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CHANGE TAKES TIME, MELANIE MARLETT SAYS
Infotag’s interview with World Bank Country Manager for Moldova Melanie Marlett.
Infotag: How has the global financial and economic crisis influenced World Bank's (WB) policy, in particular when it comes to developing states such as Moldova?
Melanie Marlett: The global crisis has hit this part of the world the hardest and the WB tried to respond very quickly. In many cases, the WB came together with the IMF, like in Romania, Latvia and Ukraine. The crisis hit Moldova at the end of 2008, but the country started to feel the impact only in early 2009. Unlike the USA and Western Europe, Moldova really felt the secondary effects of the crisis because its banking sector was not strongly interlinked with the international one.
We have provided support to Moldova through the existing projects that were already functioning well and showing results. For example, in the spring of last year we put $10 million of additional financing into an existing project called the Rural Investment and Services Project that provides lines of credit to rural entrepreneurs. We also provided additional financing to the Moldova Social Investment Fund (MSIF), which has been operating in Moldova for many years and has helped implement projects all across Moldova in water supply and sanitation, heating systems, road rehabilitation, renovation of schools and kindergartens. Before the crisis we put $5 million more into this project and just recently we added $20 million more into it but introduced slight adjustments. In particular, we required more local level employment, so that people who were hit by the crisis and who do not have a job would be eligible for employment.
We have also put $24 million of additional financing into the Competitiveness Enhancement Project to provide lines of credit to exporters who were hit hard by the crisis. In addition, we have been preparing a $25 million budget support operation for 2010, which we hope to take to our Board of Directors in June. We have been also discussing with the Ministry of Social Protection a new project worth $15 to $20 million to help expand the targeted social assistance programme, whose goal is to reach people who are not able to make ends meet.
So, we used a variety of instruments in a variety of sectors to try to address job creation, social protection, stabilization of the budget and access to credit for rural entrepreneurs and exporters. We are happy that we were able to move quickly with the former government, as well as with the current government.
Infotag: The WB has been rather actively supporting structural reforms implemented by the Moldovan government. In your opinion, what reforms in this sector should and could be accelerated?
M.M.: Moldova is still going through a very difficult political transition, plus the economic crisis. Outside investors look at Moldova and ask themselves whether it is worth investing their money here given the risks involved. So, the government needs to undertake measures that will help bring foreign investors into Moldova, as well as encourage domestic investments. I think that a number of reforms can and should be made in improving the business environment. The WB issues a Doing Business Report every year. Last year Moldova was among the top 10 reformers globally because they were able to reduce the time that it took to register a business and eliminated a number of other constraints. Now the government is looking at how to reduce the amount of time that it takes to get a construction permit, which was one of the indicators where Moldova ranked very low globally.
Reforms in the agriculture sector also need to be continued, especially in terms of liberalizing the agriculture market and focusing more on investments rather than subsidies. We are also working closely with the government in the transport, financial, social assistance, health, education and central public administration sectors. The number of public servants is very large and we are helping the authorities look at the civil service pay reform based on performance.
Infotag: How receptive is the Moldovan society to economic reforms and what role should the government play in changing people's mentality?
M.M.: I think this is a very important question because in an economic crisis the government has to take very tough and unpopular decisions. We have been working with the government on communication strategies to ensure that the people of Moldova understand why certain reforms need to be made and what measures should be taken to mitigate their impact.
For instance, now it is very difficult to explain to people the need of school optimization. People want to have a school in their community even if they have 10 students and 3 teachers. But the education budget is a huge part of the government budget and they have to start reducing it. This is not something that could be done overnight. It is going to take time. A pilot project has already been launched in Riscani and Causeni districts, where buses are transporting children from small communities to the closest schools in larger communities. The key consideration here in addition to generating savings is the quality of education, because if you save money on an inefficient school, then you can invest more in buying computers, books and paying better salaries to teachers. Yet, I would like to mention that changing people's mentality is a difficult task everywhere, not only in Moldova.
Infotag: In your opinion, how long will it take for Moldova to reach European standards? Especially given the fact that the EU is in flux while Moldova is trying to play catch up.
M.M.: I have no answer to this million dollar question. But the EU has been very supportive in helping Moldova move on this path, giving it significant financial support and technical assistance. I do not know how long it will take, but I know that the government is working hard to achieve this goal and I think they have been making good progress already.
Infotag: Could you tell us briefly about the most important projects to be implemented by the WB in Moldova in 2010?
M.M.: I've already mentioned most of the projects currently implemented in Moldova with WB support. I would only like to add here that we are now discussing with the government an information communication technology project. We hope this project will help move Moldova towards what we call a "2020 vision". We are talking here about e-Moldova, where we are going to have e-solutions in three sectors: to improve services to the public through IT, to provide better services to the business through IT and to reduce corruption in the system through IT. For example, we are looking at e-procurement and other types of e-services that will allow people to do many things on-line rather than go to three different ministries to get a license or a permit. We are also looking at mobile banking and the National Bank seems to be very keen to do this.
Another project I should mention is the Disaster Risk Mitigation and Climate Change Adaptation Project. When I came here in 2007 Moldova was facing one of the worst droughts in its history, and then we had the devastating floods of 2008. This year we had very cold temperatures and lots of snow. Nobody knows what 2010 will bring. So, instead of just dealing with crisis after crisis, we want to help the government to better prepare for such situations. For example, we are seeking to help the Weather Forecast Centre to improve its system so that they can do better weather forecasting and better early warning for farmers.
Infotag: What new projects does the WB have in its portfolio for Moldova and which of them could be implemented in the near future?
M.M.: The only other project that I would mention is improving energy efficiency.
Infotag: What do you exactly mean by this?
M.M.: Good question. One thing may be investments, made together with other donors, in rehabilitating the CETs, providing technical assistance to help restructure the debt owed by Termocom, helping the government to establish an energy efficiency agency. One of the good things that the government has already done was to move the regulation of the energy and heating to ANRE.
Infotag: What industries in Moldova have good prospects for development and, subsequently, could have a positive impact on GDP growth in the future?
M.M.: The construction sector has been until recently one of the key drivers for GDP growth, but it has also been hit hard by the crisis. The Moldovan economy showed vulnerability during the crisis because it had been relying too much on remittances. In the recent past, the main areas that contributed to the economic growth in Moldova were textiles and services. We think there is potential for growth in high value agricultural products and IT. In particular, the number of call centers could be increased. Tourism, especially eco-tourism is an industry with good potential in Moldova too. Yes, Moldova still has poor roads and almost no good sanitation conditions in the countryside, but don't forget that people go to Africa where these things are missing as well. Yet, they go there because that is an adventure and they could come to Moldova for the same reason. There is also potential for high value agriculture, like walnut growing, which has not been fully exploited yet.
Infotag: Had the investment climate been more attractive for investors in recent years, how much impact could direct foreign investments in the Moldovan economy have made?
M.M.: Direct foreign investments have been increasing rapidly in Moldova over the past few years and the business environment has improved. However, there is still a lot to be done, especially when it comes to how long it takes to get a construction permit, register a business, trade across borders, enforcing contracts and so on. The government seems very keen to improve the situation. The risks of coming here and investing are also very high because of the political uncertainty. At the same time, statistics for 2002-2009 show that the direct foreign investments dropped more because of the 2006 wine ban and the global crisis rather than because of the business conditions in Moldova.
Infotag: How objective are the statements of some experts who say that nothing has changed in the Moldovan economy since a new government came to power in 2009, "maybe apart from the fact that the 'roof' was replaced but all the schemes remained the same"?
M.M.: Change takes time. The new government has come in a very difficult period but they have been working very hard. The government had a very impressive 100 days report. They made significant progress in dealing with legislation and liberalizing the market in many areas. They have also taken all the actions required by the IMF and even had a lower budget deficit than the Fund projected. Yet, people will not be happy unless they see a direct impact on their lives, but this is not going to happen overnight. In fact, the government should be congratulated for what it has accomplished so far. Of course, there is much more to be done, that is why we are here, to help and support them in their effort. So, give them a chance.
Infotag’s dossier: The WB was established in 1944 and is headquartered in Washington, D.C. It has more than 10,000 employees in more than 100 offices worldwide. The WB's mission is to fight poverty and help people help themselves and their environment by providing resources, sharing knowledge, building capacity and forging partnerships in the public and private sectors. The WB is not a bank in the common sense as it is owned by 186 member countries. Moldova became a member of the WB in 1992. The WB opened an office in Moldova in 1993. Now the bank has a 30-member staff in Moldova, plus team members in Kiev, Bucharest and Washington – overall 150 people dealing with Moldova in one way or the other. Since 1993, the WB has committed about $800 million to Moldova, of which about $500 million has already been disbursed.
Melanie Marlett was born on April 16 [our warm congratulations] 1958 in New York. She received her Bachelor's and Master's Degree in agriculture from Cornell University and her PhD from Tufts University in Boston, Massachusetts in international food policy. She spent most of her career living in and working in Africa for various international organizations. She worked in Gambia, Rwanda, Kenya, Somalia, Congo, Eritrea, Zaire, Tanzania, Uganda and Zambia. She also worked in Nepal, Thailand, Guatemala and Washington DC. Moldova is the first country in which Melanie has worked in this part of the world. Speaks English and Mandinka (an African language); can understand French and is learning Romanian. Likes everything about Moldova: people, food and wine, culture and seasons. Does not like the roads and the lack of good bathrooms in the countryside.
