2019: three steps forward, two steps back.
Perhaps this is how we can summarize the past 2019 in Moldova. Both entrepreneurs and ordinary citizens of the country felt this. The trilogy "How to Overthrow the Oligarchs" was being played out in the political arena, living in the country has become more expensive, planning a business is more difficult. The whole country expected anticipation of positive changes three times in a row. In general, the changes were made, but the real results will be noticeable later. Unless, the changes fall into the next electoral millstones and political populism.
The main findings of 2019 according to InfoMarket agency:
Three Prime Ministers, two Speakers of Parliament and one President. Moldova was unstable and emotional during 2019 which is common for every electoral year. Public parliamentary elections were held in the winter. The new Moldovan Parliament includes four political formation: Party of Socialists of the Republic of Moldova (PSRM), "ACUM", the Democratic Party and the Party of "Shor". As expected, none of them managed to get a majority. However, the "ACUM" political bloc and the PSRM created a temporary coalition in order to create favorable conditions for the development of the country and its citizens and "in the name of saving Moldova from the oligarch Plahotniuc". The executive branch of the government represented by Pavel Filip was replaced by Maia Sandu and her representatives in the summer, but the fragile union cracked in the fall: the government of M. Sandu was dismissed. The new Cabinet of Ministers , headed by Ion Chicu, began its work in mid-November. One President, two Speakers of Parliament and three Prime Ministers ruled in the country during 2019. Eventually, all three branches of power are concentrated in the hands of the Party of Socialists by the end of the year. A separate "premiere" in Chisinau during the local elections, the representative of the "left party" first "took" the capital. The political trends of the country as a whole reflected the situation at the main line of the government the political dominance has changed dramatically in many settlements across the country. Irina Vlah was elected as Bashkan (Head) of Gagauzia autonomy for a second term.
The funding from regular external partners and donors was unlocked. However, unequivocal negotiations and rapprochement with the Russian Federation may slow down the allocation of funding in the future and the implementation of the European agenda of Moldova. The hot summer in the political arena gave a good result: Maia Sandu’s government was given a large credit of trust. Although, external partners said openly that the new government would have to prove and gain confidence, in early October, the International Monetary Fund allocated Moldova a new tranche of loans to support the budget with $46.1 million in the framework of a 3-year program for the country, it was followed by unblock of financing from the European Union. The European Parliament made it clear in December that the EU is not very clear about the foreign policy promoted by the current authorities (for example, the first official visit of the new Prime MinisterI. Chicu was made to Russia). Furthermore, provision of funds is entirely dependent on the implementation of the reforms and commitments undertaken by Moldova under the Association Agreement.
New investors at the banking market. The banking sector of Moldova has been receiving an increased attention of foreign investors for the second year in a row. The Hungarian "OTP Bank Nyrt" acquired a total of 98.26% stake of "Mobiasbanca Groupe Société Générale." The bank changed its name to "Mobiasbanca - OTP Group." At the same time, the Bulgarian company Doverie-Invest acquired a total of about 77.63% of Moldindconbank's shares. The arrival of new investors in the banking and financial sector of Moldova is the evidence of the attractiveness of this sector and its stabilization after the "theft of a billion." Although, the banking fraud case has not stopped spinning the wheels, and the money was not returned yet, the measures were taken to improve the transparency of bank shareholders tightening the regulation. Some banks rebranded in 2019, launched new corporate services and mobile applications. Competition for customers has grown, the competition is not only between the banks but also in the financial services market as a whole.
NCO: "Cheeki Breeki" or "Ta-dah!" Non-bank credit organizations issued financing of 7.5 billion lei (+ 36% for a year and + 62% for two years) within 9 months. More than 570 thousand customers became NCO clients over the three quarters of 2019, the net profit of this sector reached 801.4 million lei or 52% more compared to the situation at the beginning of October 2018. The World Bank drew the attention of the authorities to the fact that rapid growth, even with the sector being not large enough, requires special attention and supervision to reduce tax risks.Consumers’ complaints about fraud in this area are also growing, although, this is usually the lack of financial literacy of citizens and the lack of restrictions on the part of the regulator. But, the NSSMC has developed a bill aimed at regulating the activities of NCO. The regulator proposes to limit the costs of short-term loans received for a period of up to two years, so that all payments, including hidden payments, penalties for delay, payment of commissions, administration fees, etc. did not exceed 100% of the amount of the initial loan. In the future, the NCO may cooperate with the Credit History Bureau to protect against lending of dishonest individuals and put an end to abuses of consumers, etc.
Moratorium on privatization and "Citizenship in exchange for investments" program. The first and only privatization round of 2019 was canceled almost immediately at the peak point of the June’s political crisis. The country's parliament introduced a moratorium on privatization and state property concessions a month later, and the conclusion of public-private partnerships. At the same time, the parliament launched an investigation into the legality of the privatization process of such strategic facilities for Moldova as Chisinau International Airport, Tutun CTC, Air Moldova , SE "Train Stations and Bus Stations" , etc. The conclusions of the commissions were as expected, but apart from general statements, formal reductions in the Public Property Agency and the transfer of reports to the prosecutor's office brought poor results. The traces of some investors have already been lost, but the chances of returning objects without compromising the image and budget of the country are negligible. The program "Citizenship in exchange for investments" has also been temporarily suspended. The authorities introduced 4-month moratorium on the issuance of Moldovan citizenship in exchange for investments in August, they extended it for another two months in December. First, the government of M. Sandu and now the government of I. Chicu should evaluate this program in terms of benefits for the country and its citizens. Eight applicants were granted citizenship before the moratorium, having a thorough check on the reliability and brought to the Moldovan budget of more than half million of euro. 74 applicants for citizenship are on the waiting list in exchange for investments in the amount of EUR 3.7 million.
But, the moratorium on tax audits for the period until the beginning of 2018 was canceled. In accordance with obligations to the IMF, from September 6, 2019, the ban on checking the correctness of calculation, declarations and payment of taxes, fees and other payments to the state budget, budgets of administrative-territorial units, state insurance contributions and compulsory health insurance for tax periods until January 1, 2018 were canceled. The amendments to the Tax Code will come into force two years later, from January 1, 2022 to counter tax fraud in the course of tax control carried out by indirect methods and sources. In particular, the provisions excluding the taxable income of 500 thousand lei when assessing income by indirect methods were excluded from the Tax Code. It is worth noting that since 2019, the State National Tax Service (SNS) began to monitor all bank accounts of individuals. More than 5 million bank accounts of individuals entered the field of view of the tax authorities. Such monitoring allows you to analyze information on transactions in the bank accounts of individuals in order to identify the risks of terrorism financing timely and efficiently, money laundering and tax evasion. In the future, this will allow the SNS to exchange data with other states on transactions in foreign accounts of individuals-citizens of Moldova, and the sources of data used by the SNS to analyze and apply indirect taxation methods will be expanded.
Demonopolization of some markets. Some particularmarkets have fallen under the "ardent hand" of M. Sandu’s government. It was announced that the monopoly on the export of metal wastes will be stopped (demonopolization of the Metalferos company), as well as the export market for nuts, and the monopoly on the dialysis market will be eliminated. There were also identified solutions for the demonopolization of the grain market and grain exports; proposals were introduced into the Law on "deoffshorization." According to the Law all companies entering into contractual relations with the state are obliged to declare the last beneficiary. How long have these results been consolidated after the change of government? It remains to be seen…
The updated Civil Code entered into force on March 1st. The long-awaited law provides a set of measures to protect privacy, new rules are introduced for consumers’ protection, it also clarifies the legal status of administrators, procedures for registration and liquidation of enterprises. The changes were made to the law of the principles of the separation of inheritance into law and testament, the rules of inheritance, determination of the legal status of the heir, custody of the estate, etc. This important document resulted in amendments to a number of other laws. Tthe harmonization of documents is still ongoing, as the new Civil Code created in some places contradictions in the legislation. New versions of the Tax and Customs codes will be developed in 2020, as expected.
The reverse supplies of natural gas in Moldova through the Trans-Balkan pipeline. The traditional New Year’s case is "Will Russia turn off the gas or not?" The topic had a new context this year. The gas conflict between Ukraine and Russia threatened the energy security of Moldova. Moldova imports Russian gas in transit through the territory of a neighboring state. Although, Moscow and Kiev signed the protocol of an agreement on the transit of Russian gas to the EU and the settlement of mutual requirements, the Moldovan authorities, with the help of EBRD financial support, developed an alternative option for importing "blue fuel" via the Trans-Balkan pipeline. This is an additional, albeit more expensive route for importing gas to Moldova through the territory of Ukraine. But, it will be used only in force majeure cases.
Moldova took 48th ranking in the World Bank's annual report "Doing Business 2020." Although, this is one step lower (simply, other countries are improving their positions), the indicator is quite high, it aggregates and reflects the merits of the P. Filip’s government, since the rating data are calculated based on the results of 2018, the business index in Moldova has improved, it is an excellent trump card in the hands of the following governments and a base for attracting investors. Moldova was distinguished by rather high indicators among 190 countries of the world by such criteria as business registration, taxation, international trade, protection of shareholders minority, obtaining loans, resolution of insolvency. The German company "Dräxlmaier" opened a new plant in Cahul town in 2019, investing 30 million euro. The German company "Kaufland" has invested more than 85 million euro in the development of its trading network in Moldova. Turkish company "Summa" opened the four-star "Courtyard by Marriott" hotel with an investment of 10 million euro. Trans-Oil Group begins the construction of a new oil press plant in the territory of the Giurgiulesti port, it will spend $22 million to this project... The above mentioned serves as an evidence that Moldova has great potential and conditions for doing business which allow to invest and develop here. // 31.12.2019 - InfoMarket.
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