Note #8 – July 2004 CISR/ADEPT, see: www.e-democracy.md
Echo of the bread crisis
Many people still remember the troubles of the wheat and bread crisis of 2003: bad wheat harvest, protracted reaction of the Government, “bread mafia”, abrupt increase (39.8% a year) of prices for bread, emergency actions of the Parliament, Government and economic units to import wheat. One as well could think the situation is under the control now. The Higher Security Council of the Republic of Moldova under the President V. Voronin examined the facts of the matter twice (February 28 and April 27, 2004) and “demanded the Government to take measures that would allow no more bread crises, to call those responsible to account and establish a strict control over economic units activating in this field”.
It should be mentioned though that the main indicator – prices for bread – stabilized in the first half of 2004 (% to the December of 2003):
And first of all this is beneficent for the poor (circa 40% of the population) that spend the major part of their incomes for food.
And all of a sudden, when nobody expected it, alarming information came from the “bread frontline” in July:
The bread crisis of 2003 that has endangered the country’s food security, as it is well-known, has also seriously shaken the whole state machinery. Learning a lesson from the occurrence, the President, Parliament and Government took a series of urgent actions to regulate the situation in the bread and grain market. Among them were:
Are these actions enough? Do they guarantee that errors and abuses in the wheat and bread market, including those in which corrupted officials participate will not happen again?
As one can see, reaction of authorities to the wheat and bread crisis of 2003 showed mainly through administrative and organizational actions. But this is clearly not enough for transparency and competitiveness of the market environment.
Moldova’s grain market tends to grow. Over the last years, more than 60% of sown areas have been under grain and in productive years export of wheat, barley and corn exceeds 1/3 of the total export of plant cultivation products. But there still has been formed no stable legal base of this market.
We already have exotic – for many other countries – laws “On wine” and “On walnuts”, but no law on a more important thing - “On grain and grain market”. Meanwhile, it is this law that – under experience of Russia, Kazakhstan, Ukraine, Romania and Hungary – has to be oriented at creation of legal, economic and institutional conditions for competitive production and formation of a grain market that would provide for the country’s internal needs of bread, seed and fodder grain, as well as its export. The main aspects of the law should include: participants in the grain market, state support of grain production and processing, formation and utilization of grain resources, control over quality of grain, grain storage, organization of grain purchases for the state reserve, formation of an intervention fund to stabilize prices, grain export-import operations. Strict execution of such law will raise transparency and restrain voluntarism.
There are other actual problems that require solution. Will there be implemented a mechanism of state grain purchases from peasants on the security of their grain? Will standards of financial and informational service of the grain market be improved? How justified is preservation of the monopolist position of Franzelutsa SA in bread production? Why there were introduced no targeted compensations for bread for the poor instead of the populist, but unprofitable for the state, production of “cheap” bread for everyone?
All these solutions belong to the market arsenal. And unless we accomplish them, a bitter statement will remain topical: “Bad harvest of grain is a misfortune, but the rich one is a burden as well”.
 Нет – повторению хлебного кризиса. «Независимая Молдова», April 28, 2004
 Source: Department of Statistics and Sociology
 Government press release, July 6, 2004
 Ministry of Agriculture of Romania, AP Flux, 8 июля, 2004