European integration

EU-Moldova Deep and Comprehensive Free Trade Area: a springboard to modernization or a road to ruin?

Perhaps never before has Moldova received as much attention and limelight as these days. Even back in the mid‐nineties when it was dubbed by The Economist as the strongest reformer in the post‐Soviet space Moldova remained deeply anchored in the Russia’s backyard, a shabby former Soviet province.
Alex OPRUNENCO, Centrul Analitic Independent "EXPERT-GRUP", 10 May 2011, 12:30

In mid‐2000s Moldova often found itself overshadowed by Georgia and Ukraine, which since Rose and Orange revolutions were seen as poster children of western‐bound democratization and modernization. Not anymore, however. Since the late 2009 Moldova has made striking progress in democratization and reforms, or at least so the story goes. Certainly, both domestic and external factors have been at work. As heydays of Georgia, following war with Russia and stamp‐out at opposition media and parties, and Ukraine, following reversal of Orange revolutions and ascension of Viktor Yanukovich, appeared to fade away, the time was ripe for Moldova to take the front stage.

The ‘Twitter ‘ revolution and electoral debacle of the Communists ushered way for the establishment of the pro‐European ruling coalition and Moldova suddenly looked like a country poised to become a stellar example of the effectiveness of the EU's soft power's glamour.

Indeed, the fact that Moldova is the poorest country in Europe and has been plagued by kleptocratic rule for both decades since independence has looked like a temporary nuisance once the pro‐European government was installed and western help and support have been forthcoming.

As early as beginning of 2010 (at least) the West and the EU, in particular, heaped praise on and put forward unprecedented aid packages for Moldova in order to anchor it on the ‘westernization' path and explicitly supported the pro‐European leadership of the country. The process culminated in the beginning of 2011, when succession of visits to Moldova by the western leaders and officials of the unprecedentedly high level took place. A cherry on the cake: Moldova was famously dubbed as the 'democratic success story' by the US Vice‐President Joseph Biden upon his visit to Moldova in March 2011.

DCFTA as a litmus test

However, from the development standpoint, the respective wording looks very much as a hyperbole and should be treated as such. As we can see from below it also should also be treated as a complement rather than a statement. The small table below tries to sketch some limits to the successes achieved.

And here is where the DCFTA comes to the fore. If Moldova will ever become success story in the Eastern Partnership countries it will be able doing so through overcoming failures and effectively becoming part of the European economic space for which the DCFTA is crucial and necessary precondition.

The European integration however is not a goal in itself; rather, first and foremost it is
about improving lives of Moldovan citizens. In this sense the rationale of the DCFTA extends far beyond simple free trade in goods:

• It offers more stable trade framework. In other words it is better than ATPs, because the latter have to be reviewed every three years and can be relatively easily scrapped, while DCFTA will offer much more extensive timeframe, which is important both for foreign and domestic investors;
• It extends the trade to other areas than goods, including services and sensitive goods such as agrifood;
• It might complement political efforts to (re)integrate Transnistria in Moldova;
• Ultimately, it will usher implementation of the EU acquis, which in many areas will lead to institutional reforms and dismantlement of vested interests. As such, DCFTA will act as the development and modernization trigger for Moldova.

From this we can see, that Moldova may be facing a once‐in‐generation window of opportunity to change its development path. As such the issue should be approached with utmost seriousness.

Since the window of opportunity has been opened by domestic and external factors, the very same factors can shut this window. Thus, the reform process can remain on its ‘mimicking‘ path, obstructed by vested interests and heightening domestic political instability, or by shift of the EU interests to its southern neighborhood or to the financial stability of the Community members, etc. All of these can unravel Moldova's European endeavor. In the worst case the EU will become disenchanted with Moldova's inability to deliver on its commitments.

While abroad developments lie clearly outside of the management capabilities of Moldovan Government or diplomacy, the domestic drawbacks should be a focus of Moldovan leadership if it is serious about succeeding. From the brief history of Moldova's euro‐approximation process several important and inherent risks can be outlined:

• Vested interests. Vested interests controlling certain sectors of economy are interested to maintain their dominant positions and we already see the resistance in certain sectors. Vested interests have also enough clout to have political actors by their side, often pouring oil on fire of the internal cleavages in the ruling coalition.
• Bureaucratic incompetence or inertia. Furthermore, the tasks stemming from the DCFTA are very ambitious and require extensive knowledge and competence from the national bureaucracy which in many cases is notorious for its complacency, inertia and unwillingness to change. Moreover, the level of competence and openness to reform varies enormously from one ministry to another;
• Irrational exuberance of Moldovan officials. The hype surrounding Moldova's success story may make national leadership and bureaucracy to believe that progress in the DCFTA implementation will come by itself, that the EU will be forgiving of Moldova's lack of progress since the country is ‘too successful' to fail. You can see that certain governmental progress reports are unfathomably upbeat.
• The implementation of the EU‐Moldova Action Plan (since 2005) is full of failures, while many commitments are still unfulfilled. It would be naïve to believe that once the ‘malignant' communists were ousted from power these shortcomings will vanish by themselves. There are all signs that past failures have not been properly assessed and Moldova will be continuously beset by them.
• Many actions envisaged by the DCFTA preparations are very costly, and Moldova clearly lacks financial, technical and human resources to accomplish them. In other words, Moldova can fail on some of commitments not because of bad will of its bureaucrats or vested interests, but because it may be simply lacking the capacities to deliver and costs may be overwhelming for its public budget, companies and citizens. It is crucially important to have clear understanding of these matters as soon as possible and certainly before the negotiations per se start.
• Furthermore, the communication on the risks and benefits should be improved. Since it will dramatically change the way the public policies and private business are done in Moldova, as well as have huge impact over ordinary citizens' lives the awareness should be raised while public support mobilized in order to overcome resistance of vested interests, etc.
• Last but not least, the Transnistrian issue with respect to the DCFTA is essentially a doubleedged sword. On one side, the DCFTA can foster more Transnistrian companies and bodies to follow European (and implicitly Moldovan) rules, while at the same time protracted political stalemate can effectively block DCFTA preparations at some point. In fact, the Action Plan for preparation for the negotiation on the DCFTA already contains certain provisions on Transnistria and it is not fully clear yet how they will be implemented.

Having these shortcomings in mind, some other cross‐cutting issues/remarks should be highlighted. The DCFTA is and will be a convolute and delicate subject. As it was mentioned, Moldova can balk at critical pieces of reforms because of lack of political will, strength of vested interests, bureaucratic and institutional inertia, etc. But it can also fail due to financial, technical and human resources gaps for doing this. And here is exactly where the EU should find balance with its approach towards Moldova: offering ‘less for less' in the former case and applying conditionality if needed; and going ahead and making more tangible its ‘more for more' principle, i.e. putting more aid (often, technical and targeted, rather than high‐level consultancy) and flexibility in understanding Moldova's objective difficulties and needs. Otherwise, Moldova risks filling the ranks of others would‐be, but unattained, success stories in European neighborhood.

 

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