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MoldovaPostindependence Privatization and Other Reforms
Once independence was achieved, Moldova's government
undertook measures to begin privatization, which included
passing
a law mandating privatization and establishing the State
Department for Privatization to direct the process. The
overall
reform policy was guided by "The Draft Economic Reform
Program of
the Government of Moldova," a 1991 document calling for
establishment of a market economy but permitting
significant
provisions for government intervention.
In late 1992, the government presented Parliament with
a more
market-oriented policy in its "Program of Activity of the
Government of Moldova for 1992-1995." Its goal was to form
a new
social pact as a basis for a new society and economy for
Moldova.
The two-part program would first aim at stabilizing the
country
and then provide for the economy's recovery and growth by
such
means as agrarian and trade reform, social protection, and
a
legal framework for a market economy. The direction of the
new
government was elaborated in the "Program of Activity of
the
Government of the Republic of Moldova for 1994 to 1997,"
which
was adopted by Parliament and which focuses on
restructuring the
economy, reorganizing enterprises, privatizing small and
mediumsized enterprises, promoting entrepreneurship, decreasing
the
budget deficit, implementing an efficient fiscal policy,
and
formulating new mechanisms to create a market economy.
Another
bill, the "Program for Privatization for 1995-1996," was
approved
by Parliament in March 1995. It focuses on foreign
investment,
privatization of agricultural land, the introduction of
cash
auctions, mass privatization, and the development of
capital
markets. Over 1,450 state enterprises are to be auctioned
off.
During 1992 enterprise privatization committees
inventoried
assets at each enterprise in the republic; the aggregate
result
of this inventory became the basis of calculations of
Moldova's
total industrial wealth. Each citizen was to be provided
with
vouchers (or Patrimonial Bonds) in 1993, endowing him or
her with
a share of this total wealth based on years of employment
in the
economy. Citizens would receive one voucher point per year
of
work in the republic. Enterprise employees were to be
allowed to
purchase up to 30 percent of the value of their
enterprises at
nominal value. By special arrangement, 40 percent of the
value of
enterprises in the food-processing sector was to be
allocated to
suppliers. The program was to be completed by the summer
of 1995.
As of the beginning of 1995, Moldova had 4,400 state and
57,000
private enterprises.
Employees of collective and state farms were also to be
provided with vouchers based on the length of their
employment in
the agricultural sector. In January 1992, Moldova expanded
the
amount of free land that eligible families would receive
from
state farms to 0.5 hectare per family, with an additional
0.1
hectare to be added for fourth and subsequent family
members up
to a maximum of one hectare per family, on the condition
that it
not be resold before 2001 (although it could be
bequeathed).
Collective and state farms were to be converted into
jointstock companies first, and the land and property were to
be
allocated later. In 1993 Moldova had 481 small private
farms; by
1995 this number had increased to 13,958. In 1995 1.5
percent of
agricultural land in Moldova was held by these small
farmers. The
reasons for slow privatization of the agricultural sector
include
slow privatization of large organizations, the use of
outmoded
production methods and equipment, poor accounting
practices, and
a shortage of processing facilities.
At the same time that privatization plans were under
way,
actual reform efforts were halting and relatively
ineffectual,
and Moldova's economy declined. A number of factors
contributed
to the decline, including the complicated political
situation in
the republic (which had seen several changes of leadership
in its
first years of existence) and the political and military
conflict
with Transnistria. Substantial industrial capacity is
located in
Transnistria, and the disruption of traditional economic
ties
with enterprises there has had a negative effect on the
economy
of right-bank Moldova.
Further, because Moldova's economy was firmly embedded
in the
broader economic structures of the former Soviet Union, it
also
suffered damage from the breakdown in interrepublic trade,
abrupt
increases in external prices, and inflation resulting from
the
Russian government's policy of printing large amounts of
money.
(Moldova retained the Russian ruble as its currency until
November 1993.) The consequence of all these factors has
been a
substantial economic downturn in both industry and
agriculture,
accompanied by increased unemployment and a decline in
labor
productivity. In 1991 Moldova's national income was only
at 1985
levels. Moldova's industrial output in early 1995 was half
of the
output of 1990. Moldova's gross domestic product
(GDP--see Glossary)
declined by 30 percent in 1994 (by 5 percent in
1993
and by 28 percent in 1992), and its industrial output
declined by
34 percent (by 12 percent in 1993 and by 27 percent in
1992).
Data as of June 1995
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