State-owned enterprises situation is serious, while the negative indicators increased year by year, and their managers continue to be paid royally. IDIS experts and IT-Moldova (Transparency International) recommends central authorities to reassess conditions in which the state assets are managed and to create a clear strategy to develop the state-owned enterprise sector.

"There are serious problems in the management of these enterprises. The accumulated losses of state-owned enterprises increased by 1.5 times, and joint stock companies doubled in 2015 compared to 2014. Criteria for the nomination of directors of publicly owned enterprises are not transparent, and positions are held by relatives of dignitaries and politicians. We cannot speak of any meritocratic filtration system of the managerial staff. We have over 400 non-functional state enterprises", explained Ianina Spinei expert Transparency International Moldova.

State enterprises are penetrated by corruption, tax irregularities and suspicious transfers of land and properties under management, but very few enterprises provide sufficient information on their financial status and heritage. Transparency is a luxury that these enterprises not allow. Accordingly, we do not have sufficient data on the names of the managers, budgets, audits, founders and tender contracts. "We have 400 state enterprises that are dysfunctional due to lack of assets, their services are not competitive. The fact they don’t work there is a risk that their assets will be sold illegally", said Spinei.

IDIS Viitorul expert, Veaceslav Ionita says that the state must clearly define in the new law which the goods are prepared for privatization, sold or pledged. Currently, there is a vicious practice to obtain loans from commercial banks, and most times the loan exceeds the asset (currently payables amount to about 15 billion lei). In addition, the expert notes the existence of a conflict of interest. On the one hand, a ministry is responsible for policy development and creation of equal conditions and competition of business, on the other hand, this ministry claims to properly manage some state enterprises in its field surveillance. The clearest example is Moldtelecom, but there are others that confirm this unfortunate practice contrary to free competition and the spirit of functioning market.

"The state must establish a clear and a well thought out strategy on public assets. We have many examples through tricks, managers of enterprises have actually managed to destroy the state-owned enterprises, achieving substantial resources for themselves and their families. The investigation press reported almost weekly about these cases and criminal investigation bodies do not reach perpetrators that compromise by their actions the public sector. Although there is national legislation which provides for transfer of the dividends to the state budget, money is often used to finance elections in favor of ruling parties. There are concerns about the decisions of the amalgamation of state-owned enterprises. An example would be the decision to merge enterprises Civil Service, the State Chamber and the Chamber of Licensing with "Registry" that could create chaos in the system, a chaos convenient to some interest groups. "It is unfair that some tasks that should be accomplished by the state to be reorganized because this creates the risk area, including alienation. We have a lot of reports from CC, indicating serious violations of company and the loans used for lending to businesses”, concluded Veaceslav Negruta, Transparency International expert.

For more details, please contact the Press officer, Victor Ursu at ursu.victoor@gmail.com or by phone 069 017 396.

The Government is seeking financial resources to balance public finances and to allow honoring commitments and promises on the spending side. In this context, in 2016, the Government came up with some tax inventions . We talk about the wealth tax, which is limited to taxing buildings for housing, worth more than 1.5 million MDL and an area less than 120 square meters. Is there anything else in the Tax Code, the real estate tax is already provided. The big problem is that with the introduction of wealth tax we will see double taxation of the same good and the same subject of taxation. This is a constitutional mismatch. Furthermore, all OECD and IMF recommendations on tax matters exclude the double taxation and cataloged as an abusive practice. It is the opinion expressed in the program "15 minutes of economic realism" by Veaceslav Negruta, associated expert.

Another issue is that tax revenues from real estate and other properties are sources of income for local authorities, which completes its local budgets. Or by introducing wealth tax we have interference of the central government over local authorities' financial rights. On the one hand, the real estate tax is paid in the local budget and the same building; the same owner is charged a wealth tax, which is paid from the state budget. These practices are unacceptable and detrimental to the construction and concept that was placed at the base of the Tax Code.

"Wealth tax which was introduced from July 1, 2016, violates another citizen's right. He applied for the entire period of 2016 while the law was implemented only last six months. Concerned citizens have paid twice as much. Another problem - the revaluation of real estate has not been completed in rural and wealth tax applicability entails risks for owners of housing. Under a depreciation of the leu against the dollar or euro, a house may cost more and thus become subject to tax. We may wake up that many citizens are indebted state due to MDL depreciation", explained Negruţa.

In his view, the determination of wealth tax must set clear criteria to have some undesirable phenomena. The real estate market may abound with offers due to debt payments, on the other hand - to witness the phenomenon of the division of property into separate parts with separate cadastral creating more goods and attempts respectively to circumvent taxation. That would mean fictitious divorces, unwanted social things.

"Such inventions are dangerous. It takes a deep approach to be involved responsibility fiscal policy and assessing buildings, central, and local authorities. Original packaging is the strange law which came as it will be a "luxury tax". It's not the luxury, but people used as dwelling buildings. However, some individuals have other properties such as, for example, garages that are not intended for housing but can be worth more than a house. There are other things that have fallen somewhat from this tax "luxury things" because it was an attempt to "sell" to the public this tax as tax tracking of certain categories of citizens wealthy. In reality, however, it has set a precedent with serious risks that this law is challenged in the Constitutional Court, people to seek damages from the law in 2016", said Negruta.

In conclusion, the economist said that the Government is seeking for financial resources. Or those populist promise and electoral costs increase salaries of certain categories and fiscal consolidation is not properly understood and applied by governments in Moldova. Fiscal consolidation does not mean inventing new taxes, but enlarging the tax base by attracting those goods and income that have not been taxed so far, the legality of fiscal requirements. From this point of view, there is a very useful tool for authorities. It's the indirect method of assessment and taxation of property and income, but the law implemented in 2013 remains legally applied in practice. In Moldova are special phenomena, we have individuals who have allowed certain purchases were not entered into the field of taxation and here IRS could contribute by imposing voluntary compliance and indirect methods fiscal consolidation real and not invented by new taxes and non-compliant definitions and methodological legal norms and international recommendations.

For further details, please contact the Press officer of IDIS Viitorul, Victor Ursu at: ursu.victoor@gmail.com or by phone 069 017 396.

The broadcast is performed by IDIS Future in partnership with Radio Free Europe.

IDIS Viitorul experts presented, on February 8, the Socio-economic development strategy of Gagauzia. In preparing the document, with the support of the authorities and Executive Committee of Gagauzia meetings, discussion panels and workshops on areas were organized and businessmen were interviewed. This activity is carried out with the financial assistance of the European Union within the program "Support to agriculture and rural development in Gagauzia and Taraclia" (SARD), implemented by the United Nations Development Program through IDIS “Viitorul”.

 "The document is important for Gagauzia while establishing priorities and directions of development and which areas the region should focus on. Only analytical information on the situation in the region includes 240 pages, divided into 14 topics”, explained the expert, Viorel Chivriga.

In his view, the strategy aims to create jobs, attract foreign investment, economic development and raising the living standards of citizens.

"IDIS Viitorul was involved in drafting the previous strategy of socio-economic development of Gagauzia for 2009-2015. The new document, developed in close cooperation with the authorities in Comrat is more complex and covers important areas for the development of Gagauzia and increase the welfare of citizens in the region for the period 2017-2022", said Liubomir Chiriac, Vice-director of IDIS “Viitorul”

The document was developed for a period of five years and focuses on: sustainable use of natural resources, human resources and social sector development, ensuring sustainable economic growth in the region, territorial branding and promoting the image of Gagauzia.

For more details, please contact the Press officer, Victor Ursu at ursu.victoor@gmail.com or by phone 069 017 396.

IDIS “Viitorul” continues to increase its level of professionalism of its experts. Last week, economist Diana Enachi conducted a study visit to Estonia to study best practices in integrity policies to prevent corruption and promote transparency tools, especially using IT solutions and open data.

The program included the visit of the highest institutions such as the National Audit Office of Estonia, Ministry of Finance, E-Governance Academy, the Committee for monitoring political party funding, Transparency International - Estonia.

"Estonia's experience shows that IT solutions and use of open data can significantly reduce the risks of corruption in the public sector and not only. What our institutions should take from the Estonian practice it is to put the citizen at the center, whether the public service delivery, budgeting or public policy. In Estonia, anyone who wants to see how budgets are formed and the public money is used, can access an online platform developed by the Ministry of Finances. And if we're talking about how public money is spent - E-Procurement Portal is an open data resource through which about 90% of all public tenders are held. It is a tool of "accountability" extremely useful for the citizen who has access to data throughout the procurement process and can actually see what is the "cost" of a final purchase compared to the price of the contract", explained Diana Enachi.

Study visit to Estonia was organized by the Institute for European Policy and Reform in partnership with Transparency International - Estonia.

Moldova's economy is underdeveloped due to a lack of alternative financing. The only solution is banks, but the National Bank tight monetary policy restricts lending. This happened after the robbery banking system in 2014 that caused the Moldovan Leu depreciation, increased prices, and the slowing of the economy.

"National Bank tightened the monetary policy by increasing mandatory minimum reserves for the resources attracted in Lei from 14% to 35% and 5.5 times and the base rate from 3.5% to 19%. All these actions had some consequences: the economy was drained of money, the momentary mass fell from 62.3% of GDP in 2013 to 52.4% in 2015. Thus, through its policies, the NBM has stolen over 13 billion lei from the economy, if we compare the GDP. Moreover, people were scared of the Leu depreciation and reduced savings in Lei in favor of foreign currency", said the expert of IDIS Viitorul, Veaceslav Ionita at the program "15 minutes of economic realism".

The expert argues that monetary instruments look good in theory, but in practice things are different. An example is loans to individuals and businesses. "In late December 2016, the volume of loans to households for consumption, purchases of property and starting a business amounted to 6.48 billion Lei. 3.5% of these loans are bad loans or compromised. Meanwhile, credit to the operators amounted to 29.1 billion Lei, and compromised or non-performing loans are 3.5 times higher than in the case of individuals and reach the average of 12.4%. In constructions and services, they touch an alarming rate: 31.1% and 40% respectively".

In his opinion, the explanation is very simple for individuals: loans are low and credit decision is taken at the level of banks usually by lower hierarchical level loan officers. That is the case for large companies. In Moldova, nobody wants to discuss that a corrupt relationship exists between the large businesses and managers the all commercial banks. Or, struggling with bad loans is not done through tightening the monetary policy, but through the Anti-corruption Prosecution Office.

The expert suggested reducing the base rate to 3.5% and reduced reserve requirements to 20%.

The entire show can be watched here

For further details, please contact the Press officer, Victor Ursu at ursu.victoor@gmail.com or by phone 069 017 396.

2017 will be better in economic terms compared to 2016. The main branches that will increase are agriculture, trade and investment. A less pleasant news is that tariffs for electricity, gas, and heat will also increase. This is the opinion expressed by IDIS Viitorul experts, Veaceslav Ionita and Victor Parlicov in the program "60 minutes of economic realism".

"Trade will increase in conditions which the tax will be 1% of turnover. Agriculture will develop as a result of better benefit to farmers, support from the state and foreign assistance. In terms of investment, it could increase after restoring the confidence of foreign partners. We have the example of 2014 when the state was a strong player in construction and has invested in the rehabilitation of schools, kindergartens, build aqueducts and local roads", explained Veaceslav Ionita.

In turn, Victor Parlicov feels that the main problem in 2017 remains the billion theft. The Government will take certain actions that will look good in front of citizens, so it is hard to talk about reforms. We have the example of the pension reform, which sparked a series of discussions in society on the background of the low trust in the Government. Authorities will focus on the small things that look nice, but not on reforms needed by Moldova.

"In 2017 we will have an increase in tariffs for electricity and natural gas by 10%, due to the inclusion of financial deviations in price. The natural gas tariff will be increased due to the oil prices on international exchanges. The only good news of the year would be an economic revival on the lower level", said Parlicov.

According to the expert, any action that would take a government to push up the economy will have no effect. "Rather, the authorities are trying to do the balancing act not to disturb development partners and provide positive news to population, but the risk of 2017 is falling out of favor with development partners”.

The entire show can be watched here

For further details, please contact the Press officer, Victor Ursu at ursu.victoor@gmail.com or by phone 069 017 396.

IDIS "Viitorul" presents the second issue of the newsletter "Bugete fără secrete” (in English “Budgets without secrets”). The publication aims to make transparent the activity of local public authorities in Moldova by promoting transparency and financial accountability.

Inside this edition:

TOP: Moldovan localities with the highest incomes per capita
BUDGET: How mayors from Briceni miss million revenues in local budgets
COMMENT: Veaceslav Negruta: “Debts to the budget grew significantly during 2016 in anticipation of the amnesty announced by the Parliament"
SLOVAK BEST PRACTICES: The thief has often the loudest voice against the theft
REPORT: Rayon administrations, transparent and not too
OPEN GOVERNMENT: "Citizens must know how public money is spent"
INTERVIEW: Slovakian Ambassador in Chisinau - "With a corrupted mind you cannot have success in life"

More information you can find in the Newsletter (available only in Romanian)

The Newsletter is produced within the project “Transparent, financially sound and competitive municipalities in Moldova” which is implemented by the Institute for Economic and Social Reforms (INEKO) in partnership with IDIS “Viitorul”, with the support of the SlovakAid and the US Embassy to Moldova. The project aims to increase the financial accountability of local governments in 50 municipalities throughout Moldova.

Money transfers of Moldovans working abroad, even if they remain at a fairly high level, no longer play an important role in the fact that exports exceed the money introduced in the country for the third consecutive year. In 2017, the volume of remittances will be $ 1.27 billion, and foreign currency sales - $ 2 billion, below the level of export earnings. This is the opinion expressed by the economist IDIS Viitorul, Veaceslav Ionita in the 15 minutes of economic realism show.

The money from the remittances has been exhausted, the only possibility to develop the Republic of Moldova is the domestic resources by attracting investments, creating jobs and ensuring income within the country. Money abroad will grow on average by 5-10% annually.

Veaceslav Ionita also notes an increase in the salary in the economy, which fell after the 2014 crisis to $ 1.5 billion from $ 1.8 billion. We anticipate that in 2018-2019 the salary paid in the economy will exceed the number of remittances.

According to the economist, securing the revenues to the state budget was based, until recently, on the transfers of Moldovans working abroad. "In 18 years, the remittances of Moldovans through official channels (banks and transfer systems) amounted to USD 18 billion, but the sum amounts to USD 27 billion, considering the volume of currency sold on the foreign exchange market in cash. The $ 9 million discrepancy shows that this money was brought home cash by Moldovans who came home. "

Also in the 18 years, the Republic of Moldova exported goods and products in the amount of USD 27 billion. In other words, net income from money from abroad is equal to total income from exports. For comparison, the revenues of the citizens from the exports are USD 4 billion, and remittances USD 27 billion. During this period, the paid salary fund was $ 20 billion, 7 billion less than remittances.

"We note that the impact of foreign money is higher than all the salary paid on the economy. The welfare of the citizen was determined by the money sent from abroad. But salary has not played an important role since 2004. For example, foreign currency sales were $ 760 million, and the salary was only $ 550 million, "Ionita said.

In 2007-2008, Moldova was the first country in the world with the most money coming from abroad to GDP. In 2008, the volume of transfers reached the highest level - USD 2.4 billion with a share of GDP of 39.5%.

In conclusion, the economist IDIS Viitorul said that remittances continue to play an important role until 2014, when their volume has begun to decline, and the USD 2.4 billion level will be reached very hard in the coming years.

The show is made by IDIS "Viitorul" in partnership with Radio Free Europe.

For further details, please contact the press officer, Victor URSU, at the following address: ursu.victoor@gmail.com or at 069017396.