Of Reforms and a New Government in Moldova

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People on the main street of Chisinau, capital of the Republic of Moldova
People on the streets of Chisinau, capital of the Republic of Moldova. Photo: Elena Prodan / World Bank

After several months of campaigning and negotiations, Moldova’s new Government is about to take shape. The World Bank is looking forward to hearing the new Government’s plans for reform.

What will be the World Bank’s main messages when it meets the new Government? If we had to choose the three most important points, here they are:

1) The banking sector needs a clean-up. As we have been saying openly since 2013, the regulators and the courts need to make banks follow the rules - without interference from politicians to protect invisible interests. The Moldovan taxpayer shall pay dearly for  poor governance in the financial sector in 2013-4. As acting Prime Minister Leanca said, these scandalous events must not be allowed to repeat themselves.

2) Businesses need more transparency and less corruption. The World Bank/EBRD Business Environment and Enterprise Performance Survey (BEEPS) compares how businesses saw their operating environment in 2013 with how they saw it in 2009. There have been improvements nearly everywhere, for example in transport, access to finance, security, energy, customs regulations and telecoms. But in 2013, according to surveyed businesses, two big challenges remain: political instability is problem number 1 and corruption is problem number 2.

3) The Deep and Comprehensive Free Trade Agreement with the EU makes reform even more urgent. For sure, it offers exciting opportunities to Moldovan exporters. However, free trade will also make EU goods cheaper in Moldovan shops. So competitiveness will be critical. Moldova currently scores 4 out of 7 in the Global Competitiveness Index rankings (between Greece and Iran), with good ratings of 5 only for health and primary education services. The scores are particularly weak for institutions, market size, innovation and technological readiness. In addition, the Doing Business report of the World Bank Group notes that Moldova’s performance in trading across borders has stagnated - a critical issue for Moldova’s ambitions of regional integration.

During the elections, the World Bank was encouraged by talk on all sides of a modern, efficient economy. We look forward to working with the next Government to make it happen.
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Note: This post has been modified by the author since it was first published.

Authors

Alex Kremer

Country Manager for Belarus, Europe and Central Asia

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