Development Region North: creation process and prospects. Economic analysis by Info-Prim Neo

The formulation of a regional development policy became a national priority. Its implementation will create unfailing possibilities for overcoming the present state of affairs in the economic and social life of the country and of its people. The regional development is an imperative, given Moldova’s aspirations for European integration, especially since having a common border with the European Union (EU). During the past years, the regional development policy became one of the most important and complex policies of the EU. In European understanding, the regional policy should be aimed at reducing the social-economic disparities between regions and increasing the economic and social cohesion, focusing on significant development areas such as economic growth, transport, agriculture, urban development, environment protection, employment and professional formation, education etc. The principles that form the basis of the regional development policy are: decentralisation, partnership, planning, cofinancing. The achievement of these principles offers possibilities of solving the problems of the vulnerable regions, ensuring a dynamic and sustainable economic growth by efficiently bringing the regional and local potential to good account. At the end of 2006, the Parliament adopted “the law on regional development in the Republic of Moldova.” In such a way, there was created the legal basis in regional development, there were identified the necessary resources for implementing the regional development policy. According to this law, the country is divided into six functional development regions: North, Centre, South, the Autonomous Territorial Unit Gagauzia, the municipality of Chisinau, and Transnistria. The Ministry of Local Public Administration was entrusted with the implementation of the law. The EU Project “Support to the Regional Development Implementing Bodies” supports it. At the current stage, the Project provides assistance to the development regions North, Centre and South in formulating the Development Strategies for 2007-2013 and the Operational Plans for 2007-2009. A constitution meeting and the first workshop of the Strategic Planning Group of the Development Region North (DRN) took place in mid-February in the municipality of Balti. The group includes over 100 representatives of the local public administrations, of the civil society and private sector. The next meetings worked out analyses and drafted documents that were improved by confrontation of ideas during workshops. [General characteristics] The Group drew up the social-economic analysis of the DRN and carried out the SWOT analysis of the region. Therefore, the DRN is one of the largest regions in Moldova, being the second by the number of people (1,025,000) after the region Centre. It embraces the municipality of Balti and the districts of Briceni, Edinet, Donduseni, Drochia, Falesti, Floresti, Glodeni, Ocnita, Rascani, Sangerei, and Soroca. The DRN covers all the northern part of Moldova. Geographically, the region borders Ukraine in the north and in the east and Romania in the west, the Development Region Transnistria in the southeast and the Development Region Centre in the south. The DRN includes 20 urban centres. The municipality of Balti is the largest of them and is located at a crossroads that joins the north with the south and the east with the west of the region and of the country. The municipality of Balti is an important social, university centre and a key market for the agricultural producers of the region. Compared with 1989, the population of the region decreased by 123,600 people or by 11.3%. The largest part of the population is concentrated in villages – 68%. The population density (97 residents per km²) is lower than the average per country, but higher than in the Centre and South regions. The region has the lowest number of young people aged under 14 in comparison with the rest of the country. At the same time, the persons aged over 65 make up 18.6% and exceed the average per country (10.4%), being the region with the largest number of elderly people. Most of the employed people work in agriculture and forestry (44%), followed by education and social assistance (17%), the industrial sector (12%), trade (6%), transport and communications (4%) etc. [Original potential] The geographic position of the DRN is extremely favourable for implementing transfrontier cooperation projects. The zone has a diversified transport infrastructure, aquatic resources, mineral resources, historical and cultural patrimony and two functional Euroregions: the Upper Prut and Siret-Prut-Nistru. The RDN is characterised by a multitude of natural protected areas and cultural objects of an incontestable value. The region includes 102 natural areas protected by the state, which make up about 25% of the country’s fund of natural areas, two beaches of national importance, museums, ecclesiastic buildings including five monasteries and four convents. The largest scientific reservation of the country “Padurea Domneasca” (The Domneasca Forest), which includes over 79 rare species of pants, is located in the wetlands of the Middle Prut. One of the largest caves in the world, “Emil Racovitsa”, is also in the DRN. It ranks the third among the plaster stone caves and the eighth in the general ranking of the giant underground caves on the planet. The Tsaul Park is located in the middle of the village with the same name and contains about 150 species of plants, of which about 100 are exotic. The Park in Myndyk is a collection of species of the rare and valuable dendroflora in Moldova. But not many potential tourists have the possibility of admiring these beauties of the nature due to the underdeveloped tourism infrastructure of the region. The region has only 18 hotels or similar establishments with a total capacity of 2,415 places. The necessity of improving the quality of the accommodation and entertainment infrastructure is evident. The development of transfrontier tourism can become an opportunity in the area. The zone favours the development of many types of tourism. It has a picturesque landscape with many recreational possibilities and a valuable cultural and historical potential that favours the development of agritourism. The large number of churches and monasteries offer the possibility of organising pilgrimages to these religious buildings, fact that will contribute to the appearance of a new type of tourism, the ecclesiastic one. There are also possibilities for the green, entertaining and cultural tourism. [Acute economic problems] As in the rest of the country, the labour market in the DRN is strongly affected by migration, mainly of young people, which reaches great proportions. The people predominantly leave for the EU member states and for Russia, because they cannot find in Moldova favourable working conditions and salaries that will enable them to have a decent living. The number of women and persons with higher education that emigrate has considerably increased during the last few years. The number of unemployed is on continuous increase. The unemployed in the DRN in 2005 made up about 30% of the unemployed in the country. At the same time, the number of people that do not have a permanent job or work in the informal economy is rather high. Expert of the EU Project “Support to the Regional Development Implementing Bodies” Andrei Balynski considers that under such conditions, the employment and placement capacities must be considerably increased by adapting the workforce to the labour market demands. It is opportune to permanently train the unemployed and the disadvantaged groups, to create optimal conditions for a flexible labour market, to reduce the unemployment rate among young people. Agriculture is the most important branch of the economy in the DRN, but its productivity has decreased. The same expert formulates the key reasons for the present situation: few investments; intensely parcelled agricultural lands; the infrastructure for collecting agricultural products is not functional, and the local agricultural products cannot compete with the imported products. The motives for the low productivity in the animal-breeding sector are related to the disbanding of the majority of the large complexes, as a result of which the auxiliary farms began to breed animal themselves. Possibilities should be identified for selling agricultural products and for opening factories for processing raw material, along with the modernisation of the agricultural sector, which would ensure an evidently superior productivity. A hindrance to the industrial development of the region is the worn-out equipment of the enterprises. The food industry plays the primary role in the region. Among the most important products manufactured in the region are: sugar (100% of the total per country), vegetal oil, dairy products, fermented tobacco, and meat products. A number of 145 enterprises work in the DRN. Most of them are located in the city of Balti, what confirms the high concentration degree of the industry. According to the data of 2005, the industrial production in the region comes to 4,221 million lei, accounting for 21.1% of the total per country. The average yearly number of productive personnel in industry is about 32,000 persons, as opposed to about 126,000 people per country. The light industry, the building materials industry, the electro-energy industry and others represent the most important sectors. By renovating the equipment and implementing advanced technologies, the industry can become an important element in the development of the region. A problem confronting the region is the small volume of investments. There is yet a tendency to increase the investment activities of the economic agents from their own resources. In 2005, the investments in fixed capital in the DRN were 1,202.1 million lei or 16.7% of the investments in fixed capital made at national level. About 10% of the investments made in the DRN were allocated from the national budget and about 4% from the local budgets. The volume of state investments remains insignificant. The largest part of the investments was made in the municipality of Balti and in the districts of Soroca and Briceni, fact that maintains significant discrepancies in the development level of the region. The local roads of the region are in a deplorable condition and must be extensively repaired. Due to the poor condition of the roads, the attractiveness of the rural settlements for investors is rather low. The limited budgets of the mayoralties do not allow repairing the local roads. It is clear that considerable investment is needed to repair the network of roads in the settlements. Despite the railway connection with Russia, Belarus and Ukraine, there is no electrified railway. Trains’ speed is low due to the precarious technical condition. The improvement of the technical condition of the railways and of the access to the European transport corridors is key. The energy sector is fully dependable on imported resources and that diminishes the degree of energy security. The municipality of Balti is the only one to be supplied with thermal energy from the Thermoelectric Plant North. No municipal thermal stations work in the other settlements. Another problem is the supply with natural gas. Only 35.2% of the settlements are connected to the network of gas distribution network. The salaries in the economy of the DRN are lower than the average per country. In 2005, for instance, the average nominal salary in the region was 970.4 lei or 73.6% compared with the average salary in the country. Also, the salaries differ depending on the zone. For example, the nominal value of the salary in Balti is twice greater than in Briceni. [Acute social problems] A rather sensitive problem for the region is the quality of the education, which is greatly affected by the insufficient infrastructure and by the weak motivation of the personnel in the education institutions. There were 497 primary and secondary schools in the DRN at the end of 2005, of the total of 1,551 schools existing in the country. Their share was 32%. The number of primary and secondary education establishments has slightly decreased, mainly due to the reduction in the number of students as a result of the fall in the birth rate and of en masse emigration of the students together with their parents abroad. The secondary vocational education establishments do not have modern teaching aids and facilities that would correspond to the always-changing demands of the labour market. The situation in the healthcare system is not better. The hospitals have very few beds for sick people: 39.1 per 10,000 people. This is much under the average per country of 63.9 beds. The medical equipment is worn-out and outdated. The rate of territory doctors is 20.5 doctors per 10,000 people, as against the average per country of 34.9 doctors per 10,000. The number of average medical personnel is also on the decrease and as a consequence there is a shortage of medical staff in the rural settlements, which benefit from primary medical assistance only and there is an inequality between the medical services provided in the rural and urban areas. The pollution level in the DRN is very high due to the insufficiency of investment in the re-technologisation of the polluting production processes. As a result of the rise in car imports, the exhaust emissions into the atmosphere have increased by about 30%. Due to the lack of investment to restore the wastewater treatment facilities and the sewerage systems, the domestic households and the enterprises became major sources of pollution. Not even the fifth part of the wastewater treatment stations built before 1990 work at present and as a result only about 70% of the water is treated. The communal-housing complex is now on the brink of a crisis of infrastructure due to the physical wear of the water supply equipment and sewerage systems and the use of inefficient equipment from the viewpoint of energy consumption. All these lead to the flow of the untreated or insufficiently treated wastewater into shallow waters, what endangers the sanitary-epidemiological and ecological security of the drinking water sources. [Weak and strong points] The analysis of the potential of the DRN carried out by the EU Project “Support to the Regional Development Implementing Bodies” in concert with the Strategic Planning Group has identified the following weak points: dependence on foreign energy sources; the local budgets have limited financial capacities; outdated industrial technologies and potential; excessive parcelling of the agricultural land; underdeveloped service infrastructure, low productivity in agriculture; corruption affecting the development of some sectors, shortage of qualified labour force; unfavourable business environment; small degrading towns; insufficient transparency in the activity of the local public authorities; limited capacities for developing tourism; existence of major pollution sources. At the same time, the development of the DRN can be ensured by: modernizing the enterprises by introducing new technologies; developing small business in rural areas; modernizing agriculture and developing ecologically pure agricultural products; promoting and developing export; creating a favourable investment climate for attracting foreign investment; developing alternative sources of energy; promoting cross-border cooperation and participating in regional and good neighbourhood programs; tourism; creating conditions for attracting the qualified personnel that emigrated for a period abroad back to the country; developing the irrigation systems by using the rivers and accumulation ponds; establishing railway connection with the EU; utilising the unused production spaces. All these can lead to good results at all the levels. [Region Development Vision] On the basis of the previous analyses and social-economic audit, the Strategic Planning Group of the DRN formulated the Region Development Vision. According to the expert of the EU Support for the Regional Development Implementation Bodies Project Constantin Nunu, the document outlines the specialisation of the region, the principal development directions of the areas of public interest. In such a way, “the Development Region North is a dynamic region with prosperous towns and a well-shaped development pole (the municipality of Balti), characterised by a diversity of sustainable economic activities based on the traditional entrepreneurial practices of the residents, open to the technological and information challenges, which will put to good use its favourable geographic position. The region will have a developed and qualitative physical infrastructure that will offer opportunities of territorial cooperation and quick access to the European transport corridors, and will be an attractive tourist destination. All the residents will benefit from training and employment possibilities, access to qualitative public services and utilities that will ensure high living standards.” [Strategic and specific objectives] The strategic objectives of the region are now being formulated: - to enhance the sustainability of the economic activities by using the geographic position of the DRN, the industrial potential and natural resources; to develop the human resources to meet the labour market demand by improving the professional training and requalification system; - to develop the physical and environment infrastructure, strengthen the territorial cooperation relations; - to develop the social infrastructure, improve the quality and accessibility to public services. The strategic objectives are supported by specific objectives and measures that should be achieved so as to solve the identified problems. The Development Strategy of the DRN will include the Operational Development Plan that will constitute the region’s project portfolio for the next three years. Project ideas are now being collected from representatives of the local public authorities and of the civil sector and the Plan will be drafted this month.