The Interview of the InfoMarket agency with the former vice-prime minister, ex-minister of economy of Moldova, published on April 06, 2017
InfoMarket: The company you are currently working with – Business Intelligent Services (BIS) – has published last week a study on the relationship between the Free Trade Agreement with the EU (DCFTA) and some significant events that have taken place in recent years: the Russian embargo, the crisis in Banking sector and the international economic situation. What are the main conclusions of the study?
Valeriu LAZAR: Our country’s foreign trade and the Moldovan economy as a whole would look much better in official statistics without the presence of the Russian embargo, the banking crisis (provoked by the “theft of a billion”) and also a less complex international economic environment. You probably know the saying: “history does not accept the subjunctive mood,” but statements that DCFTA led to the economic crisis in recent years, prompted us to demonstrate by figures that in reality things are exactly the opposite, and propaganda statements with a political tinge only harm the economy, trade and business.
BIS has analyzed the impact of the banking crisis and the Russian embargo on the Moldovan business environment and the main conclusions are as follows: as a result of the embargo, which was exclusively a political decision in a certain geopolitical context, the Moldovan exporters lost profits of about $125 million in just two years. When we receive and process the data for 2016, we can confidently say that this amount will be much higher. At the same time, if Moldovan exporters, which are more than two-thirds of the loan portfolio, would be able to absorb the same amount of loans as before the banking crisis, then exports to the EU could grow by $100- $150 million annually. I suggest that you read the full analysis posted at the website (www.bis.md) in order to convince you once again that the three most common accusations against DCFTA are myths, namely, the allegations that the Russian embargo and the introduction of Customs duties are due to the signing of the DCFTA, that soon after the signing of the DCFTA a billion was stolen, and that as a result of DCFTA, the local market was flooded with European goods.
InfoMarket: Why would a commercial company conduct such a study and publish it?
Valeriu LAZAR: In the portfolio of services provided by BIS, a special place is occupied by the implementation of various analyzes and studies under the general title of Business Intelligence, since we have a sufficient professional analytical capacity. Simply taking into account that the majority of analyzes conducted for our clients are confidential, we have no right to publish them, and on the other hand, seeing that the so-called pseudo-analyzes dominate the society, which mislead public opinion and harm the economy of the Republic of Moldova, we decided to conduct our own initiative, an analysis on the topic of DCFTA, followed by other similar studies.
InfoMarket: You speak as if it affected you personally…
Valeriu LAZAR: This affects the entire business and the entire society in Moldova. But, it affects me also for the reason that being in the position of the Minister of Economy, I have coordinated the processes related to the negotiations and the signing of the Agreement for a deep and comprehensive free-trade zone with the European Union for about five years, and of course I am concerned about what is happening with the economy of the country I live, after its entry into legal force.
DCFTA offers many business opportunities, but for those who are not competitive there are certain risks. I said back in 2013-2014, that the primary task of the government, business support organizations and development partners is to ensure the most possible coordination and effective interaction to support the local private sector in using DCFTA’s capabilities, increasing competitiveness, thus minimizing risks. The access to foreign markets is very important and the concept of new opportunities showed up for Moldova. In addition, we decided to open up our market, we agreed on a fair solid package of technical (advice, expertise) and financial assistance both for entrepreneurs infrastructure and businesses development, and launching or capitalizing various support programs for the private sector (such as PARE 1 + 1 , PNAET, ENPARD and others). This is the fundamental difference between the Free Trade Agreement with the CIS and the DCFTA agreement, the first case it is only the liberalization of mutual trade and each country independently (at its own expense) makes efforts to use the opportunities associated with it, then for practical implementation of the program on the structural transformation of our economy and its integration into the common European market which ultimately implies the DCFTA – we are allocated significant resources, both from the EU and its countries-participants, and the donor community as a whole.
The day the Association Agreement was ratified, I resigned as the Minister of Economy after the negotiation and preparatory processes were completed. At that time, I told that the most difficult period had begun, and in this sense the most difficult tasks will now be not so much in the conduct of public services as they will gravitate towards the private and associative sector and the whole business support sector, including the related consulting sector, which is designed to help the private sector adapt to European standards. It requires strong donor support, which for almost all these two years has been lacking for understandable and unfortunate reasons, which are of criminal origin and least associated with the economy and trade, but have a negative impact on these areas.
InfoMarket: In this situation, some politicians want to abandon the Association Agreement, implying the DCFTA, since it did not bring economic benefits, while changing the vector to approach the Eurasian Customs Union…
Valeriu LAZAR: We believe that the embargo was imposed due to geopolitical considerations in the absence of convincing commercial arguments. Our analysis clearly shows that the embargo has caused serious damage to the economic interests of our country, and significantly reduced the use of the DCFTA capabilities. The mash of geopolitics with the economy and trade does not make anything good. I could draw an analogy with “forbidden” techniques from b-movies where a positive character, before entering the final battle, intentionally got injured by opponents in order to reduce his winning chances. The same thing happened with Moldova, when I see how hypocritically and cynically the cause substituted with the consequence, I remember this forbidden admission.
InfoMarket: Another spreading idea is supposedly the possibility of a serious revision of the Agreement with the EU in accordance with its own provisions, after three years from the date of its entry into legal force. What is your opinion?
Valeriu LAZAR: Indeed, the Association Agreement forsees that after three years, the parties may reconsider some of its provisions, within the framework of the Association Council platform on the basis of an integrated and accurate assessment. It must be acknowledged that we no longer follow the scenario which we based our negotiations with the Association Agreement. Since 2012-2014, there were completely different realities: the two most important economic and trade partners of the Republic of Moldova were not in a state of undeclared war, it was not even “on the horizon loomed” the introduction of mutual sanctions between Russia and Western countries, which have a direct impact on the trade performance of the country, were not experienced any sort of problems in the banking sector (at least the government was not aware of), no negative effects of these and other circumstances arising after the ability of government and the private sector of the Republic of Moldova to implement the European agenda and harness the potential of DCFTA.
Thus, the activation of the article of the Agreement you referred could be a good opportunity to carry out an objective and professional assessment to stop the speculation in this regard. In my opinion, it would be advisable to prepare and test the methodology for analyzing the situation, in order that we could analyze what was planned and what was achieved after three years from the date of signing the Association Agreement. If the real prerequisites arise-based on professional analysis of figures, rather than on emotions or geopolitical rhetoric, then it will be possible to begin negotiations with Brussel about possible revision of the association’s agenda taking into consideration new realities.
InfoMarket: Did you just incline the fact that it is necessary to suspend the implementation of the reforms?
Valeriu LAZAR: I think that the term “suspend” is not the most appropriate in this case, I would rather allow some revision of the implementation of the European reform program in accordance with available resources, real institutional capacity, for better implementation of this process. When we speak about the quality, it is necessary to bear in mind the “philosophy” of this process, which carries a transforming character and means not just a “robotic” following the European legislation by “a rattling good speed”, it is necessary to overlook these profound changes through “mind and soul” both the government officials and public society. There is one more defining element, we must provide the necessary prerequisites for the effective implementation of legislation and other policy documents that comply with European standards, otherwise we risk losing credibility in this process.
I will give you an example, I saw the reaction to the request of the Minister of Economy and the subsequent decision of Parliament to postpone for several months the entry into legal force of the new law on the promotion of the use of energy from renewable sources, and my reaction, like many businessmen, was initially negative. But, to be honest, this is a good example. This is the way to act, so as not to deceive either ourselves or our partners. It makes no sense to follow the initially approved plan blindly if there are certain delays due to objective reasons, such as the suspension of some external assistance projects that were supposed to serve as support for the development of secondary legislation, ensuring the necessary level of training of responsible institutions, etc… It may happen that this logic is also true for some provisions of DCFTA in the sense that we are lagging behind objective reasons and the quality of the process suffers, then it will become necessary to update the deadlines for the implementation of certain provisions of the Agreement. I hope that it will not come to this, especially since recently there has been a significant dynamization of the process implementing the program of European reforms. But, again, I repeat, it would be the most professional, honest and the only right approach from the legal point of view, which, in my opinion, would cause more confidence in the process implementing the European program.
We are separated only a few months from the moment when the DCFTA association agreement is “fulfilled” for exactly three years, a significant part of this period being lost in terms of the effective implementation of the association’s program, and this is clearly shown by a study conducted by BIS. We wanted to challenge the expert community in order to encourage it to participate more actively in public discussions on the successes and failures of DCFTA, if we do not do this on the basis of professional platforms, then stakeholders will be engaged in the politicized Platforms. This evaluation process can also be a good opportunity to assist the Government in identifying the main obstacles prioritizing time, human and financial resources accordingly.
InfoMarket: Looking a bit ahead about the assessment: What do you think are the main conclusions regarding the process of European integration in Moldova?
Valeriu LAZAR: I often recall the words of the former chairman of the European Commission, Jose Manuel Barroso, at the meeting in 2014, he said that it is the adoption and understanding of the process of European integration that will be the most important achievement of the governments. It is important that this process becomes sustainable and irreversible, but you can come to this state only when you have the support of a sufficient part of society that would understand the essence and influence of this process that would be involved to create the need for the government to make reorganization. Unfortunately, regarding the above mentioned, I cannot say there was done enough to inform and involve in the process of the European reforms those whom this difficult but absolutely essential historical process was intended for the entrepreneurs and the whole society. The results after three years will be a good opportunity for “closing these gaps.” Moreover, despite all the negative circumstances, we have positive results, which are reflected in qualitative growth of exports to the EU which is mentioned in the BIS research, many projects were implemented in terms of economic and social infrastructure, at the expense of European and international programs, many successful projects have been implemented in the private sector. Unfortunately, positive results are covered timidly, if not replicated on a sufficiently large scale, in order to change the perception of society. In this context, I can note that the state of confusion in the Moldovan society remains, concerning the essence of the DCFTA Association Agreement. Everyone has not realized that DCFTA, for example, does not affect only foreign trade, but also touches the modernization of Moldova. This is our national project, integrating the small and fragile economy of Moldova into a highly developed common European market should not be viewed as a process that leads us “somewhere” from “someone” or excludes cooperation with other trade and economic partners.
I have already said this many times, we will be respected and valued both in the East and in the West, only if we are economically developed and provide high social standards for our citizens, the effective implementation of the Association Agreement / DCFTA is not the final stage, but rather a road-map to achieve our sustainable development goal, which involves the investments, creating jobs with competitive wages, modernizing economic and social infrastructure, etc. In other words, we need real economic projects, not “Byzantine discussions” on geopolitical topics.