The political transition following the parliamentary elections in 2019 produced a major change of power that created preconditions for boosting the reforms’ agenda, but the fundamental weaknesses of the state of the country were not resolved yet.
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The shadow economy in Moldova has reached the point where it has a very strong and persistent negative impact on the tax revenues, but especially on the economic growth. It placed Moldova among the countries with the highest level of shadow economy in the region. In recent years, the shadow economy in Moldova has been steadily growing and spreading, affecting increasingly the development of the economy. The immediate effects of tax evasion are related to forgone losses to the state budget (fiscal discrepancy). The large size of the shadow economy is mainly due to weak institutions, characterized by limited administrative abilities in the public sector to coordinate and manage the economic system and the relationships that characterize it. In addition, it is caused by perceptions about high fiscal pressure, complexity and instability of fiscal regulations, weakness of the tax administration, moral hazards and contagion (when some individuals observe the behaviour of other individuals and try to replicate for financial gains). In order to properly address this issue in a sustainable way, the policies, so far did not take into account the behavioral insights – the social norms and psychological factors that explain tax evasion in Moldova. This study comes to fill this gap by providing the necessary analytical framework that explains the tax evasion from the behavioral point of view and provides policy recommendations in this regard.
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The bail-in procedure is a relatively new one at global level. Actually, according to Directive 2014/59/UE, up until now no European financial institution was salvaged from bankruptcy through bail-in5. Considering the complexity of the Directive, the existing contraindications between European governments regarding the bail-in procedure, as well as the extremely strong lobby from international financial groups, certain reluctance in implementing the provisions is present in several European countries. However, the recent history notes the use of bail-in in the Cyprus banking crisis, and more specifically, in the recovery of the financial situation in two financial institutions with systemic impact.
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Moldova’s electricity sector remains vulnerable and weak because of corruption, dependence on unreliable suppliers which abuse their dominant position, and unfinished liberalization. In fact, the rules of the game in the sector are incomplete and discriminatory, at the expense of the Moldovan taxpayer or small consumer. A recent example is the controversial tender for electricity imports in early 2016. Moldova continues to purchase energy from Transdniester, which pushes up the consumption of non-paid gas. The irresponsible behavior of players in the separatist region – with the blessing of Chisinau – increased Moldova’s total gas debts to the Russian Federation, which are now as high as 80-90% of the country's GDP. Delays in dealing with the issues of mismanagement and corruption in the energy sector burden the whole economy of the country, far beyond the energy sector.
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Politically, the Moldovan authorities must prioritize the construction of the pipeline to Chișinău, where the demand for energy is located. One must put aside the negative political attitudes towards Romania and the European Union (EU), and political decision-makers and institutions must focus on facilitating and accelerating the connection to the Western gas market. The volatility of the regional context does not allow for any stop or delay on political grounds and requires swiftness in finding solutions to technical barriers, within the national legal framework. At the investment level, it is necessary to secure the construction operations of the Romanian company Transgaz SA, both in Romania and in Moldova, against the negative impact of the budgetary and fiscal policies of the Romanian authorities, which may affect the budgets allocated for construction. At the same time, priority is given to co-opting the European resources available to facilitate construction operations. Under no circumstances should the Romanian company receive exclusive treatment contrary to Moldovan legislation in the field of public procurement, environmental protection, etc. In technical matters, starting and finishing the construction requires compatibility between the European (European) construction standards used by the company and the (still) obsolete technical standards in Moldova. Also, there is a risk of a shortage of construction capacities, both for materials (pipelines) and labor force (qualified personnel - welders, site managers, etc.). As a horizontal issue for the whole interconnection project, it is essential to ensure a high level of transparency of the procurement process for the private land along the Ungheni-Chișinău pipeline route and for the actual construction of the infrastructure. On one hand, it is necessary to prevent arbitrary and disputable decisions in the land acquisition process, which could cause opposition to the construction of the pipeline. On the other hand, the up-to-date monitoring of the construction steps will ensure the identification of bottlenecks and their removal as swiftly as possible, in line with existing regulatory requirements.
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The results of the analysis highlighted major deficiencies regarding the allocation and transparency of expenses intended for the President's institution. The current way of recording expenses for this institution does not reveal all expenses. Part of the expenses are carried out by other institutions and are not included in the expenses intended for the Presidency. Also, the activity of the President is not sufficiently transparent compared to the practices of other Presidencies and does not fully respect the transparency requirements established by the domestic legal framework. Another topic, which does not directly relate to the President's expenses, but Belangs to his competence, is the awarding of decorations for special merits towards the state. And on this subject, the Republic of Moldova has great deficiencies not only in the transparency of the process, but also in the way of regulation.
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The Republic of Moldova is a country with few underground resources, at least at the current level of research. Consequently, the Republic of Moldova does not have an extractive sector with an important weight in the structure of the economy. At the same time, without this sector it would be difficult to cover the needs of supplying the population and businesses with homes, buildings and other infrastructure elements. On the other hand, if we take into account the fact that for the Republic of Moldova the soil and climate traditionally represent the fundamental resources for livelihood and economy, then the way in which useful mineral resources are exploited is very important. The object of this analysis is only the widespread useful mineral resources (sand, clay, building stone, loamy sand and sandy clay, etc.). Respectively, oil, natural gas, solid fuels were not included in this study.
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In order to identify the mechanisms/tools that could be used by NBM, banks and Government to overcome this lack of confidence and resume the lending activity, Expert-Grup committed to facilitate the dialogue between commercial banks, NBM, experts and other stakeholders. How we can stimulate the lending activity and bring back trust in the bank-customer relationship study was developed for this purpose1. This document focused on two subject lines. On the one hand, the study aims to identify the actual causes that fuel the bank disintermediation and the constraints that hinder the expansion of bank loans, on the other hand – to present solution how to foster this activity. In addition, in order to explore the actual situation, the Questionnaire for Assessing the Lending Activity was developed and sent to banks. This tool allowed forming a much clearer picture of the constraints affecting the demand and supply by types of loans. In the end, the results were discussed at a round table attended by representatives of commercial banks, Government, top management of NBM and other economic experts. The presence of all the stakeholders around the same table allowed to express the inside vision on this phenomenon and this note comes to synthesize and to totalise the results of the actions conducted by Expert-Grup in order to identify the factors underlying the bank disintermediation and the solutions regarding the stimulation of lending activity.
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