Expert: "Plahotniuc’s Business Keeps Living." Moldova's Economy Goes into the Shadows Again

Marina DRAGALIN After a short recovery period, the Moldovan economy displays again alarming symptoms: privatization of profitable state-owned enterprises, restoration of gray feeding schemes and strange maneuvers with the National Bank. Last summer, it seemed that Moldova received carte blanche to update not only the political, but also the economic system. The elimination of "infection" influence of the oligarch Vlad Plahotniuc was to significantly improve the Moldovan economy and bring it to a normal market state. And, indeed, first months after the regime change, the new authorities vigorously fought against various corruption schemes and their beneficiaries. However, recently this process has stalled and somewhere even reversed. Now, the Moldovan economy is once again entangled in updated “gray schemes” and dubious projects under official cover. One of such controversial decisions was the president’s initiative to redirect part of National Bank’s profits to the state budget. This step is presented as a means of easing the budget burden meaning redemption of government bonds from the National Bank under the law on the stolen billion. According to the latter, loans guaranteed by the state in the amount of about 13.5 billion lei provided by the NBM in November 2014 and March 2015 were converted into public debt, which must be repaid within 25 years. According to the experts of Independent Analytical Center Expert-Grup, the initiative encroaches on NBM’s independence, compromises efforts to capitalize it and, in fact, does not represent an effective solution to the public debt problem. Indeed, it is rather presumptuous to count on debt repayment by NBM profit alone. Recently, it is very insignificant when compared to the amounts required: 700 million lei to repay the loan body and another 500-600 million lei in the form of interest. Quite a lot of people pay attention to the political nature of this decision. Thus, the vice-president of the parliament, Alexandru Slusari claims that "Igor Dodon is openly lying that the burden of the stolen billion will be reduced." “He is trying to somehow mask his inability to do what he promised in 2016 - to repeal the bill on billions. Unfortunately, Igor Dodon is concerned about the election campaign. He does not think about macro-financial stability, does not think about prospects, but acts on the principle of “after me – the deluge”. He must show the voters that he has done at least something as to the theft of the billion, and that at least some of the money that can be redirected for election purposes appears, ” Slusari said. Another highly controversial topic was the campaign to privatize and re-privatize state-owned enterprises. One of its first “victims” at the initiative of Igor Dodon, will obviously become Metalferos, that is already in a scandal. Many experts see in the enterprise’s hasty privatization an attempt to quickly hide and destroy information about the many illegal schemes that existed there for years. The flimsy arguments of Prime Minister Ion Chicu added oil saying that "the state does not need to deal with the collection of scrap metal and waste paper" and with allegedly only 2 percent enterprise profit. Actually, the fact that Metalferos has been feeding for many years, at least, the Democratic Party and the Plahotniuc’s suite, is being Polisinel’s secret for quite a while. Therefore, one can only hope that the current movements are in no way connected with someone’s intentions to revive the scheme for 2015-2019, revealed by the Anti-Corruption Prosecutor's Office in December last year, according to which the Metalferos leadership earned more than 2 billion lei. At the same time, attempts to transfer the source of income into the right hands under the auspices of demonopolization do not stand up to criticism - companies that have received a license to collect and export used metals openly state that after this "demonopolization" the cost of scrap metal only increased. Apparently, the long-suffering Chisinau airport is waiting for its turn. The government is already demanding the seizure of real estate owned by the asset owner, Avia Invest, and is seeking to freeze its accounts and terminate the concession agreement. Ion Chicu emphasized that the airport should return to the state ownership, but immediately “subtly” hinted at a subsequent sale, since, in his opinion, the state would not be the best airport manager. The Tutun CTC tobacco factory and the Garile si Statiile Auto network of bus stations are likely to be affected by similar processes - reports on violations in the privatization of these companies have already been drawn up. Despite the fact that the Minister of Economy and Infrastructure, Anatol Usatii, says that there is still no final list of state-owned enterprises and companies that should be privatized, sales revenue has already been budgeted for 2020. According to Veaceslav Ionita, economist at Viitorul Institute for Development and Social Initiatives, there currently exist 4 shadow schemes through which the flow of illegal capital in the amount of $1.2 billion passes annually. This is imports under- and overpricing, lower export and export prices at a speculative price. According to his estimates, over the course of 20 years, from $15 to $20 billions of illegal capital has been circulating to and from Moldova, and this does not include the trade in arms, drugs, people and a billion stolen from the banking system. So far, the government actions do not reveal a special desire to somehow reverse the negative “shadow” trend in the Moldovan economy, in which obviously alarming processes are taking place. The economy shadowing signals the weakness of state institutions, fueling corruption and undermining tax revenues. At the same time, there is a process of regeneration of the “feeding” schemes that seemed to be destroyed after Plahotniuc’s flight thanks to various infrastructure projects, such as road construction. Non-transparent financial and economic maneuvers not only harm Moldova itself, but also significantly reduce the external donors’ credibility to the country. It is not surprising that funding from the West is almost frozen, and Russia is in no hurry to give Moldova a half-billion loan announced by Chisinau long ago. These problems are added by the completely atrophied ability of Moldovan politicians to think at least somehow globally within state categories, and not just to constantly be in the logic of the election campaign. It seems that the technocratic government has still not been able to offer a single breakthrough idea or project that could interest both domestic and foreign investors. Even the Russian loan, if received, will be used only for inefficient and promiscuous patching of road pits, since there is simply no clear and long-term strategy for strengthening the infrastructure of the same international highways. We have to admit that the Moldovan authorities are missing a historic chance to restart the decrepit economy due to outside help and support. All available scarce surpluses are directed to populist social benefits and corruption-prone infrastructure projects, and at this time, economic processes in the country are again drifting into the shadows.