of documents and programs: “National Housing Concept, Strategy of housing space market and other real estate”, “On the protection of settlements against dangerous geological processes”, “On reconstruction and heating rehabilitation for existing houses”, and “On housing benefits and credits”.
  - Creation of a National Housing Agency to develop the market for housing construction and improve financial relations; Agency to draft normative acts for its activity.
  - Actions to ensure effective functioning of the cadastral system to support the housing market and housing construction.

### Housing — Objectives
- Medium-term objectives (in light of the Millennium Development Goals):
  - to improve the access of the population, especially of socially-vulnerable groups, to housing;
  - to increase the durability and amenity of existing housing.

### Housing — Strategy and priority actions for 2004-2006
- Major measures to be taken:
  - i) develop state “social housing” policy to avoid distortions in the efficient working of the housing property market;
  - ii) improve the legal and regulatory frameworks and create an infrastructure attracting means in the field of mortgage lending for housing building, reconstruction and purchase;
  - iii) improve the regulatory framework, and its mechanisms and apply it to condominiums and create owners associations;
  - iv) approve and implement the state Program for completion of unfinished apartment buildings;
  - v) develop and implement pilot-projects for upgrading and rehabilitation of existing housing.

### Agri-food sector and rural development — Situation analysis
- Natural and production base:
  - Cernoziom soils cover 80% of the land area.
  - Important products: fruits, vegetables, tobacco, grapes, sunflower, winter wheat, corn and animal products.
- Economic significance:
  - Agriculture and food industry account together for approximately 33% of the GDP and for about 65% of total exports.
- Import dependence:
  - No production capacity for inorganic fertilizers, pesticides, mineral or vitamin nutrition additives, veterinary medicines or fuels; reliance on imports of these commodities.
- Production decline and productivity:
  - Agricultural production fell by about 35% in the first half of the 1990’s and by 20% in the second half, now being less than half of its 1989 – 1991 level.
  - Yields depending on crop are 20-60% lower than the 1989-1991 levels.
  - Value added per person in agriculture is about US$400 during last few years.
  - Labor productivity has declined.
- Structural changes:
  - Areas under low resource crops (wheat, corn, sunflower) have increased; areas under intensive crops (tobacco, vegetables) have been reduced.
- Agri-processing industry:
  - About one third of agri-processing enterprises created in the planned economy era have been successfully restructured; most remain in deep financial crisis.
  - Some enterprises have significant development potential if capital for equipment modernization were available.
- Land privatization and farm structure:
  - “Small privatization” increased household plots from 180 thousand ha in 1990 to 300 thousand in 1992.
  - “Large privatization” distributed land entitlements (“land shares”); physical allocation of plots to individuals/families who left collective farms.
  - Privatization and restructuring of large-scale state and collective farms is now practically complete; new private enterprises continue to evolve.
  - About half the land is cultivated by various medium to large enterprises; the second half is owned mainly by small independent farmers.
  - Result: a very fragmented structure of land ownership.
- Rural labor and migration:
  - Transition resulted in a loss of jobs in agriculture; in some villages about 40% of active population is presumed to have gone abroad or to the urban areas.
- Trade and finances:
  - Agriculture and food sector ensures a positive trade balance in external trade (circa US$200-400 million), though the surplus has been significantly reduced.
  - Increased imports of agricultural and food products create problems for domestic producers; imports of raw materials have contributed to growth of exports of processed products.
  - Lack of finance is a main problem for agricultural enterprises and agri-processing enterprises seeking modernization.
- Sources of rural credit:
  - Commercial banks and non-bank financial institutions; a third source is foreign donor agencies.
  - Major part of bank loans goes to food processors and input suppliers.
  - Credits to the individual sector come mostly from non-bank financial institutions supported by the New Lending Initiatives under the World Bank Rural Investment Support Project (RISP).
  - RISP initiated in late 2000; credit lines developed through commercial banks and the Rural Finance Corporation, Savings and Lending Associations.
- Role of foreign donors:
  - Active donors: USAID, TACIS, SIDA, DFID, Soros Foundation, from Japan, Poland and the Netherlands — providing investment, grants, soft loans and guarantees to banks, and technical assistance.
- European integration and rural development:
  - EU methods of providing assistance for rural development will be taken into consideration, as stipulated in Recommendation nr.1296/1996 of the Council of Europe Parliamentary Assembly regarding the European Chart of Rural Space.
  - Non-economic activities in rural areas, presently underdeveloped, will be deployed alongside agriculture.
- Government support and fiscal treatment:
  - State support channels:
    - subventions from the budget in cash;
    - non-monetary support.
  - Subventions from the budget for agriculture have not exceeded 3% of the total of budgetary expenditures of the state in recent years.
  - Most expenditures used for the Agricultural Support Fund and irrigation; other limited production activities and institutions receive financing.
  - Non-monetary support mainly in the form of reduction/cancellations of taxes intended for elimination of results of natural disasters.
- WTO commitments and market access:
  - Under WTO membership agreement, Moldova has commitments limiting subsidies; export subsidies are prohibited.
  - Provisions use the concept of the Total Aggregate Measurement of Support (Total AMS).
  - Moldova’s commitments foreseen a 20% reduction of subsidies by 2004.
  - Since Moldova uses now only 8% of allowed domestic support, the AMS rate will not affect the agricultural sector in the nearest future.
- Taxation and trade regime:
  - Contribution of agriculture to the state budget is lower than the sector’s share in GDP.
  - Main taxes: land tax, Social Fund contributions, income tax, VAT, and excises; other general taxes and charges apply.
  - Moldova has signed Free Trade Agreements with 17 countries (a number have not been ratified or fully implemented).
  - Moldova was granted the “Generalized System of Preferences” in 1993/1994; its last version was applied from 1 January 2002 to 31 December 2004.
  - Moldova has a liberal import policy and negotiated tariff rates as a WTO member; prohibition on non-converted measures (quantitative import restrictions, variable import levels, minimum import prices, discretionary licensing, non-tariff measures favoring state enterprises).
  - Moldova has undertaken large market-access commitments; tariff levels are lower than in neighboring countries by 30-50%, limiting possibilities for local producers’ protection.

### Agri-food sector and rural development — Objectives
- Enhance population’s welfare in rural areas by:
  - continuing the reform process in the agricultural sector to create agricultural enterprises of optimum scale, advanced production capacities and market connections to move from volume to quality and value added;
  - building a strong commercial and institutional framework according to market economy principles, focusing on implementing international standards of quality, efficiency and range of products, and the full spectrum of services from production to selling;
  - developing non-agricultural activities in rural areas within rural and regional development strategies;
  - ensuring technical and financial support from international donors using effective structures for counterparts interaction.

### Agri-food sector and rural development — Long Term Strategy
- Maintain macroeconomic stability as a base for agricultural recovery and poverty reduction.
- Improve legal, regulatory, and operating environments to reduce excessive regulation, inconsistent policies and the shadow economy, thereby stimulating investments, trade development and economic growth as set out in the Private Sector Development section of this Strategy.
- Promote sustainable growth through increasing competition and stimulating private initiative; reconfirm commitment to implement agricultural policies and support institutions for a viable market oriented rural economy.
- Promote liberal agricultural policies as stated in the Memorandum of Understanding on the Agricultural Sector signed in December 2001 with the World Bank.
- Medium-term focus:
  - (a) strengthening land ownership rights;
  - (b) developing land markets;
  - (c) providing appropriate services to post-privatization agricultural enterprises through creating technological machinery private stations.
- Government will ensure:
  - (i) creating farming structures and sizes determined by transparent, market based means;
  - (ii) land transactions can take place freely without administrative interference by Government, local authorities or neighbors;
  - (iii) maintain institutional and technical capacities of Cadastre offices with trained manager and staff;
  - (iv) continue to seek donor assistance in providing legal aid services including an information campaign on land owners rights, dispute resolution and land transaction problems;
  - (v) carry out an information campaign for farmers about different scenarios of, and alternatives to, land leasing and swapping, procedures associated with these arrangements: types of contracts, standardized terms and conditions of lease contracts, etc.
- Land consolidation approach:
  - Addressed through further development of the agricultural land market to develop economically viable farming units over the next decade.
  - Measures to improve operation of the land market and promote land lease.
  - No single optimum scale of production; appropriate farm size depends on resource intensity and relative market prices. Emphasis that efficient farming depends more on skills, opportunities and constraints facing producers than on farm size alone.

*Source: _cr04395 - 395. Priorities   areas   for   the   development   of   international   cooperation   in   the   field   of*

### 431. The  emphasis  will  be  on  providing  information  to  land  owners  about  their  property  rights,

### _cr04395 - 431. The  emphasis  will  be  on  providing  information  to  land  owners  about  their  property  rights,

### Agricultural policy, land rights, and organizational forms
- Emphasis on providing information to land owners about their property rights, alternative forms of organization and resources available for applying their rights for production, income and forms of labor force employment.
- Legal-organizational forms identified: peasant farms, joint stock, agricultural production cooperatives, limited companies, and various forms of lease arrangement.
- Environmental protection and preservation of areas of special scientific and recreational interest will be integrated into policy for a viable and competitive farming sector.

### Subsidies, poverty alleviation, and WTO considerations
- Moldova has limited resources for the subsidization of the agricultural sector; effective use of limited budgetary resources is crucial.
- Agricultural subsidies should be carefully targeted to efficiently promote the Government’s economic growth and poverty reduction objectives and encourage restructuring in the post privatization phase.
- Policies will be non-discriminatory and avoid introducing distortions in the efficient functioning of commercial markets.
- The Government will provide support to peasant farms in parallel with subsidies to agricultural enterprises using WTO Green Box measures negotiated during accession to WTO; eligible uses include extension, advisory, marketing and promotion services, infrastructure, and domestic food security.
- Formulation of subsidy policy is complex in light of EGPRSP economic growth and poverty reduction objectives; international experience and assistance will be used.

### Rural finance and the Rural Investment and Services Project (RISP)
- The Rural Investment and Services Project (RISP) plays an important role in improving rural finance in Moldova; extension into a second phase is hoped for.
- After an objective review, continuation of crediting on traditional components will be considered along with possible new components including:
  - risk mitigation,
  - agricultural trade,
  - irrigation,
  - infrastructure development.

### Taxation and fiscal policy
- The fiscal system is based mainly on indirect taxation (VAT, excise duties), which does not reflect the income and profitability situation of individual farms and enterprises.
- Over the long term, the taxation system should shift to a more direct and progressive system of taxation.

### Trade, market access, and quality standards
- CIS member states, mainly Russia and Ukraine, remain Moldova’s major trade partners despite decreased export and especially import shares.
- Assessment of possibilities to penetrate other European markets must consider: (i) the accession process to the EU, and (ii) rapidly escalating technical barriers to trade in food products (phyto-sanitary controls, minimum residue levels, environmentally friendly purchasing, good agricultural practice (EUROPGAP)).
- European market division for external suppliers (as described):
  - larger countries of Western Europe (notably UK, France, Germany) are setting the pace in application of new quality and food safety standards; accessing these markets is already very difficult;
  - remaining countries of the current EU are slower in applying technical standards and are presently more accessible for new suppliers, but likely to progressively apply new standards in coming years;
  - accession countries are themselves unlikely to apply new standards in the foreseeable future but may impose them on external competitors as a non-tariff barrier.
- Trade development policy will assist sector refocusing on new market opportunities; both domestic and external avenues must be exploited across short, medium and longer terms.
- Government will continue bilateral negotiations with official bodies responsible for health and sanitary inspections and certifications to harmonize required standards.
- Export potential exists for unprocessed products in traditional and new markets; processed food market access relies heavily on total quality management systems rather than major marketing investments.
- Creation of a quality assured marketing chain is proposed: processors contracting with producers for specified volumes using specified inputs and technologies; integrated producer-to-consumer models will require attraction of international commercial partners via EGPRSP private sector development strategy.

### Labor adjustment, social protection, and rural development strategy
- Improving international competitiveness and shifting market focus will change demand for agricultural workers; skills and age profiles may not match needs of more specialized agricultural and agri-industrial enterprises.
- Rationalization of production and processing will create new jobs and opportunities for commercial and service enterprises; initiatives will be required for protection of those affected by adjustment and for the environment.
- Overall rural and agricultural development strategy will include:
  - private sector development especially for small and medium enterprises;
  - a regional approach to development;
  - social services and infrastructure provision;
  - human resource development;
  - focus on other problems related to poverty and social exclusion;
  - preservation of culture and heritage of rural areas and protection of the environment;
  - social protection arrangements including pension provisions.
- A strategy study for rural development will be proposed for international support; combined elements aim to improve economic and social life in rural areas.

### Institutional restructuring and regulatory roles
- Ministry of Agriculture and Food Industry will be restructured to adapt its role from executive to facilitator, minimizing regulation; focus on analysis-based policy development and monitoring implementation.
- Regulatory functions will be limited to food safety, veterinary and phytosanitary controls required by international conventions.
- Private sector schemes will be encouraged to raise quality standards in agriculture.
- International donor technical assistance will be needed to prepare a long term strategic plan for restructuring public administration in agriculture at central and local levels.
- Government will promote rationalization and cooperation among projects and organizations assisting agricultural development, emphasizing building on existing structures rather than creating new organizations.

### State Reserves for grain
- State Reserves for grain are to serve in case of emergency; Government commitments:
  - (a) limit the Reserves to the maximum level equivalent to one and a half month worth of human grain consumption;
  - (b) maintain the level of grain held by the Reserves in line with the country’s fiscal situation;
  - (c) adhere to the operating principles for the Reserves stipulated in Government’s Letter of Development Policy to the World Bank.

### Technical assistance, EU compatibility, and studies
- Several proposed measures, including review of subsidy measures, require donors’ technical assistance.
- International project implementation practices should move towards compatibility with technical assistance provided to EU accession countries.
- Studies to be undertaken (Long Term Strategy and Priority Actions):
  - land consolidation study supported by international technical assistance to review recent evolution, efficiency of land market functioning, cadastre and registration systems, organizational options, information and advisory needs of land owners and producers, and relevant international case studies; recommendations to guide medium and long term actions;
  - studies on restructuring of the Ministry of Agriculture and Food Industry, agricultural subsidy policy in the context of economic growth and poverty reduction, and preparation of a rural development strategy; these three studies together with the land consolidation study will identify key elements for improving the policy framework for agricultural reform and rural transformation.

### Priority Actions for 2004-2006
- Develop programs dedicated to the rural poor jointly with NGO’s and international institutions; adopt a public investment and expenditure approach to redress past imbalances in provision of economic and social infrastructure, health, education, etc.
- Strengthen collaboration between private and public sectors in providing information and consultancy for small farmers; strengthen education and vocational training activities; develop financing of micro and small enterprises through NGO’s.
- Medium term priority: provide information and advice to rural populations with emphasis on support, skills and capital for new crop, livestock, agro-processing and non-farm enterprise start-ups. Support forms include information on venture selection, training, management, legal aspects, market access, technical and commercial feasibility of micro-projects, and assistance visiting financing institutions. Activities could be contracted to local organizations including NGO’s. Actions linked to ongoing SME promotion initiatives.
- Pursue land consolidation through a special study with international technical assistance to review land consolidation evolution, land market efficiency, cadastre and registration, organizational options, and advisory needs; develop concrete medium and long term actions based on study.
- Create farmers and agricultural entrepreneurs’ organizations to improve access to information, markets and production opportunities: producers’ groups, input purchasing associations and cooperatives, producer-owned distribution companies, bulk purchase agreements.
- Promote strategic planning in commercial and raw agricultural material processing enterprises; encourage mergers and rationalization to create “critical masses” capable of competing internationally by adjusting enterprise profiles to market requirements.
- Promote exports via state Agency MEPO (Moldovan Export Promotion Organization) and provide direct co-funding to enterprises for investment in market development in priority regions and market segments; promote domestic and international investment in agriculture as described in EGPRSP private sector development proposals.
- Offer technical and financial assistance for developing rural community development programs (participative principle); undertake a study on opportunities for creating the National Agency and National Fund of Rural Development; intensify assistance and create incentives to develop non-agricultural activities of the rural population.
- Study mechanisms for industry, trade and services transfer to rural localities, including cooperation of rural enterprises with urban and foreign enterprises.

### Regional development policy — situation, objectives, and long-term strategy
- Situation analysis:
  - During transition insufficient attention to regional aspects of reforms; policies were mostly macro-economic with no mechanisms to promote institutional and legal frameworks for regional and local self-administration.
  - Economic crisis had an extremely negative impact on regional economies, increasing inter-regional socio-economic discrepancies, especially between the capital and other regions.
  - Regional gross domestic product in Chisinau is 3.2 times larger in comparison to other regions; volume of investments is higher by 5.9 times.
  - Taraclia regional gross domestic product per inhabitant is 1.3 times larger than the average of regions (excluding municipality of Chisinau); Orhei and Lapusna are by 1.2 times lower.
  - Territorial differentiation of economic conditions aggravates inequality and poverty; welfare and opportunities are strongly correlated with place of residence.
  - The Transnistrian conflict affects political and socio-economic development; reintegration requires consolidation of statehood based on international norms, improved economic growth, higher living standards, reduced poverty, and democracy. External factors include EU integration and internationalization of Transnistrian problem resolution, notably OSCE participation.

- Objectives of regional policy:
  - (i) balanced and sustainable socio-economic development throughout the country through reduction of differences in socio-economic development amongst regions, especially between center and periphery;
  - (ii) augmentation of resources potential for addressing socio-economic development problems of regions;
  - (iii) provision of support to local administration bodies in socio-economic development of territories and coordination with national, sector and territorial development programs;
  - (iv) achievement of significant progress in solving the Transnistrian problem and the country’s reintegration, based on respect of the Republic of Moldova’s sovereignty and territorial integrity.

- Long term strategy principles (aligned with European practice and EU-candidate experience):
  - efficiency – efficient use of natural, human, production and financial resources;
  - equal access – all citizens, irrespective of residence, have equal rights of access to economic, social and cultural goods;
  - subsidiary – central authority performs only measures that cannot be performed more efficiently at lower levels of public administration;
  - sustainability – support of regional development is done on a stable base and ensured with financial resources and necessary tools;
  - planning – support is based on national and regional development strategies with well defined objectives, priorities and mechanisms;
  - coordination – all regional development support measures are coordinated at national and regional levels;
  - partnership – planning, developing and performing regional development support measures is based on cooperation between central and local public administrations, public and private sectors, and civil society institutions;
  - transparency – ensure transparency of distribution, allocation and usage of resources for implementing regions’ development strategy, programs and projects.

*Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2004/_cr04395.pdf*

### 460. The regional development measures and programs will be mainly oriented towards:

### _cr04395 - 460. The regional development measures and programs will be mainly oriented towards:

### Regional development measures and programs (paragraphs 460–465)
- Main orientations:
  - i) improvement   and   development   of   infrastructure   and   localities   (transport   and   telecommunications networks, communal services);
  - ii) development of small business and entrepreneurship in general, increasing its role in the recovery of the regional economy;
  - iii) development of services and sectors  alternative to the agriculture;
  - iv) attraction of local and foreign investments in regions’ economies;
  - v) facilitating production growth and promotion of exports from regions;
  - vi) development  of  social  assistance  systems  and  social  services  rendered  to  regions’  inhabitants;
  - vii) environment protection and maintaining ecological sustainability.
- Reintegration policy focus (paragraph 461):
  - political regulation of the Transnistrian conflict;
  - elaboration and implementation of the post-conflict development plan;
  - promotion of democratization and human rights in the region.
- Medium Term Priority Actions:
  - Passage of a Law on regional development support to set objectives, tools and financial resources for territorial development (paragraph 462).
  - Identification of regions for development and support in accordance with the Statistical Classifier of Territorial Units used by EU; each region will comprise several existing administrative-territorial units (with the exception of the municipality of Chisinau) (paragraph 463).
  - Creation of a two-level system of coordination and administration:
    - national: Coordination Council and National Regional Development Agency;
    - local: administration committees and regional development agencies (paragraph 464).
  - Specific reintegration actions to be undertaken (paragraph 465):
    - i) drafting and adopting a new Constitution of the Republic of Moldova;
    - ii) securing the Moldova-Ukraine border, including its Transnistrian segment;
    - iii) developing the post-conflict development program.

### Tourism — Situation Analysis (paragraphs 466–469)
- Role and potential (paragraphs 466–467):
  - Tourism can generate income, employment, foreign currency earnings and contribute to the state budget; can catalyze development of other sectors.
  - Moldova’s tourist route combines natural sites (reserves, flora and fauna) with archaeological assets (monuments, museums, folklore, popular art).
- Recent performance (paragraph 468):
  - Over the period 2000-2003 the total number of visitors involved in organized tourism has increased by 96%, reaching 153 thousands persons in 2003.
  - In 2003 total foreign visitors in the country amounted to 23,598 persons, an increase of around 25 % over their number in 2000.
- Major problems hindering tourism development (paragraph 469):
  - i) limited financial resources for tourist infrastructure, attraction of tourists, services facilitation, marketing and promotions;
  - ii) low quality, or total absence, of road infrastructure in tourist areas;
  - iii) lack of structures for tourist accommodation, in line with international standards, for the whole country with the exception of the capital;
  - iv) poor condition of a large number of monuments and tourist sites;
  - v) insufficient professional training of the personnel employed in this industry;
  - vi) cumbersome and costly procedures for obtaining visas;
  - vii) low public awareness regarding existing tourism potential and societal benefits.

### Tourism — Objectives and Long Term Strategy (paragraphs 470–471)
- Main objectives for development of tourism (paragraph 470):
  - The international promotion of Moldova’s tourism industry;
  - The sustainable and balanced development of the country’s heritage;
  - Improvements in management;
  - an enhanced quality in the services rendered.
- Sustainable development will contribute to (paragraph 471):
  - i) increased employment in the country’s rural areas;
  - ii) improved tourism infrastructure;
  - iii) adjusting and maintaining the quality of rendered tourism services at the international level;
  - iv) the possibility of fruitful partnerships between the public sector, the private sector and NGOs;
  - v) increased foreign currency earnings;
  - vi) increased flows of investment in existing and new tourism enterprises;
  - vii) quality improvements in the training of personnel, and the diversification of specialty areas, according to requirements of the tourism sector in line with international standards;
  - viii) maintaining the quality of the environment for both tourists and permanent residents;
  - ix) the development of actions for the efficient promotion of tourism.

### Tourism — Priority actions for 2004-2006 (paragraph 472)
- Emphasis areas:
  - i) Drafting rural tourism development projects (pilots);
  - ii) Increasing the involvement of local authorities in developing and promoting rural tourism;
  - iii) Developing environmental tourism by arranging and creating national parks;
  - iv) Drafting projects for restoring and renovating infrastructure in order to attract domestic and external financing for the necessary quality improvements;
  - v) Identifying cultural and historic heritage objects that are likely to be of interest to tourists;
  - vi) Creating the National Center for Staff Retraining for professional training and upgrade the skills of employees in the sector;
  - vii) Extension of classification on all types of tourism reception structures;
  - viii) Offering methodological assistance to economic agents in drafting and promoting investment projects in the sector;
  - ix) Developing efficient quality control mechanisms for services rendered to tourists;
  - x) Drafting promotion programs for a number of targeted markets;
  - xi) Simplifying border-requirements and procedures.

### Environmental protection and sustainable use of natural resources — Situation Analysis (paragraphs 473–487)
- Overall assessment (paragraph 473):
  - Irrational use of natural resources, intensive exploitation of agricultural lands, ecologically harmful technologies, and air and water pollution have reduced productivity of natural potential and harmed water, air, soils and biodiversity.
- Water quality and access (paragraphs 474–476):
  - Water quality of major rivers varies from "moderately polluted" (Nistru, Prut) to "polluted" (Raut, Bic).
  - The majority of underground water resources do not meet potable water standards due to excessive concentrations of undesired chemical substances (fluorine, iron, hydrogen sulphide, chlorides, sulphates, excessive mineralization).
  - Rural situation: 132,000 wells and springs used; only 17% of families use central supply sources.
  - Main causes of water pollution (paragraph 475):
    - i) disposal of residue water insufficiently cleaned due to lack or poor operation of sewerage and treatment systems;
    - ii) washout of fertilizers, herbicides, pesticides and other polluting substances from warehouses and unequipped dumps;
    - iii) agricultural works in water protection areas and lack of equipped conservation zones;
    - iv) storage of animal and household waste in perimeters of settlements;
    - v) accidental waste disposal by enterprises;
    - vi) inefficiency of monitoring, evaluation and compensation systems for damage to water resources.
  - Impact: increased morbidity, higher expenditures for health care, disproportionate effect on the poor (paragraph 476).
- Soil degradation and erosion (paragraphs 477–479):
  - Agricultural soil yield potential is declining; accelerated degradation reduces opportunities for agroindustrial growth.
  - Erosive processes: area of eroded land increases annually by 0.9%, and 26 million tones of fertile soils are lost from arable lands.
  - Annual damage to the national economy from soil degradation estimated at circa Lei 3.1 billion, comprising:
    - Lei 1.5 billion of erosion losses;
    - Lei 0.2 billion of landslide and ravine losses;
    - Lei 1.4 billion – estimated costs of agricultural production losses due to decreased land productivity.
  - Main causes of soil degradation:
    - i) poor cultivation technologies;
    - ii) land allocation insufficiently accounting for soil conservation;
    - iii) insufficient crop rotations;
    - iv) insufficient financial resources at national, local and new land-owner levels;
    - v) limited access to information on efficient land use;
    - vi) unauthorized cutting of forestry protection belts;
    - vii) lack of forestry protection curtains.
- Air pollution (paragraph 480–481):
  - Main urban pollutants: motor transport, thermal power stations and boiler-houses.
  - The average annual concentration of nitrogen oxides in Chisinau, Balti and Tiraspol municipalities exceeds the maximum accepted norm by 1.5 times; sulphur oxides in Bender municipality - by 1.7 times.
  - Causes: obsolete vehicles, low-quality fuel, coal and black oil use, lack of emissions-clearing facilities, obsolete production technology, insufficient monitoring and compensation mechanisms.
  - Health effects: increases in lung cancer, respiratory diseases, allergies; disproportionate impact on the poor (paragraph 481).
- Waste and toxic substances (paragraphs 482–484):
  - Country has collected 30 million tons of waste, including over 6 million tons of industrial waste; existing dumpsites total area about 1000 hа and are ecologically unsafe.
  - Many rural settlements lack dumpsites; illegal dumping is common; neutralization works are almost not performed.
  - Toxic stockpiles: 1,712 tons of unsuitable or prohibited pesticides stored in 340 warehouses (80% in unsatisfactory condition); 23,920 tons of contaminated oils used in power sector, possibly containing BPC, are a critical threat.
  - Causes: lack of waste sorting and processing plants; lack of effective prevention/evaluation/compensation mechanism; insufficient financial resources; low ecological knowledge and culture; incorrect use and storage of chemicals.
- Forest and biodiversity status (paragraphs 485–487):
  - Forestry fund covers 392.4 thousands ha (11.6% of country’s territory) with territory covered with forests – 349.5 thousands ha (forestation level of 10.3%) as of 01.01.2002 (Land Cadastre situation).
  - Afforested area (less than 10% of land area) is insufficient for effective protection; forest share has decreased due to authorized and unauthorized cuts.
  - Main causes of forest degradation: illicit cutting driven by wood/fuel price increases; lack of efficient local controls; low ecological knowledge; excessive grazing; inadequate regeneration practices.
  - Natural reserves protected by the state make up only 1.96% of the country’s territory (compared to 3 % in Ukraine, 7 % in France, 13 % in Germany, 25 % in Austria), insufficient for biodiversity preservation.
- Environmental objectives (paragraph 487):
  - prevent and reduce the degradation of natural resources and increase efficiency of their use;
  - maintain the quality of the environment as a factor that ensures health and quality of life;
  - create an effective natural disaster monitoring, prevention and damage compensation system.
- Millennium Development Goals target (paragraph 488):
  - Increase share of terrains covered by forests from 10.3% in 2002 to 11% in 2006;
  - Increase weight of natural protected areas for conservation of biodiversity from 1.96% to 2.1% in the same period.

### Environmental protection — Long Term Strategy (paragraph 489)
- Priority areas:
  - i) reduction in the pollution of water resources;
  - ii) improvement of waste management and the reduction of toxic substances and waste;
  - iii) protection and increase of the forestry fund;
  - iv) protection and extension of areas of natural reserves protected by the state;
  - v) reduction in the speed of soil degradation;
  - vi) improvement of the system of natural disasters monitoring, and provision of information and education to the population in this area;
  - vii) improvement of the administrative, economic and financial mechanisms for environmental protection and sustainable management of natural resources;
  - viii) increase in the level of ecological knowledge of the population, facilitation of access to information on environmental issues, and participation of the public in decision-making regarding management of natural resources.

### Environmental protection — Priority Actions 2004-2006 (paragraph 490 and following)
- Water resources protection:
  - preparation of the Action Plan for harmonizing environmental legislation and regulations for water in line with the provisions of the EU legislation on environment;
  - preparation of a national strategy on protection and sustainable management of water resources;
  - inventory of aquatic potential, quality assessment, and identification of pollution sources;
  - preparation and implementation of measures to eliminate pollution sources.
- Improvement of waste management and reduction of toxic waste (implementation and monitoring of National Program for Household and Industrial Waste Management, approved in 2000, and National Plan of Stockholm Convention, approved in 2004):
  - repackaging, centralized storage and destruction of 1,712 tons of pesticides, including from the Persistent Organic Polluters (POP) class;
  - inventory of POP and PCB, dismantling and decontamination of oils and equipment used for PCB containing substances;
  - conducting a feasibility and cost-efficiency study for upgrading waste disposal sites, first steps including separate collection change and building a new waste processing plant initially for Chisinau;
  - developing and implementing pilot projects for waste processing in rural areas;
  - inventory, renovation and re-equipment of Bekkari (animal waste disposal) waste sites.
- Forest fund protection and extension (Government’s Strategy for Sustainable Development of the Forest Sector for the years 2003-2020):
  - improvement of forest inventory and development systems;
  - increase the number of forest plantations on surfaces of the Forest Fund and local public administrations;
  - development of programs for rational and sustainable use of wood and non-wood forest’s products.
- Extending and safeguarding natural areas protected by the state (National Strategy for Biodiversity):
  - conservation of biodiversity in mid-course of river Prut and development of adjacent communal forestry;
  - creation of the Ecologic Network;
  - creation of the National Park “Lower Nistru”.
- Reducing pace of soil degradation (Government’s Program for Processing New Lands and Increase of Land Fertility for 2003-2010):
  - developing and realizing anti-erosion protection measures and rehabilitation of degraded land;
  - developing and implementing pilot projects for rational use and irrigation of soils, including protection of moist areas;
  - training of farmers land owners in soil processing and use of mineral fertilizers and pesticides;
  - planting forestry belts for agricultural land protection;
  - rehabilitating communal pastures and improving their management.
- Improvement of natural disaster monitoring, information and training:
  - increase public awareness regarding impact of natural disasters;
  - upgrade equipment and technologies of the disaster monitoring system for prevention.
- Improvement of administrative, economic and financial mechanisms:
  - review and improvement of activities and administration capacities of the National Environment Fund;
  - preparation and publication of a Guide on environmental impact and its assessment.
- Raising public awareness, access to information and participative approaches:
  - develop legal and institutional framework to implement international environmental Convention requirements Moldova is party to;
  - consolidate capacity of central and local public bodies regarding information and participative approaches;
  - training on sustainable use of natural resources;
  - review and improve environment monitoring system;
  - develop the National Strategy on Environmental Education;
  - create local environmental information and consulting centers;
  - develop methodology for creating and developing structure of natural resources data base.

*Source: _cr04395 - 460. The regional development measures and programs will be mainly oriented towards:*

### 491. The  quality  of  education  is  one  of  the  most  important  human  resource  development  factors.

### _cr04395 - 491. The  quality  of  education  is  one  of  the  most  important  human  resource  development  factors.

### Education — situation and key findings
- Education plays a leading role in facilitating economic growth, technologic and intellectual modernization and increasing welfare.  
- In 1996-1997 around a quarter of consolidated budget expenditures, which corresponded to approximately 10% of GDP, were allocated for education.  
- After the 1998 economic crisis education expenditures fell:  
  - 1999: education expenditures were 16.4% of total budget expenditures (corresponding to 4.7% of GDP).  
  - 2002: education expenditures increased to 23.9% of total budget expenditures (corresponding to 5.6% of GDP).  
- In comparison to early 90s, education expenditures were reduced significantly in real terms.  
- Increased reliance on fees and private provision:  
  - Around 35% of universities and 21% of colleges are private sector establishments.  
  - Around 77% of higher education students pay for their tuition, with the fee varying from 3000 to 9000 lei.  
- Access and enrollment:  
  - Around 56% of children aged 3 to 6 years old are enrolled in pre-school institutions.  
  - Primary enrollment rate dropped from 96% in 1997 to 93% in 2002.  
  - 2002 gross enrollment rate in gymnasiums was 87.9%.  
  - Every fifth gymnasium graduate has not continued his studies at the next educational level.  
- Inequality in access by poverty and location:  
  - 2002 per capita consumption of poor households on education amounted to only a tenth of the expenditures of non-poor households.  
  - Enrolment rates: children from poor households — secondary general education: around 74%; higher education: 7%. Children from non-poor households — secondary general education: 81%; higher education: 24%.  
  - Share of graduates from rural localities — secondary and higher education: 76% and 6% respectively. From urban localities: 81% and 29% respectively.  
  - Notable discrepancies exist between official statistical information and Household Budget Survey data on children’s education due to reliance on different data sets.  
- Institutionalization and special needs:  
  - 63 special institutions and boarding schools currently operating: 3 orphanages with 153 children; 19 boarding gymnasiums with 5991 children; 13 special schools for children with physical and sensorial disabilities, cardio-vascular diseases, neuro-psychological diseases, and behavioral deviations with 1895 children; 28 specialized schools for children with mental disorders with 3377 children.  
  - Around 35% of children in boarding institutions are orphans left without parental care; 65% come from vulnerable families.  
  - Around 5500 institutionalized children have serious health problems.  
  - Average cost of maintaining a child in these institutions is of the order of 4900-6000 lei per year.  
- Educational provision gaps:  
  - Educational institutions are totally non-existent in 250 localities (around 16% of total localities) with a child population of around 10,000.  
  - Another 60 localities have only primary schools with 1700 pupils; 500 localities have only gymnasiums.  
  - Poor quality of roads, lack of transportation and finance hamper access.  
- Participation and outcomes:  
  - Over 1990-2000 the average duration of studies per person decreased by 3 years.  
  - Average duration of secondary general education in Moldova is by 4 years lower than the average for OECD countries.  
  - Education enrollment rate of the population aged between 7-24 is around 61% (compared to Russia 82%, Ukraine 81%, Romania 68%).  
  - National tests of VIth grade pupils improved: 2002 average math grade was 44.2 points out of 100; Romanian language 65 points. 1997 results were 32 and 47 respectively.  
  - Grade gap of around 20 points between rural and urban pupils.  
- Staffing and resource use:  
  - Low salaries: amounting to 69% of the average salary in the economy in 2003, adversely affecting quality and retention of qualified personnel.  
  - In 2003-2004 the total required teaching staff was 2,305 specialists. Of the 1800 young teachers that were appointed only 1052 took their position, covering only 45.6% of needs.  
  - Sector characterized by inefficient use of financial, human and material resources; education expenditures per pupil vary significantly among institutions by 2-3 times.  
  - Payments for energy account for a quarter of total expenditures.  
  - Educational institutions work at around 75% of their capacity. An envisaged 40% decrease in number of pupils by 2010 will require network optimization.  
  - Education management training and re-training of teaching staff continues to be weak.

### General objective and long-term strategy
- General objective: Ensuring access to quality education and ensuring the efficient and sustainable functioning of the education system in a way, which facilitates its role in developing human resources and the economy.  
- Specific objectives for development (beginning of the millennium):  
  - increase access to education services, especially for children from vulnerable families;  
  - systematic improvement in the quality of educational services rendered;  
  - raising the efficiency of financial, human and material resources management;  
  - updating the system of social integration of children with special educational needs (SEN) and of vulnerable children.

### Priority directions for 2004-2006
- Promote public and private partnerships for supporting and developing the educational system.  
- Optimize the network of rural educational institutions.  
- Improve the allocation of resources for the efficient and sustainable development of education.  
- Motivate the performance of teaching staff and create an attractive environment for their activity.  
- Provide training to managerial staff.

### Priority targets and actions for 2004-2006
- Target: By 2006 the rate of net enrollment in secondary education will reach 88.9%.  
- Priority actions to facilitate access, especially for the poor:  
  - improve legislative and normative acts regarding consolidation and use of community funds for education, especially for the poor;  
  - re-distribute resources favoring primary, secondary general and secondary professional education;  
  - increase efficiency of managing resources with emphasis on priority resources allocation for increasing the salaries of staff, and acquiring textbooks, didactical materials and equipment;  
  - draft and implement the rural education development program;  
  - create in the rural environment “circumscription” schools in parallel with provision of transportation services for pupils;  
  - implement a flexible and equitable system of support to students and pupils from secondary general education by offering scholarships, depending on their successes and the financial situation of their families;  
  - optimize pre-school and school institutions, taking into consideration present demographic trends, in order to ensure that all children have access to general mandatory education;  
  - extend textbook loan schemes for high schools pupils, and increase subventions of textbooks for the poor.  
- Actions to improve quality at all levels:  
  - develop and implement state education standards;  
  - develop school and university curricula, including in continuing lifetime education, and implement new teaching technologies;  
  - systematic participation in international tests (such as TIMSS, PISA, etc.);  
  - develop and realize the presidential program “SALT” of implementing information and communication technologies in the educational system;  
  - improve the system of continuous training and re-training teaching staff;  
  - reconsider the place and role of secondary professional education and adjust it to community requirements, while updating the range of professions offered in consultation with social partners;  
  - develop and implement the national system of evaluation of pupils’ knowledge and skills and the efficient monitoring of admission in higher educational institutions;  
  - develop mechanisms of implementing the European system of transferable academic credits;  
  - adjust the catalog of specialties to ISCED 97 and ISCO, and restructure curricula to organize higher education in 2 university cycles in accordance with the Bologna Declaration provisions.  
- Actions to integrate children with special educational needs (SEN):  
  - organize assistance services for children with special educational requirements in secondary general education institutions, and develop community services for their assistance and support;  
  - create a database of children with SEN to develop efficient programs and measures for their assistance;  
  - develop and implement special programs for children with specific educational needs;  
  - create and develop a system of services as an alternative to institutionalization;  
  - develop and implement standards for the care, education, medical assistance, recuperation, and rehabilitation of children with SEN;  
  - consolidate didactic and technical-material base for adequate professional training of special education institutions’ graduates to facilitate their integration in society.  
- Measures to increase efficiency of resource management:  
  - improve and complete the legislative framework to ensure coherence and continuity of the educational system’s development;  
  - create information systems for education management;  
  - modify methodology of financing activities for training and re-training of teaching and managerial staff of pre-university educational institutions;  
  - improve methodology of budget financing of the educational system (program, unit-based financing, etc.);  
  - upgrade technical-material base of education institutions and implement energy conservation measures;  
  - improve system of teaching and management staff attestation;  
  - establish responsibilities and competences of central and local public authorities and social partners to create conditions for efficient functioning of educational institutions.

### Healthcare — situation analysis (linked to human resources development)
- Transition period adversely impacted population health and the healthcare system, hampering human resources development and increasing inequality in access to medical services.  
- Vital statistics and morbidity:  
  - Death rate increased from 9.7 per 1,000 in 1990 to 11.6 in 2002.  
  - Birth rate fell from 13.0 per 1,000 in 1990 to 9.9 in 2002.  
  - 26.4% of all deaths in 2002 were people belonging to the working-age; among men working-age deaths accounted for 37.7% of the total for 2002.  
- Disease profile: double burden — infectious and parasitic diseases as well as cardiovascular diseases and cancer.  
- Morbidity counts (official data):  
  - 1995 total number of cases of morbidity was 1,736,5 people (400.0 cases per 1000 people).  
  - 2002 number fell to 1,276,3 thousand people (352.3 cases per 1000 people).  
  - Falling number of visits to medical institutions caused by reduced access to healthcare services and medicines, and labor migration abroad.  
- Regional variations in illness incidence linked to ecological discrepancies.  
- Socially preconditioned illnesses: TB, HIV/AIDS and addictions — worsening trends:  
  - Number of people diagnosed for the first time with active TB: 54.5 per 100,000 people in 1995; 83.6 in 2002.  
  - Patients with AIDS: 0.05 per 100,000 people in 1995; 0.5 in 2002.  
  - Number of HIV carriers: 0.2 per 100,000 people in 1995; 4.5 in 2002.  
  - People diagnosed for the first time with drug addiction and drug abuse: 7.1 per 100,000 people in 1995; 33.9 in 2002.  
  - Millennium Development Goals seek to reverse HIV/AIDS and other serious illnesses by 2015; major efforts required due to rising incidence in Moldova.  
- Child health and vaccination:  
  - Infant mortality (under 1 year old) fell from 21.2 per 1000 of births in 1995 to 14.7 in 2002.  
  - Epidemiological situation for some viral infections stabilized recently thanks to international aid in purchasing vaccines (diphtheria, polio, viral hepatitis В and others).  
- Access and financing:  
  - Cuts in state financing increased medical services provided against fees via official payments in public institutions, private sector growth, and unofficial payments.  
  - Household Budget Survey: only 44.1% of the population has adequate access to medical services; 40.0% have limited access; 15.1% have no access whatsoever.  
  - Poor families spend only 2.1% of disposable income on medical services; extremely poor 1.8%; households with a decent level of living spend 4.4% of their budget on healthcare.  
  - Per capita cash expenditures of poor households for health are 5 times less than those of the non-poor.  
  - Only 27.0% of the poor have financial access to medical services.  
  - Access to healthcare services of rural residents, elderly and large families is under the national average.

*Source: _cr04395 - 491. The  quality  of  education  is  one  of  the  most  important  human  resource  development  factors.*

### 519. The  negative  consequences  of  the  1990s  economic  crisis  have  manifested  themselves  not

### _cr04395 - 519. The  negative  consequences  of  the 1990s  economic  crisis  have  manifested  themselves  not

### Healthcare — Situation and reforms
- Total budget expenditures on healthcare fell from 6.7% of GDP in 1996 to 3.6% in 2002.
- Budget resources have been concentrated on financing current expenses of institutions, causing material and technical base deterioration.
- Salaries and wages in healthcare remained among the lowest in the economy.
- Consequences included diminished access to medical services and underfunding that hampered quality improvements.
- Restructuring under the Republic of Moldova’s Healthcare Development Concept for the period 1997-2003 led to:
  - consolidation of a number of medical institutions;
  - reduction in the total number of institutions and beds in hospitals;
  - reduction in the number of medical personnel with focus on primary medical care and urgent medical assistance.
- Progress achieved: decreased expenditures for auxiliary services and redistribution of resources from the hospital level to primary and emergency medical care.

### Healthcare — Mandatory health insurance (implementation and financing)
- Countrywide introduction of mandatory health insurance on January 1, 2004, based on the 1998 Mandatory Health Insurance Law.
- Pilot program: Hincesti raion from July 1, 2003 to December 31, 2003, tested regulatory acts, procedures, and instruments.
- The National Health Insurance Company (NHIC) signed medical assistance provision contracts with public medical-sanitary institutions to provide the basic package of health services comprising:
  - primary healthcare services at sector level,
  - drugs for children under 5 years,
  - pre-hospital emergency care,
  - ambulatory care,
  - hospital care.
- Coverage and access rules:
  - Entire population covered for all primary medical sector and emergency services at the pre-hospital stage, irrespective of insurance status.
  - Except emergency cases, access to hospital services is granted to the insured following referral by a family doctor.
- Funding sources for mandatory health insurance:
  - (i) mandatory health insurance premiums amounting to 4% of the salary for the employed, which equally shared by employees and employers;
  - (ii) own contributions by entrepreneurs, and other persons that are insuring themselves individually;
  - (iii) government budget contributions on behalf of those that are ensured by the Government by law.
- Budget contributions are expected to cover around 70 percent of projected expenditures.
- Local governments expected to support materially public medical-sanitary institutions and participate in co-financing of National health programs.

### Healthcare — Objectives and MDG targets (by 2006)
- Main objectives of the healthcare sector reform program:
  - to increase access of the population, and, especially, of the poor, to basic health services through the development of primary medical care;
  - to improve the quality and standards of heath care, by upgrading clinical procedure, skills of the medical personnel, primary health care equipment, extending the process of re-accreditation of medical institutions, and implementing efficient monitoring and evaluation mechanisms;
  - to improve measures for the prevention and treatment of socially conditioned diseases;
  - to increase service efficiency in the use of financial, human and material healthcare resources by continued rationalization of the hospital sector and the implementation of the mandatory health insurance to improve financial stability.
- Millennium Development Goals (targets by 2006):
  - reduce the under 5 child mortality rate from 18,2 (per 1000 children) in 2002 to 15,0 in 2006;
  - reduce the infant mortality rate from 14,7 (per 1000 new-born) to 12,1 in 2006;
  - ensure the vaccination of children under the age of 2 to 98% against measles;
  - reduce the maternal mortality rate from 28,0 (per 100.000 births) in 2002 to 23,0 in 2006, and ensure that qualified medical personnel attend all births;
  - reduce the TBC associated mortality from 15,8 (per 100.000 persons) to 14,0 in 2006;
  - reduce the incidence of HIV/AIDS from 4,66 (per 100.000 persons) in 2002 to 4,00 in 2006.

### Healthcare — Long-term strategy and risks
- Long-term strategy:
  - develop mandatory healthcare insurance as a main instrument to address problems and improve healthcare;
  - introduce market principles and competition to enhance quality of medical services and improve healthcare management and resource use;
  - state insurance of specific groups to guarantee access to healthcare services.
- Expected contributions of insurance introduction:
  - mobilize sufficient financial resources to support increased access of the poor to medical services;
  - provide increased financing to improve quality of medical services and increase access for worse-off people.
- Identified risks during implementation:
  - partial and untimely collection of envisaged mandatory health care insurance contributions;
  - instability in attendance rates at medical institutions causing financing instability;
  - poor management of finance and information flows;
  - persistently low accessibility of services to the poor due to obligation to pay for services not included in the Uniform Program of mandatory health care insurance services.
- Mitigation: permanent monitoring of implementation process and results and necessary measures to improve system efficiency.

### Healthcare — Priority actions 2004-2006
- Key measures to improve conditions and outcomes:
  i) improvement of the regulatory and legal framework governing relationships between participants and defining rights and obligations;
  ii) strengthening institutional capacity for collection, pooling and transfer of funds including accounting, administrative and IT capacities;
  iii) ensuring transparent management of the NHIC’s operations to maintain credibility with contributors;
  iv) continuing accreditation of medical institutions;
  v) development and implementation of an integrated medical information system in the public health care system;
  vi) development and implementation of a system for monitoring and assessments of results;
  vii) implementation of mechanisms for regulation and supervision of financial flows and quality of services;
  viii) strengthening the capacity of national and regional staff in working with the new system;
  ix) consolidating and strengthening the technical-material basis of the health care system through equipping medical-sanitary institutions with modern medical equipment and technologies.
- Continued consolidation of medical institutions to focus resources on advanced specialized medical centers in the Chisinau municipality in accordance with the hospital services restructuring program; emphasis on increasing allowances for scientific research and information.
- National programs to be reviewed and improved (state budget financed) include:
  i) The National immunization program for 2001-2005;
  ii) The National program for TB control for 2001-2005;
  iii) The program for strengthening the material and technical resource base of the Blood Service;
  iv) The National program for the prevention and treatment of diabetes - MoldDiab program for 2002-2005;
  v) The program of quality perinatal services;
  vi) The National Program for fighting viral hepatitis;
  vii) The National Program for the prevention and treatment HIV/AIDS and sexually transmitted diseases for 2001-2005;
  viii) The National Program for prevention and fighting cancer;
  ix) Measures for fighting mental diseases, drug addiction and alcoholism.
- Programs aimed at improving mother and child care include:
  i) programs of medical assistance for pregnant women and sick children;
  ii) the provision of compensated in ambulatory conditions drugs to babies and pregnant women.

### Social insurance — Situation analysis
- The social insurance system is based on compulsory contributions and provides:
  - retirement pension;
  - disability pension;
  - survivor pension;
  - temporary disability indemnity;
  - unemployment indemnity;
  - sickness prevention indemnity and work rehabilitation indemnity;
  - maternity indemnity;
  - child raising indemnity;
  - sick child care indemnity;
  - death grant to cover burial costs in the case of death.
- For some categories, particularly the poorest, social insurance payments are the main source of income; poverty dynamics depend on system efficiency.
- Constraints due to 1990s crisis and reforms:
  - major employment level and structure changes negatively impacted the state social insurance budget;
  - cut in number of employees decreased number of insured persons and constrained growth of contributions;
  - many residents abroad found themselves outside mandatory social insurance, eligible only for voluntary insurance.
- System fragmentation and inequities:
  - numerous pension allowances violate principle of “social equity”;
  - pension insurance for workers in agriculture: contribute only 14% to the state social insurance budget (SSIB) but receive 52% of its incomes;
  - means gathered from contributions provide less than one third of expenditures needed for social insurance payments.
- Indexation history:
  - Until 2003, real value of pensions was to be maintained through indexation with an increase of at least 5% annually; accumulation of pension arrears made implementation impossible and pensions were increased only through recalculation.
  - Starting with 2003 a new pension indexation procedure applied on an annual basis, taking into consideration average inflation rate and the country’s average wage increase.

### Social insurance — Key problems, objectives, and long-term strategy
- Key problems:
  i. financial instability of the system;
  ii. fragmented and non-uniform pension legislation;
  iii. significant and, in many cases, unfair redistribution of resources among different categories of insured persons;
  iv. relatively small size of pensions and indemnities.
- Objectives to eliminate weaknesses:
  - To consolidate the financial stability of the social insurance system;
  - To ensure consistency between insurance contributions, benefits and risks;
  - To improve the methodology for calculating and reviewing the amount of payments.
- Medium-term possibilities to increase financial stability:
  i) complete individual records of the insured and corresponding social insurance contributions to encourage growth in insured people;
  ii) define more clearly social risks for each category of citizens to increase transparency;
  iii) introduce medium-term forecasts of revenues and expenditures of the mandatory state social insurance budget, taking into account macroeconomic, demographic and budget forecasts;
  iv) raise efficiency of administration by computerizing procedures of individual record-keeping.

### Social insurance — Implementation actions and priorities 2004-2006
- Necessary actions include:
  - develop and implement a computerized information system of individual tracking of insured persons and social insurance beneficiaries, presenting reports in electronic format to the National Social Insurance House and self-service of contributors and social insurance beneficiaries through the web site www.CNAS.md;
  - develop the concept, mechanism and components of the computerized informational system of servicing insured persons, state public and local bodies with information of social insurance;
  - improve the mechanism of interaction with social insurance informational systems of economic agents, central and local public bodies;
  - popularize social insurance legislation and educate taxpayers on voluntary payment of social insurance obligations.
- Pension-specific tasks:
  i) further unify and harmonize the pension legislative framework and its practical application, and create single pension conditions for all pension categories;
  ii) reform the pension system for persons that work in agriculture;
  iii) apply the principle of dependence of the amount of pension on the size of contributions for each insured person;
  iv) increase the amount of social insurance delivery through indexation.
- Priority actions for 2004-2006:
  i. continue keeping individual records of the insured and a computerized informational system of corresponding social insurance contributions;
  ii. develop a more accurate assessment of social risks;
  iii. implement medium-term forecasts of revenues and expenditures of the mandatory social insurance budget, taking into account macroeconomic, demographic and budget forecasts;
  iv. reform the pension system for those in agriculture;
  v. improve contributions’ calculation methods;
  vi. increase the amount of social insurance benefits.
- Medium-term objective: increase the quantum of pensions and benefits paid from the social insurance system to reduce the gap between these payments and the average monthly wage; additional budgetary resources will be necessary to diminish disparity between pensions and wages and to increase benefits.
- Expected enablers: improved transparency and efficiency in the social insurance system combined with further economic growth to increase financial stability and resources.

### Social assistance — Situation analysis
- Social assistance is an important instrument for redistributing economic development results in favor of poor citizens; achievement of poverty and inequality reduction goals depends on enhancing the efficiency of this system.
- Social assistance is a component of social protection, comprising programs, measures and specialized services targeted at persons, families, groups in difficult situations who cannot access a decent life due to economic, socio-cultural, biological or psychological circumstances.
- Current social assistance system includes two forms, usable separately or in combination:
  - social benefits;
  - social services.

*Italic: Source — IMF staff content from the provided PDF chapter.*

### 546. Despite  considerable  changes,  the  social  assistance  system  in  terms  of  benefits  and  services

### _cr04395 - 546. Despite  considerable  changes,  the  social  assistance  system  in  terms  of  benefits  and  services

### Social assistance: overall assessment and targeting
- Overall performance of the social assistance system remains inefficient; main problem is poor targeting of resources.
- In 2002 the poorest 20% (lowest quintile) of the population accounted for only 6.6% of the total amount of social benefits (except pensions).
- In 2002 another 20% (upper quintile) of wealthiest citizens accounted for 46.0% of the total amount of social benefits (except pensions).
- Conclusion: a considerable portion of the poor fall outside the monetary support system and existing resources require reorientation toward them.

### Main shortcomings in the social benefits system
- Benefits are based on the category approach (except two types of means-tested benefits: monthly indemnities for children aged 1.5-16, and cash benefits provided by the Social Support Fund).
- No well-grounded methodology for determining the sizes of different benefits, conditions and procedure for adjusting their quantum.
- No uniform record keeping of recipients; result: some people receive payments within different programs, while many in need fail to receive any social benefits.
- No system for monitoring and assessing results of social benefit programs and their impact on welfare of recipients and poverty dynamics.
- No distinct mechanism for allocation and use of budgetary means for social assistance: resources from the state budget are allocated to the mandatory social insurance budget and are managed within its budget by NSIH.
- Legal and regulatory framework for social assistance is not consistent; different benefits and allowances are regulated by numerous Government laws and regulations, which are insufficiently connected.

### Social services: coverage, quality, and institutional issues
- Social services are poorly developed and remain centralized: developed at the central level and dispatched for execution in the field, preventing assessment of real community needs and specific problems.
- Services are targeted at only a limited number of groups: home-based services are rendered only to the elderly and disabled people living alone; not extended to disabled children or adults, or families in need of home-based support.
- Existing services do not meet demand: number of applicants is almost twice the number of actual beneficiaries.
- Lack of financial resources to maintain the network of workers and employ new ones is a cause of failure to meet demand.
- Institutional based care is widely used due to underdevelopment of social services; from cost-quality ratio this is not the most efficient form for children, adults, or the elderly.

### Objectives of social assistance
- Improve the efficiency of the social benefit system by targeting them at the poorest, and focusing on the social groups at risk.
- Develop the system of social services by diversifying and improving their quality and facilitating a more active involvement of civil society.
- Develop and implement specific programs, such as: protection of family and child and the protection of people with disabilities.

### Long-term strategy: reform directions
- Address weaknesses related to financing procedures, organization and administration of the social benefits system.
- Adjust delivery mechanisms through measures aimed at improving targeting and increasing efficiency:
  - Impact monitoring of programs to improve eligibility criteria, and to rationalize types, forms and duration of benefits provision.
  - Provision of social benefits to the poor consistent with objectives of social assistance; develop and approve poverty criteria, a household welfare evaluation model and other necessary tools.
  - Creation of a separate social assistance budget; establish clear procedures for its formation, management and planning within medium-term budget planning.
  - Development and implementation of a unified data base of social assistance recipients for more efficient use of funds and better targeting.
  - Revision, consolidation and improvement of the legal framework regulating provision of monetary social assistance.
  - Improvement of coordination of measures and actions in social assistance at central and local level by non-government organizations and foreign donors.

### Development of social services and deinstitutionalization
- Two development directions:
  - Diversification of forms and types of social services.
  - Improving quality of services rendered by social institutions and developing alternative protection forms adjusted to minimum quality standards.
- Deinstitutionalization measures to maintain at-risk groups in family/community:
  - (Re)integration into the community with support from existing social services and social workers.
  - (Re)integration into own families, extended families, or placement at parental assistants (persons/families ensuring through home-based activity the care and education needed for harmonious development of children with a view to ensuring (re)integration into their own biological family, establishing guardianship, placement in family-type orphanages or adoption).
- Development requires active participation of public authorities and local communities, improvement of social services locally and encouraging local civil initiatives; extend spectrum of social services and increase role of local public authorities and civil society; shift from universal centralized policies to community forms to increase civil society participation.

### Priority actions for 2004-2006
- Medium term actions will support long-term strategy.
- Impact monitoring of social assistance programs will be carried out under general monitoring arrangements for EGPRSP implementation.
- Gradual implementation of the beneficiary means-testing principle to improve the current social benefit system (primarily of targeted benefits).
- 2004: develop necessary legislative framework, identify responsibilities and institutional arrangements; terms of reference for specification of poverty criterion, a household means testing model, and other necessary tools to be designed with external assistance.
- 2005-2006:
  - The social assistance budget will be separated from the social insurance budget.
  - An efficient mechanism will be created and implemented providing clear procedures of planning and management of financial means for medium term social assistance.
  - Implementation of the single database of social assistance beneficiaries is envisaged.
  - Over 2005-2006 a primary network of diversified social services under the Law on Social Assistance and the National Strategy on protection of child and family will be created.
  - Minimum quality standards for social services provided by resident institutions and community centers will be developed, approved and implemented.
  - A system for accreditation and monitoring of social services and evaluation of their quality will be set up within the Ministry of Labor and Social Protection in 2005.

### Labor market: situation analysis (key statistics and trends)
- Economic crisis led to a considerable fall in number of jobs, sizable unemployment and labor force migration abroad.
- In 1994-1999 the number of employed in the economy fell by 193,000 people, or by 11.4%.
- In 1998-1999 the most massive reductions occurred: 151,000 employees, or 9.2%, as a result of the Russian economic-financial crisis.
- In 2000-2002 the number of the employed rose by only 10,000 (0.7%).
- According to ILO methodology based on the labor force survey, the unemployment rate declined from 11.1% in 1999 to 6.8% in 2002; this decrease was due to a massive outflow of labor abroad rather than increased jobs.
- In 2000-2002 incomes generated by hired labor and self-employed activity in the non-agricultural sector accounted for only around 40% of the total disposable income of the population.
- Employment structure changes: share employed in agrarian sector increased to 49.6% in 2002; proportion employed in budget-financed sectors was 17.3% in 2002.
- In 2002 social insurance deductions accounted for 26.5% of direct expenses of employers for salaries and wages.
- Official labor market: in 2002 only 24,000 people were registered as unemployed, whereas number of unemployed according to ILO methodology amounted to 110,000.
- In 2002 only 38% of those who had applied to employment agencies were employed, and only 6% of them got unemployment indemnities.
- In 2002 expenses for professional training of staff accounted for only 0.4% of all employers’ expenses on labor force.

### Labor market: vulnerabilities and groups at risk
- High level of poverty determined by shortage of work places, low employment rate, high proportion receiving relatively low income from work, and weak motivation for employers to create jobs and increase wages.
- Youth unemployment priorities:
  - In 2002 the unemployment rate among youngsters aged 15-19 was 15.3%, and for those aged 20-24 was 15.1%, more than twice the country’s average unemployment rate.
- Socially vulnerable groups requiring special attention:
  - Persons with disabilities (physical and mental), persons released from detention places and social rehabilitation institutions, drug addicts, etc.
  - Number of disabled persons (according to legislation - invalids) that benefit from social aid account for circa 111 thousands persons.
  - In 2002 through the National Agency for Labor Force Employment only 139 invalids were employed despite much larger demand.

### Labor market: strategy and medium-term measures
- Long-term goal: economic growth accompanied by higher participation of labor force in production and services, increasing employment and growing importance of wage income in poverty reduction.
- Policy directions:
  - Deregulation to reduce bureaucratic barriers to job creation and address labor market regulation rigidities.
  - Create environment for private investment, support of small and medium scale business and private sector development.
  - Evaluate outcomes of employment policies, improve content and impact through monitoring and review.
- Medium-term measures to address constraints:
  - Review regulatory framework to ensure higher flexibility of the labor market and provide incentives for hiring.
  - Improve services and training of unemployed, especially socially vulnerable groups.
- Planned policies and measures:
  - Diversify and improve quality of employment services.
  - Assist the disabled in finding employment.
  - Prevent unemployment of youth and assist young people in finding employment.
- Specific planned actions:
  - Improve technical equipment of employment agencies.
  - Establish a labor market information system to inform population on employment and retraining possibilities and labor market situation.
  - Update and diversify labor mediation services.
  - Develop and optimize retraining and professional education system for the unemployed according to labor market situation.
  - Improve social protection system for the unemployed.
  - Implement marketing research and forecasts on the labor market.
  - Establish three special training Centers to facilitate access of disabled persons to jobs; develop and implement mechanism encouraging flexible employment arrangements for the disabled based on needs and barriers studies.
  - Establish network of centers for information, professional orientation and integration of young people under primarias (municipalities), education institutions, and territorial employment agencies; centers will also provide advice to young people on how to set up their own businesses.

### Youth policy: situation analysis
- Youth constitute 25.7% of the total population (each fourth person is aged between 15 and 29 years).
- Opinion polls identify most acute problems for young people: low levels of income, unemployment and healthcare, limited access and low quality of education, and high levels of insecurity and criminality.
- Many young people see no economic future in Moldova; limited and regionally unequal economic opportunities push youth to leave the country.
- Consequences include human trafficking and an alarming number of youth involved in criminal activities.

*Content unit: _cr04395 - 546. Despite  considerable  changes,  the  social  assistance  system  in  terms  of  benefits  and  services*

### 584. Many  young  people  abandon  school,  and  few  get  adequate  professional  training,  especially

### 584. Many  young  people  abandon  school,  and  few  get  adequate  professional  training,  especially

### Youth challenges and vulnerabilities
- Many young people abandon school and few receive adequate professional training because of limited access possibilities and resources to benefit from good quality and competitive education.
- Education methods are inadequate to develop a critical and independent capacity to think, necessary in modern society.
- On entering the labor market, many young people lack the skills and competences necessary to start an independent life.
- The vulnerability of youth is maintained because of the continuous transition that the country is going through; young persons are susceptible to a range of economic, physical and psychological risks (paragraphs 584–585).
- Manifestations of vulnerability include: a large group of excluded or marginalized young people, growth of drug abuse, youth violence, spread of sexually transmitted diseases and HIV/AIDS, dark perceptions of the future, and a general feeling of incapacity and uncertainty.
- Extended poverty has a dramatic impact on the health of youth (paragraph 585).
- Despite new pluralist democratic opportunities, youth participation in public and political life remains limited; participation in the electoral process is insignificant (paragraph 586).

### Objectives (paragraph 587)
- The main objectives in this area are to:
  - i) improve employment and self-employment prospects for young people;
  - ii) increase the accessibility to educational and health services, as well as to those regarding healthy living and personal development;
  - iii) develop human and institutional capacities in working with the youth;
  - iv) stimulate the involvement of young people in the decision-making process in the areas of social, economic, cultural and political development of the country, by creating local youth councils and other forms of participation;
  - v) facilitate access to information, to services and quality leisure time.

### Guiding principles for government action (paragraph 588)
- Government actions in the field of youth will be guided by four key principles:
  - (i) guaranteeing non-discrimination — every young person has equal rights regardless of race, color, sex, age, religion, ethnic origin, social origin, political orientation, family, place of living or any other characteristic;
  - (ii) ensuring equal opportunities — every young person, regardless of his/her background, will be offered the chance to develop his/her potential as an individual, as well as a citizen;
  - (iii) respecting the youth as citizens — young persons are full citizens, with the same rights and obligations as any other group in society, including the right of expression, opinion and meeting;
  - (iv) encouraging youth participation — young people are to be encouraged to exercise their rights in order to be able to fully participate in the life of society.

### Participation, representation and policy formulation (paragraphs 589–593)
- Young people will be offered the opportunity to express freely their opinion on problems they face and to be listened to by administrative institutions, directly or via representative bodies, and to participate in formulating youth policies.
- Government implementation measures include:
  - (i) consolidating the social partnership with civil society, especially youth associations;
  - (ii) encouraging dialogue and inter-ministerial cooperation on youth problems;
  - (iii) consolidating European and international cooperation in youth problems and related areas;
  - (iv) creating an adequate legal framework on the basis of European practices.
- Government will promote young people as equal and dynamic partners and will create a mechanism for permanent inter-sector consultations (education, healthcare, social protection, police, army, local public authorities) with civil society and foreign donors for accomplishment of strategy and action plans.
- Conditions will be created for cooperation of youth and youth associations with governmental bodies and local public authorities, promotion of voluntary services, and support for development of youth networks and associations throughout the country.
- Favorable conditions for organizations and persons working with youth will be created, including facilitation of education for youth specialists, voluntary youth leaders training, integration of national, regional and local youth administrations and programs by the Department of Youth and Sports, and permanent monitoring via a National Youth Research Center (paragraph 593).

### Access to information, services and special programs (paragraph 590)
- Measures to ensure access to information and services:
  - (i) undertaking studies regarding the youth situation and, based on such studies, revising youth policy;
  - (ii) ensuring access of the young to information regarding rights and opportunities in all spheres (education, healthcare, social protection, leisure time etc.) by creating a national network of youth service Centers;
  - (iii) development of a promotion program through the mass-media (TV, radio, written and electronic press) of social messages pertaining to healthy life style and youth development;
  - (iv) ensuring quality services for the youth within healthcare, educational and social assistance institutions;
  - (v) development of policies for supporting young families, searching for possibilities to ensure them with dwelling premises, child care facilities, consultations for young mothers, etc.;
  - (vi) promotion of special programs for groups of disadvantaged youth and youth at risk, to prevent and fight against their social exclusion.

### Employment, vocational training and emigration measures (paragraph 591)
- Measures to reduce unemployment among young people include:
  - (i) vocational training of unemployed youth, review and modernization of the youth vocational training system, youth support in rural areas through development of private financing of agricultural and non-agricultural activities;
  - (ii) contribution to reduction of youth emigration and stimulation of reverse flow of young people studying and working abroad, by creating work opportunities in the country;
  - (iii) conclusion of bilateral agreements with other countries regarding the legalization of the work of the young abroad.

### Leisure, cultural exchange and talent support (paragraph 594)
- To utilize leisure time of the young, local authorities and civil society organizations (mayoralties, schools, the church) will be encouraged to use existing resources, stimulate private sector support, consolidate technical-material basis for organizing leisure activities at local level, ensure conditions for international contacts between young people, and support talented young people in various areas.

### Expected outcomes and risks in strategy implementation (paragraphs 595–602)
- Recent context and aims:
  - Over the last four years, modest economic growth has occurred in Moldova; macroeconomic situation stabilized and income levels increased (paragraph 595).
  - Achieved growth is perceived as a statistical trend with little impact on ordinary people due to traditional growth factors and inequitable distribution.
  - Main objective of the EGPRSP is to change the quality and nature of economic development and humanize distribution of outcomes; focus is required on overcoming constraints and imbalances impeding long-term sustainable economic and human development (paragraph 596).
  - Substantial growth in investments, exports and employment are considered basic conditions for transition to a socially focused development trajectory (paragraph 596).
- Strategy characteristics:
  - The strategy is integrated and systemic, covering macroeconomic policy direction and tasks/priorities across almost all sectors (paragraphs 597–598).
  - Government anticipates support of civil society; openness and dialogue are seen as major success factors (paragraph 599).
- Identified risks:
  - Limited experience in carrying out well-targeted policies that require professionalism, special instruments and mechanisms for efficient implementation and monitoring, and limited skills in coordinating activities (paragraph 600).
  - Upgrading the country’s management system may be the most difficult issue; inadequate development of market economy institutions and infrastructure may hamper achieving objectives; uneven regional development of market infrastructures may produce uneven regional private sector development (paragraph 601).
  - External debt and lack of external support may impede investment flows; inadequate investment will prevent achievement of priorities including in the social sector (paragraph 602).
- Conditionality:
  - Successful implementation depends on changes in management, support of business community and citizens, and crucially, provision of external support (paragraph 602).

### EGPRSP implementation, monitoring and evaluation — Implementation (paragraphs 603–608)
- Implementation arrangements:
  - Following approval of the EGPRSP, economic and social development programs will be adjusted to sectoral priorities and harmonized with medium and long-term objectives of the EGPRSP (paragraph 603).
  - Implementation will be developed at national and local levels: line ministries and departments responsible at national level; local public administration bodies to lead at local level; the Ministry of Economy to have a coordinating role (paragraph 604).
  - Line ministries and local administrations will cooperate with civil society and private sector organizations; some activities could be outsourced to relevant NGOs (paragraph 605).
- Role of civil society (paragraph 606):
  - Civil society should:
    - act as a “social watch” and actively participate in monitoring and evaluation, including generating and disseminating independent data;
    - engage in policy dialogue with the government and provide feedback on effectiveness of chosen strategies and policies;
    - advocate more effective policy options;
    - assume responsibility for implementation of specific initiatives.
- Ongoing participation and adjustments:
  - Participation and consultation processes initiated during EGPRSP elaboration will continue throughout implementation to support monitoring, evaluation and adjustment; EGPRSP will be adjusted according to experience gathered; organizational forms will evolve to ensure interaction of all interested parties (paragraph 607).
- Oversight:
  - Oversight and coordination of EGPRSP implementation, monitoring, evaluation and annual update will be performed by the EGPRSP National Council, headed by the President of the Republic of Moldova (paragraph 608).
  - Tasks of the EGPRSP National Council include:
    - (i) coordinating activities for implementation, monitoring and annual update of EGPRSP;
    - (ii) approving annual plans for EGPRSP implementation;
    - (iii) hearing and approving the annual report on EGPRSP and MDG implementation;
    - (iv) facilitating interaction between executive, legislative and local public administration bodies and civil society in the EGPRSP implementation process.

### Monitoring and evaluation arrangements (paragraphs 609–617)
- Core components of monitoring and evaluation (paragraph 609):
  - i) monitoring the implementation of sectoral policies and of the overall EGPRSP;
  - ii) monitoring and evaluation of achieved results;
  - iii) evaluation of the impact of implemented policies on the poverty reduction and economic growth objectives.
- Indicators and their use (paragraph 610):
  - Final indicators of impact will be widely used during evaluation and to measure achievement of fundamental goals.
  - Intermediate indicators will measure contributions, actions and factors whose combined effect assists attainment of final objectives.
  - Indicators will be reviewed and improved during implementation for better measurement of progress.
  - The list of final and intermediate indicators is provided in Annex 5.
- Monitoring Units (MUs) (paragraphs 611–614):
  - Special groups (Monitoring Units - MU) composed of personnel from respective divisions of ministries and departments will monitor implementation of sectoral policies and final and intermediate progress.
  - MUs will be responsible for:
    - monitoring the implementation of sectoral action plans;
    - monitoring and recording results of ongoing activities;
    - reporting on progress towards established targets, based on defined sectoral indicators;
    - monitoring sectoral trends;
    - analyzing impact of specific policies on sector situation;
    - developing recommendations for alternative policies and sectoral interventions and revising sectoral action plans accordingly;
    - ensuring cooperation and coordination between relevant entities for implementation of cross-sectoral initiatives;
    - ensuring proper information sharing.
  - Coordination of monitoring and evaluation at local levels will be performed by economic directorates/sections of municipal and raion councils, with involvement of local communities through representatives of public authorities, community organizations, NGO networks etc.
  - MUs will provide local communities with necessary support, ensuring information flow from national to local level through dissemination of relevant materials, publications and reports.
- Reporting and forums (paragraph 615):
  - Regional forums will be organized annually to discuss progress and plans and evaluate EGPRSP impact in every region.
  - Annual reports will be published in each region based on monitoring data, collected evaluations and results of the national forum.
- Ministry of Economy role (paragraph 616):
  - The Ministry of Economy will:
    - i) coordinate the monitoring and evaluation process at interdepartmental and regional levels;
    - ii) perform the synthesis analysis of impact of policies promoted to achieve the EGPRSP objectives at the national level.
- EGPRSP Implementation Monitoring Unit (EIMU) (paragraph 617):
  - To achieve these goals the EIMU will be formed, comprising three subdivisions:
    - - A division for monitoring and synthetically evaluating the EGPRSP’s implementation;
    - - A division for monitoring poverty and the impact of poverty reduction policies;
    - - A division facilitating information, communication and participation.

*Source: _cr04395 - 584. Many  young  people  abandon  school,  and  few  get  adequate  professional  training,  especially*

### Box  4

### Box 4

### EGPRSP Implementation Monitoring Unit (EIMU) — Main functions
- Work planning:
  - Development, in cooperation with line ministries, of the EGPRSP Annual Implementation Work plans and follow up on their implementation;
  - Setting specific final and intermediate targets and performance indicators, to be used in monitoring and evaluation, including by the implementing partners (line ministries); making recommendations on measurement methodologies and tools;
- Monitoring:
  - Regular monitoring of various intermediate and final indicators; aggregating national data;
  - Rating progress towards the agreed objectives and providing relevant comments to implementing partners;
  - Ensuring the consistency, quality and coherence of data and monitoring mechanisms used by implementing partners;
  - Providing capacity building support to implementing partners;
  - Monitoring the progress of the Republic of Moldova in achieving medium and long term goals;
- Analysis and evaluation of policies and reporting:
  - Reviewing and analyzing current situation in the country, including regular poverty analysis;
  - Assessing the impact of policies set forth in the EGPRSP;
  - Analyzing links between various sectoral policies;
  - Providing policy recommendations to both the National Council and implementing partners (line ministries);
  - Facilitating more consistent data application for evidence-based policy development and advocacy;
  - Preparing annual reports for EGPRSP implementation and MDG reports;
- Information, communication, participation:
  - Coordinating various information flows and disseminating relevant data/reports to interested parties, especially the National Council, line ministries, general public, through structures and networks existing at national and local levels;
  - Facilitating, in cooperation with the Participation Council, the involvement of various stakeholders in the policy analysis and monitoring and evaluation process;
  - Providing support in organization of the mandatory evaluation;
  - Providing assistance in organization of the activity of the Participation Council.

- Additional EIMU role:
  - Maintaining an integrated database of strategic economic and social development indicators (MDG, EGPRSP, EU, etc.);
  - Acting as a main point of contact (“one-stop shop”) for the development of data;
  - Operating a web-based database open for public access to foster ownership and participation.

### Participation Council — Role, composition, and activities
- Core responsibilities:
  - Ensuring transparency of EGPRSP implementation;
  - Mobilizing and facilitating the involvement of different partners into the implementation of specific activities;
  - Serving as a discussion forum for various stakeholder groups aimed at the identification of innovative solutions to problems and challenges;
  - Fostering a meaningful policy dialogue between the civil society and the government;
  - Facilitating participatory monitoring and independent evaluation of the results achieved;
  - Ensuring, in cooperation with EIMU, the development and implementation of a sound communication strategy, including wide and timely dissemination of the relevant information to partners.
- Composition:
  - Representatives of central authorities (Parliament, Government and Presidency), local public administration, NGOs, private sector, trade unions and donors;
  - The PC will be formed to a great extent by representatives of the civil society; members will be delegated by representative organizations/coalitions/unions;
  - Terms of reference and meetings schedule to be set during its first sessions.
- Operating mechanisms:
  - Initiating Working Groups to address specific sectoral or cross-sectoral issues, with participation from ministries/departments and civil society;
  - Facilitating local then national consultations to update the EGPRSP annually;
  - Annually developing and submitting the report “Policy on Poverty Reduction Impact in Moldova” for public discussion; the National Council is responsible for examination and approval.

### Sources of information for monitoring and evaluation
- Data sources:
  - Statistical and administrative data compiled and submitted by the Department Statistics and Sociology, National Bank of Moldova, other central and local public administration bodies.
- Required improvements:
  - Undertake the population’s census to improve demographic information and sampling frameworks for Household Budget Survey, Labor Force Survey, and other statistical researches;
  - Develop new social researches (health status, living conditions, access to studies, participatory poverty evaluation, qualitative surveys) with donor support and use views of poor as performance indicators;
  - Officially approve the methodology for measuring the poverty line;
  - Develop a poverty map for detailed local-level monitoring and policy targeting;
  - Specify the list of poverty indicators to be published by the Department of Statistics and Sociology.
- Data quality and use:
  - Improve interaction between ministries/departments and the Department of Statistics and Sociology to define and improve indicators linked to final and intermediate impacts;
  - Dis-aggregate data, where possible, by sex, age, ethnicity, socio-economic status and geographic location;
  - Publish information and methodologies used in assessing progress to ensure transparency and enable independent evaluation by external bodies (NGO coalitions).

### Development of statistics — Priorities and actions
- Legal and methodological framework:
  - Implement a new law on statistics to align with guidelines approved by the Statistics Division of the United Nations in April 1994.
  - Revise methodologies for data collection and processing in line with international standards, especially those of the European Union.
- Key statistical projects:
  - Population’s Census envisaged for 2004;
  - General Agricultural Census scheduled for 2006.
- Systems and classifications:
  - Establish an integral system of enterprises’ statistics based on the National Register of Statistical Units (NRSU) and complementary research (annual, monthly, quarterly observations);
  - Create a network of universal “Master” survey modules to improve labor force and living standards statistics;
  - From 2004, develop statistical data on the basis of new national statistical classifications of economic activities (CEAM) and of products (CP);
  - From 2005, include industrial products and services (PRODMOLD) to modernize the statistical cycle.
- Technical capacity and human resources:
  - Equip IT hardware with licensed software products;
  - Modify processes for information gathering, storing and dissemination; create centralized databases with confidentiality controls;
  - Maximize capacity to satisfy increasing user informational requirements and ensure compatibility with other information systems;
  - Improve staff qualifications via training (abroad and domestically), involvement of foreign experts, better motivation and working conditions to increase attractiveness of statistical work.
- International cooperation:
  - Compile data according to international standards for comparability and continuous improvement of methods and IT;
  - Present information to international bodies in accordance with state responsibilities.

### Actions, costs, and linkage to MTEF — Priorities, costing, and financing scenarios
- Priority actions and funding character:
  - Priority actions cover 17 sectors distributed over about 30 programs.
  - Approximately 50% of the actions have “nil” or “low” additional funding implications.
    - “Nil”: actions carried out from existing budgets (legal/regulatory drafting, internal studies, policy reviews).
    - “Low”: limited funding needed (local consultants, small group training, local information systems).
- Prioritization guidance for line ministries:
  - Focus on activities and expenditures contributing directly or indirectly to poverty reduction and/or economic growth, identifiable beneficiaries and benefits;
  - Favor activities extendable affordably to relevant target populations rather than a few;
  - Favor expenditures that benefit vulnerable and disadvantaged groups;
  - Favor expenditures involving savings (e.g., closure of underutilized facilities, replacement services that are cheaper or higher quality);
  - Favor expenditures well-planned with realistic and modest costs.
- Implementation constraints:
  - Prioritization criteria applied only partially due to late introduction and weak policy analysis capacities in ministries;
  - Training and mentoring planned to strengthen pro-poor sectoral strategies and application.
- Indicative costing and MTEF coverage:
  - Costs are estimated on a preliminary basis; contingency items included; Technical Assistance (TA) requirements indicated but not estimated.
  - Table: EGPRSP Total Costs 2004-2006 (million Lei) and Percentages of Total
    - 2004
      - Activities under MTEF 948,3
      - Activities with unsecured funding 1195,8
      - Total 2144,1
    - 2005
      - Activities under MTEF 1154,0
      - Activities with unsecured funding 2152,2
      - Total 3306,2
    - 2006
      - Activities under MTEF 1114,1
      - Activities with unsecured funding 2664,8
      - Total 3778,9
  - MTEF will finance approximately 44.2%, 34.9% and 29.5% in 2004, 2005 and 2006 respectively; activities with unsecured financing are candidates for development partner consideration.
- External financing trends and scenarios:
  - Donor commitments between 2000 and 2003 averaged $30 million, about 90% in the form of credits, the remainder as grants.
  - Projected commitments for 2004: US$33 million in new credits and US$2.3 million in grants.
  - Ministry of Finance optimistic scenario for new commitments:
    - Around $60 million in 2005 and US$67 in 2006 (grants and financing for budget support and projects).
    - Projected disbursements of new financing: around US$16 million in 2005, and US$37.5 million in 2006.
    - Of disbursements, budget support financing already included in MTEF ceilings: US$11 million in 2005 and US$18 million in 2006.
    - Remaining for new EGPRSP activities: US$5 million in 2005 and US$19.5 million in 2006.
- Government financing strategy and priorities:
  - Domestic resources expected to remain extremely tight during 2004-2006; no realistic basis for additional domestic resource flows beyond MTEF ceilings.
  - Government committed to preparing and effectively implementing a sound, reform-oriented and realistic EGPRSP to build confidence and attract additional development partner flows.
  - New activities will need partial financing from existing resources via budget restructuring, cost reductions, and savings redirected to new priorities.
  - The three main spending sector Ministries (Education, Health and Social Protection) have engaged in robust policy and expenditure analysis under the MTEF, leading to improvements in spending policies; expansion of MTEF methodology to other sectors planned to strengthen public expenditure capacity.

*Source: Box 4 of the EGPRSP document.*

### ANNEX I. POVERTY PROFILE

### ANNEX I. POVERTY PROFILE

### 1. Residence
- Urban                36.8 32.2 29.9                19.4                27.5
- Rural                63.2 45.1 70.1                30.2                72.5
- Total 100.0 40.4 100.0 26.2 100.0

### 2. Household size
- 1 person 10.4 34.6 9.1 19.6 8.0
- 2 persons 22.6 32.9 18.4                18.7                16.0
- 3 persons 22.8 35.4 20.2                20.4                18.0
- 4 persons 25.2 43.4 26.8                30.6                28.9
- 5 persons 12.4 49.8 15.2                36.6                17.3
- 6 and more persons 6.7 63.0 10.3 46.4 11.8
- Total 100.0 40.4 100.0 26.2 100.0

### 3. Household type
- One-member Household 10.4 34.6 9.1 19.6 8.0
- Couple without children 16.3 32.5 13.1 17.4 10.8
- Couple with under-18 children 30.9 42.0 32.2 28.3 33.1
- Lone parent with under-18 children 6.9 34.4 5.9 22.4 5.9
- Other households with under-18 children 22.7 48.0 26.9 34.6 30.1
- Other households without children 12.7 40.9 12.8                25.2                12.1
- Total 100.0 40.4 100.0 26.2 100.0

### 4. Household composition
- Household with 1 child 26.8 36.1 24.4 23.9 24.6
- Household with 2 children 23.8 45.4 26.4 31.9 28.7
- Household with 3 children 7.4 53.4 9.7 38.5 10.9
- Household with 4 and more children 2.7 69.5 4.5 48.6 4.9
- Household without children 39.3 35.8 35.0                20.5                30.9
- Total 100.0 40.4 100.0 26.2 100.0

### 5. Social-economic groups
- Farmers                20.8 47.3 24.0                32.7                25.8
- Agricultural employees                14.7 56.0 20.1                39.5                22.4
- Non-agricultural employees                34.1 28.0 24.1                17.0                21.9
- Entrepreneurs 2.3 18.8 1.0 6.1 0.5
- Pensioners                26.1 45.5 29.1                28.4                27.9
- Others 2.1 32.6 1.7                19.9                  1.6
- Total 100.0 40.4 100.0 26.2 100.0

### 6. Main source of income
- Remunerated activity                31.7 29.3 23.4                18.2                22.0
- Individual agricultural activity 41.8 46.8 48.0 31.5 49.9
- Individual non-agricultural activity 2.2 22.6 1.2 11.7 0.9
- Social allowances 12.6 59.1 18.1                39.1                18.5
- Other sources 11.7 32.3 9.3 19.1 8.6
- Total 100.0 40.4 100.0 26.2 100.0

### 7. Number of employees
- 1 person households       
  - Without an employee 7.2 42.3 7.6 23.3 6.5
  - 1 employee 3.2 18.5 1.5 11.7 1.5
- Households with 2 and more employed       
  - Neither person works 12.5 44.3 13.3 26.1 12.0
  - 1 employee 21.6 35.1 19.1 22.1 18.2
  - Two employees 42.0 39.7 41.5 26.2 42.4
  - Three and more employees 13.5 51.8 17.0 38.2 19.5
- Total 100.0 40.4 100.0 26.2 100.0

*Source: _cr04395 - ANNEX I. POVERTY PROFILE*

### 8. Educational level of the HH head

### 8. Educational level of the HH head

### Educational composition of household heads
- Higher and incomplete higher education: 11.5 13.3 3.9 6.3 2.7
- Secondary and vocational studies: 58.0 40.8 58.5 26.3 58.2
- Incomplete secondary and primary education: 27.2 49.4 33.0 34.0 34.9
- No primary education or illiterate: 3.2 59.2 4.7 34.5 4.2
- Total: 100.0 40.4 100.0 26.2 100.0
- Source: PPMU based on HBS data.

### Poverty incidence by educational attainment (2002)
- Poverty rate (Poor / Extremely poor) — Total, Urban, Rural:
  - Total: 40.6 (Poor) 25.9 (Extremely poor)
  - Urban: 33.4 (Poor) 20.0 (Extremely poor)
  - Rural: 45.0 (Poor) 29.5 (Extremely poor)
- By education category — Poor / Extremely poor (Total; Urban; Rural):
  - Higher and incomplete higher: 15.3 (Poor) 7.4 (Extremely poor); Urban 13.4 / 5.9; Rural 21.0 / 11.7
  - Secondary and vocational: 38.9 / 24.4; Urban 35.2 / 21.4; Rural 41.7 / 26.8
  - Incomplete secondary and primary: 49.1 / 32.6; Urban 47.0 / 29.7; Rural 49.6 / 33.4
  - No primary education and illiterate: 56.2 / 35.2; Urban 73.1 / 42.3; Rural 53.1 / 33.9
- Source: PPMU based on HBS data.

### Structure of poor and non-poor by educational attainment and residence (2002, percent)
- Poor — Total / Urban / Rural:
  - Higher and incomplete higher: 4.1 / 8.6 / 2.0
  - Secondary and vocational: 47.8 / 61.4 / 41.6
  - Incomplete secondary and primary: 42.6 / 26.4 / 49.9
  - No primary education and illiterate: 5.5 / 3.6 / 6.4
- Non-poor — Total / Urban / Rural:
  - Higher and incomplete higher: 15.4 / 27.8 / 6.2
  - Secondary and vocational: 51.5 / 56.6 / 47.6
  - Incomplete secondary and primary: 30.2 / 14.9 / 41.5
  - No primary education and illiterate: 3.0 / 0.7 / 4.7
- Source: PPMU based on HBS data.

### Enrollment rates by poverty status and residence, 2002
- Gross Enrollment Rates:
  - Primary Education — Total: 1.02; Urban: 1.03; Rural: 1.01
  - Primary Education — Poor: 1.01; Urban: 1.00; Rural: 1.01
  - Primary Education — Extremely poor: 1.01; Urban: 1.02; Rural: 1.01
  - Secondary Education — Total: 0.79; Urban: 0.82; Rural: 0.77
  - Secondary Education — Poor: 0.75; Urban: 0.79; Rural: 0.73
  - Secondary Education — Extremely poor: 0.74; Urban: 0.77; Rural: 0.73
  - Higher Education — Total: 0.27; Urban: 0.44; Rural: 0.10
  - Higher Education — Poor: 0.11; Urban: 0.27; Rural: 0.04
  - Higher Education — Extremely poor: 0.09; Urban: 0.23; Rural: 0.03
  - Higher Education — Non-poor: 0.36; Urban: 0.50; Rural: 0.16
- Net Enrollment Rates:
  - Primary Education — Total: 0.93; Urban: 0.94; Rural: 0.93
  - Primary Education — Poor: 0.92; Urban: 0.92; Rural: 0.92
  - Primary Education — Extremely poor: 0.92; Urban: 0.92; Rural: 0.92
  - Secondary Education — Total: 0.78; Urban: 0.81; Rural: 0.76
  - Secondary Education — Poor: 0.74; Urban: 0.78; Rural: 0.72
  - Secondary Education — Extremely poor: 0.73; Urban: 0.77; Rural: 0.71
  - Higher Education — Total: 0.17; Urban: 0.29; Rural: 0.06
  - Higher Education — Poor: 0.07; Urban: 0.17; Rural: 0.01
  - Higher Education — Extremely poor: 0.05; Urban: 0.15; Rural: 0.01
  - Higher Education — Non-poor: 0.24; Urban: 0.33; Rural: 0.10
- Source: PPMU based on HBS data.

### Related poverty, demographic and income context (selected indicators)
- Poverty indicators by residence areas, 2002 (percent):
  - Total — Rate P0: 40.4; Gap P1: 12.4; Severity P2: 5.2
  - Total — Extreme poverty: Rate P0: 26.2; Gap P1: 6.6; Severity P2: 2.4
  - Urban — Poverty Rate P0: 32.2; Extreme poverty Rate P0: 19.4
  - Cities — Poverty Rate: 16.5; Extreme poverty Rate: 8.5
  - Towns — Poverty Rate: 53.2; Extreme poverty Rate: 33.9
  - Rural — Poverty Rate P0: 45.1; Extreme poverty Rate P0: 30.2
- Structure of disposable income by quintiles and activity (1999 vs 2002) — diagrammatic figures present shares by salaried activity, individual agricultural activity, individual non-agricultural activity, social benefits, other income across quintiles (figures shown in diagram).
- Structure of disposable income of the extremely poor by activity, 2002 (percent):
  - Urban — salaried activity: 52.3; individual agricultural activity: 8.0; individual non-agricultural activity: 2.4; social benefits: 27.1; other income: 10.2
  - Rural — salaried activity: 14.0; individual agricultural activity: 52.0; individual non-agricultural activity: 0.6; social benefits: 22.6; other income: 10.8
- Structure of disposable income by type of sources, 2002 (percent):
  - rural poor — total income 100.0; income in cash 44.9; income in kind 55.1
  - rural population — total income 100.0; income in cash 49.5; income in kind 50.5
  - urban poor — total income 100.0; income in cash 87.7; income in kind 12.3
  - urban population — total income 100.0; income in cash 89.8; income in kind 10.2
  - total poor — total income 100.0; income in cash 57.6; income in kind 42.4
  - total population — total income 100.0; income in cash 67.5; income in kind 32.5
- Inequality of household disposable income ‘before’ and ‘after’ social transfers (Gini):
  - 1998 — Before social transfers: 0.4448; After social transfers: 0.4435
  - 1999 — Before: 0.4351; After: 0.4342
  - 2000 — Before: 0.4172; After: 0.4165
  - 2001 — Before: 0.4308; After: 0.4279
  - 2002 — Before: 0.4241; After: 0.4214
- Incidence of social transfers, 2002 (percent):
  - Households without beneficiaries: Total 85.3; Poor 86.9; Non-poor 84.7; Poverty rate 24.2
  - Households with beneficiaries: Total 14.7; Poor 13.1; Non-poor 15.3; Poverty rate 21.1
- Source: PPMU based on HBS data.

*Source: PPMU based on HBS data.*

### ANNEX 2. METHODOLOGICAL PRINCIPLES FOR THE

### _cr04395 - ANNEX 2. METHODOLOGICAL PRINCIPLES FOR THE 

### Background
- Methodology developed in conformity with the Decision of the Government of the Republic of Moldova no. 619 of 16 May 2002 „On approval of the Plan of actions designed to build the capacity for poverty monitoring and evaluation for the period 1 June 2002 – 31 May 2005”.
- Purpose: The absolute poverty line shall be used for poverty analysis and evaluation of anti-poverty impact of Government policies, and will be conducted on a regular basis over the long period of time.
- The methodology addresses three fundamental issues in poverty measurement:
  - measuring welfare of the population,
  - comparing households of different size and composition (equivalence scale),
  - designing the poverty line.

### Conceptual and methodological principles
- Basic unit: household (as defined in the Household Budget Survey).
- Basic measure of welfare: household’s consumption expenditures (preferred over income because income is widely underreported).
- Consumption expenditures include:
  - expenditures for food consumption (including imputed market value of items taken from household’s production),
  - expenditures for non-food items,
  - payment for services.
- Welfare measures to be used:
  - population’s consumption expenditures per capita (divided by the number of persons in the sampled households),
  - ‘equivalized’ consumption expenditures (divided by adult–equivalent number of household members).
- Deflation and price base:
  - To ensure comparability between households surveyed in different months, consumption expenditures will be deflated using the monthly Consumer Price Index (CPI).
  - Prices as of January of the year of study will be taken for the base.
- Equivalence scale:
  - The OECD equivalence scale will be used: value of 1.0 is assigned to the first adult in a household; 0.7 to each other adult; and 0.5 to each child aged under 15.
  - This is a temporary solution pending development of a country-specific equivalence scale.

### Method of calculation of the absolute poverty line (overall approach)
- Principle: The method is “absolute” — focuses on estimating the amount of money necessary to guarantee meeting basic needs defined in terms of food and non-food requirements (necessities).
- Core method: food-energy-intake method assessing value of food consumption meeting the energy requirement for health and normal activity.
- Caloric standard: minimum daily calories intake equal to 2282 Kcal per person per day (as stipulated in Decision no. 902 of 28 August 2000).
- The absolute poverty threshold equals the food component (extreme poverty/food line) plus minimal non-food requirements (including services).

### Determination of the absolute extreme poverty line (food line)
- Population selected: persons in the 2nd to 4th deciles of the distribution of total consumption expenditure.
  - Note: the 1st decile is excluded because its consumption structure differs significantly from the rest of the population.
- Food basket:
  - Composed of 46 products (for the selected decile group).
- Procedure:
  - Food-energy-intake of each product is calculated (according to the Alimentation Institute of the Academy of Science USSR, 1989).
  - Establish each product’s percentage share in total consumption expressed in calories.
  - Adjust the caloric input of each consumed product to the value of 2282 kcal/day.
  - The resulting amount of money represents the value of the food line (extreme poverty line).

### Establishment of the absolute poverty line (food line + non-food minimum)
- Assumption: population whose consumption expenditures equal the food line spend for non-food consumption only the required minimum.
- Procedure (stepwise):
  - Select the population whose consumption expenditures (C_T) match the food line (S_ex) ± the standard deviation (σ) of this value: C_T = S_ex ± σ.
  - Establish the actual structure of the monthly consumption expenditures for this population group.
  - Calculate the consumption structure based on shares of food and non-food consumption in total consumption.
  - Compute the absolute poverty line S as:
    - S = S_ex + (S_ex x the share of non-food products and services)
    - i.e., add to the food line (S_ex) the food line quantum multiplied by the established coefficient of non-food component.

### Specific numeric parameters and selections (explicit)
- Caloric requirement used: 2282 Kcal per person per day.
- Deciles used for food basket derivation: 2nd to 4th deciles (1st decile excluded).
- Number of products in the food basket for the selected group: 46 products.
- Equivalence scale values (OECD equivalence scale):
  - first adult = 1.0
  - each other adult = 0.7
  - each child aged under 15 = 0.5
- Selection criterion for population around food line: C_T = S_ex ± σ (standard deviation σ of S_ex).

*ANNEX 2. METHODOLOGICAL PRINCIPLES FOR THE EVALUATION OF THE ABSOLUTE POVERTY LINE (Excerpt from the document awaiting approval by the Ministry of Economy and the Department of Statistics and Sociology of the Republic of Moldova)*

### 3. Private sector development

### 3. Private sector development

### Ownership and size
- Share of private sector in GDP, % (Source: DSS): 75; 76; 70,5; 71,2

### Investment and finance
- Foreign direct investments, USD million (Source: NBM): 136,1; 147,1; 117,1; 43
- Commercial banks assets as a share of GDP, % (Source: NBM) — (appears later in document under Finance sector): 29,1; 31,4; 35,1; 37,7
- Rate of growth of banking credit to the economy, % (Source: NBM) — (appears later in document under Finance sector): 40,1; 35,4; 34,3; 44

### Employment and firms
- Number of employees in private sector, thousand (Source: DSS): 1167; 1159; 1166; 1016
- Number of SMEs (Source: DSS): 19996; 20518; 22138; 22437
- Number of employees in SMEs (more than 20 people), thousand (Source: DSS): 157; 123; 130,4; ...
- Turnover of SMEs, MDL million (Source: DSS): 7930; 9164; 10833; 12306

### Related activity indicators (contextual)
- Rate of growth of turnover of goods, % (Source: DSS): 14,9; 16,9; 31,6; ...
- Rate of growth of turnover of goods on railway, % (Source: DSS): 27; 30,9; 38,8; ...
- Rate of growth of turnover of passenger, % (Source: DSS): -10,8; -13,3; 23,1; ...
- Number of house telephone sets in the public network or connected to it, total per 100 inhabitants (Source: DSS): 13,9; 15,6; 17,3; ...
  - in urban network: 24; 28,1; 27,5; ...
  - in rural network: 6,8; 8,1; 10,1; ...
- Share of length of optical cable in total length of inland network of cable telecommunications, % (Source: DSS): 23,9; 43,1; 43,3; ...

### Indicators of industrial linkages (relevant to private sector)
- Industry as a share of GDP, % (Source: DSS): 16,3; 18,7; 18,6; ...
- Rate of growth of industrial output, % from last year (Source: DSS): 7,7; 13,7; 10,8; 13,6; 12; 11; 10,5
- Employment in industry, thousand persons (Source: DSS): 161; 165; 171; ...
- Labor productivity index of big industrial enterprises, % compared to last year (Source: DSS): 112; 119; 112; ...

### SMEs and private-sector performance — summary of reported figures
- Number of SMEs: 19996; 20518; 22138; 22437
- Number of employees in SMEs (more than 20 people), thousand: 157; 123; 130,4; ...
- Turnover of SMEs, MDL million: 7930; 9164; 10833; 12306
- Number of employees in private sector, thousand: 1167; 1159; 1166; 1016
- Foreign direct investments, USD million: 136,1; 147,1; 117,1; 43

*Source: _cr04395 - 3. Private sector development*

### introduction of pro-bono services.

### introduction of pro-bono services.

### Legal framework
- Review of the legal framework and development standards of justice area regulations
- Lead agency / resourcing and timing indicators (as presented):
  - Ministry of Justice: Nil  Low + TA  Nil  Nil   Low   Medium Medium  Nil Low/medium  Nil
  - Timing: 2004  2005  2004-5  2004-5   2004-5   2005-6 2005-6  2004 2005  2004-5

### Judicial system
- Studies and evaluations of the organization and functioning of justice, covering areas from protection of individual rights to the perspectives of sustainable economic development
- Institutional development and capacity building for legal personnel
- Ensuring access to modern equipment and informational technologies

### Development of the legal education system
- Review of legal education standards
- Optimizing education and training curricula

### Enforcement of court decisions
- Review of performance and functioning modalities of the current system of court decision execution.

### Corruption
- To figh t corruption with main emphasis on removing bureaucratic barriers to entrepreneurial activities which provide the main opportunities for corruption
- Priority actions referenced to other sections:
  - 1. Minimization and simplification of the administrative regulatory framework for business and enterprise – see Private Sector Development
  - 2. Professional capacity building and professional development in public administration – see Public Administration Reform
  - 3. Carrying out of open discussions between the public administration, civil society and the development partners on medium term institutional reform
- Timing: 2004-6

### Private Sector Development — Regulatory Framework
- Objective: To deregulate and place the accent on estimation and monitoring of regulations’ impact
- Priority actions:
  - 1. Simplification and optimization of business registration and post-registration procedures, obtaining authorizations, permits, licenses;
  - 2. Reducing all forms of state control and reorient them to tax collection, training/education and consulting support;
  - 3. Increasing the efficiency of paid services provided by public authorities;
  - 4. Optimize fiscal policies and procedures, especially for SME.
- Lead agency: Ministry of Economy
- Funding / timing: Nil  Nil  Nil Nil; 2004-6  2004-6  2004-6 2004-6

### Standards, Metrology and Conformity (Adjustment to EU and international practices)
- Objective: To adjust to legal and administrative practices of EU and international ones regarding standards, technical regulations and conformity evaluation, adjustment of the institutional framework
- Priority actions:
  - 1. Improvement of the methodological basis and procedures for the assurance of products conformity and accreditation according to international/European criteria and practices;
  - 2. Enhancing producer’s responsibility by establishing legal provisions alongside producers’ conformity declaration procedures;
  - 3. Demonopolization of the conformity assurance procedure;
  - 4. Promoting the voluntary application of standards by developing technical regulations, concurrently with transposing international/European standards into the national system;
  - 5. Creation of adequate conditions for the introduction of ISO 9000 quality and ISO 14000 environment management systems;
  - 6. Improvement of accreditation and products conformity assurance systems’ activity, aiming at their accelerated involvement into the international circuit;
  - 7. Creation of conditions to conclude mutual recognition of conformity certificates/declarations agreements as part of the international trade circuit
- Lead agency: Ministry of Economy, Department of Standardization and Metrology
- Funding / timing indicators: Low   Low  Nil  Medium; 2004-6   2004-6  2004-6  2004-6; Nil  Medium  Low; 2004-6  2004-6  2004-6

### Competition Promotion
- Objectives:
  - To ensure the right of economic agents to benefit from competition within the law and the rules of correct and honest conduct of business;
  - To not allow limitation of competition, abuse of dominant market position, and infringing the legitimate rights of consumers;
  - To assign central and local public authorities to contribute to the development and protection of competition
- Priority actions:
  - 1. Development of the National Competition Agency (NCA)
  - 2. Preparation of new competition laws / modification of existing ones
  - 3. Ensuring policy transparency in the area and NCA activity by creation of a web page
- Lead agency: NCA
- Funding / timing indicators: Low; Nil Low; 2004; 2004-6; 2004

### Corporate Management
- Objectives:
  - To develop corporate culture; To improve corporate management; To ensure compatibility of internal corporate system with the international one
- Priority actions:
  - 1. Developing the draft Corporate Administration Code;
  - 2. Improving the present legal framework and the mechanism for its application, and assuring the coherence of the legal and procedural framework with the judicial branches;
  - 3. Creating a competitive environment inherent to market economy;
  - 4. Undertaking a constructive dialogue between the public and the private sectors, in order to achieve balance between the interests of the Government and the business community, as well as of all the participants in corporate relations
- Lead agency: Ministry of Economy
- Funding / timing indicators: Nil Nil   Low Nil; 2004 2004-6   2004-6 2004-6

### Development of SMEs
- Objectives:
  - To increase SME contribution to economic growth
  - To consolidate the role of SME in solving socio-economic problems
- Priority actions:
  - 1. Reviewing and improving the legal and institutional framework, promoting of SME concept, elaborated on the basis of best international practices;
  - 2. Facilitating the access of SMEs to finance through such specific actions as: microcredit lines at accessible interest rate; development of microfinancing organizations, assuring the efficient use of financial resources provided by or though the state budget, including financial support from international financial institutions and other donors.
  - 3. Improving the access of the SMEs to information and consultancy services, including creation of a national network of informational consulting Centers, business incubators, with the active participation of the local public authorities, and attracting technical assistance;
  - 4. Preparing qualified personnel for SMEs and promoting business culture, by outlining the importance of the economic education to young people
- Lead agency: Ministry of Economy
- Funding / timing indicators: Nil  High     Medium    Medium; 2004-6  2004-6     2004-6    2004-6

### External Trade Promotion
- Objectives:
  - To ensure stability, accessibility and predictability of the trade legal framework;
  - To remove and not allow new unjustified non-tariff barriers;
  - To rationalize the regulatory procedures aiming to reduce to a minimum “entry/exit” costs for commercial activities;
  - To speed-up the penetration of external markets
- Priority actions (selected):
  - 1. Analyzing and evaluating, jointly with the National Bank of Moldova and financial institutions, the factors that can improve the balance of trade and acceleration of exports;
  - 2. Publicizing international treaties, which Moldova is party to;
  - 3. Using the potential offered by the preferential commitments with the EU and other developed countries, analyzing the comparative advantages of local products;
  - 4. Increasing the efficiency of Moldova’s participation at multilateral negotiations within the WTO, negotiating with the EU of a preferential commercial arrangement;
  - 5. Developing the legal and institutional framework for the services sector according to the provisions of the appropriate WTO agreement;
  - 6. Collecting, categorizing and disseminating information regarding the conditions for local goods and services for accessing international markets;
  - 7. Developing modern information systems, which would enhance the visibility of export trade opportunities, especially those of SMEs;
  - 8. Using modern exports promotion tools;
  - 9. Encouraging SMEs to create export alliances;
  - 10. Increase the efficiency of Embassies and commercial Representations of the country in exterior for the promotion of domestic products.
- Lead agencies: Ministry of Economy; Moldova Export Agency (MEPO)
- Funding / timing indicators: Nil  Nil  Nil   Nil   Nil   Medium  Medium  Medium  Nil  Nil; 2004-6  2005 2005  2005   2004-5  2004-6  2004-6  2004-6 2004-6  2004-6

### Customs Administration (Optimization)
- Objective: To optimize the Customs Administration
- Priority actions:
  - 1. Correlation of customs legislation regarding economic agents and development of open and transparent cooperation with the commercial sector;
  - 2. Rationalizing procedures, identification and application of audit and risk assessment practices
  - 3. Introduction of irregularities prevention system, especially for operative check of information at customs posts;
  - 4. Standardization and optimization of customs procedures and controls, developing customs statistics in cooperation with targeted institutions;
  - 5. Improving customs evaluation through unification of the tariff classification;
  - 6. Developing customs information and communication system, creation of electronic customs environment;
  - 7. Professional training and retraining, with an emphasis on poverty mitigation incentives;
  - 8. Establishment of customs administration performance evaluation system
- Lead agency: Customs Department
- Funding / timing indicators: Nil   Medium   Nil  Medium   Low Medium  Medium    Nil; 2004-6 (for listed actions where timing given)

### Investment Environment
- Objectives:
  - To improve legislation regarding guarantees and the protection of the rights of investors and creditors, as well as the protection of the industrial and intellectual property rights;
  - To not create barriers to investment activities and, depending on the case, fast elimination of such impediments;
  - To improve and adjusting the facilitated fiscal regime, as well as the modalities of its application towards local and foreign investors
- Priority actions:
  - 1. Continuing the privatization of public assets, including adjacent terrains, with the aim to use those assets more efficiently, as well as attracting “efficient” investors;
  - 2. Modifying fiscal legislation in matters regarding improving the incentives for local and foreign investors;
  - 3. Developing the regional infrastructure with the purpose of improving investments at the regional level;
  - 4. Supporting the infrastructure and institutional development of the financial market in order to consolidate the role of the financial sector in the mobilization and circulation of investment resources, as well as reduce investment risks;
  - 5. Carry out dialogues with representatives of the investor community and business, aiming to optimize the resolution of the problems pertaining to the improvement of the investment climate;
  - 6. Developing instruments and mechanisms for stimulating the banks to offer long term loans, as well as for attracting the savings of the population, including the transfers of the people employed abroad, into the investment activity;
  - 7. Creating an efficient system for the dissemination of information, for foreign and local investors, about the opportunities for investment in Moldova.
- Lead agency: Ministry of Economy
- Funding / timing indicators: Nil Nil See infrastructure Nil Nil Nil Low; 2004-6 2004-5 2005 2005 2004-6 2004-6 2005-6

### Cadastre
- Objectives:
  - To improve the unified national system of property registration;
  - To complete land privatization to facilitate development of the real estate market;
  - To implement the new system of mass appraisal for taxation;
  - To ensure financial and institutional sustainability of the national cadastre.
- Priority actions:
  - 1. Final drafting of laws and regulations covering property registration aimed at supporting the real estate market;
  - 2. Completing the transfer of parcels into private ownership;
  - 3. Primary mass registration of properties;
  - 4. Mass appraisal of (a) apartments and individual residential houses in urban areas and (b) commercial, industrial and manufacturing properties, for taxation purposes;
  - 5. Reorganizing the system of cadastre bodies and creating a specialized cadastre company;
  - 6. Creating an integrated information system for cadastre and making it available to different users;
  - 7. Public information and staff training.
- Lead agency: National Cadastre Agency
- Funding / timing indicators: Nil  Minimum Medium Medium   Minimum/Medium  Medium  Medium/TA; 2004-6  2004-6 2004-6 2004-6   2004-6  2004-6  2004-6

### Finance Sector
- Objective: To improve the performance of the banking system
- Priority actions:
  - 1. Improvement of the legal and regulatory framework for new investment institutions
  - 2. Introduction of new financial instruments
  - 3. Introduction of the information on the securities market system
  - 4. Simplification of the issue procedures and market transactions
  - 5. Improvement of control and supervision mechanisms for securities market
  - 6. Sustainable development of savings and credit associations
- Lead agencies: National Bank of Moldova; Ministry of Finances and Ministry of economy
- Funding / timing indicators: Nil Nil Minimum Nil Nil Nil; 2004-6

### Industry
- Objectives:
  - To achieve sustainable industrial growth
  - To diversify industrial output in order to increase the input of the non-agricultural processing areas
  - To improve the quality of industrial technology, management and
- Priority actions (selected):
  - 1. Acceleration of privatization and restructuring processes of industrial enterprises, performing bankruptcy procedures of inefficient and broke enterprises;
  - 2. Conducting a study on identification of the development priorities for a competitive industrial sector;
  - 3. Developing the program of implementing integrated quality management systems, adjusted to international standards requirements;
  - 4. Creating developing programs for certain industrial sectors in order to attract investment;
  - 5. (text continues)
- Timing: 2004-6

*Source: _cr04395 - introduction of pro-bono services.*

### Introduction of a legal framework for elaboration and implementation of programs on technology parks development;

### Introduction of a legal framework for elaboration and implementation of programs on technology parks development

### Legislative and industrial policy actions
- Introduce legal framework for elaboration and implementation of programs on technology parks development.  
- Legislative support of industrial capital consolidation processes, formation and development of different forms of associations.  
  - Lead agencies: Ministry of Industry, Min Industry, MEPO, Ministries of Industry, Finance and Economy.  
  - Indication of Additional Budget/Funding: Nil / Minimum / Minimum / Minimum / Nil / Nil.  
  - Timing entries: 2004-6, 2005, 2005, 2005, 2004-5, 2004-5.

### Competitiveness and industrial development
- Objective: To accelerate industrial development in the regions.  
- Priority actions:
  - Developing the infrastructure for industrial production export promotion, and provision of information and consulting services.  
  - Examine, together with the Ministry of Finances and the Ministry of Economy, possibilities for creation of the Industrial Investment Bank with joint capital (private and state).  
  - See Private Sector Development.  
- Funding/priority: Minimum.  
- Timing: 2004-6; 2005.

### Research and Innovations
- Objectives:
  - To raise the level of research and development; To ensure the efficient use of technological-scientific results in the economy; To develop the innovational sector based on delivery of research and development works and their results; To ensure the effective use of the existing intellectual potential.
- Priority actions (ranked 1–13):
  1. Harmonization of national legislation in the area of intellectual property protection with stipulations of international agreements and conventions.  
  2. Developing legal and organizational measures for transfer of the intellectual property rights, constituted from budgetary means, to organizations that possess this work.  
  3. Develop the legal and normative base and organize attestations for state scientific research institutions, reorganization or liquidation of institutions that have lost their scientific profile and do not have sufficient human and technical-material resources.  
  4. Inventory of the state scientific research institutions patrimony, selling unused goods and use the means gained for the improvement of the research technical-material base.  
  5. Developing and adopting a legal base for regulating the creation and functioning of modern infrastructure of research and innovations, including specialized financial institutions, funds and agencies, innovational parks, business-incubators.  
  6. Extending and modernizing the system of statistical record-keeping indices of research and innovational activities.  
  7. Implementation of insurance mechanisms for risks related to the development and implementation of innovations.  
  8. Improving procedures of amortization and taxation of intellectual property objects.  
  9. Develop certain legal and organizational measures for leasing of modern unique equipment and devices for scientific purpose.  
  10. Creation of a unique electronic database that would ensure registration of innovations and intellectual property objects.  
  11. Training and re-training of innovation specialists.  
  12. Improvement of the higher and post-graduate education programs of staff training for research and innovations.  
  13. Developing and implementing mechanisms for stimulating innovational activities in small enterprises.  
- Lead agencies / stakeholders: A, Ş, M, ASPPI, ASDA, Med, DSS, ME, CS, Ş, DT.  
- Indication of Additional Budget/Funding: Medium; Nil; Nil; Minimum; Nil; Minimum; Medium; Minimum/medium; Nil; Medium; Medium; Minimum; Minimum.  
- Timing: 2004-5; 2004-5; 2004-5; 2004-5; 2004-5; 2004-5; 2005-6; 2005-6; 2005-6; 2005-6; 2005-6; 2005-6; 2005-6; 2005-6.

### Infrastructure — Energy
- Objective: To enhance energy security and the environment for efficient and sustainable energy development.
- Priority actions (ranked 1–5):
  1. Extension of gas main-pipelines connections by constructing gas distribution stations and inter-urban gas pipelines.  
  2. Promotion and implementation of the National Program for renovation and decentralization of heating supply systems in cities of the Republic of Moldova.  
  3. Restructuring the energy sector by attracting private capital in different forms.  
  4. Improving the regulatory framework to support development of the energy market and competition.  
  5. Improving payment collections for energy along with social protection of vulnerable groups.  
- Lead agency: Ministry of Energy.  
- Indication of Additional Budget/Funding: Maximum; Maximum; Minimum; Nil; See social protection.  
- Timing: 2004-6; 2004-6; 2004-6; 2004-5; 2004-6.

### Roads and Transport
- Objectives: To improve access to services through road and railway rehabilitation; To raise the efficiency and quality of transportation services; To improve transport security and safety and ensure environmental protection; To facilitate international trade.
- Roads priority actions:
  1. Design and implementation of roads rehabilitation program envisaging growth of the light, periodic maintenance.  
  2. Study for the creation of a sustainable and transparent roads financing system.  
  3. Design and implementation of regional roads projects.  
  4. Implementation of modern systems of roads condition evaluation and maintenance and repairs prioritization.  
  5. Implementation of the Chisinau - Giurgiulesti road rehabilitation project.  
  6. Negotiations with international financial organizations on the rehabilitation of national European roads.  
- Rail priority actions:
  1. Rehabilitation of the railroad network to the projected level of safety parameters for trains circulation.  
  2. Implementation of the conditions of the Memorandum Agreement between the Council of Creditors and CFM.  
  3. Implementation of the existing CFM Restructuring Plan, by separating the management of rail infrastructure from the management of transport services.  
  4. Divestment of the socio-cultural and communal possessions and ancillary enterprises from the CFM structure.  
  5. Renovation of the passenger rail carriages and diesel trains fleet.  
- Lead agencies: Ministry of Transport; CFM.  
- Indication of Additional Budget/Funding: Minimum; Minimum; Maximum; Minimum; Maximum; Maximum; Maximum; Minimum; Medium; Nil; Maximum.  
- Timing: 2004-5; 2004-5; 2005-6; 2005-6; 2005-6; 2004-6; 2004-6; 2005-6; 2004-5; 2005-6; 2004-6.

### Water Supply and Sewerage
- Objectives: To improve access of population to the drinking water sources and improvement of the quality of services; To improve protection of water supply from pollution and depletion; To conserve water and energy; To rationalize water supply and sewerage tariffs.
- Access and Quality priority actions:
  1. Development and modernization of water sewerage systems in 156 localities.  
  2. Construction of 93,300 rural wells.  
  3. Implementation of pilot projects for ground water treatment for nitrates and sulfates contamination.  
  4. Implementation of pilot project for mechanical and biological waste water treatment.  
- Water conservation and environmental protection:
  5. Creation of the groundwater monitoring program.  
  6. Implementation of measures for efficient surface water drainage.  
  7. Restoration of existing and establishment of new water protection areas and sanitary zones.  
- Tariff policy:
  8. Completion of water meter provision to all consumers.  
  9. Preparation of a methodology for tariff calculation and review.  
  10. Carrying out publicity campaign when setting tariffs.  
  11. Enforcement of penalties for non payments and raising payment collections.  
- Improvement of legislative and regulatory basis:
  12. Implementing services of technical audit of water supply and sewerage systems.  
  13. Bringing the existing legislation, standards and regulations on water supply and sewerage in line with the European and international standards.  
  14. Improving the legal and regulatory framework to attract private capital to the sector in the form of concessions, rents, trust management, and joint ventures, including privatization of central water supply and sewerage systems.  
- Lead agency: DCDT.  
- Indication of Additional Budget/Funding: Maximum; Maximum; Medium; Medium; Medium; Medium; Medium; Medium; Medium + TA; Minimum; Minimum; TA; TA; TA.  
- Timing: 2004-6; 2004-6; 2005-6; 2005-6; 2004-6; 2004-6; 2004-6; 2004-6; 2004-5; 2005-6; 2004-6; 2005-6; 2004-6; 2004-6.

### Telecommunications and Information Technology
- Objectives: To create the preconditions for the establishment of the information society; To ensure gradual liberalization of the telecommunication market; To improve access to and quality of telecommunication services.
- Information Technology priority actions:
  1. Drafting and adoption of laws on personal data protection, circulation of electronic documents and digital signature, e-commerce and contracts.  
  2. Drafting the National Strategy “Information society technologies for development”.  
  3. Pilot project for the creation of seven collective access points at post offices, schools, libraries.  
  4. Development of ICT program for public administration.  
- Telecommunications priority actions:
  1. Harmonization of national legislation and regulations with those of the EU, WTO and European Conference of Postal and Telecommunications Administrations.  
  2. Development and upgrading of networks (including fiber optic) based on private investment.  
  3. Finalization of the introduction of the National Numbering Plan.  
  4. Review MoldTelecom tariffs.  
  5. Privatization of MoldTelecom.  
  6. Review the possibility for a minimum service package.  
- Lead agencies: Department of Information Technology; Ministry of Transport and Communication.  
- Indication of Additional Budget/Funding: Nil; Medium; High; Nil; High but private; Low; Low; Low; Nil.  
- Timing: 2005; 2005-6; 2006; 2004-5; 2005-6; 2005; 2004; 2004; 2004-5.

### Housing Construction
- Objectives: To improve access to housing particularly of the vulnerable; To increase the durability and amenity of existing housing.
- Priority actions:
  1. Study to prepare social housing policy and strategy.  
  2. Improvement of the legal and regulatory framework for hypothecation (mortgage) lending.  
  3. Improvement of the condominium regulatory framework and its application.  
  4. Divestment of incomplete state housing to the National Housing Agency and program for completion based on private investment.  
  5. Development and implementation of pilot projects for upgrading old housing.  
- Lead agencies: Department for Construction & National Housing Agency.  
- Indication of Additional Budget/Funding: Low + TA; Nil; Nil; Nil; Medium.  
- Timing: 2005; 2004-5; 2004-6; 2004-6; 2005-6.

### Agri-food Sector and Rural Development
- Objectives: To continue the reforms in the agricultural sector; To build a strong commercial and institutional framework for market led development; To develop non-farm activities in rural areas; To ensure effective technical and financial participation from international donors.
- Agriculture priority actions:
  1. Study to support the implementation of Land Consolidation to review the current state of consolidation from the efficiency and equity perspectives and to make recommendations for addressing the issue over the medium to long term.  
  2. Ministry of Agriculture and Food Industry Restructuring Study.  
  3. Agricultural Subsidy Study to review subsidies in the light of the growth and poverty reduction goals of EGPRSP.  
  4. Development with non-government organizations of pro-poor programs for the provision of information and advice, educational and vocational training, and micro and small enterprise financing.  
  5. Development of farmer group strategies for more efficient access and use of information, markets, inputs and production opportunities.  
  6. Promotion of strategic and commercial planning in processing enterprises.  
  7. Promotion of export market development – see Private Sector Development.  
- Rural Development priority actions:
  1. Rural Development Strategy Study.  
  2. Provision of social services and physical infrastructure in rural areas - see relevant sector sections.  
- Lead agencies: Ministry of Agriculture; NGOs; Min Economy; MEPO; Min. of Ag.  
- Indication of Additional Budget/Funding: Low + TA; Low + TA; Low + TA; Medium; Medium; Low; Low + TA.  
- Timing: 2004; 2005; 2005; 2005-6; 2005-6; 2005-6; 2005-6.

### Regional Development
- Objectives: To achieve country wide, balanced and sustainable socio-economic development; To expand resource possibilities to solve socio-economic development problems of the regions; To support local administrations in socio-economic development and coordination.
- Priority actions:
  1. To enact a law in support of regional development which will lay the basis for the establishment of institutions for the implementation of regional development policy.  
  2. Selection and identification of regions for development support covering several existing administrative territorial units but excluding Chisinau.  
  3. Establishment of a two tier coordination system at the national and local levels.  
  4. Drafting and adoption of the new Constitution of the re-integrated state.  
  5. Contribution to elaboration of a general guaranty system, including international guarantees.  
  6. Achieving control and transparency at the border between Moldova and Ukraine, including transnistrian border section.  
  7. Elaboration of the post-conflict development program.  
  8. Sustaining active implication of the civil society in settlement of the Transnistrian problem.  
- Indication of Additional Budget/Funding: Low + TA (ongoing); Medium.  
- Timing: 2005; 2005-6; 2004-5; 2005-6; 2004-5; 2005-6; 2004-6.

### Tourism
- Objectives: To promote tourism at the international level; To develop national tourism value heritage in a sustainable and balanced manner; To improve tourism management; To increase the level of rendered tourism services.
- Priority actions:
  1. Drafting and implementing rural tourism development projects (pilots).  
  2. Organizing seminars for local authorities and population of rural and ecologic tourism development.  
  3. Creation of an informational base, editing guides and catalogues on rural tourism product, promotion of tourism product in target markets.  
  4. Drafting and promotion of investment projects on restoration, renovation and development of tourism infrastructure.  
  5. Creation of the National Center for retraining the tourism industry staff.  
  6. Developing efficient quality control mechanisms for services rendered to visitors.  
  7. Investigation and promotion of investment opportunities in tourism.  
- Lead agency: Tourism Development Department.  
- Indication of Additional Budget/Funding: Medium; Minimum; Medium; Medium; Medium; Nil; Medium; TA.  
- Timing: 2004-6; 2004-6; 2005-6; 2005-6; 2004-6; 2004-5; 2004-6; 2004-6.

### Environmental Protection and Sustainable Use of Natural Resources
- Objectives: To reduce the deterioration of natural resources and increase the efficiency of their use; To maintain the quality of the environment as a factor to support health and quality of life; To create an effective disaster monitoring, prevention and compensation system.
- Waste Management priority actions:
  1. Destruction of 1,712 tones of prohibited pesticides, including persistent organic pollutants (POP).  
  2. Inventory of POP and PCB and, dismantling and decontamination of oils and equipment polluted with PCB.  
  3. Feasibility study for upgrading waste disposal sites, concentrating on separation of waste type collections for waste processing and starting construction of a waste processing plant initially in Chisinau.  
  4. Planning and implementing pilot project for waste processing in rural areas.  
  5. Inventory, renovation and re-equipment of Bekkari animal waste sites.  
- Water Resources priority actions:
  1. Preparation of Action Plan for harmonizing environmental legislation and standards for surface and ground water with those of the EU.  
  2. Inventory of water resources, quality, and sources of pollution.  
  3. Preparation of national strategy on protection and sustainable management of water resources.  
  4. Preparation and implementation of measures to eliminate pollution sources.  
- Public Awareness priority actions:
  1. Creation of regional environment information centers.  
  2. Capacity building for central and local government officials regarding information and participatory approaches to environment protection.  
  3. Trainings on sustainable use of natural resources.  
  4. Review and improve the environmental monitoring system.  
  5. Preparation of a national strategy on environmental education.  
  6. Development of the legal and institutional framework for implementing the requirements of the international Conventions, the Republic of Moldova is party to.  
  7. Creation of a natural resources database.  
- Forest Protection, Biodiversity, Soil Degradation, Natural Disaster Monitoring and Relief, Administrative and Financial Mechanisms: multiple targeted priority actions listed including extending forest plantation; biodiversity conservation in the Prut River middle course; pilot projects for rational use and irrigation of soils; publicity campaigns on the impact of natural disasters; review of Environmental Fund activities; preparation and publication of the environmental impact assessment guide.  
- Lead agencies: Ministry of Environment and Regional Development; Mins Ag/Env.  
- Indication of Additional Budget/Funding: Nil; Medium; Low; Medium; Medium; Medium; Low/medium; Low/medium; Medium; Medium; Low; Low; Medium; Low/Medium.  
- Timing: 2004-5; 2004-6; 2005; 2005-6; 2005; 2005; 2005; 2005-6; 2005-6; 2005-6; 2005-6; 2004-6; 2004-5; 2005-6; 2005-6; 2006 for some items.

### Education
- Objectives: To improve access to education especially of the poor; To improve the quality of educational services; To improve the system of social integration of children with special needs; To increase the efficiency of resource use.
- Access priority actions:
  1. Improvement of legislative and normative acts regarding consolidation and use of community funds for education, especially for the poor.  
  2. Adequate distribution of resources amongst levels in favor of primary, secondary general and secondary professional education.  
  3. Efficient management and priority resource allocation for increasing the salaries of employees in education, textbooks acquisitions, didactical materials and equipment.  
  4. Drafting and implementing the rural education development program.  
  5. Creation in rural areas of “circumscription” schools in parallel with provision of transportation services for pupils through revision and adaptation of the pre-school and school education to present demographic situation, considering the access of all children to the mandatory general education.  
  6. Implementation of a flexible and equitable system of support for students and pupils from secondary general education by offering scholarships, depending on their successes and financial situation of families.  
  7. Extend textbook loan schemes for pupils from high schools and subventions of textbooks for the poor.  
- Quality priority actions (ranked 1–9):
  1. Developing and implementing state education standards.  
  2. Develop school and university curricula, including in education based on life skills, implementing new teaching technologies.  
  3. Systematic participation in international tests (TIMSS, PISA, etc.).  
  4. Developing and realizing the presidential program “SALT” of implementing information and communication technologies in the education system.  
  5. Improving the system of initial training and in-services training of teaching staff.  
  6. Reconsidering the place and role of secondary professional education and its adjusting to community requirements, updating the catalog of trades and professions in partnership with social partners.  
  7. Developing and implementing the national system of evaluation of pupils’ knowledge and skills and efficient monitoring of admission in higher education institutions.  
  8. Developing mechanisms of implementing the European system of transferable academic credits.  
  9. Adjusting the catalog of specialties to ISCED 97 and ISCO, restructuring the curricula in order to organize the higher education in 2 university cycles according to the Bologna Declaration provisions.  
- Special requirements priority actions (ranked 1–6) covering assistance services for children with special educational requirements, database creation, alternative services to institutionalization, standards of care and consolidation of didactic and technical-material base for professional training.  
- Increasing the efficiency priority actions:
  1. Improving and completing the legislative framework to ensure coherence and continuity of education system development.  
  2. Creating the education management information system.  
  3. Modifying the methodology of financing activities of initial and in-service training of teaching and managerial staff from pre-university education.  
  4. Improving the methodology of budget financing of education system (program, unit-based financing, etc.).  
  5. Upgrade of the technical-material base of education institutions and implementation of energy conservation measures.  
  6. Improving the system of teaching and management staff attestation.  
  7. Establishing responsibilities and competences of central and local public authorities, social partners, in order to ensure normal conditions for education institutions’ functioning.  
  8. Improving conditions for the functioning of pre-school institutions for mandatory preparation of children to school.  
- Lead agency: Ministry of Education.  
- Indication of Additional Budget/Funding: Nil; Nil; Nil; Maximum; Medium; Nil; Minimum; Minimum; Minimum; Medium; Medium; Medium; Minimum; Medium; Medium; Minimum; Medium; Nil; Nil.  
- Timing: 2005; 2005-6; 2004-6; 2005-6; 2004-6; 2005-6; 2004-6; 2005-6; 2005-6; 2005-6; 2005; 2005-6; 2005-6; 2005-6; 2004-6; 2004-6; 2005-6; 2004-6; 2004-6.

### Healthcare
- Objectives: To increase access of the population, especially the poor, to medical services; To improve the quality and standards of medical services; To facilitate measures for the prevention and treatment of socially conditioned diseases; To increase the efficiency of the resource use.
- Passing to Mandatory Health Insurance priority actions:
  1. Health monitoring and impact assessment system.  
  2. Review and implement mechanisms for regulation and supervision of financial flows and service quality.  
  3. Establish an information system for the mandatory healthcare insurance and healthcare system in general.  
  4. Capacity strengthening by medical institution staff training on the new system.  
  5. Review and rationalize health regulatory and legal framework.  
  6. Completing the accreditation of medical institutions.  
  7. Strengthening institutional capacity.  
  8. Ensuring transparency of HIC’s operations.  
- National Health Programs (equal ranking) — selected programs and actions:
  1. Restructuring and consolidation of medical services and institutions.  
  2. National immunization program 2001-2005.  
  3. TB control program 2001-2005.  
  4. Blood Service technical-material base consolidation program.  
  5. Diabetes prevention and treatment program MoldDiab 2002-2005.  
  6. Quality perinatal services program.  
  7. Sexually transmitted diseases and HIV/AIDS program 2001-2005.  
  8. National Program for fighting viral hepatitis.  
  9. Realizing the provisions of the National Program for prevention and cardiovascular diseases.  
  10. Realizing the provisions of the National Program for prevention and fighting cancer.  
  11. Measures for fighting mental diseases, drug addiction, toxicomania and alcoholism, cancer.  
  12. Programs of medical assistance for pregnant women, sick children.  
  13. Provision of small babies and pregnant women with drugs, compensated in ambulatory conditions.  
- Lead agencies: Ministry of Health and Health Insurance Company.  
- Indication of Additional Budget/Funding: Medium; Minimum; Medium; Medium; Nil/Minimum; Nil; Medium; Minimum; Medium; Minimum; Medium; Medium; Medium; Medium; Medium; Medium; Medium; Medium; Medium; Medium.  
- Timing: 2004-5; 2004-6; 2004-5; 2005-6; 2004-6; 2004-5; 2004-6; 2004-6; 2004-6; 2004-6; 2004-6; 2004-6; 2004-6; 2004-6; 2004-6; 2004-6; 2004-6; 2004-6; 2004-6; 2004-6.

### Social Insurance (partial entry)
- Objectives: To consolidate the financial stability of the system; To ensure consistency between insurance risks.  
- Priority actions (partial list):
  1. Social insurance harmonization review.  
  2. Implementation of individual records of for social insurance contributions.  

*Source: _cr04395 - Introduction of a legal framework for elaboration and implementation of programs on technology parks development; PDF chapter/section.*

### Introduction of the social insurance fund medium term forecasts

### Introduction of the social insurance fund medium term forecasts

### Social Protection / Pensions
- Objective: Development of the pension system for the self-employed especially in agriculture.
- Objective: Improvement of calculation methods for contributions and benefits — "To improve the methodology for calculating and reviewing the amount of payments".
- Priority action: Increase the volume of social insurance benefits through indexation.
- Lead agency: Ministry of Labor and Social Protection.
- Indicative funding and timing:
  - Indication of Additional Budget: Nil +TA; Medium; Low; Medium/high; Low +TA (as listed across actions).
  - Timing entries include: 2005-6; 2004-6; 2005; 2005-6; 2004-6.

### Social Assistance
- Objectives:
  - To improve the quality and diversity of specialized social services.
  - To improve the targeting of social payments.
- Priority actions (ranked):
  1. Introduction of social assistance program impact monitoring (as part of general EGPRSP monitoring).
  2. Introduction of a poverty indemnity.
  3. Introduction of a separate social assistance budget and single register of beneficiaries.
  4. Study on the modernization of specialized social services.
  5. Creation of a network of professional social services.
  6. Preparation of compulsory quality standards for social service institutions.
- Lead agency: Ministry of Labor and Social Protection.
- Indicative funding and timing:
  - Additional Budget: Nil; Low plus TA; Low; Medium; Nil; Nil.
  - Timing entries: 2004; 2004; 2005; 2006; 2005.

### Labor Market
- Objectives:
  - To improve the efficiency of the labor market.
  - To improve the quality of employment services.
  - To assist the disabled to find employment.
  - To assist young people into employment.
- Priority actions (numbered):
  1. Equipping the National Agency for Labor Force Employment.
  2. Creation of a labor market informational system.
  3. Modernization and diversification of labor mediation services.
  4. Optimize the unemployed training and retraining activities.
  5. Review of the social protection system for the unemployed.
  6. Implement marketing and forecast researches on the labor market.
  7. Creation of three pilot centers for professional training of socially vulnerable persons.
  8. Preparation of flexible employment arrangement provisions for vulnerable persons.
  9. Creation of three youth employment centers.
  10. Bringing the internal legislation on migration in accordance with the international standards.
  11. Making a comprehensive study on population migration and its consequences; creation of an informational system and the improvement of the management of migration processes.
- Lead agencies: National Agency for Labor Force Employment; Migration Department.
- Indicative funding and timing:
  - Additional Budget indications: Medium; Medium; Minimum; Medium; Minimum; Medium; Nil; Medium; Low; Medium.
  - Timing entries: 2005; 2004-6; 2004-6; 2004-6; 2004-6; 2004-6; 2006; 2004-5; 2004-5; 2004-6.

### Youth Policy
- Objectives:
  - To increase youth employment.
  - To improve the access of youth to information.
  - To improve capacities to work with youth.
  - To involve youth in the processes of decision making.
- Priority actions:
  1. Study and revision of youth policies.
  2. Ensuring access to information for youth.
  3. Special programs for youths and young families at risk.
  4. Vocational training – see Labor Market and Education.
  5. Adoption and implementation of the Youth Inclusion Project.
- Lead agencies: Department for Youth and Sports, ANL, Ministry of Labor and Social Protection, Ministry of Education.
- Indicative funding and timing:
  - Additional Budget: Nil; Medium; Medium; Nil; Medium.
  - Timing entries: 2004-6; 2005-6; 2005-6; 2005-6; 2004-6.

### Development of National Statistics
- Objectives: Improving insurance of public authorities, civil society with quality and relevant statistical information.
- Priority actions:
  1. Improving the legal and institutional framework and statistical management.
  2. Improving publications, dissemination of statistical information and relations with users.
  3. Improving statistics products and infrastructure.
  4. Improving technical capacities of statistics system.
  5. Consolidate capacities of central and local public authorities on obtaining administrative data and extending their use for statistical purposes.
- Lead agency: DSS (with interested public authorities for some items).
- Indicative funding and timing:
  - Additional Budget indications: Minimum; Medium; Medium; Medium; Minimum.
  - Timing entries: 2004-2006; 2004-2006; 2004-2006; 2004-2006; 2004-2006.
- Specific census items listed: 3.1 Population Census; 3.2 General Agricultural Census.

### Implementation Monitoring and Evaluation
- Objective: To ensure effective implementation, management and coordination of EGPRSP.
- Lead agency: EGRPSP Coordination Unit, Ministry of Economy.

### Budgeting definitions (as presented)
- NIL INDICATES NO ADDITIONAL COSTS. ACTIONS WILL BE CARRIED OUT FROM EXISTING BUDGETS. INCLUDES INTERNALLY CARRIED OUT STUDIES, POLICY AND STRATEGY REVIEWS, LEGAL AND REGULATORY CHANGES.
- Low indicates low cost activities requiring limited funding e.g. studies requiring local consultants, local information systems, small group training.
- Medium indicates substantial costs needed e.g. for national information systems, national training programs.
- High indicates major capital investments in infrastructure e.g. in roads, water supply infrastructure.

### Annex 7 — EGPRSP PRIORITY ACTIONS INDICATIVE COSTS (Thousand lei) — selected figures and structures
- MTEF costs envelope and Unsecured additional costs: table columns for 2004, 2005, 2006 (values shown per priority).
- 1. PRIVATE SECTOR DEVELOPMENT: MTEF costs envelope entries 156726 (2004), 83832 (2005), 68397 (2006); Unsecured additional costs entries 17416 (2004), 41230 (2005), 44650 (2006).
- Selected subitems and figures:
  - 1.5 External trade promotion: MTEF costs envelope 83800 (2004), 6800 (2005), 3000 (2006); Unsecured additional costs 9150 (2004), 8880 (2005), 10850 (2006).
    - Specific measures with amounts:
      - Item 12: 250 (2004), 300 (2005), 300 (2006).
      - Item 14: 2700 (2004), 2000 (2005), 2300 (2006).
      - Item 15: 200 (2005), 200 (2006), 250 (2006) [as listed].
      - Item 16 (Development of customs information and communication system, creation of electronic customs environment): 69000 (2004) and unsecured amounts 1350 (2004), 1440 (2005), 1500 (2006).
      - Item 17 (Professional training and retraining): MTEF 10100 (2004) and unsecured 1800 (2004), 1350 (2005), 1440 (2005), 1500 (2006) [as listed].
  - 1.7 Creation of the cadastre of immovable property: MTEF costs envelope 72926 (2004), 77032 (2005), 65397 (2006); Unsecured additional costs 5016 (2004), 8640 (2005), 9000 (2006).
    - Subitems with amounts:
      - Final drafting of laws and regulations: 5221 (2004), 9168 (2005), 5928 (2006).
      - Reorganization of cadastre bodies and creation of specialized cadastre company: 1130 (2004) and 2880 (2005) [as listed].
      - Creation of integrated information system for cadastre: 5251 (2004), 1072 (2005), 6714 (2006).
      - Provision of public information and staff training: 3043 (2004), 2315 (2005), 1995 (2006); Unsecured additional costs 5016 (2004), 8640 (2005), 9000 (2006).
      - Completion of the transfer of land parcels into private ownership: 44111 (2004), 44599 (2005), 33750 (2006).
      - Primary mass registration of properties: 14171 (2004), 14174 (2005), 9600 (2006).
      - Mass appraisal for taxation purposes: 5704 (some year) and 4529 (some year) as listed.
- 2. PUBLIC ADMINISTRATION REFORM: MTEF costs envelope 20175 (2004), 26314 (2005), 25955 (2006); Unsecured additional costs 0 (2004), 3206 (2005), 5585 (2006).
  - 2.3 Public finance management: MTEF costs envelope 20175 (2004), 26314 (2005), 25955 (2006); Unsecured additional costs 0 (2004), 2806 (2005), 5385 (2006).
    - Priority actions and amounts:
      - Creation of an integrated informational system of public finances management: 14500 (2004), 21024 (2005), 22185 (2006).
      - Further development of the Medium Term Expenditures Framework and method for drafting budgets based on programs and performance: 2150 (2004), 2210 (2005), 2300 (2006).
      - Improvement and systematization of legislation concerning budgetary process and fiscal area: 250 (2004), 250 (2005); Unsecured 605 (2004), 605 (2005).
      - Revision and approval of the Budgetary Classification: 250 (year unspecified), 200 (unsecured) and unsecured 630, 630 as listed.
      - Development and implementation of the state debt management strategy: 2900 (2004), 2060 (2005), 1100 (2006); unsecured 543 (2004).
      - Development of the treasury system and improvement of public sector accounting: 125 (2004), 300 (2005); unsecured 578, 3600 as listed.
      - Development and implementation of the strategy in the area of internal audit and financial control in the public sector: unsecured amounts 270, 370, 450, 550 as listed.

*Source: _cr04395 - Introduction of the social insurance fund medium term forecasts*

### 2.4 The Judicial system  0 0 0 0 400 200

### 2.4 The Judicial system

### Access to justice
- Revision of public legal costs
- Participatory revision of public legal information and assistance systems
- Discussion with private legal profession regarding the possibilities for introducing pro-bono services for the poor

### The legal framework
- Revision of the legal framework and standards

### The judicial system (organization, functioning, capacity)
- Study and evaluation of the organization and functioning of justice, from protection of property and individual rights to the perspective of sustainable economic development — 200
- Institutional development and capacity building for legal personnel — 200, 200
- Ensuring public access to legal information — TA, TA

### The legal education system
- Revision of legal education standards
- Upgrade of education and training curricula

### Enforcement of court decisions
- Revision of performance and modalities of current system activity

*Source: _cr04395 - 2.4 The Judicial system  0 0 0 0 400 200*

### 9.  REGIONAL DEVELOPMENT  0 0 0 0 0 0

### 9.  REGIONAL DEVELOPMENT  0 0 0 0 0 0

### Regional development policy and coordination
- Implementation of a law in support of regional development which will lay the basis for the establishment of institutions for the implementation of regional development policy         TA
- Selection and identification of regions for development support covering several existing administrative territorial units but excluding                 Chisinau         TA
- Establishment of a two tier coordination system at the national and local levels
- Country Re-integration:
  - Drafting and adoption of the new Constitution of Moldova
  - Contribution to elaboration a general guaranty system, including international guarantees
  - Achievement of control and transparency at the border between Moldova and Ukraine, including Transnistrian border section
- Elaboration of the post-conflict development program
- Promotion of active implication of the civil society in settlement of the Transnistrian problem

### Tourism
- Totals: 1437 (MTEF costs envelope) 24249 (Unsecured additional costs) 25068 (No Priority Actions)
- Priority actions and cost items:
  - Drafting and implementation of rural tourism development projects (pilots): 1000 (2004)    4800 (2005) 4800 (2006)
  - Organization of seminars for local authorities and population of rural and ecologic tourism development: 47 (2004) 508 (2005) 508 (2006)
  - Support in creating the tourism reception infrastructure alongside major objects: 10400 (2005) 10400 (2006)
  - Creation of the National Center for retraining the tourism industry staff: 390 (2004) 2925 (2005) 2340 (2006)
  - Creation of an informational base, editing guides and catalogues on rural tourism product, promotion of tourism product in target                  markets: 5616 (2005) 7020 (2006)
  - Investigation and promotion of opportunities for investment in tourism     TA
  - Developing efficient quality control mechanisms of services rendered to visitors

### Environment — aggregate totals
- Totals: 51747 (MTEF costs envelope) 108527 (Unsecured additional costs) 111977 (No Priority Actions) 97687 (2004) 161862 (2005) 368712 (2006)

#### 11.1 Waste Management, reduction of the impact and quantities of toxic substances and wastes
- Subtotals: 32100 (MTEF) 84150 (Unsecured) 91400 (No Priority) 22900 (2004) 82650 (2005) 231800 (2006)
- Items:
  - Destruction of 1,712 tones of prohibited pesticides: 32100 (MTEF) 28150 (2004) 17200 (2005) 2900 (2006) 1850 (?) 1800 (?)
  - Inventory and dismantling and decontamination of PCB equipment: 56000 (Unsecured) 74200 (No Priority)
  - Feasibility study for upgrading waste disposal sites initially in Chisinau: 50000 (2005) 150000 (2006)
  - Planning and implementation of pilot project for waste processing in rural areas: 800 (2005) 60000 (2006)
  - Inventory, renovation and re-equipment of Bekkari animal waste sites: 20000 (2004) 30000 (2005) 20000 (2006)

#### 11.2 Water Resources
- Totals: 260 (MTEF) 260 (Unsecured) 260 (No Priority) 390 (2004) 9015 (2005) 9015 (2006)
- Items:
  - Preparation of Action Plan for harmonizing environmental legislation and standards for surface and ground water with those of the EU: 8500 (2005) 8500 (2006)
  - Inventory of water resources, quality, and sources of pollution: 60 (2004) 60 (2005) 60 (2006) 190 (2004) 315 (2005) 315 (2006)
  - Preparation of national strategy on protection and sustainable management of water resources
  - Preparation and implementation of measures to eliminate pollution sources: 200 (each year listed for 2004, 2005, 2006)

#### 11.3 Public Awareness
- Totals: 0 (MTEF) 0 (Unsecured) 0 (No Priority) 2000 (2004) 2000 (2005) 2000 (2006)
- Items:
  - Creation of regional environment information centers
  - Capacity development of government central and local officials regarding information and participatory approaches to environment protection
  - Trainings on sustainable use of for natural resources
  - Revision and improvement of the environmental monitoring system
  - Preparation of a national strategy on environmental education
  - Development of the legal and institutional framework for implementing the requirements of the Arhus Convention: 2000 (2004) 2000 (2005) 2000 (2006)
  - Creation of a natural resources database

#### 11.4 Forest Protection
- Totals: 11087 (MTEF) 11087 (Unsecured) 11087 (No Priority) 18877 (2004) 18877 (2005) 18877 (2006)
- Items:
  - Extension of forest plantation on lands of Forest Fund and local administrations: 11002 (MTEF) 11002 (2004) 11002 (2005) 11002 (2006) 18512 (2004) 18512 (2005) 18512 (2006)
  - Improved forestry inventory and management systems: 60 (2004) 60 (2005) 60 (2006) 140 (2004) 140 (2005) 140 (2006)
  - Preparation of programs for sustainable wood and non-wood processing: 25 (MTEF) 25 (2004) 25 (2005) 25 (2006) 225 (2004) 225 (2005) 225 (2006)

#### 11.5 Biodiversity
- Totals: 6000 (MTEF) 5000 (Unsecured) 3000 (No Priority) 6000 (2004) 2000 (2005) 1000 (2006)
- Items:
  - Biodiversity conservation in the Prut River middle course and development of community silviculture: 6000 (2004) 5000 (2005) 3000 (2006) 4000 (2004) 2000 (2005) 1000 (2006)
  - Creation of an environmental network: 2000
  - Creation of the Lower Nistru National Park

#### 11.6 Soil Protection
- Totals: 0 (MTEF) 6230 (Unsecured) 6230 (No Priority) 44720 (2004) 46520 (2005) 105720 (2006)
- Items:
  - Pilot projects for the rational use and irrigation of soils: 800 (2005) 60000 (2006)
  - Preparation and implementation of tree planting for soil conservation: 43720 (2004) 43720 (2005) 43720 (2006)
  - Anti-erosion activities and rehabilitation of degraded areas
  - Training land owners and farmers in ecological farming methods: 1000 (2004) 2000 (2005) 2000 (2006)
  - Rehabilitation, improvement of communal pastures management: 6230 (Unsecured) 6230 (No Priority)

#### 11.7 Natural Disasters
- Totals: 2000 (MTEF) 1800 (Unsecured) 0 (No Priority) 700 (2004) 800 (2005) 300 (2006)
- Items:
  - Publicity campaigns
  - Upgrade of the equipment and technology of the disaster monitoring system: 2000 (MTEF) 1800 (Unsecured) 0 (No Priority) 700 (2004) 800 (2005) 300 (2006)

#### 11.8 Administrative and Financial Mechanisms
- Totals: 300 (MTEF) 0 (Unsecured) 0 (No Priority) 2100 (2004) 0 (2005) 0 (2006)
- Items:
  - Revision of the activities and modalities of the National Environmental Fund: 2100 (2004)
  - Preparation and publication of the environmental impact assessment guide: 300 (MTEF)

### Education — aggregate totals
- Totals: 14790 (MTEF) 111520 (Unsecured) 162420 (No Priority) 50500 (2004) 130805 (2005) 152400 (2006)

#### Access
- Actions and costs:
  - Creation of the legal framework for the use of community funds for schooling, especially for the poor
  - Reallocation resources between sectors to favor primary and gymnasium education: 28300 (2005) 59700 (2006)
  - Efficient management and priority resources allocation for increasing the salaries of employees in education, textbooks acquisitions, didactical materials and equipment
  - Drafting and implementation of the rural education development program: 39000 (2005) 39000 (2006) 45000 (2006?)
  - Creation in the rural environment of “circumscription” schools in parallel with provision of transportation services for pupils
  - Implementation of a flexible and equitable system of support for students and pupils from secondary general education by offering scholarships, depending on their successes and financial situation of families: 12000 (2005) 12000 (2006)
  - Extension of textbook loan schemes for pupils from high schools and subventions of textbooks for the poor: 2500 (2004) 2500 (2005) 2500 (2006) 1500 (2004) 6000 (2005) 5600 (2006)

#### Quality
- Actions and costs:
  - Preparation and introduction of state standards for education: 2800 (2004) 2800 (2005) 2800 (2006) 6700 (2004) 6700 (2005)
  - Development of school and university curricula, including in education based on life skills, implementing new teaching technologies — program started, costs for implementation are 1900 thousands USD and are covered from the grant
  - Systematic participation in international tests (TIMSS, PISA, etc.)
  - Development and implementation of the presidential program “SALT” of implementing information and communication technologies in the education system
  - Improvement of the system of initial training and in-services training of teaching staff: 2500 (2005) 2500 (2006)
  - Reconsideration of the place and role of secondary professional education and its adjusting to community requirements, updating the catalog of trades and professions in partnership with social partners
  - Development of and implementing the national system of evaluation of pupils’ knowledge and skills and efficient monitoring of admission in higher education institutions: 3800 (2004) 3800 (2005) 3800 (2006)

#### Special Requirements
- Actions and costs:
  - Organization of assistance services for children with special educational requirements in secondary general education institutions, develop community services for their assistance and support: 4000 (2005) 4000 (2006)
  - Creation of a database of children with special educational requirements in order to develop efficient programs and measures of their assistance: 105
  - Development and implementation of programs and different forms of education for children with special educational requirements: 10300 (2005) 13000 (2006)
  - Creation and development of a system of services, alternative to institutionalization (family type institutions, etc.): 790 (2004) 820 (2005) 820 (2006)
  - Development and implementation of standards of care, education, medical assistance, recuperation, rehabilitation of children with special educational requirements: 10300 (2005) 2700 (2006)
  - Consolidation of didactic and technical-material base for quality professional training of special education institutions’ graduates in order to facilitate their integration in society: 4900 (2004) 4100 (2005) 4100 (2006) 10000 (2004) 12000 (2005) 15000 (2006)

#### Management Efficiency
- Actions and costs:
  - Improvement and completion of the legislative framework in order to ensure coherence and continuity of education system development
  - Creation of the education management information system: 11900 (2004) 15000 (2005) 17000 (2006)
  - Modification of the methodology of financing activities of initial and in-service training of teaching and managerial staff from pre-university education
  - Improvement of the methodology of budget financing of education system (program, unit-based financing, etc.)
  - Upgrade of the technical-material base of education institutions and implementation of energy conservation measures: 18100 (2004) 24800 (2005) 25000 (2006) 27000 (2006)
  - Improvement of the system of teaching and management staff attestation
  - Establishment of responsibilities and competences of central and local public authorities, social partners, in order to ensure normal conditions for education institutions’ functioning
  - Improvement of conditions for the functioning of pre-school institutions for mandatory preparation of children to school: 39100 (2005) 40000 (2006)

### Healthcare — aggregate totals
- Totals: 182840 (MTEF) 144650 (Unsecured) 132880 (No Priority) 287712 (2004) 689137 (2005) 789702 (2006)

#### 13.1 Implementation and Support of Mandatory Health Insurance System
- Totals: 52400 (MTEF) 67250 (Unsecured) 60900 (No Priority) 157886 (2004) 506436 (2005) 608386 (2006)
- Items:
  - Establishment of an information system for mandatory medical insurance: 65000 (2004) 65000 (2005) 65000 (2006)
  - Capacity consolidation by medical institution staff training on the new system: 2886 (2004) 2886 (2005) 2886 (2006)
  - Completion of accreditation of medical institutions: 1100 (2004) 1200 (2005) 1300 (2006)
  - Consolidation of institutional capacity: 51300 (MTEF) 66050 (Unsecured) 59600 (No Priority) 90000 (2004) 424550 (2005) 526500 (2006)
  - Modernization of the Republican College of Medicine: 14000 (2005) 14000 (2006)

#### 12.2 National Health Programs
- Totals: 130440 (MTEF) 77400 (Unsecured) 71980 (No Priority) 129826 (2004) 182701 (2005) 181316 (2006)
- Program items and costs:
  - Implementation of National immunization program: 10400 (2004) 6700 (2005) 7000 (2006) 3370 (2004) 1070 (2005) 770 (2006)
  - Implementation of National TB control program: 26000 (2004) 5900 (2005) 3500 (2006) 6500 (2004) 6300 (2005) 6100 (2006)
  - Implementation of Blood Service technical-material base consolidation program: 5830 (2004) 6180 (2005) 6680 (2006) 12198 (2004) 33848 (2005) 33348 (2006)
  - Implementation of Diabetes prevention and treatment program MoldDiab: 8610 (2004) 11300 (2005) 11800 (2006) 52243 (2004) 49553 (2005) 49053 (2006)
  - Implementation of HIV/AIDS prevention and treatment program: 57500 (MTEF) 20920 (Unsecured) 16400 (No Priority) 2180 (2004) 1980 (2005) 1880 (2006)
  - Implementation of quality prenatal services program: 40600 (2005) 40600 (2006)
  - Implementation of measures for fighting mental diseases, drug addiction, toxicomany and alcoholism: 2400 (2004) 5000 (2005) 5100 (2006) 7400 (2004) 5000 (2005) 5200 (2006)
  - Implementation of the National Program for fighting viral hepatitis: 2030 (2004) 2145 (2005) 2260 (2006)
  - Implementation of the Program for prevention and fighting cancer: 2700 (MTEF) 4400 (Unsecured) 4500 (No Priority) 12905 (2004) 11205 (2005) 11105 (2006)
  - Implementation of the Programs of medical assistance for pregnant women, sick children: 8000 8000 8000
  - Provision of small babies and pregnant women with drugs, compensated in ambulatory conditions: 17000 (MTEF) 17000 (Unsecured) 17000 (No Priority) 23000 (2004) 23000 (2005) 23000 (2006)

### Social Protection — aggregate totals
- Totals: 4180 (MTEF) 16168 (Unsecured) 16180 (No Priority) 28988 (2004) 30443 (2005) 29019 (2006)

#### 14.1 Social Insurance
- Totals: 3240 (MTEF) 15212 (Unsecured) 15212 (No Priority) 0 (2004) 1440 (2005) 0 (2006)
- Items:
  - Social insurance harmonization review         TA TA
  - Implementation of individual records of social insurance contributions: 3240 (MTEF) 5000 (2005) 5000 (2006)
  - Introduction of social insurance fund medium term forecasts: 1440 (2004)
  - Development of pension system for the self-employed especially in agriculture
  - Improvement of calculation methods for contributions
  - Unification and harmonization of the system and pension legislation, and the application of general pension norms to judges and prosecutors: 10212 (2005) 10212 (2006)

*Source: _cr04395 - 9.  REGIONAL DEVELOPMENT  0 0 0 0 0 0*

### 14.2 Social Assistance 940 956 968 28988 29003 29019

### 14.2 Social Assistance 940 956 968 28988 29003 29019

### Social assistance — priority actions and cost items
- Introduction of social assistance program impact monitoring.
- Introduction of poverty benefits system — TA TA.
- Introduction of separate social assistance budget and register.
- Study on the modernization of specialized social services.
- Development of professional network for social services — 940 956 968 988 1003 1019.
- Preparation of quality standards for social service institutions.
- Support of most vulnerable population’s layers to cope with growth of energy tariffs — 28000 28000 28000.

### Labor market — priority actions and costs (aggregate line and itemized)
- Aggregate line: LABOR MARKET 32595 41808 48659 4500 5720 2760.
- Equipping the National Agency for Labor Force Employment.
- Creation of a labor market informational system — 1100 761 597 2000 1500 500.
- Modernization and diversification of labor mediation services — 85 175 262.
- Optimization of the unemployed training and retraining activities — 5700 10246 10724 1500 760.
- Revision of the social protection system for the unemployed — 25700 30526 36080.
- Implementation marketing and forecast researches on the labor market — 10 100 100 500 500 500.
- Creation of three pilot centers for work preparation of socially vulnerable persons — 1000 1220 1000.
- Preparation of flexible employment arrangement provisions for vulnerable persons — 896.
- Creation of three centers of youth employment centers — 1000 1000.
- Bringing the internal legislation regarding the migration and asylum in accordance with the international standards — TA TA.
- Making a complex study on the migration of the population and its consequences; creation of an informational system and improvement of the management of migration processes — TA TA TA.

### Youth policy — actions, programs, and costs
- Aggregate line: YOUTH POLICY 200 770 780 10200 11410 11300.
- Conduct of studies on Youth situation and modification based on that of youth policies and legal framework.
- Fulfillment of actions of forming new technology skills and other life skills of unemployed youth, according to the Youth Inclusion Project (YIP) — 50 50 50 750 850 750.
- Implementation of actions for youth that graduated secondary studies and are not employed and/or studying - at regional level (YIP) — 700 1100 1000.
- Professional orientation actions with internships and employment in selected enterprises from Republic’s raions (YIP) — 1600 2000 2000.
- Increase access to services and information sources.
- Creation of a support fund for gifted youth in science and technique, education and culture by offering stipends and other supports — 1500.
- Implementation of actions for preventing of risky behavior by promoting cognitive, cultural and sport opportunities, and access to new IT (YIP) — 50 100 100 450 900 900.
- Realization of cultural, cognitive and sport radio and TV projects and programs for youth — 70 80 130 220 (presented across entries).
- Creation of a Youth National Research and Investigations Center and a network of Youth Centers in rural areas (YIP) — 2000 2000 2000.
- Creation of Youth Resources Centers (Chişinău – 2 centers, in Soroca, Bălţi, Cahul, Ungheni, Orhei – each one center) — 3000 3680 3680.
- Realization of the National Program for training and re-training of youth professional workers — 100 200 100 200 400 300.
- Promotion of financial (through project contests) and technical support (youth resource centers) to the youth associative sector (YIP) — 350 450 350 450.

### Development of national statistics — priorities and costs
- Aggregate line: DEVELOPMENT OF NATIONAL STATISTICS 34122 5679 2770 29205 58466 43089.
- Improvement of the legal and institutional framework and statistical management — 463 463 1489 3123 1134.
- Improvement of publications, dissemination of statistical information and relations with users — 644 639 471.
- Improvement of statistics products and infrastructure, including Population Census and General Agricultural Census — 34122 5216 2307 9603 18234 38397.
- Improvement of technical capacities of statistics system — 17469 36470 3087.
- Consolidation of capacities of central and local public authorities on obtaining administrative data and extending their use for statistical purposes.

### Capacities development and totals
- EGPRSP Implementation Monitoring Unit — 6800 14400 15000.
- TOTAL line entries appearing as:
  - TOTAL 948289 1153987 1114128 1087068 1956568 2422586.
- Costs of inestimable actions (10% of TOTAL) — x x x 108707 195657 242259.
- GENERAL TOTAL 948289 1153987 1114128 1195775 2152225 2664845.

### Public reactions in debates on EGPRSP (January–March 2004) — types, themes, and contributions
- Identified types of public reactions:
  - Methodological aspects and structure of papers under discussion.
  - Content (text).
  - Conceptual aspects of documents.
  - Action plans.
- Reactions to integrated EGPRSP — structure and methodology:
  - Proposal to include a chapter on endogenous and exogenous risks that might compromise Strategy implementation in the following three years.
  - Suggestion for more thorough quality studies on the nature of poverty and establishment of a clear procedure of consultation with the poor.
  - Recommendation to choose a scientifically grounded methodology for the calculation of an official poverty line to improve targeting of social assistance policies.
- Reactions to the text:
  - EGPRSP variant that started public debate in January 2004 was considered to contain too many findings with a political character.
  - Proposals to extend social actors involved in the EGPRSP process to include Trade unions, local communities associations and opposition political forces.
  - Economic experts argued for reduction of the number of priority areas; opinions converged on selecting a social policy (healthcare, education, or social insurance), developing the private sector as a driving force of economic growth, and improving governance.
  - Proposals to intensify presence of “Environment protection and sustainable use of natural resources” and to give a more “ecological” character to EGPRSP.
  - Suggestion to include a sub-component referred to science, resulting in chapter 6.5 “Development of the science sector”; the chapter should state the link between consolidation of research and development sector and poverty reduction until 2006.
  - Concern about non-uniform territorial development; suggestion to add “Regional development” as a general objective or a sector strategy (Regional Development Agency and Ministry of Economy mentioned as responsible institutions).
- Reactions to the action plan:
  - Need to more clearly identify public agencies responsible for implementation of actions.
  - Suggestion to eliminate actions with a purely formal character, no impact on poverty/economic growth, or not achievable within a three-year timeframe.
  - Concern that EGPRSP will be implemented during 2004-2006 though approval is only in June-July 2004; suggestion to change implementation term to 2005-2007.
- Contributions incorporated into EGPRSP:
  - Chapter V “PRSP priorities and objectives” reflected proposals: 1) improving the governance, 2) private sector development and 3) changing the role of governance (health, education, social insurance, etc.).
  - Inclusion of chapter 5.3 “EGPRSP and Millennium Development Goals”.
  - Inclusion of chapter 6.5 “Research and Innovations”.
  - Inclusion of chapter 6.10 “Regional development policy”.
- Reactions to sector components — selected highlights:
  - Public Sector Reform: proposal for a separate section dedicated to fighting corruption in all public structures.
  - Judiciary: recommendations to develop mechanisms regulating judge activity, create a Magistrates Institute for ongoing professional training, include provisions of the National Plan for the protection of human rights, approve the Law on state guaranteed access to justice (draft), enforce court decisions for social-vulnerable layers, and promote legal training of the population.
    - Contributions: chapter name changed to “Legal Sector Reform”; creation of a National Institute of Justice (Magistracy) included (p.263); emphasis on access of social-vulnerable layers to legal services; optimization of legal education curricula (p.273).
  - Local Public Administration: suggestions to regulate financial relations between central and local authorities when delegating competences; base strategy on regional development concepts; require strategic plans for all localities; develop a national plan on development and financing local infrastructure; create community development centers; re-institute positions of youth and sports workers where lacking; involve civil society in local and national budget development with media coverage.
  - Quality of governance: proposals to involve the civil sector and economic agents in service provision, provide equal rights to state, public and private schools, respect minority interests and rights, involve youth more actively, and improve cooperation between public administration and civil society.
  - Public institutions: suggestions to consider revision or possible cancellation of historical debt of public institutions, create a system of continuous staff development within public administration, reduce paid services that function as hidden taxation, and create efficient communication between public authorities and the population.
    - Conclusions: reconfirmation of decentralization principle and efficient management of public institutions’ goods (p.222); create continuous training system for public servants; involve the public in decision-making, especially local budgets (p.221, 224); establish responsibilities of local public administration relative to central authorities (p.213, 215); modify legislation to improve local Taxes mechanism to increase fiscal base for local budgets (p.197).
  - Private Sector Development: public identified major problems — 1) instability and complexity of regulatory framework, 2) administrative control and excessive tutelage by state bodies, 3) high bureaucracy, 4) limited access to financial resources including micro-financing and long-term credits, 5) difficult access to external markets, 6) persistence of corruption.
    - Essential proposals:
      1. Conduct a regulatory reform to dramatically change state–business interaction as a solution to institutional blockings.
      2. Simplify procedures for registration, account opening, tax accounting, VAT registration, obtaining licenses and authorizations to remove bureaucratic barriers.

*Source: _cr04395 - 14.2 Social Assistance 940 956 968 28988 29003 29019*

### 3. Simplifying the fiscal system for small and medium scale enterprises – reducing the number of taxes

### 3. Simplifying the fiscal system for small and medium scale enterprises – reducing the number of taxes

### Fiscal simplification and tax burden
- Reduce the number of taxes and fees and decrease the costs of fiscal administration (some central and local taxes involve administrative costs, which are higher then the taxes themselves).
- The Government of Moldova should seriously consider the possibility to reduce the fiscal burden even more, under the regional average, thus, gaining some advantages compared to the neighboring countries.

### Investment policy measures
- Meliorating investment policies:
  - Canceling VAT on import of technologies and equipment.
  - Exempting from the payment of re-invested income tax.
  - Reducing amortization periods.

### Economic information and business support
- Improving the system of economic information:
  - Creating regional centers of economic information and business consultancy.
  - Editing a quarterly bulletin for investors.
- Facilitating the access of beginning businessman to activities related to training in the field of business administration:
  - Providing some specialized training or consulting activities, on specific issues.

### Labor market and education linkages
- Consolidating the links of reverse information within the labor force market system – vocational and higher education institutions.

### Access to finance and leasing
- To solve the problem of access to long-term bank loans:
  - Facilitation of leasing activities.
  - For banks to easier attract clients, leasing must be exempted from the obligation of payments tracking.
  - Use the fund for small business support as a guarantee in obtaining credits.

### Participatory economic policy and natural resource management
- Improving the participatory framework of economic policy – every interested person or institution should have the right to participate in the decision making on economic policy.
- Introducing the state monopoly on the extraction and use of natural reserves – this will provide an equitable access to the country’s wealth.

### Removing policy contradictions
- Removing the main contradictions which exist in the economic policy – for instance, some policies intensify corruption, whereas others have a reverse effect.

*Source: _cr04395 - 3. Simplifying the fiscal system for small and medium scale enterprises – reducing the number of taxes*

### 12. Improving the country’s image internationally – participation at international exhibitions, placing adds

### 12. Improving the country’s image internationally – participation at international exhibitions, placing adds in prestigious international magazines

### Key contributions and cross-cutting business environment recommendations
- Simplifying all procedures, not only those for registration but also post-registration (accounts opening, tax accounting, registration as a VAT payer, obtaining licenses and authorizations) especially for SME (p.291, i);
- Reducing the number of all state control forms, ensure consultancy from the part of fiscal bodies (p.291, ii);
- Simplifying the accounting system (p. 307, iii);
- Informing the population and economic agents about new business opportunities, through opening of specialized information centers, business-incubators, by editing and disseminating magazines, booklet, electronic pages, etc., especially at regional level (p.310, iii);
- Proposals regarding the access of small and medium scale enterprises to financing of activities through micro-crediting lines, loans security, etc. (310, ii);
- Creation of conditions for participation in public debates on business environment issues (p. 323, v);
- Promotion of the country’s image internationally through domestic products and services at international exhibitions, publications, etc., including providing SMEs with information of selling markets and access conditions (p. 314, vi, viii, x);
- Proposals regarding infrastructure development in regions and the rural area as a precondition to attract investments (323, iii);
- Guarantee and protect the intellectual and industrial property rights (p.321, i, 359, i);
- Stimulate banks to offer long term credits (323, vi);
- Sub-chapter 6.4.7 “Creation of the real estate framework” was included;
- Use of special regimes of crediting innovational activities done within small enterprises (360, iii).

### Infrastructure development Strategy — Technical and technological proposals
- Initiating new technologies to preserve asphalt (polymeric compound layer).
- Installing meters for the natural gas, water and heating.
- Initiating experimental projects to test technologies to determine procedures for the energy conservation in dwelling spaces.

### Infrastructure development Strategy — Structural proposals
- Rehabilitating the network of bus stations in raion centres and those in rural centres.
- Stimulating the creation of private enterprises in construction, repairs and road maintenance to catalyse competition and improve service quality.
- Initiating a system for tracking the quality of all water-supply resources in localities.

### Infrastructure development Strategy — Policy proposals
- Developing the energy market, the competition and eliminating the monopoly in distribution.
- Improving state control system over the newly built edifices.
- Implementing the General Urban Plan in all localities of Moldova.
- Creating viable mechanisms for financing investments in infrastructure (state contribution – economic agents – local public administration – consumers).
- Implementing a tariffs system compliant with market economy requirements with a simultaneous introduction of a viable mechanism for the protection of people with low incomes.
- Improving the tariffs policy through differentiated prices from social and seasonal aspects.
- Implementing and developing a program for the creation of alternative energy resources, which may cover around 10% of the country’s needs and reduce the energy dependency of Moldova on external sources.

### Environment-related infrastructure measures and proposals
- Establishing a more rigorous control of the Metrology and Standards Department over mineral water bottling and use of water to produce other food products.
- Creating authorized permanently monitored dumps in localities.
- Organizing an annual contest “The best well” to improve the quality of water in localities’ wells.

### Infrastructure contributions (reflected measures)
- Install meters for efficient use of natural gas, water and heating resources (p. 364, b).
- Develop a tariffs system with simultaneous protection mechanism for people with low incomes for efficient collection of payments for water and energy (p. 367, v, p. 387, ii).
- Housing improvement proposal reflected in measures (p. 402, v).
- Increase the share of non-traditional sources in the energy balance (solar and wind energy, biogas) included in measures (p.367, i).
- Energy conservation measures and promotion of population information on conservation methods (p. 364, b, ii).
- Propose initiation of negotiations with international financial bodies to include the Republic in European corridor projects to rehabilitate roads (p. 377, vi).
- Actions proposed to maintain roads to stop degradation (p. 377, i).
- Propose large scale application of biological waste water cleaning and creation of sanitary zones to stop polluting waters (p. 385, iv).
- Intensify building of “social dwellings” (p. 402, i, p. 398, vi).

### Agri-food sector and rural development — reactions and strategic direction
- NGOs: little attention to rural training.
- Public officials: more emphasis needed on strategic development plans for rural community development.
- Agricultural producers: involve communities in debates on normative acts affecting them; need tax reliefs, introduction of a unique tax, state subsidies of essential commodities, protection of domestic producers, export stimulation, creation of insurance mechanisms in agriculture.
- Emphasis on building a strong commercial and institutional framework aligned with market economy principles, including implementation of international quality standards and full production chain services.

### Agri-food sector — land, organization, and market proposals
- Ensure strictly voluntary consolidation of land; promote information campaigns on alternative land lease modes, land exchange, etc.; land consolidation exclusively through free market mechanisms.
- Stimulate specialization of agricultural enterprises to create optimum size enterprises.
- Create information centres in every locality or commune for agriculture, commerce, etc., implementable by local NGOs.
- Create commercial structures offering services to agricultural exporters to obtain conformity documents recognized in the West.

### Agri-food planned measures and institutional proposals
- Implement a National Program of Rural Development focused on specialization of geographical zones and incentives through modern technologies.
- Stimulate integration and association of agricultural producers and processing enterprises to create higher added value.
- Establish a National Agency for Rural Development and ensure transparency of Ministry of Agriculture activity.
- Create favourable conditions for rural tourism and non-agricultural activities (craftsmanship, etc.).
- Address transit of goods overseas (especially through Ukraine) at the state level.
- Develop information and consultation networks for market and price information.
- Maximize use of Moldova’s scientific potential (selection, seeds production, technology transfers).
- Develop private ventures in rural infrastructure: roads, telecommunications, storage and waste processing, potable water-supply systems.
- Estimate and decrease producers’ risks; restore the irrigation system.
- Improve fiscal system in agriculture to offer direct support through taxation.

### Agri-food contributions (measures incorporated)
- Provision of subsidies to agricultural producers in priority fields included in the Strategy (p. 432, p. 453).
- Attract NGOs for provision of information, consultancy, training for rural areas (p. 446, p. 447).
- Integration and association of agricultural producers in associations and production cooperatives reflected in the strategy (p. 449).
- Encouraging specialization of agricultural enterprises and creation of farmers’ organizations (p. 449).
- Proposals on cooperation between rural and urban agricultural producers (p.452).
- Development of non-agricultural activities in rural areas reflected in the general objective (p. 426).
- Increased attention to development of rural infrastructure (p. 441, p. 446).

### Regional development policy — rationale and measures
- Crisis widened economic gap between the capital and other regions; Transnistrian conflict affects political and socio-economic development; requires macro-level systemic approach.
- Support local public administration in territorial development with resource allocation and correlation of local plans with national and sector programs.

### Regional development contributions (included measures)
- Inclusion of chapter 6.10. “Regional Development Policy” in the EGPRSP.
- Improve and develop infrastructure in localities (transport and telecommunications, roads, gas, utilities) as key to decrease inter-regional gap (p. 460, i).
- Develop small business and increase its weight in territories (460, ii).
- Develop non-agricultural activities (p. 460, iii).
- Create the National Agency for regional development (p. 464).
- Facilitate growth of production and promotion of exports from regions (p. 460, v).

### Environment protection and sustainable use of natural resources — conceptual framing
- Use “reducing pollution” instead of “stopping pollution” as the latter is unattainable within 3 years.

### Environment strategy — actions by objective
- Reducing degradation of water, forest and soil and enhancing productivity: consult population on community issues, harden sanctions for ecological legislation violations, review methodology for calculating pollution taxes and procedures for ecological inspection of cars.
- Soils protection: provide ecological consultations in agriculture, enforce soil protection technologies, apply law on re-cultivation-forestation of degraded land.
- Forest protection: support private forest development nationally; increase forestation by 20% using slopes, planting trees around water basins, planting green belts along small rivers (e.g. Raut, Ciuluc); create recreation places in forest zones; plant field protection strips of resistant species (specific for the country’s South).
- Maintain and improve environment quality as a health factor: destruction and neutralization of toxic substances and waste and appropriate domestic waste management.
- Create authorized garbage storage sites and sarcophaguses for waste isolation according to modern requirements.
- Implement separate collection of waste in rural zones and cities; provide mechanisms for Mayor’s office to organize collection and transportation of garbage and waste according to a fixed schedule.
- Public information and education: meetings to inform on waste use and recycling; involve population in liquidation of unauthorized dumps; create a hot-line for reporting unauthorized dumps.
- Prevention and reduction of natural calamities impact: enforce laws prohibiting dwellings on hazardous terrain; investigate and monitor land plots subject to slides; enforce barrages of lakes.
- Water sources: inventory activities, marking polluted water sources and rebuilding water ecosystems.

### Environment contributions (measures reflected)
- Water sources inventory, quality determination and polluted sources location and development of a plan for liquidation of pollution sources (p. 490, ii).
- Development of pilot-projects for waste use in rural areas (p. 490, ii).
- Increase of forestation areas and planting protection forest belts on agricultural land (p. 490, iii).
- Provide ecological consultancy in agriculture on soil protection technologies, use of fertilizers and pesticides, pasture land improvement (p. 490, v).
- Investigation and monitoring of land plots subject to landslides and other natural calamities (p. 490, vi).
- Review taxation procedures for environmental damages (p. 490, vii).
- Improve population access to information, train population in ecological area, increase public participation in environment decision making (p. 490, viii; p. 489, viii).

### Education Strategy — vocational, secondary, and financing proposals
- Develop entrepreneurial spirit among youth from general school.
- Restructure vocational schools according to current labor market requirements; introduce vocational training and entrepreneurship in general schools.
- Introduce an objective for professional training of pupils, following the NGO “Junior Achievement” economic education model.
- Introduce secondary education in the strategy’s objectives; focus fields: organizational and management capacity of education institutions (including decentralization of finances management), human resource management in education (including decentralization of professional re-training), curriculum and didactical materials enhancement (introducing optional subjects), optimize legislation for better financing and incentives for sponsorship by economic agents.
- Education co-financing: develop regulation for transparent collection and administration of funds received from parents; support parents and teachers’ associations.
- Establish local committees coordinating school, local public authorities, social and medical assistance for mandatory feeding and supervision of socio-vulnerable children and families with multiple children; assure access to extracurricular activities, especially in rural areas.
- Address unequal conditions for private education institutions; note discriminatory requirement for private institutions to have a statutory fund of 300.000 lei.
- Solve employment problems of young specialists: award teachers public servant status and employ directors through contest for a 4 years term; promote teacher motivation for quality.
- Create an independent structure to accredit education institutions with quality criteria covering teaching-learning process, evaluation, curriculum, manual quality.

### Education contributions (adopted measures)
- Inclusion of vocational education as a priority and adjustment to labor market requirements; include children with special educational requirements in vocational education (p. 507, vi).
- Correlate training with market requirements and classified lists of specialists from higher education institutions, colleges and polyvalent schools (p. 507, ix).
- Create appropriate legal framework to increase community role in school financing (p. 506, i).
- Organize tracking system and alternative assistance services for children with special educational requirements to avoid institutionalization (p. 508).
- Promote appointments to important positions and teacher motivation through contest mechanisms (p. 509, vi).
- Prioritized allocation of resources for salary raises of education employees and improvement of material base to address teacher attrition (p. 506, iii; p. 509, v).

### Healthcare Strategy — structure, priorities, and action proposals
- Request for clearer, less voluminous presentation of problems leading to poverty and clearer priority objectives.
- Major salary raise for all medical staff to ensure decent living and optimal work conditions.
- Diversify training methods (including distant learning), modernize equipment, create an informational health protection system.
- Prioritize health education across state agencies: education, medical and sanitary.
- Clarify role of local public administration and private medicine within national health system.
- Action plan proposals: show source of financing and amounts for every action.
- Provide the patient choice of family doctor and clarify doctor obligations and rights.
- Enlarge the single insurance package to include dental care and treatment of chronic and social diseases; enhance legal framework of medical insurance and harmonize with European legislation.
- Include vulnerable social groups (mothers with multiple children, chronically ill, etc.) in state insurance beneficiaries and expand services list.
- Centralize endowment with equipment subject to needs and agreement of medical units’ representatives.
- Ensure every locality has at least one emergency car.
- State responsibility to ensure cardio-patients with necessary medication.
- Provide alternative assistance to people with mental disorders outside mental homes and ensure hospital treatment under normal conditions for severe mental disorders.
- Create emergency stations with coverage area not larger than 25 km and a sufficient number of specialized teams (cardiologists, neurologists etc.).
- Reopen milk kitchens for children from 1 to 3 years; ensure pregnant women with Fe and foliates and educate on nutrition.
- Develop perinatal centres at raion centres with modern equipment and trained specialists rather than perinatal centres in every rural community.
- Develop individual vaccination plans and ensure every family with a vaccines calendar.
- Introduce “health education” classes in school programs delivered by specialists; develop local programs on health education and responsibility through informative, cultural and sports activities.
- Mark polluted water sources as not recommended for consumption (linked to Environment Strategy).

### Healthcare contributions (measures incorporated)
- Create legal framework to regulate relations between doctors and patients, their rights and obligations (p. 527, i).
- Mother and child health improvements reflected in action plan, ensuring children and pregnant women with compensated medications (p. 530, ii).
- Chapter with measures on fighting psychical sicknesses completed (p. 529, ix).
- Creation of an informational system for the health care system reflected in the strategy (p. 527, v).
- Application of active measures for fighting socially conditioned sicknesses included in objectives (p. 529, ii).
- Consolidation and strengthening of technical-material base of the health system; endowment of medical-sanitary institutions with modern medical equipment and technologies (p. 527, ix).

### Social Protection, Social Assistance and Labor Market — coordination note
- General comment: weak coordination of activities aimed at protecting children and families in difficulty between the Ministry of Education, Ministry of Health and Ministry of Labor and Social Protection and local public authorities.
- Actions proposals categorized as active and passive policies.
- Begin development of an efficient information mechanism of population able to work (text ends here).

*Source: _cr04395 - 12. Improving the country’s image internationally – participation at international exhibitions, placing adds*

### 1. developing  an  information  system  that  would  cover  the  whole  territory  of  Republic  of  Moldova,

### _cr04395 - 1. developing  an  information  system  that  would  cover  the  whole  territory  of  Republic  of  Moldova,

### Developing an information system and labor market information
- Develop an information system that would cover the whole territory of Republic of Moldova, including localities from the rural area.
- Create a transparent informational system of population able to work.
- For the Labor Market chapter: creation of an informational system about employment possibilities, recycling and situation on the labor market was proposed and accepted (p. 579, ii).

### Promoting social inclusion
- Create opportunities for the employment of marginalized persons.
- Stimulate economic agents through fiscal facilities to employ disabled people.
- Support creation of production centers for people with disabilities to produce various traditional artisans and handicrafts within the limits of their capacities and provide substantial facilities for marketing these products.
- Create alternative forms to social services at the community level for lonely elderly citizens, disabled persons, etc., by establishing community centers for social and medical assistance.
- The idea of creating community centers for the provision of medical-social services to people with special requirements was supported and accepted (p. 557, p. 564, 556).

### Preventing unemployment among young people
- Fiscal incentives to economic agents to employ young people.
- Economic education of youth from the rural area in view of initiating and opening their own businesses.
- Provide some facilities by exempting from the income tax on the first year of activity for young people who started their own business.
- Establish a partnership between the Ministry of Education and MLSP to create unique accounting for children aged from 15 to 18 and young people up to 20 years to establish labor market needs, professional training and directing them to professions in demand on the market; this category should be accounted by NALFE.
- Youth access to higher and vocational education through offering long term loans with a small interest rate.
- Extension of best practices on economic education for young people, promoted by a number of NGOs, with enhanced focus on young people from the rural area (services on initiating and developing own businesses, trainings, information, etc.) (chapter Support and development of small and medium scale enterprises) and other measures for prevention of youth unemployment (p. 591, ii, p. 581).

### Promoting legal emigration of the labor force
- Regulating the emigration of the labor force.
- Negotiating agreements with EU countries regarding legal employment.

### Fighting unemployment through active policies
- Organizing labor force fairs throughout Moldova.
- Creating a center of readjustment and re-qualification of marginalized persons.
- Stimulating the diversification of economic activities in the rural area.
- Initiating public works.

### Assuring efficient social protection through active policies
- Indexing revenues and social transfers to the inflation rate and minimum consumption basket.
- Reforming the pensions system in agriculture.
- Creating the position of a social assistant within the local public administration.
- In the area of pensions provision it was proposed their indexation to inflation (p. 535).
- As a response to the situation with pensions payments to people employed in agriculture it was proposed to develop a system to respond to the situation in this area, included in Social Insurance chapter (p. 542, iv, p. 539, i.).

### Improving social protection through passive policies
- Educate a civic spirit of responsibility towards fiscal obligations and active population’s awareness of the need to make payments into the social insurance budget, explaining that the size of the pension depends on the contribution of every person.
- Develop a deinstitutionalization policy for handicapped people and get them closer to the community.
- Develop the job of the personal assistant/caretaker who will provide assistance to a person with disabilities, allowing this person to be with the family and making institutionalization unnecessary.
- Develop a policy for stimulating families to take lonely or abandoned children in their homes to avoid institutionalization.
- Create a system for segments with special requirements such as children and persons with special requirements (p. 556).
- For the de-institutionalization of children and disabled persons it was proposed their integration in families (their own or placing them in family type houses) (p. 556).

### Contributions and accepted proposals from consultations
- Orient social aid to the most vulnerable social layers and develop poverty criteria and official threshold of poverty (p. 552, p. 554 ii, p. 560, p. 105, p. 501).
- Create a system for segments with special requirements such as children and persons with special requirements (p. 556).
- Support and accept the creation of community centers for provision of medical-social services to people with special requirements (p. 557, p. 564, 556).
- Increase access of disabled people to the labor market by creating fiscal facilities for economic agents (p. 580).
- Creation of an informational system about employment possibilities, recycling and situation on the labor market was proposed and accepted (p. 579, ii).
- Extension of best practices on economic education for young people promoted by NGOs, with focus on rural youth (p. 591, ii, p. 581).

### Implementing, monitoring and evaluating EGPRSP — key procedural and institutional comments
- Need to enhance and finalize the existent institutional framework for implementation, monitoring and evaluation of EGPRSP, followed by a detailed and clear description of attributions, way of functioning and creation of every component.
- Need to analyze and apply existing experience to ensure the continuity principle.
- Need to develop a mechanism of interaction between the national level (National Council for EGPRSP implementation) and the local level; the place and role of NGOs at raion and local levels are not defined and their activity and contribution need measurement.
- Create an institution/office where any person, organization or institution may express opinion, request information, etc.
- Leadership role in implementation: Government through ministries and departments, with a distinct role for the Ministry of Economy; participation of other interested parties remains.
- Point 623: the annual report on monitoring and evaluation “The impact of the Policy on Poverty Reduction in the Republic of Moldova” needs a clear specification on who will make this report: a special unit of the Ministry of Economy.
- Maintain and improve the Participatory Council as a tool of interaction between Government, civil society and donors; improve the mechanism of creating and functioning of the council.
- It is incorrect for the institution responsible for implementation (Ministry of Economy) to exercise evaluation functions as well; evaluation functions should be exercised by someone from outside the Government (for ex. the Parliament).
- Distinction between monitoring and evaluation: (i) monitoring is internal and continuous administration of the project; (ii) evaluation is external, periodic, and may be handed over to international consultants.
- The central role in EGPRSP monitoring must be Ministry of Economy’s, which does not have direct implementation responsibilities; evaluation of 2-3 years of implementation could be conducted by the Parliament, including civil society.
- Principle of parity in the National Council for EGPRSP implementation should observe central and local public authorities, private sector, civil society and donors; civil society representatives should be delegated by NGOs coalitions or networks with respective experience and potential.
- As a result of proposals, the existent institutional framework was taken as basis, especially the Participatory Council, to be enhanced and extended to the next level.
- Interested parties proposed to specify the institution responsible for elaboration and submission of the report “Policy impacts on Poverty Reduction in Moldova,” namely, the Ministry of Economy.
- To assure a link between local and central levels, organization of regional forums where EGPRSP implementation progress and results of policies monitoring will be discussed at regional and local levels was proposed.

### Government letter and decisions on external debt, EGPRSP credibility and MTEF adjustments
- Government communication (Chisinau June 7, 2004) thanks IMF support for EGPRSP implementation and notes need to ensure a sound macroeconomic framework and a credible state external debt management strategy.
- Over 2004, the stock of arrears to bilateral and commercial creditors was reduced from $ 92million to $23.8 million as of July 1, 2004, while the external debt stock reduced by almost $106 million or 14% compared to the end of the last year.
- Buy-back transactions (commercial debt to OJSC Gazprom and Hewlett Packard) increased costs associated with external debt service since payments were not included in the 2004 budget.
- Remaining commercial debt: Eurobonds rescheduled in 2002 and Dresdner Bank loan rescheduled in 2003; these are included in the MTEF and paid on time according to the agreed schedule.
- Government has been consistently servicing debt to multilateral creditors without external financing during this period.
- Remaining problem: servicing debt to bilateral creditors; Government’s intentions are spelled out in paragraphs 119 and 125 of the MTEF for 2005-07.
- Government decided to start interest payments to bilateral creditors, Paris Club members, beginning with July 1, 2004 and keep making these payments during 2005, with subsequent rescheduling of these debts with the IMF’s support, to settle all external debt servicing arrears in 2006.
- Since August 1, 2003, Government has been in permanent discussion with bilateral creditors; agreed on a new rescheduling for 15 years with some non Paris Club Members such as Turkey and Romania, officially confirmed.
- Government cannot now receive written confirmation from bilateral creditors about acceptance of arrears accumulation, but believes resumption of interest payments beginning with July 1, 2004, is an important action showing goodwill.
- Government requests IMF and World Bank support to find a compromise with bilateral creditors and to support joint World Bank–IMF support of the EGPRSP.
- Government will amend the EGPRSP and MTEF as soon as possible to bring them in line with the Government decision about starting interest payments to bilateral creditors, Paris Club members, beginning with July 1, 2004.

### Draft Government Decision (high-level provisions)
- Ministry of Finance will continue communication with external creditors and international financial organizations to reduce the burden of the external debt.
- Main directions and principles of stabilization of the external debt in paragraph 184 of EGPRSP 2004-06 are completed with: “Demonstration of good will and credibility of the Government to bilateral creditors by the payment of current interest on bilateral debt starting from July 1, 2004.”
- Paragraph 68 of the Medium-Term Expenditure Framework is completed with: “To facilitate this attitude the Government will demonstrate good will and credibility to bilateral creditors by the payment of current interest on bilateral debt starting from July 1, 2004.”
- Decision to take effect on the date of its publication.

*Italic: Content compiled from the provided PDF chapter/section.*

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2004/_cr04395.pdf_