"Our major objective consists in taking and implementing the commitments arising from the European course": interview of Moldovan deputy prime minister, minister of Economy to SIA MOLDPRES.

Chisinau, 8 September /MOLDPRES/ – MOLDPRES: Mr. Deputy Prime Minister, Minister of Economy Octavian Calmic, Moldova recently marked 25 years of Independence, but there are many voices saying that our country is not independent even after a quarter century. And one reason is our dependence in terms of energy. I want to ask what is being done to eliminate this problem and I am referring to interconnection projects with the electricity grids and gas of Romania, respectively, the European Union and when do you think Moldova will be independent in energetically?

Octavian Calmic: The issue of energy security of the Republic of Moldova is on the political agenda of the Ministry of Economy, too. Of course, following geopolitical and regional processes that have occurred in recent years at this chapter we faced some serious difficulties. But now, we have a very clear and real perspective of implementing energy investment projects, coming to create an alternative sustainable supplies of electricity and natural gas in the European market.

Due to ministerial team and specialists of subordinate institutions’ efforts, now we find that the population will be provided with energy sources at a rate of one hundred percent. Moreover, through actions taken, we managed not only providing citizens and businesses with electricity and gas in full volume, but at lower prices. And this is very important, in economic situation that we find ourselves, presently. Thus, at the beginning we were able to get a discount on the price of imported natural gas and electricity by 28 per cent, which further contributed to the reduction of tariffs for households.

But for us to develop and create a secure energy system in all aspects, the Economy Ministry has undertaken a number of measures, which in the near future will enable us to diversify our sources of energy supply to our country. One way of achieving this goal are interconnection projects of transport networks for electricity and natural gas between Moldova and Romania, which later will give us access to EU energy market.

In this respect, following the signing in May 2015 Memorandum of Understanding between the governments of Moldova and Romania on these projects, it was created a joint working group, which constantly meets and coordinates these projects, in particular the extension of the pipeline Iasi – Ungheni in Moldova until Chisinau and in Romania until Onesti. Also during these meetings on the electricity they discussed the future development of the first interconnections asynchronous Isaccea – Vulcanesti – Chisinau. Currently, underway is the feasibility study of this interconnection of electricity, conducted by a consortium led by ISPE.

Moreover, at the recent meeting with the Energy Minister of Romania Victor Grigorescu, we agreed to elaborate soon a joint plan to include more bilateral energy cooperation activities, including by initiating investment projects in Moldova's system energy with companies from Romania.

It is noted that the feasibility studies for these investment projects have been completed and the Ministry of Economy will soon launch procedures for the selection of design pipeline Ungheni – Chisinau and high voltage line Isaccea – Vulcanesti – Chisinau station interconnection back-to-back in Moldova. Financial resources have been identified in this regard.

The successful implementation of projects in the energy sector was established and high-level coordination group for the energy market and interconnections of energy systems, with the participation of the World Bank, European Commission Energy Community, EBRD, USAID, Romania and Sweden.

Talking about creating an energy efficient system security, I want to mention that recently the European Commission through the Energy Community Secretariat initiated a regional technical assistance project for four years, with a budget of about 4,6 million euros, for the Republic of Moldova, Ukraine and Georgia. In the case of our country, project main objective is to provide the necessary support to national authorities to develop secondary framework to implement laws approved in the energy sector transposing the acquis communautaire, commitment assumed by Moldova in the Energy Community Treaty.

All these measures, and many others, to be implemented, make us believe that, by 2020, Moldova through Romania's energy system will be connected to the Community.

MOLDPRES: Mr. Calmic, one of the failures of Moldova in these 25 years is that GDP has not yet reached at the last years of the Soviet period. What are the Economy Ministry’s forecasts for the coming years in this regard and when you think that we could reach the level of 1991?

Octavian Calmic: Of course it is good when you provide a benchmark from which you can start in the development of analysis, conclusions etc. And in our case, 1991 would be a good benchmark, if there were a few important points that do not allow us to make a comparison equidistant from all points of view of clues then and those today. Here it is why:

First, during the 25 years of Moldova's Independence, economy has shifted from a planned economy to a market one. Moreover, until 1991 statistics also covered the left bank of Nistru region, and a considerable part of enterprises were union subordinated, fulfilling orders in defence of the Soviet Union, which reported their results direct to Moscow.

In these circumstances, the official calculations of national GDP were presented only since 1993, with districts located on the left bank of the Nistru. In these circumstances, we find that in 1999 GDP was down by 41.2 per cent and in 2010 – was virtually equal to the level of 1993, representing 99.1 per cent. In 2015, GDP already exceeded the level of 1993 by 19.8 per cent.

If we go further with this analysis, I should mention that, according to international statistics in terms of GDP per capita calculated on the basis of purchasing power parity, in 2015 it was $ 4,638 compared to $ 2,935 in 1993 and $ 2,033 in 1999.

MOLDPRES: We are facing a severe economic crisis caused largely by fraudulent bank transactions in 2014. How long will this crisis last?

Octavian Calmic: In 2015 GDP was down by 0,5 per cent, especially in the agricultural sector contracting account the added value of which was reduced by 13,8 per cent. Problems in the banking sector have contributed this year, the national currency depreciation by 34,1 per cent (in annual average terms), respectively, the average inflation rate increased by 9,7 per cent. But thanks to measures taken by the National Bank and the Government, in the first 8 months of this year, the Moldovan leu depreciated against the same period last year by only 8,7 per cent and the annual inflation rate in January-July was 9,1 per cent, continuing a trend of diminishing.

According to the estimates that we have made based on updated forecast of macroeconomic indicators for the years 2017 – 2019, developed and coordinated with IMF experts, GDP growth in the years 2017-2019 will be generated by the annual increase in real terms industrial output 4,7 per cent and agricultural 4,3 per cent, following the reorientation of investment policy for performance programs, upgrading of infrastructure and small business development.

Being based on these trends, it is estimated GDP in the years 2017-2019 to grow at an average rate of about 3,3 per cent real annual growth. There will be some changes in the structure of GDP: categories of resources – will increase the share of gross value added from 84,8 per cent (2016) up to 85,7 per cent (2019); by uses – share of final consumption will decrease from 106,2 per cent to 102,1 per cent, the negative value of net exports – from 27,6 per cent to 24,7 per cent. The share of gross fixed capital will increase from 22,9 per cent to 23,9 per cent.

MOLDPRES: In this context, what are the steps, actions of the Ministry of Economy to overcome this crisis? Which are the new projects that would let Moldova’s economic development?

Octavian Calmic: Currently, our major objective consists in taking and implementing the commitments arising from the European course, namely, the implementation of the Association Agreement with the European Union, including a Deep and Comprehensive Free Trade Agreement (DCFTA).

The successful implementation of these documents will be in export growth and stimulating the flow of European direct foreign investment in Moldova; creating more competitive enterprises and technological development of the country; improving the safety of consumer products and consumers in particular; strengthening national income and wage growth. Thus, following implementation of the DCFTA is expected long-term GDP growth by 5,4 per cent, exports 16 per cent of national income by about 142 million euros, 4,8 per cent of wages. So, development of trade relations with the European Union is an important factor in strengthening the national economy and the most efficient way to modernize the country economically.

We will continue implementing the measures which aim to ensure a fair and transparent business environment for affairs. We goaled to establish clear rules for businesses, reducing the number of permits exclusion of abuse by control bodies by reducing their number by 70 per cent. In this regard, there have been changes already to the legislative framework, the list of permits was reduced by 114 of the 416 positions identified, or more than 25 per cent. It was applied a moratorium on state controls and controls established of consultative nature of small and medium enterprises within 3 years. By that stage, about 200 businesses have benefited from the effects of the moratorium, so thus creating favorable conditions for their development.

Development of small and medium enterprises is another strategic objective because of their potential to generate revenue and new jobs, promote innovation and strengthen the economy. At present, small and medium enterprises in Moldova are the most numerous and important segment of companies, representing over 97 per cent of all staff working in the national economy.

The principles that guide us in the development of this sector are supporting the principles of the Small Business Act, namely: simplifying the administrative burden on SMEs access to finance, and increase SME access to public procurement and development funds. They are in the process of implementation of a number of programs and mechanisms to support the sector: National Program for Youth Economic Empowerment Program for Attracting Remittances in Economics, "PARE 1 + 1" program COSME, the State Fund Loan Guarantee Program "Women in Business", Business incubators in Moldova. We will continue implementing them and create new tools to stimulate and support the SME sector.

We want to be a country with a competitive economy with a production-based economy and an attractive investment climate. We will implement mechanisms for attracting investment in industrial parks and special economic zones and develop these platforms. These commitments are undertaken in a set of strategic documents which are being implemented, such as: Roadmap for improving the competitiveness of Moldovan National Strategy for Investment and Export Promotion Strategy, reforming the regulatory framework of entrepreneurial activity, etc. .

MOLDPRES: We know that because of "theft of billion" and the 2014 political uncertainty, foreign investors, who were so few started to avoid Moldova further. Has it been done anything to regain their confidence?

Octavian Calmic: Of course, banking problems had an impact on international credibility and the country's image, but we can not speak they directly affect foreign investors, given the fact that the location of an investment decision depends on a lot of factors.

Incidentally, this is also supported by statistical data. According to these data, the net inflow of direct foreign investments in the national economy in the first quarter of 2016 was US $ 34.74 million, by 1,1 times more compared to the fourth quarter of 2015. This is due, in large part, to the reinvested income growth, which demonstrates investors' increased credibility for Moldova. Joint ventures and those with foreign ownership have recovered 22,7 per cent of total investments used in the country, or 2,3 percentage points more than in the same period of 2015, which confirms the interest and confidence of foreign investors in placing investment in our country.

Here, I would like to mention that Moldova has a number of advantages of investment: the existence of favorable tax climate, advantageous geographical location, free access to foreign markets, skilled workforce etc. Due to these advantages and measures taken by the Government, there were attracted several major investment projects, that are planned to be expanded in the coming years.

An example might be "Miss Draexlmaier Automotive" S.R.L. company, working in the FEZ "Balti" since 2010 and carries out investment project of producing electric wiring for cars. So far, company has made investments in the amount of US $ 35 million. Also, during 2016-2017 company plans to invest an additional approximately US $ 35 million. Following the completion of the investment project is planned to create 2,500 new jobs.

An investment project of national importance is the place of "GG Cables & Wires EE" S.R.L. The volume of investments made from 1 January 2016 reached 20 million US dollars, and sales volume achieved in the aforementioned period totaled 1,1 billion lei. At present, this company operates 101 employees, average monthly salary is about 16 thousand lei. Between 2016-2017 company plans investments of US $ 25 million. Following the completion of the investment project is planned to create 800 new jobs.

The government also undertakes efforts towards creation of a favorable environment for attracting investments, the realization of investment projects and export promotion. Improving the Moldova’s investment climate, increase investment attractiveness of the country for the location can be found between the primary tasks set by the Government. The most important issues to be resolved in the near future are related to the modernization of existing infrastructure, including the transport etc.; protection of investments, including property; reducing bureaucratic barriers, including the exportation of goods etc.

I would like to relate that in these directions were already taken concrete steps to harmonize Moldovan legislation with EU directives, simplifying the procedure for registering a business, improve the legal tax and customs etc.

Moldova offers to potential investors a wide range of opportunities, located on industrial sites existing or greenfield, supported by facilities provided for by law for industrial parks, special economic zones, the International Free Port "Giurgiulesti" and tax breaks general for economic producers.

Also, in order to create an investment environment more attractive, this year has been approved national strategy for attracting investment and promoting exports for 2016-2020, which includes a series of measures designed to come to greet foreign investors.

In addition, in order to facilitate the economic activity of foreign investors and for settlement of possible rapid divergence, a Council was created to promote investment projects of national importance under Government Decision no. 585 of 05/12/2016.

For the coming period, in order to improve the investment climate, the Ministry of Economy aims to achieve the following objectives: implementing the National Strategy for attracting investment and promoting exports 2016-2020, reforming and streamlining business by Moldovan Investment and Export Promotion Organization (OPIEM), implementing regulatory reform that will eliminate the administrative and regulatory barriers and facilitate investment promotion, launch single window implementation of the National Strategy for Development of SMEs, the Roadmap increase competitiveness, we will accelerate the fulfillment of commitments under the AA/DCFTA etc.

MOLDPRES: In your opinion, can Moldova become a prosperous state in the future and secure economically, a country where people do not go from poverty to seek a better future?

Octavian Calmic: I declare with all responsibility that if we have political stability, support of citizens and development partners, in a few years we will implement programs and development strategies of the country, and this brings us, finally, towards stability, prosperity, poverty reduction and turn Moldova into a prosperous state.

It will be difficult because the "legacy" received by the current government is not easy, but in these few months we have demonstrated that we can achieve results in difficult situations. I am firmly convinced, that things will normalize in Moldova and will move on an upward trend of development, with an attractive business environment and friendly people who have entrepreneurial ideas and image of the country recovered both domestically and internationally.

(Editor M. Jantovan)