Impact of COVID-19 on the Republic of Moldova: what short and medium-term interventions are needed to minimize its effects?
The Institute for European Policies and Reforms (IPRE), in partnership with Privesc.eu and with the support of the Hanns Seidel Foundation, organized on Wednesday, 25 March 2020, a videoconference dedicated to analyzing the impact of COVID-19 on the Republic of Moldova.
The debate was attended by representatives established in the Republic of Moldova and abroad of civil society, financial and economic analysts, representatives of business associations from the Republic of Moldova and national authorities. In their interventions, they referred in particular to the measures already taken and those to be applied by the authorities in order to manage the pandemic crisis and to minimize its negative effects on the economy of the Republic of Moldova, the citizens in general and the business environment. Here are some of the main interventions of the speakers.
Dionis Cenuşă, Researcher, Giessen University, Germany: “From the first day when this pandemic became a reality for the Republic of Moldova, I can say that the authorities were trying in some way to make some quick decisions, but they were not logically prepared and they did not have the necessary speed. So, when the number of infected people started to increase in Italy, it was clear that the problem of filtering the persons arriving in the Republic of Moldova must be solved in order to detect the cases of infection. I think that here was, if I can use the word, a shameful escape from the authorities, because the decisions to introduce very serious measures did not meet the public expectations. But this was not the most serious aspect, because after filtering we also encountered a communication issue. Therefore, the communication of the authorities with the citizens, who had to isolate themselves when they returned from the countries affected by COVID-19, was not as expected. I do not want to accuse anyone, but this has prevented the state from identifying these persons and admitting the transmission of the infection locally. I can conclude that communication and transparency play an important role in stopping the spread of this infection, and the EU experience can be an example in this sense.”
Mila Malairau, Executive Director, American Chamber of Commerce of Moldova (AmCham): “The first thing we did was to set up very clear channels of communication, not so much with the state, but one between the economic agents, because what they needed was to exchange experience, with the problems they face and what solutions they find. We believe that the greatest added value we could offer to our members, with this AmCham platform, was the opportunity to discuss. We have chosen three important dimensions, such as human resource management how to organize people in crisis situations. The second dimension was taxation, as we wanted to make sure that we report to the authorities and how we continue to pay the state taxes. The third dimension was the reaction and compliance of the business to the decisions of the Commission for Exceptional Situations. Thus, we managed to offer that platform of dialogue, and then to communicate to the Government, what are the clear, certain measures, and which are the uncertain ones that may create confusion”.
Mariana Rufa, Executive Director, European Business Association: “First of all, we have a very close collaboration with the Government, and all those provisions that have been adopted, including the Parliament, have been discussed very quickly with the business environment. There were many questions and differences in the applicability of these measures. Beyond online discussions, this sharing of experience of each company is not always sufficient, we have provided consultations, which have been divided into different areas: taxation, labor code relations, commercial law and even force-major. It was extremely important to ensure the applicability of those provisions issued by the authorities and to facilitate the continuity of the business companies, which decided to continue their activity. We have extremely good discussions with the authorities and we have already discussed that from the national budget we have some incentives, subsidies to support those companies which have had to declare technical unemployment. For us, the representatives of the business is very important to have a 50 to 50 approach, that is to say, remedying both the state contribution and the business”.
Liliana Busuioc, Executive Director, AIM – Alliance of Small and Medium Enterprises of Moldova: “We currently represent 47 companies from eight industries and have launched a public call to see what are the biggest challenges in the context of this crisis for SMEs . So far we have received information from 150 companies from different industries about how they are affected and what their recommendations are in the current context. We all know that 85% of the companies in Moldova are micro-enterprises, which have up to nine employees and I want to mention that 60% of the labor force employed in the economy is part of the SME sector. Thus, in the current context, many companies are in a crisis situation and it is very likely that they will not survive. There is a risk that many of them will go bankrupt, such as restaurants, hotels, beauty salons, etc. We gathered several complaints and identified the biggest problems. Thus, many came with the request to reschedule in particular the payments to taxes, taxes for salaries, VAT. So, the entrepreneurs will want fiscal relaxation or maybe even subsidization regarding these taxes and, subsequently, support in negotiating the loan rates, so that they have enough time to act.”
Dumitru Vicol, Strategist, American Bank, London, UK: “It is important to understand that, unlike the 2008 crisis, which was solved with money, this crisis cannot be solved with money. As a result, in the optimistic case the effects will be very serious, and in the pessimistic case it will be disastrous. However, there are some lessons I have learned from the previous crisis. The main lesson is that after unemployment rises enormously, the recovery of the economy is very difficult. The reaction of governments and banks at the moment is quite sharp, because they want to keep the unemployment as low as possible. There are three solutions. One solution is to offer practically unlimited cash, as it has been applied in the big countries, but also in the Czech Republic or Romania. Two other solutions are fiscal flexibility and measures to protect jobs. Thus, the Government must come up with solutions that offer the possibility of re-adaptation to new realities. I believe that the current responsability of the Government is to keep the job market at the existing level, almost at costs, which cannot be calculated at the moment, because when the productive capital is destroyed it is much more difficult to recover. It will matter more when the recovery comes, than the current crisis. So these two elements are important: crisis management and the strength of post-crisis recovery”.
Oleg Tofilat, Advisor to the Prime Minister of the Republic of Moldova: “My daily mission is to work analytically and formulate policies to mitigate the economic effects and, in particular, post-crisis relaunch policies. What is clear and with which we agree is that we are now in a situation of uncertainty. What the Government has to do now? We must be determined and thoughtful. The first thing the Government is doing now is to minimize the spread of the epidemic. This is not just about medicine, but also about logistics. It is about the repatriation of the Moldovans. We have to reformulate all our life activity in a few weeks and it is a resource consuming process. It’s not ideal, but we can say that the epidemic is not spreading as fast as elsewhere, and currently the situation is under control. What will be next week? I assure you that no one now knows the answer to this question.”
Ghenadie Crețu, Program Coordinator, IOM Office in the Republic of Moldova: “Moldovans are extremely mobile, with almost 1 million citizens abroad, and migration is a channel of propagating the socio-economic impact of the crisis, but also medical. Thus, we have 300-350 thousand Moldovans abroad, who work on a short-term basis, with a precarious status and no work permit. They are the most vulnerable. Their share is 22-25%, which would be 60-70 thousand people and are exposed to the quasi-immediate loss of jobs. Many of them have tried to return, exposing themselves, but also their families, to the risk of contamination. Here is the message about the empowerment of diaspora. What can be done? It is about organizing charter transportation, but not everyone will be able to return. Thus, we are in dialogue with our offices in the countries where the people remained, but we also collaborate with the Chisinau authorities. If we talk about remittances, I would like to make a comparison with 2008, when they fell by 20%, which led to a 10% reduction in budget revenue. So, in line with fiscal relaxation, the drop in remittances could put great pressure on the public budget, including in the case of a massive comeback of Moldovans, after this acute period of COVID-19 spread will pass”.
Ana Groza, Executive Director, Association of Foreign Investors (FIA): “We believe that the measures imposed by the authorities in managing the state of emergency were not harsh enough. Maybe it was going to be done 2-3 weeks before, because we see the very high level of lack of responsibility of the citizens. Surely the impact of this crisis will be a profound one, which, unfortunately, we do not know, but it will certainly have consequences both at economic and social level. Here we come with a message to the authorities, that we, on our part, will continue the economic activity, taking care of our employees, but we want an effort, including financial, from the state. All these measures must be accompanied by transparency, openness and the ongoing dialogue we have”.
During the video conference, Ion Chicu, the Prime Minister of the Republic of Moldova, intervened spontaneously: “It is clear that we are going through a complicated situation and this is even more complicated because of the uncertainty and the impossibility to make interventions in the medium and long term. In these conditions it is difficult to make realistic forecasts. We are trying to have more approaches regarding the support for the economy. Our objectives are to keep the maximum of the employees, with the support of both the business and the state. We also have other proposals, which we will announce next week, especially in creating jobs in the highly demanded sectors in the coming period, including those in agriculture”.
For more details you can watch the video of the event here.
The event was organized within the project “EU DEBATES CAFÉ: Advancing knowledge and expertise on EU institutions and policies in the Republic of Moldova”, implemented by IPRE in cooperation with the Hanns Seidel Foundation in the Republic of Moldova and with the financial support of the Federal Ministry for Economic Cooperation and Development.
