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Experience and Techniques of Aid Coordination in Moldova
 (January 2003)  


Republic of Moldova – a young European state that declared independence 11 years ago – is now at the stage of development. A triune task is being solved: strengthening of statehood, transformation of the economy into a market one and democratization of social life. Since till recently there were no historical precedents of transition “from socialism to capitalism”, but democratic states with developed market economy exist in the modern world, - those states were the ones who helped Moldova, however, as well as all countries in transition.

It was early 90’s already when Moldova established relationships with international organizations (TACIS – 1991, IMF and WB – 1992, etc.). Besides credits, the country received large amount of technical assistance (TA) in form of gratuitous financing and know-how programmes for democratization of the society and market economy development. TACIS, for instance, contributed during the 90’s (1991-1999) to attraction into the country of circa 70 mil euro, including 17 mil in 1996/97, 19,5 mil in 1998/99, 25,0 mil in 2000/2001. The TACIS Indicative Programme for 2000-2003 is estimated to be 50 mil euro. 

Participation of donors in the TA rendering to Moldova varied yearly. The most part of the TA financial resources (40-53%), though, falls yearly at USAID (financial sector reform, land reform, reorganization of kolkhozes and sovkhozes, post-privatization processes in rural area). The next are TACIS, UN, the Government of the Netherlands and, during the last years, DFID (Great Britain) and SIDA (Sweden). Former active presence of the GTZ (Germany) in Moldova ceased after 2000. Starting with 2004, the financial assistance from the USA to Moldova will also be reduced: to 23.5 million dollars, i.e. one third less than it was in 2002.

Several questions are justified: what was the general background in the country for the TA realization? What has been happening in political, social and economic life of Moldova during the recent years? How did TA correlate to these complex processes? How it coordinated and what was the efficiency of its utilization? 

Development of the Republic of Moldova as a state and life of its population after 1991 took place under quite dramatic circumstances: territorial dismemberment of the country (separatism of Transnistria); sharp economic downswing (by 2/3 as compared to 1989); contradictory and inconsequent reforms; decrease of state budget resources for health care (to 3.0% to GDP) and education (5.0% to GDP); widening of the poverty zone, sharp differentiation of incomes of the population. Given the lack of a reform strategy accepted by the population and the lack of continuity in actions of alternating governments, external debt of 1,5 bil USD supplemented by the internal one – 2,4 bil MDL – which increased 10 times, is a heavy burden for the state. The state machinery, as well as “political elite” and scientific circles failed to solve the tasks of transformation of the state, economy and society satisfactorily. After 1991 Moldova changed 9 governments, but population evaluated their activity as unsatisfactory. After a decade of reformation experiments, Moldova only in 2000-2002 succeeded in stopping the downswing given that GDP decrease during this period was 63.0% as compared to 1990. It is worth mentioning for comparison that this decrease, on the whole in the CIS countries, this downswing was 50.5%, while in the CEE countries – 22.6%. 

It is necessary to take into account lessons of transformation that are also important for decision-making for the future. This would enable the Government to give up working as a “crash crew” and the country to switch from the tactics of survival to the sustainable development strategy:

·        It is necessary to provide for a social consensus as refers to the substance of reforms and interconnection between its components;

·        The population needs a strong and effective state able to provide for lawfulness and institutional support of the socially-oriented market economy and sustainable human development;

·        Necessity to reestablish the unity of territorial and economic complex of the country, meets interests of both the state and the population, regulating of relations with Transnistria based on European standards of regional self-government;

·        One can exit the exclusive circle of depression only through paying more attention to the real sector of economy, which requires creation of incentives for economic units profitable both for them and the state; provision for rights of investors and a transparency of tenders, protection of the sector of small and medium enterprises as it is a basis for formation of the middle class – an ally of reforms. Fight against corruption and “usurpation of the state” by business groups have to be subordinated to these same goals;

·        While realizing reforms, one should start from that social responsibility of the state has not reduced at all along with transition from the centralized planned economy to the market one. It is only methods of regulation of social processes that change. Now, it is elimination of poverty that is being brought to the forefront.

And, finally, success of the Government and donors, which help the former, depends directly on efficiency of combination of their political, social and economic components. Positive and negative experience of Moldova gained during the transition period demonstrates quite clearly dependence of the transformation progress on political stability. Political risks and disorderly state policy are an enemy of reforms. 

Scenarios of Moldova’s mid-term development are conditioned by three circumstances, at least: demographic situation (depopulation, reduction of share of able-bodied persons within the population, mass labor migration abroad); obsolescence of capital assets under low investments activity; and, finally, the third factor of cumulative action is a great state debt, both internal and external. 

The above-mentioned constraints precondition a single way for Moldova and its government – to secure positive changes in the economy, support social optimism further (which the current Government is quite good at) and achieve, at least, 6-7% GDP growth. Realization of the optimistic scenario of the Republic of Moldova is possible on conditions of dynamic reforms and social consensus, common understanding of priority of the national interests over the corporate, clannish and regional ones, reduction of pressure upon the state of social and political forces, neutralization of which requires additional efforts, resources and time. And there has been already lost a lot of time. 

The pessimistic scenario is possible if the Parliament fails to provide for a legal basis for the “second wave of reforms” and the President and Government gets trapped by circumstances and is constantly busy with realization of “urgent measures”. 

From the constitutional point of view, the Republic of Moldova is oriented at democracy, political pluralism, social consent and market economy. A “little” is holding this up -  authorities, population and civil society (as a new “vanguard” of the people) should, finally, come to a common consent on what state the Republic of Moldova should be and what are its long-term interests. 

Work of the Government and donors that collaborate with the country for 2003 and the nearest period of time is quite documentarily formalized. And this, unlike the previous period, allows regulating, finally, coordination of the technical assistance rendered to the country. 

Looking back at the ten-year practice of utilization of technical assistance by Moldova, one can say that organization of work in this area was poorly provided for both by the Government and donors. 

 

Drawbacks related to the Government organization of the TA utilization:

1.      Lack of clearly formulated priorities and a balanced strategy of reforms. Hence, there difficulties during determination of “in what areas the TA is needed?” As a result, it often turned out that memorandum drafts (for instance, between the Government and IMF/WB) were mainly prepared by the helping party;

2.      Insufficient coordination of the TA from a single center in the Government (Ministry of Economy). Its role has been reduced for a long time to simple composition of consolidated information on TA, without real capabilities to affect “spontaneous actions” of ministries and departments. It is a paradox, but the Ministry of Economy (producer of ideas and coordinator of reforms) received much less TA that, for instance, the National Bank or the Ministry of Finance, not to mention the “champion” of this field – the Ministry of Agriculture and Food Industry. Attempt to create a Project and Programme Implementation Center (PPIC) came quickly to an end along with stoppage of the UNDP financial support;

3.      “Spontaneous actions” of ministries, departments and state agencies (there are about 50 of them) that long for TA. Given narrow departmental argumentation, insufficient analysis and substantiation of issues “for TA”, this generates errors during selection of the goal, doubling of activities or rivalry in obtaining TA just “for oneself”. As a result, in the 90’s different donors in different departments helped prepare the laws “On Foreign Investments”, “On Bankruptcy” (GTZ, WB), substantiation of agricultural strategy (TACIS, WB, USAID), on export advancement (UNDP, GTZ, TACIS). The relay race of elaboration of the new market-oriented Civil Code of the Republic of Moldova lasted for seven years (beginning with 1991!): there were used resources by turns of the TACIS, GTZ and USAID. The Code has been approved by the Parliament in June 2002, but, according to a common estimate, its application in practice is quite problematic. It seems that there will be required additional work;

4.      Control over realization of the TA project is insufficient. The Moldovan party quite often contents itself with obtaining TA, launching of projects, trips abroad to get experience, etc. The situation in the country is unsteady and sometimes projects designed for 2-3 years require adjustment. Examples are the TACIS, UNDP and USAID projects in the area of local self-government and administrative-territorial reform;

5.      Insufficient transparency of elaboration and realization of projects. The Government’s neglect of opinions of NGOs and mass-media signals.

 

Reserves and defects of donor organizations in the TA rendering are as follows:

1.      Arguable selection of areas (sectors) for rendering of TA. The examples are attention to agricultural business without coordination with rural development; neglect of needs of the industrial development (even till 1995 when ARIA has been created and the Government issued decisions on reconstruction of enterprises, freezing of their debts, etc.); late attention to problems of public sectors and regional development reformation;

2.      Unsatisfactory quality of monitoring resulting in the fact that a series of the TACIS projects, which had management problems since the very beginning (ARASS, creation of the employment information system), nevertheless continued spending of financial resources during 2-3 years till a complete fiasco of these projects;

3.      Unjustified concentration of attention and resources of donors in single sectors, which generates doubling of activities: privatization (during 1994-98), local administration (after 1999), Transnistria and Gagauzia (after 1996) and other;

4.      Sluggishness in projects launching. Cycle of a TACIS project launching is the longest among all donors (2-3years, sometimes) and USAID is the most operative;

5.      Hidden manifestations of corruption, “softening” of relations between project management and state bodies – TA recipients through monetary payments, study tours for the state bodies’ leadership, acceptance for employment in projects of their relatives or protégés.

 

New tendencies in organization of TA rendered to Moldova

The majority of CEE countries after the decade of reforms decided that their transitional period is over (see: conferences – “Beyond Transition”, Warsaw, May ’02; “From Transition to Integration”, Sofia, etc.).

But the Republic of Moldova after ten years of reforms has just denoted recommencement of economic growth and a more balanced approach to political, economic and social reforms. This approach is reflected both in legal creation and practice of the Parliament and practice of the Government.

The current stage of interaction of the Government and donor organizations (including TACIS) is distinguished by certain prerequisites for improvement of work “as regards analysis, realization and implementation of projects”:

1.      Presence of fundamental documents that determine activity of the Government and donor organizations for a mid-term period:

  1. Programme of activity of the Government for 2001-2004, its corroboration by laws and mid-term designs of the Government (programmes for employment, small business support, attraction of investments, export promotion, etc.);
  2. Strategy of socio-economic development of the Republic of Moldova till 2005;
  3. Interim Strategy for Poverty Reduction (PRSP), etc.

2.      Constructive interaction of legislative (the Parliament) and executive (the Government) branches of power. Presence of a stable majority in the Parliament.

According to new political and socio-economic realities, there have also taken shape new tendencies related to the TA organization and coordination. Its scale is as follows: in 2001-2002 there were no less than 112 projects in realization stage in Moldova with a total amount of financing of 88 mil USD. 64.7% of them referred to the USAID and the European Union (TACIS, donor countries). The priority areas are agricultural sector and rural development – 24.9%; social sphere – 15.2%.

 

Revision of the Government approaches to the TA utilization:

·        As the main problem there has been chosen the Strategy for economic growth recommencement and poverty reduction that is being solved under the patronage of the President V. Voronin; frame working document (PRSP) was coordinated with IMF/WB and the TA donor organizations;

·        A more иselective (more exigent) approach to selection of areas of application and themes of projects. The Government issued a series of decisions regulating rights and functions of state bodies for collaboration within the TA framework;

·        There have been undertaken attempts to evaluate efficiency of projects, which had been already realized, especially of those, that used financial resources from external credits (ARIA, etc.);

·        The Ministry of Economy elaborated for the first time «Manual on Technical Assistance Activities» (2001); a task has been set to create a system of the TA monitoring – on the Government’s level, in the Ministry of Economy and in single ministries and departments;

·        Search for an alternative solutions different from those proposed by the donors (post-privatization processes in agriculture, administrative-territorial system of the country, foundation of a commodity exchange, etc.);

·        Striving for increase of the investment component within the TA structure (reconstruction of roads, bridges, customs points, etc.);

·        Stirring up of local bodies’ initiative, especially in potential zones of growth: municipalities of Chisinau, Ungheni, Cahul.

 

New approaches of donors to rendering of TA and organization of projects’ realization show through the following:

·        Formation of mid-term programmes of TA (USAID – for 2001-2005, TACIS – for 2001-2003, etc.) in combination with a more distinct “division of labor” between donors under the IMF/WB leadership;

·        Regrouping of forces: reduction of the TA volumes by donors of the “first wave” (USAID, UNDP, GTZ) and its inflow from the EU countries (UKDFID, the Netherlands, Sweden – SIDA, Norway, Denmark), Canada and Japan;

·        Emphasis of the TACIS (given the TA amount for 2002-2003 of 21 mil euro) on practical actions for realization of the Partnership and Cooperation Agreement between the EU and Moldova;

·        Increase of the “hard aid” share (investment component of the TACIS, for example, for 2002-2003 is set to 25%) instead of consulting and training only; orientation at reduction of terms of projects realization, diversification of composition of beneficiaries, including at the local level – aspiration for evading of the TA monopolism of central state bodies;

·        Abruptly increased attention to organizations related to the civil society as co-executors of the TA projects (USAID, UNDP, Soros Foundation, UKDFID, TACIS); special researches on work-out of mechanisms of the NGOs attraction to programming and realization of projects (TACIS, July 2002).

 

Conclusion


If one tries to generalize the whole totality of the TA projects realized in the Republic of Moldova during 2001-2003, the following main areas of the TA concentration could be distinguished:

·        Quality of governance and development of democracy (legal basis and justice; institutional strengthening; internal affairs – corruption, criminality, etc.; civil society involvement, democracy programme);

·        macroeconomic stability, economic growth and poverty reduction;

·        property reform (post-privatization processes), structural reforms (energy sector, agri-business, transport and telecommunications);

·        human resources development;

·        environmental programme.

 

The TACIS Programme for 2001-2003, for example, shows in Moldova in two ways: as an instrument of the PCA EU-RM realization and as a conductor of European know-how (through projects) into key areas of state government, economy and social life.

With a view to raise efficiency of ТА in Moldova and a better interaction of state bodies and donors, as well as elimination of those defects that existed in the past, it is expedient:

1.      To “know what the assistance is for” at the level of the Government, ministries and regions. This requires professional estimation of the situation – improvement of the quality of source information and the level of analytical skills; to exarticulate vitally essential problems, solution of which really requires TA; to formulate tasks correctly; to participate actively in elaboration and realization of projects;

2.      To strengthen the body coordinating TA in the Government (Ministry of Economy) institutionally, organize a bilateral meeting between the Government and donors in the first half of 2003 on the issue of increase of efficiency of organization and utilization of the TA resources in the Republic of Moldova (at the level of responsible persons);

3.      To provide for publicity, transparency of the whole process of technical collaboration of state bodies and donor organizations, as well as through a wider involvement of civil society organizations into elaboration and implementation of projects;

4.      To use more actively capacities of regional cooperation (South-East Europe, the Black Sea collaboration region, neighboring countries – Romania and Ukraine) and experience of other countries in transition on rational utilization of TA oriented at support of democracy and reforms.

 

PS.: The above-mentioned estimates were set fourth at the TACIS-Moldova seminar “Analytical skills related to Aid Coordination and Project Monitoring”; they are based on experience of the CISR’s collaboration during 1997-2002 both with state bodies and country offices and projects realized in Moldova by the WB, UNDP, TACIS, GTZ and USAID.