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Overview of International Relations

In an official press statement US Ambassador to Moldova Pamela Hyde Smith confirmed America’s continuation on the cooperation course with the Republic of Moldova. The USA is especially interested in resolving the conflict in Transnistria and the speedy removal of Russian arms. Ms. Smith also mentioned America’s willingness to help Russia in carrying out the decisions of the Istanbul OSCE summit.

The US also supports the federalization project for Moldova brought forth by the OSCE and plans to renew negotiations referring to peace in Transnistria. As the official representative of her country Ms. Smith believes that solving this particular problem is one of the main steps to achieving future prosperity in Moldova.

The volume of trade between Moldova and the US constituted over $70 million in 2002. As experts of the Ministry of Economy pointed out textile products mostly dominate the structure of Moldovan exports to America. Imports to Moldova are comprised mostly of humanitarian aid, the amount of which increases every year.

However despite the annual help received from the UN and a dozen of foreign countries Moldova’s battle with poverty goes on. As of today it is still at the bottom in the list of all European countries. The money aimed at relieving some of the difficulties siphons out past its most needy recipients. Catching up with Italy and its formidable mafia Moldova ranks 68th in fighting corruption while Scandinavian countries such as Denmark and Sweden occupy top positions with the lowest corruption levels in Europe.

It is important to establish a control system for the funds that enter Moldova. However in the past twelve years of money borrowing with the total debt soaring as high as $1.4 million the country has not been able to reconstruct its industry. Official unemployment rate is about 20% but in reality nearly 50% of the population is jobless. In the past ten years due to hard living conditions and a difficult economic situation out of 4.4 million people approximately one million has left the country. The outflow continues as men and women seek work abroad.

The US, like many other countries officially represented in Moldova, believe that one of first measures in order to remove the drastic gap between the two social classes in Moldova is to improve the investment climate and attract more foreign investments to the republic. Ms. Smith also mentioned the importance of passing subsequent amendments to the present laws on conducting business. Moldovan authorities could become more predictable in their actions and strictly observe the existing legislation. The United States is ready to contribute to these efforts.

After the meeting in Washington between President George W. Bush and President Vladimir Voronin, the latter stated that he gained full support in the White House for his further plans in resolving the Transnistrian conflict. It is understood that certain measures will be taken if Transnistria continues to avoid negotiations. These will be maintained by the OSCE.

The US also expressed its willingness to assist Moldova in restructuring its foreign debt in terms of the Paris Club. The declaration signed by the leaders of the two countries on the results of the meeting refers to the purposeful transition from centralized to market economy.

George W. Bush emphasized the significance of continuing reform in the energy sector and the amelioration of the investment climate in Moldova. He expressed an understanding of the social and moral problems Moldova has encountered in its move to the free economy. President Bush stated that the Republic could rely on the help from the US if it maintains its current course for implementing reforms.

Vladimir Voronin also met with the head of the World Bank James Wolfensohn and the Managing Director of the International Monetary Fund Horst Koehler. They discussed further economic stabilization through reform in Moldova. World Bank management representatives promised to continue providing aid to the country in its attempt to advance economic reform and recognized the need to hasten the second transfer of WB credit for structural modifications to the SAC-III to the sum of $10.6 million.

President Voronin believes that Moldova has met all conditions sited by the bank experts. World Bank still has to specify the parameters for obtaining new credits whereas Moldova must provide information on the privatization of wineries. The republic has also requested an opportunity for refinancing the credits it received in 1992 through 1998 with an interest rate fixed by the Agency for International Development.

Vladimir Voronin convinced his counterparts that before April 2003 the government will develop a national strategy for reducing poverty and achieving economic growth. Of course this would require additional funds from the World Bank.

The US and Moldova have considered ways of ameliorating the entrepreneurial climate in the republic including the relations with the well-known Spanish Union Fenosa. Horst Koehler confirmed that Moldova would gain support for rescheduling its debt in the Paris Club. President Voronin underlined that he is about to solve the most serious question about the legalization of freight inspection of imported products. The corresponding bill was passed by Parliament in its first sessions and the law is to be adopted in the nearest future.

On June 20, 2002 the World Bank approved two credits for Moldova - a US$30 million equivalent: the Third Structural Adjustment Credit to support medium-term economic development and reform program and a US$10.5 million Adaptable Program Lending1 credit for a Rural Investment and Services Project.

The Third Structural Adjustment Credit (SAC III) will help the Government of Moldova set the basis for sustained economic growth in the medium term, first by focusing on better monitoring and evaluation of poverty reduction measures as well as improved performance in the areas of education and health care, and second, by pushing ahead on reforms to enhance the business environment. Under the SAC III, the government will receive support for consolidating economic stabilization, bolstering foreign reserves and servicing external debt.

The Paris Club is an informal group of official creditors whose role is to find coordinated and sustainable solutions to the payment difficulties experienced by debtor nations. Paris Club creditors agree to reschedule debts due to them. Rescheduling is a means of providing a country with debt relief through a postponement and, in the case of concessional rescheduling, a reduction in debt service obligations.

Valentina Lipina
Natalia Corobco

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