RESTRICTED
WORLD TRADE WT/ACC/MOL/2/Add.2
24September 1996
ORGANIZATION(96-3766)
Original: English
ACCESSION OFTHE REPUBLIC OFMOLDOVA
Memorandum onForeign Trade Régime
Addendum
TheGovernment ofMoldova hassubmitted thefollowing Additional Information on
Moldova 'sForeign Trade Régime.
_______________
Table ofContents
Page No.
1. Barter Trade 1
1.1 Statistical DataonMoldova 'sBarter Trade 1
1.2 Government-Sponsored Barter Trade 1
2. Domestic Grain Trade: Strategic Reserve, 5
State Needs andtheBread Subsidy
3. Agricultural Subsidies: WT/ACC/4 6
4. TheEnergy Sector 8
5. Updated Balance ofPayments Table for1995 8WT/ACC/MOL/2/Add.2
Page2
1. Barter Trade
1.1 Statistical Data onMoldova 'sBarter Trade
Thefollowing tables giveanoverview ofMoldova 'sbarter trade fortheyears 1993-1995.
Thetabledistinguishesbetweenbartertradeandtradeinexchangeforfullyconvertiblecurrencies(DLC),
theremainder being trade inexchange forother currencies (notshown):
Table 1:EXPORTS FOB(million USD)
Year Total Barter DLC Barter% DLC%
1993 443.238 164.852 79.182 37.2 17.9
1994 618.48 262.475 113.148 42.4 18.2
1995 740.64 188.837 307.98 25.4 43.7
Table 2:IMPORTS FOB(million USD)
Year Total Barter DLC Barter% DLC%
1993 495.349 153.569 209.036 31.0 42.2
1994 672.37 142.126 168.0 21.1 24.9
1995 773.06 137.033 282.464 17.7 36.5
The1993and1994figures forbarter trade areestimates andhavetherefore notbeenincluded
inthebalance ofpayments. The1995 figure replaces theonegiven inthebalance ofpayments table
inAnnex 1oftheMemorandum. Anupdated version ofthe1995 balance ofpayments isprovided
under Section 5.
1.2 Government-Sponsored Barter Trade
Inordertoobtaincertaincriticalinputs,especiallyenergyresources,andtoeconomiseonlimited
foreign exchange reserves, Moldova engages inbarter trade withother CIScountries.
Thesystem isasfollows. InafirststeptheGovernment establishes alistofcritical goods
tobeimported andalistofpotential goods tobeexported. Then aframework treaty isconcluded
withanother CIScountry which contains details ofthetypes ofgoods andthequantities tobeexchanged.
Theactual tradecontracts areconcluded between Moldovan companies andcompanies intheCISpartner
country. Inprinciple, anyMoldovan company canparticipate inthescheme. In1994 and1995 the
following companies haveconcluded barter contracts ofthekinddescribed above:
- Moldresurse
- Moldenergo
- Moldovagaz
- Tirex Petrol
- Arca Moldova
- Fertilitatea.WT/ACC/MOL/2/Add.2
Page3
TheMinistry ofHealth, theMinistry ofEmployment, Social Protection andtheFamily and,
through theCereal structure, theDepartment ofGrain attheMinistry ofAgriculture arealso
participation.
These companies aninstitutions purchase thegoods tobeexported totheextent possible from
domestic companies which havedebts totheState. Such companies areobliged tosupply thetype
andquantity indicated tothem. These aredetermined byGovernment decree afterdueconsultation.
Goods which cannot ornotinsufficient quantities beobtained from companies indebted totheState
arepurchased through ordinary commercial channels. Prices paidinbothcases aremarket prices.
Indebted companies receive onlydebtwrite-offs.
Thefollowing tableindicate theproducts andthevolume fortheyears 1994 and1995:
Table 3:Volumes ofenergy resources andgoods imported under Government-sponsored barter
trade arrangements in1994
Goods imported Measurement Unit Volume
Electrical energy bill.kwh 9.5
Thermal energy mill. Hcal 4.5
Natural gas bill.cubic m 1.6
Cereals th.tons 700
Sugar th.tons 58
Medicine th.USdollars 100
Table 4:Volumes ofgoods exported under Government-sponsored barter trade arrangements in
1994
Goods exported Measurement Unit Volume
Meat andmeatproducts th.tons 33
Butter th.tons 6
Vegetable oil th.tons 17
Sugar th.tons 7
Fermented tobacco th.tons 26.7
Cigarettes bill.pc. 3.6
Champagne th.dal 300
Cognac th.dal 250
Grape wine th.dal 8000
Canned fruitandvegetables mill. pc. 600
Colour TVsets th.pc. 50
Washing Machines th.pc. 22.5
Carpets th.square m 1100
Pumps th.pc. 35
Furniture th.USdollars 3000WT/ACC/MOL/2/Add.2
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Table 5:Volumes ofenergy resources andgoods imported under Government-sponsored barter
trade arrangements in1995
Goods imported Measurement unit Volume
Natural Gas mill. cubic m 2800
Fueloil th.tons 575
Coal th.tons 2000
Medicine th.lei 300
Medical equipment th.lei 10
Table 6:Volumes ofgoods exported under Government-sponsored barter trade arrangements in
1995
Goods exported Measurement unit Volume
Meat andmeatproducts th.tons 13
Butter th.tons 1.7
Vegetable oil th.tons 15.2
Sugar th.tons 19.0
Corn seeds th.tons 4.0
Pectin tons 12.3
Fermented tobacco th.tons 23.7
Cigarettes mill. pc. 500.8
Citric acid tons 502
Wine material forchampagne th.dal 3940
Rawwine th.dal 6000
Grape wine th.dal 540
Champagne th.dal 115
Cognac th.dal 65
National strong beverages th.dal 74
Vodka th.dal 5
Canned fruitandvegetables mill. pc. 194
Dried fruit tons 300
Confectionary tons 100
Etheric oils tons 22
Bottles forcognac 0.5l th.pc. 3000
Glass cans0.35l th.pc. 3800
Laminated iron th.tons 125
Fittings tons 252.4
Refrigerating installations units 65
Trailer refrigerators pc. 50WT/ACC/MOL/2/Add.2
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Anitdeflagrating electrical
enginesth.pc. 31.86
Power cables km 4240
Equipment conductors th.km 10
Electrical cable th.km 14.2
Coilandenamelled
conductorstons 8274
Textolite ofstanilat glass tons 525
Submersible pumps pc. 5030
Hermetic pumps pc. 2404
Residual pumps pc. 1580
Wood modulating machines pc. 110
Equipment forlaundries pc. 306
Electrical loaders pc. 16
Tractors pc. 1426
Colour TVsets th.pc. 30.5
Freezers th.pc. 23.2
Washing machines th.pc. 18
House lamps th.pc. 11
Irons th.pc. 4
Electrical tea-pots th.pc. 5
Cotton fabric th.m 13700
Silkfabric th.m 4300
Silkfibre tons 6.5
Artificial leather th.sq.m 450
Rubber forsole tons 896
Carpets th.sq.m 452
Leather footware th.pairs 676
Knitted goods th.pc. 100
Hosiery th.pairs 81
Ready-made cloths th.lei 264
Leather goods th.lei 140.8
Furclothes th.lei 308
Furniture th.lei 3190
Medicine th.lei 20.0WT/ACC/MOL/2/Add.2
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2. Domestic Grain Trade: State Needs, Strategic Reserve andtheBread Subsidy
Every theGovernment establishes thequantity ofgrain needed toensure thefunctioning of
thebread subsidy system. Thisquantity isalsoreferred toasthe"State Needs" andonceitiscollected
constitutes the"Strategic Reserve".
TheGovernment regulates thepurchase ofgrain from agriculture enterprises. Until theend
of1995theGovernment setthepurchase priceofgrain tobepaidbythesystem ofelevators (Cereale)
which enjoyed adefacto monopoly inthecollection, storage andmilling ofwheat. Atthattimeit
waswholly stateowned. Thegrain wasprocessed andeventually soldatadministered prices which
were -forsocial reasons -below thecost-price. Toindemnify theproducers forthelosstheState
paidthefollowing compensations intheyears 1993-1995:
Table 7:Government Expenditure ontheBread Subsidy
Year 1993 1994 1995
Amount (thsd. MDL) 9101 3012 4515
Since 1996 anewsystem hasbeen putinplace. Cereale hasbeen splitupintoregional
companies andpartially privatized. TheGovernment recommends thepricetobepaidbytheregional
Cereale elevators andseeks tomeettheStateNeeds withsupplies fromagricultural enterprises which
havedebts tothebudget ortheSocial Fund. These enterprises areobliged tosupply grain forSate
needs andreceive halfthepayment incashandhalfindebtwrite-offs. Thepricepaid(cash plusdebt
write-offs) in1996 isroughly inlinewithworld market prices, i.e.500-1 200Lei(USD 109-263)
pertondepending onthegrade.
Thegrain destined fortheproduction ofsubsidised bread ispurchased bythe,nowpartially
privatized regional elevators (Cereale) which payonlythecashportion ofthetotalprice setbythe
Government. Subsequent production stages arethusbenefiting from a50%input subsidy which is
financed bythestock ofdebtofagricultural enterprises towards theState. Total expenditure forthis
scheme isestimated toreach MDL 120million in1996. In1995 110000tofgrain werepurchased
forState Needs.
Inorder toensure theavailability ofgrain onthedomestic market despite thepoorharvest
expected for1996, theGovernment imposed atemporary banongrain exports. Itisexpected that
thebanwillbelifted in1997.
3. Agricultural Subsidies: WT/ACC/4
Moldova'sagriculturalisundergoingaprocessoftransformation,implyingfundamentalchanges
especially withregard tolandownership andStateintervention. Information onsubsidies paidinthe
pasthastherefore beenlimited to1995 andestimates havebeenprovided for1996.
Some ofthefigures given inTable 8aresignificantly lower thanthefigures planned andcited
inthe1995 Budget Law. Thisisexplained bytheshortfall inState revenues which didnotpermit
tosustain theexpenditure levels envisaged.WT/ACC/MOL/2/Add.2
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Table 8:Support toAgricultural Enterprises in1995
Measure Currency Amount
Capital Investment Support MDL 18,465,000
Livestock Subsidy MDL 1,100,000
Fruit-Tree Growing Support MDL 6,434,000
Viticulture Improvement MDL 1,987,000
Road TaxExemption MDL n.a.
RealEstate Exemption MDL n.a.
Total MDL 27,987,000
Explanatory Notes
(i) Capital Investment Support
Thisfundfinanced investment projects forState-owned agricultural enterprises. Budget oftheMinistry ofAgriculture andFood.
(ii) Livestock Subsidy
Extra-budgetary fundforlivestock breeding forState-owned agricultural enterprises. Fordetails seeAnnex 13ofthe1995Budget
Lawattached herewith.
(iii) Fruit-Tree Growing Support
Fund topurchase fruit-tree available toallfarmers.
(iv) Viticulture Improvement
Support payments available toallwinegrowers forcuttings, newwire, newplantations, newtechnologies etc.Forrepartition
seeAnnex 14ofthe1995 Budget Lawattached herewith.
(v) Road TaxandRealEstate TaxExemption
In1994 allagriculture enterprises wereexempt frompaying roadorrealestate tax.Figures indicating theforegone income are
notavailable.
Thefigures given inTable 9areplanned figures citedinthe1996 Budget Law. Asin1995,
State revenues maybesignificantly lower thanexpected andexpenditure mayhave toberevised
downwards byconsiderable amounts.
Table 9:Expected Total Aggregate Measurement ofSupport (AMS) for1996
Measure Exemption
CriterionCurrency Planned Amount
in1996
SoilConservation Article 6.2. MDL (5,000,000)
Viticulture Improvement Article 6.2. MDL (10,000,000)
Fruit-growing Improvement Article 6.2. MDL (7,000,000)
Farmer Support Payment Article 6.2. MDL (4,000,000)
Livestock Subsidy - MDL 8,000,000
Milk Subsidy - MDL n.a.
Total AMS - MDL 34,000,000WT/ACC/MOL/2/Add.2
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Notes:
(i) SoilConservation
General soilconservation measures benefitting allfarmers intheareas concerned.
(ii) Viticulture Improvement
Support payments available toallwine growers forcuttings, newwire, newplantations, newtechnologies etc.
(iii) Fruit-growing Improvement
Fund topurchase fruit-tree seedlings available toallfarmers.
(iv) Farmer Support Payment
Support payments forfarmers infinancial difficulty paidindependently ofproduction.
(v) Livestock Subsidy
Budget linetofinance MDL 14payments perartificial insemination which isavailable toallfarmers.
(vi) Milk Subsidy
Support payment toencourage theproduction ofmilkavailable toallfarmers. TheState paysMDL 0.20perlitreproduced.
Expected volume is200000000l.
4. TheEnergy Sector
Moldova 'sEnergy Sector willundergo aprocess offundamental restructuring intheyears to
come. Thisprocess willbesupported bymajor international aidagencies. ThisSection describing
thecurrent situation willtherefore belimited toabriefoverview.
Atpresent, there arefivesuppliers ofenergy inMoldova:
i. StateConcern Moldovagas, which owns together withMoldovatransgaz andTiraspoltransgaz
50%oftheMoldovan share ofthenewly created transmission joint-venture "Aprogaztranzit"
(50% owned byGazprom). Itsdistribution subsidiary purchases import supplies from
Moldovatransgas fordistribution andresale onMoldova 'srightbank;
ii. Tirex-Petrol S.A., which isinvolved inimport, transportation, storage, andretail distribution
ofpetroleum products andcoal;
iii. Moldenergo, which isinvolved ingeneration, transmission, anddistribution ofelectric power
inbothbanks oftheNistru river;
iv. Termocomenergo, which isaproducer andretail seller ofheatthroughout thecountry;
v. Thermocom, which through itsnetwork ofaffiliated municipal heating companies, istheretail
seller ofheatwithin Chisinau areaandoperates heat-only generating facilities.
They allemerged from regional subdivisions oflarger agencies from theSoviet period.
Thermocom, Moldenergo andMoldovagas arepuremonopolists, whilst Tirex-Petrol hasa20%market
share andTermocomenergo hasa40%market share.
Asforpricing, electricity, natural gasanddistrict heating tariffs areinprinciple regulated,
cost-of-service tariffs. Prices forpetroleum products andcoalareunregulated forthenon-state sectorWT/ACC/MOL/2/Add.2
Page9
andsubject toacost-plus price regulation forState companies. Theactual tariff level issetbythe
Ministry ofEconomy inconsultation withtheMinistry ofFinance. Inthepasttariffs havebeenbelow
costrecovery level.
5. Updated Balance ofPayments for1995
Table 10:Balance ofPayments oftheRepublic ofMoldova
USD million 1994 1995
Total Non-
CISCIS Total Non-
CISCIS
CURRENT ACCOUNT -82.03 -11.98 -70.06 -94.72 18.17 -112.89
Trade balance -53.90 -10.61 -43.29 -32.42 3.25 -35.67
Export F.O.B. 618.48 212.98 405.50 740.64 272.51 468.13
-barter n.a. n.a. n.a. 188.38 42.37 146.01
Import F.O.B. -672.37 -223.59 -448.79 -773.06 -269.02 -503.80
-cereals (F.O.B.) -21.51 -16.93 -4.59 -12.86 -12.86
-energy products -304.25 -20.45 -283.80 -293.29 -10.61 -282.68
-barter n.a. n.a. n.a. -137.03 -35.54 -101.49
Balance ofservices -46.15 -19.80 -26.35 -81.33 -10.53 -70.80
Transportation -51.00 -17.31 -33.69 -94.61 -22.01 -72.59
Gaztransit 10.22 10.22
Travel -2.80 -2.58 -0.22 0.53 -2.53 3.06
Insurance 0.27 -0.19 -0.09 -0.32 -0.27 -0.05
Other services -2.31 0.28 -2.59 13.06 14.28 -1.22
Transfers (total) -15.32 -13.01 -2.30 -20.50 -15.13 -5.37
from nationals abroad -9.52 -9.52 -9.52 -9.52
from direct investments -0.07 -0.05 -0.02
from portfolio investments 0.93 0.93 -10.91 -5.55 -5.36
other investments (%) -6.72 -4.42 -2.30
Current transfers 33.33 31.44 1.89 39.53 40.58 -1.05
CAPITAL &FINANCIAL
ACCOUNT228.92 122.42 106.49 97.63 71.67 25.69
Capital account -0.38 -0.35 -0.03
Capital transfers -0.97 -0.97 -0.38 -0.35 -0.03
Financial account 229.89 123.40 106.49 97.74 72.01 25.72
Direct investments 11.57 11.45 0.12 63.69 21.76 41.94
Portfolio investments 0.31 0.46 -0.16 -0.33 -0.20 -0.12
Other investments 218.02 111.49 106.53 34.37 50.46 -16.09
Assets -81.69 -44.10 -37.59 -120.95 -51.72 -69.22
Trade credits -65.83 -37.69 -28.14 -136.96 -56.26 -80.70
governmental -0.28 -0.28 -1.55 -1.55WT/ACC/MOL/2/Add.2
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USD million 1994 1995
Total Non-
CISCIS Total Non-
CISCIS
short term -0.28 -0.28 -1.55 -1.55
other sectors -65.55 -37.41 -28.14 -135.41 -54.72 -80.70
short term -65.55 -37.41 -28.14 -106.15 -54.72 -51.43
Loans (credits) 9.24 9.24 9.64 0.07 9.57
governmental sectors 9.48 9.48 9.48 9.48
longterm 9.48 9.48 9.48 9.48
short term
banking sector -0.21 -0.21 0.12 0.07 0.05
short term -0.21 -0.21 0.07 0.07
longterm 0.05 0.05
other sectors -0.03 -0.03 0.04 0.04
short term -0.03 -0.03 0.04 0.04
Currency &deposits -11.32 -3.90 -7.42 8.90 8.67 0.23
Financial organisations -1.33 0.06 -1.39 2.86 0.02 2.84
Banking sector -9.88 -3.93 -5.96 -13.22 -15.79 2.57
Other sectors -0.10 -0.03 -0.07 19.27 24.44 -5.18
Other assets -13.79 -2.52 -11.28 -2.53 -4.20 1.67
governmental -13.31 -2.04 -11.28 -1.88 -3.55 1.67
other sectors -0.48 -0.48 -0.65 -0.65
Liabilities 299.71 155.58 144.12 155.31 102.18 53.13
Trade credits 123.18 -2.10 125.28 47.16 3.64 43.46
governmental -3.61 -3.61 0.53 0.53
short term -3.61 -3.61 0.53 0.53
commercial banks 0.76 0.76
short term 0.76 0.76
other sectors 126.79 1.51 125.28 46.50 3.04 43.46
short term 126.79 1.51 125.28 46.50 3.04 43.46
Loans (credits) 151.72 157.96 -6.24 65.93 88.87 -22.94
governmental 151.72 157.96 -6.24 55.00 77.68 -22.68
longterm 151.72 157.96 -6.50 55.00 77.68 -22.68
short term 0.34 0.26
banking system 0.20 0.20 6.32 6.52 -0.20
short term 0.20 0.20 0.20 -0.20
longterm 6.32 6.32
other sectors 0.06 0.06 4.60 4.66 -0.06
short term 0.06 0.06 0.16 0.22 -0.06
longterm 4.44 4.44 0.00WT/ACC/MOL/2/Add.2
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USD million 1994 1995
Total Non-
CISCIS Total Non-
CISCIS
Currency &deposits 2.17 -0.08 2.25 7.60 9.12 -1.52
Financial organisation 3.12 -0.15 3.27 2.17 3.36 -1.19
Banking system -0.95 0.08 -1.03 5.43 5.76 -0.33
Other sectors
Other liabilities 22.63 -0.20 22.83 34.69 0.55 34.14
governmental 17.54 0.17 17.37 20.99 0.35 20.64
short term 17.54 0.17 17.37 20.99 0.35 20.64
commercial banks 0.20 0.20
short term 0.20 0.20
other sectors 5.09 -0.37 5.46 13.49 13.49
longterm
short term 5.09 -0.37 5.46 13.49 13.49
BASIC BALANCE 146.88 110.45 36.44 2.64 89.84 -87.20
Errors &omissions -114.06 -77.62 -36.44 10.11 -70.92 81.03
OVERALL BALANCE 32.82 32.82 12.75 12.75
FINANCING -32.82 -32.82 -12.75 -12.75
IMFcredit 71.29 71.29 64.67 64.67
Reserves adjustment -104.12 -104.12 -77.42 -77.42
Average exchange rate
LM/USD4.53