Chisinau-Tiraspol: building confidence at economic level will be as complicated as at political level. Analysis by Info-Prim Neo

The economic reconciliation between Moldova and the Transnistrian region will be probably as difficult as the political one. During 15 years, the secessionist region turned into an enclave compared with the territory from the right bank of the Nistru. But it has established commercial relations with about 100 countries. Three appeared two independent functional systems with all the necessary economic elements, including own currency. The attempts to get closer economically by concessions, as for instance the use of Moldova’s customs stamps by the Transnistrian authorities for a certain period, have failed in the same way as the bans imposed by Chisinau during 2004-2005, which were described by Tiraspol as economic blockade. The building of confidence between Chisinau and Tiraspol at economic level will be accompanied by animosities and interests that will complicate the process that will last much more than projected. Even if the political talks had been suspended for many times, the economic and business relations between the two banks continued, with a lower or higher intensity. [What problems we should solve?] There are a number of factors that will hinder the approaching between the two economies that have worked independently for 15 years. The adoption of a common currency will require considerable costs as this implies different administrative, financial and economic measures as well as enormous expenses. Foreign and local experts avoid assessing the costs of this process. “An economic reunification is impossible if the conflict is not solved politically,” they say. Another bone of contention is the privatization of patrimony in Transnistria, which Chisinau never recognized, declaring it illegal. The law on the privatization of companies from the left bank of the Nistru took effect on January 1, 2005. The law cancelled the results of the privatization in Transnistria and envisaged the transfer of companies into the ownership of their employees. The government asked the foreign investors to withdraw their capitals from the Transnistrian region. Will these privatizations be legalized after the economic relations are restored? In fact, the Moldovan officials will have to do the same. But no one would want to cede the property, even if the patrimony and market is re-shared between groups of influence after reunification. Inevitably, the system and principles of managing the economy will have to be reviewed. For instance, Transnistria has not implemented the agrarian reform, while the sale of land is banned. And this is not the only example of the kind. A sensitive issue is the foreign debt. Chisinau serviced a part of its debt and the payment of another part was rescheduled. Tiraspol profited from a facilitated regime offered by Russia. Transnistria’s foreign debt in 2007 rose by another 200 million USD, to over 1.8 billion USD at yearend, mainly due to the 1.4 billion USD owed to Gazprom. Will Chisinau assume these debts? Will it accept that they are paid by the taxpayers from the right bank of the Nistru, who have already borne the burden of the foreign debt? Will the Transnistria residents want to pay more for gas or Gazprom will become indulgent towards “a reunified country that is a friend of Russia?” During the past two years, Chisinau paid more for gas than Tiraspol. In the first quarter of 2008, Gazprom supplied gas to Moldova for 191 USD per thousand cubic meters, while in the second quarter Moldova will pay 213 USD. This year, Tiraspol will pay 195 USD per 1,000 m3. There are also infrastructure-related problems. The infrastructure in the past 15 years has developed autonomously. The integral economic space was divided into two independent functional systems after 1991. The parallel development of the economies of Moldova and the Transnistrian region resulted in a different legislative and normative framework as well as mechanisms on which they build. Though the economic relations between Moldova and the Transnistrian region have never been interrupted, the movement of goods between the two banks of the Nistru is anemic and oscillates depending on the ‘temperature’ of the political relations. The ‘trade’ now totals about 100 million USD, but it is far from the level of 169.1 million USD reached in 1998. These are not the only problems that must be solved in the confidence building process and in a reunification period. The ‘railway war’ that has caused to Chisinau enormous costs related to the redirection of railway transport is not yet over. The self-importance of the economic elites that can intervene should not be neglected. [What are the common points?] Regardless of the developments, the economies of Moldova and Transnistria have much in common. Both are more or less open economies. The Transnistrian economy is probably even more open given that it depends on export and import. According to the Center of Strategic Investigations and Reform, the foreign trade’s share in Transnistria’s Gross Domestic Product in 2006 was 198.2%, while in Moldova’s 111.6%. The past years saw a considerable increase in imports and a reduced rate in the rise in exports following the worsening of the balance-of-trade deficit. In 2007, Transnistria’s trade deficit was 405.0 million USD, while Moldova’s 2.348,1 billion USD, with a trade of 1.410,0 billion USD and 5.031,7 million USD respectively. Moldova and the Transnistrian region have commercial relations with about 100 countries. The orientation of exports seems much alike. Experts of IDIS “Viitorul” say that the utilization by Transnistrian exporters of Moldova’s quotas in the autonomous trade regime with the EU will contribute to the improvement of the foreign economic indicators of the region. It is expected that all the foreign economic indicators will continue to grow slightly during 2008-2009. Though different, the main groups of exported goods are limited. Chisinau exports mainly food products, drinks and tobacco, textiles, vegetable products, while Transnistria – metals, textiles, electric power, machines and equipment. The development of exports remains one of Moldova’s and Transnistria’s priorities. The export-related compromise reached in the past two years made the Transnistrian companies trust Chisinau’s policies, from which they profited, including after they got access to the EU markets. Experts of the Center of Strategic Investigations and Reform say that a compromise over the production infrastructure will stimulate the movement of goods between the two banks of the Nistru and will restore the trust and the integrity of the real economy. Despite differences, the economic problems are common. Among the most recent problems are the high inflation and the expanding shortage of labor force.