RESTRICTEDWORLD TRADE
ORGANIZATIONWT/ACC/MOL/29
13 June 2000
(00-2334)
Working Party on the
Accession of MoldovaOriginal:  English
ACCESSION OF THE REPUBLIC OF MOLDOVA
Communication from the Republic of Moldova
Report on Privatization
The Permanent Mission of the Republic of Moldova has submitted the following Report on
Privatization: 2000, prepared pursuant to the commitment undertaken by Moldova in paragraph 28 of
the draft Working Party Report (WT/ACC/SPEC/MOL/4/Rev.3).
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The Law on the Privatization Program for 1997—1998 was approved by Parliament on
25 June 1997 and came into force on 11 September 1997. Subsequently, the implementation period
for the Law was extended to 31 December 2000. It is anticipated that this program will complete the
privatization of public property in the Republic of Moldova.
The present Report reviews progress through 31 December 1999 in implementing this Law.
The Law on the Privatization Program for 1997—1998 contains the following objectives:
a. the sale of large units (packages of shares) through investment and commercial
tenders;
b. completing the sale of middle-sized and small units as single properties through
auction (by increasing or reducing the initial price);
c. the sale of State shares on the Stock Exchange;
d. the sale of rented non-residential buildings;
e. the completion of selling housing facilities;
f. the privatization and reorganization of agriculture;
g. the sale of land adjacent to privatized and private units;
h. the privatization of unfinished buildings;
i. the sale of shares that were not bid for against patrimony bonds during the mass
privatization.
In addition, the broad objectives of the 1997 Law marked a significant evolution as compared
with previous privatization programs. Previously, privatization had had mainly a political and social
orientation. The present program, however, attaches high priority to producing viable private
enterprises, attracting investment, and increasing budget revenue. The importance of the latter can be
seen by the fact that in 1996, the last year of privatization under previous programs, budget receiptsfrom privatization were 11.5 million Moldovan Leu (MDL). In 1999, however, receipts were MDL
186.5 million, a 16-fold increase. The emphasis on producing viable private enterprises and attractingWT/ACC/MOL/29
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investment reflects the desire to shorten as much as possible the transition period and return the
economy to a state of vigorous growth.
The 1997 Law also differed from previous privatization exercises in a number of its specific
features. These include its emphasis on the privatization of real estate against cash; on the
diversification of privatization methods and types of enterprise subject to privatization (includingsome in the infrastructure sector); and on the wider use of sales of shares in the Stock Market.
Leaving aside residential real estate (dealt with below), the Privatization Program planned to
privatize 821 objects according to standard projects (appendix #1 of the Program); 39 objects
according to individual privatization plans approved by Parliament (appendix #2 of the Program); and
180 unfinished buildings (appendix #3 of the Program). In addition, State shares in 610 companies
that had not been sold during the Mass Privatization Program for Patrimony Bonds were to be sold on
the Stock Exchange.
As regards the objects enumerated in appendices #1 and #2, 67 investment tenders and 406
auctions were held. This resulted in the sale of 295 objects. The difference between the total number
of auctions and tenders and the total number of sold objects is explained by the fact that a significant
number of objects were offered for sale 2 or more times due to lack of demand. The sectoral
distribution of the sales is contained in Table 1; the distribution among sectors by privatization modes
is contained in Table 2.
Of the 180 unfinished buildings earmarked for privatization, 10 had been sold by end-1999.
During 1997-1999, State shares in 424 companies were sold on the Stock Exchange. These
included shares in 81 companies listed in appendix #1 and 343 companies that were not sold for
Patrimony Bonds.
Table 1
Sectoral privatization Data Profile; Law on the Privatization Program for 1997-1998
Sector Number of Objects
approved for
privatizationNumber of Objects
privatized as of
01.01.2000Percentage of
Objects privatized
Industry 211 107 50.71
Agriculture 209 51 24.40
Construction 66 25 37.88
Transport & Communication 69 12 17.39
Trade and Public Catering 62 25 40.32
Consumer Services 35 10 28.57
Culture 100 32 32.00
Other sectors 108 33 30.56
TOTAL 860 295 34.30WT/ACC/MOL/29
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Table 2
Sectoral Privatization Data Profile by Privatization Modes; 1997—1998
Sector Privatization Mode Number of
Privatized
Objects
Industry open outcry auctions with lowering or raising the initial price;
Privatized through individual projects.107
0
Agriculture open outcry auctions with lowering or raising the initial price;
Privatized through individual projects.48
3
Construction open outcry auctions with lowering or raising the initial price;
Privatized through individual projects.25
0
Transport &Communicationopen outcry auctions with lowering or raising the initial price;
Privatized through individual projects.12
0
Trade and PublicCateringopen outcry auctions with lowering or raising the initial price;
Privatized through individual projects.25
0
ConsumerServicesopen outcry auctions with lowering or raising the initial price;
Privatized through individual projects.10
0
Culture open outcry auctions with lowering or raising the initial price;
Privatized through individual projects.32
0
Other sectors open outcry auctions with lowering or raising the initial price;
Privatized through individual projects.33
0
TOTAL 295
The privatization of real estate
During January-December of 1999, 163 “open outcry auctions with raising of the initial
price” were organized and 1,311 items consisting of individual complexes and share holdings
presented for sale. Some of the items had been put to auction previously, in some cases more than
once.
During the same period 938 items were presented for sale at 131 “open outcry auctions with
lowering of the initial price”. Again, some of the items were put to auction more than once.
Due to the lack of potential buyers many of the auctioned items were not sold. However, 85
items were sold for MDL 9.97 million.
Privatization of real estate at a symbolic price
The privatization of real estate owned by insolvent enterprises is ensured, according to the
Law, by sales at a symbolic price. A methodology has been elaborate to determine which enterprises
are to be so privatized. The Government has approved a list of properties that are to be privatized at a
symbolic price.
At present, the list of properties proposed for privatization at a symbolic price includes 59
items (5 enterprises and 54 unfinished construction objects).WT/ACC/MOL/29
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Privatization of state dwellings and rented premises
7,400 state flats were privatized in 1999.
After the privatization of dwellings, priority importance is accorded to the foundation of the
Association of privatized home and flat owners.
At the same time, contracts have been registered for the investment of own resources in
unfinished houses according to Government Decision no. 676.
In accordance with article 19 of the Law concerning the Privatization Program and in order to
accomplish the provisions of Government Decision no. 122 of 04.02.98, the Privatization Department
in 1999 examined and accepted for  privatization uninhabitable rented properties in a total amount of
MDL 17.02 million.
Agriculture
The Law on the Privatization Program for 1997-1998 set forth the procedure for privatizing
property and land attached to state agriculture enterprises. However, it became evident that additional
measures would need to be taken in support of the Law. Consequently, the National Land Project was
established and came into force in early 1998. The National Land Project has the fundamental task of
- organizing the reinforcement of laws adopted by the Parliament regarding
privatization   in agriculture, and
- the assignment of land and property and establishing new economic units based on
private ownership.
Privatization was also reinforced through other legislation, in particular Law no. 392 of May
1999  ”On Restructuring Agricultural Enterprises”, which deals with the financial and tax liabilities of
agricultural state enterprises.
As of 1 January 2000, 877 agricultural enterprises had signed agreements to join the National
Land Project. In the case of 657 companies their property and land were distributed among company
members. In the case of 124 companies debts were written off and the companies were liquidated.
Problems
The execution of Privatization Program for 1999 has taken place in difficult conditions and
has encountered several problems. Among the most frequent are:
- The poor economic and financial situation of many entities scheduled for
privatization and the accumulation of large debts, which decrease the activity of these
entities.
- The unresolved dilemma of the “budget-investment conundrum”. The attempts to
solve a tactical task, and that is to maximize revenue to the state budget – often work
against strategic interests – the attraction of investments, the restructuring ofenterprises and their relaunching.
- The considerable excess of supply over demand for state properties in both the equity
and real estate market markets.WT/ACC/MOL/29
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- The insufficiency of capital, which might be used for privatization, and in particular
for the re-launch of industrial companies, wh ich results in insufficient financial flows,
and the fact that local and foreign banks do not play an active role in the financing of
enterprises.
- The problem of restructuring the considerable debts of several enterprises included in
the privatization program. Such enterprises, as a rule, have been put up for sale
several times but without eliciting any interest from purchasers. Investors will not
take on the risk of investing in entities with substantial debt, and the risk of not being
able to respond to creditors’ requests. As a result, it is absolutely necessary to
restructure the debts of such enterprises, including the rescheduling of debts and
cancellation of historical debts to the budget before they are put up for sale.
The successful realization of the tasks relating to privatization during the year 2000 will,  to a
great extent, depend on the resolution of the problems referred to above.
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