Source: EURLEX
Language: en
Format: md

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# 52013SC0080

**JOINT STAFF WORKING DOCUMENT Implementation of the European Neighbourhood Policy in Republic of Moldova Progress in 2012 and recommendations for action Accompanying the document JOINT COMMUNICATION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS European Neighbourhood Policy: Working towards a Stronger Partnership /\* SWD/2013/080 final \*/**

  

1.         Overall assessment and
recommendations

This
report assesses the overall progress in the implementation of the EU-Moldova
European Neighbourhood Policy (ENP) Action Plan between 1 January and 31
December 2012. Developments outside this period are also considered when
relevant. It is not a general review of the political and economic situation in
the Republic of Moldova (hereafter “Moldova”). For information on regional and
multilateral sector processes, please refer to the Eastern Partnership report. The
ENP Action Plan for Moldova was adopted on 22 February 2005. Preparations on
its successor instrument, the EU-Moldova Association Agenda, were initiated in
December 2012.

The
EU-Moldova political dialogue continued to deepen in 2012 and contacts between
high-level officials intensified. In April President Timofti paid a visit to Brussels, which European Commission President Barroso reciprocated in November. In
February, Commissioner De Gucht opened negotiations in Chisinau on establishing
a Deep and Comprehensive Free Trade Area (DCFTA) as part of the EU-Moldova
Association Agreement. In June, Commissioner Füle took part in the informal Eastern
Partnership dialogue organised by Moldova. Commissioner Malmström met three
times with the Moldovan Prime Minister, marking the importance of the visa
liberalisation process. New EU-Moldova agreements were signed in the areas of
visa facilitation, aviation, agriculture, civil protection and CSDP cooperation
and progress was achieved on visa liberalisation.

The
election of President Timofti in March after a stalemate since September 2009
paved the way for gradual political stabilisation and allowed the Moldovan
authorities to concentrate on structural reforms. In February 2013 and March,
however, a renewal of tensions within the ruling, which led to the downfall of
the Government, coalition called political stabilisation into question; lasting
political uncertainty or the delays induced by anticipated parliamentary
elections could undermine the reform and transformation process underway since
2009.

In
2012, ambitious reforms in the justice and the law-enforcement systems and as
regards the fight against corruption started to be implemented, with EU
financial support. These first steps revealed the complexity of the challenges
to be addressed, in particular the need to fight corruption at all levels of
the State and society. Access to justice continued to improve. References to
the new law on freedom of expression appeared in case law, setting encouraging
precedents. An anti-discrimination law ('law on ensuring equality') was
adopted, which the Moldovan government committed to implement in a
comprehensive manner; this remains to be demonstrated in 2013. In November,
assessment by the European Commission of the implementation of the second-phase
benchmarks of the visa liberalisation action plan was launched and will
continue throughout 2013. At the same time, the withdrawal of the broadcasting
license of the NIT television channel by the Audiovisual Coordination Council,
and the opaque judicial process in this case sent negative signals regarding
the independence of the Audiovisual Coordination Council and the judiciary. The
introduction of a ban on the Communist symbols, which were still used by the
largest opposition party, undermined the inclusiveness of the reform process.

Reform
of the public administration continued in the background, in particular with
the adoption in April of a decentralisation strategy, as well as reforms in the
fields of health and education. Moldova re-affirmed its commitment to
structural improvements in the energy sector, while receiving from the
Ministerial Council of the Energy Community more time to increase the
competitiveness of its gas market. In trade-related areas, implementation of
the European Commission’s recommendations identified in the run-up to DCFTA
negotiations progressed well enough to allow for the negotiations to start in
February.

Moldova retained macroeconomic stability
in 2012 thanks to prudent fiscal and monetary policies, irrespective of the
negative shocks (weaker export demand, severe drought) that brought economic
growth to a standstill. External vulnerabilities remained high and the current
account deficit and gross external debt are at elevated levels. Implementation
of the IMF programme and the central bank's policy for building up
international reserves mitigated these risks. Structural reforms advanced,
although at a slower pace due to the negative external environment. These
should be accelerated to improve the investment climate, boost efficiency and
gradually change the current remittances-driven economic model. Privatisation
of large-scale companies – another of the Action Plan's priorities – came to a
halt. Despite some progress with addressing the issue of insufficient
protection of property rights, legislative loopholes remained and ownership
problems in the banking sector re-emerged, highlighting the necessity for
resolute action.

With
regard to the Transnistrian region (hereafter “Transnistria”), in 2012, the Moldovan
authorities significantly stepped up their contacts with the new leadership in Tiraspol, against the background of a re-vitalised ‘5+2’ settlement process. This led to a
breakthrough in some outstanding issues: freight train traffic through the Transnistrian
region was re-opened in April, beneficial mainly to the economic agents based
in the region. At experts’ level, contacts allowed to study possible approaches
to remove obstacles to freedom of movement across the Nistru river, improve the
mechanism of recognition of Transnistrian university diplomas and ensure proper
functioning of Latin-script Moldovan schools in Transnistria. However, lack of
a shared vision on the basic parameters for a comprehensive settlement held up
progress on all issues, and political and security issues were not addressed.
At the same time, moves related to the re- equipment of the foreign military
contingent quartered in Moldova and, more recently, threats of discrimination
by the Transnistrian de facto authorities of Moldovan civil servants residing
in Transnistria threatened, by reviving the risk of tensions on the ground, to
divert the sides away from mutual engagement. In December 2012, the Dublin OSCE
(Organisation for the Security and Cooperation in Europe) Ministerial Council
succeeded in issuing a "Statement on the negotiations on the Transnistrian
settlement process in the '5+2' format", for the first time since 2002.

Within
the Eastern Partnership, Moldova organised the first informal Eastern
Partnership dialogue in June and the second Conference of Regional and Local
Authorities in September. The negotiations for an Association Agreement
progressed smoothly, justifying expectations that they could be finalised in
2013.

In
2012, Moldova addressed most of the key recommendations contained in the last
year's ENP Progress Report. It stepped up efforts to implement judicial and law
enforcement reform, engaged in dialogue with Tiraspol, continued reforms in the
areas of social assistance, health and education, energy, competition and state
aid as well as regulatory approximation to the EU acquis. It finalised
the remaining steps under the first phase of the visa liberalisation action
plan, and stepped up institutional reform of the aviation sector. As a result
of progress in reforms for deep democracy and respect of human rights, Moldova benefitted in 2012 from an additional external assistance allocation of EUR 28
million under the Eastern Partnership Integration and Cooperation programme
(EaPIC). Progress is still needed on the remaining key recommendations. On the
basis of this year’s report and with a view to sustained implementation of the
EU-Moldova ENP Action Plan and its successor instrument in 2013[1], Moldova is invited to:

·
Continue to vigorously advance reforms in the
justice and law enforcement systems, through implementation of the justice
sector reform strategy, and by continuing the reform of the Ministry of
Interior and other relevant bodies.

·
Intensify the fight against corruption in
particular by reforming the prosecution system and the judiciary, and by
ensuring a fully functioning National Anti-corruption Centre.

·
Continue to improve and further simplify customs
procedures with a view to facilitating foreign trade and reducing the risk of
corruption.

·
Prevent the resurgence of institutional
deadlocks by revising its constitution; this process should be conducted in an
inclusive manner.

·
Ensure the full implementation of the National
Human Rights Action Plan;  and ensure the full application of the
Antidiscrimination Law including to cases of discrimination on the basis of
sexual orientation through, inter alia, secondary legislation in line
with international obligations.

·
Engage pro-actively with the Transnistrian side
in view of promoting an enticing, mutually acceptable vision for a common
future, and agreeing accordingly the basic parameters for a settlement.

·
Ensure the full and effective independence of
the Audiovisual Coordination Council;

·
Continue to advance dynamically the
implementation of the second phase of the visa liberalisation action plan;

·
Continue with sector reforms and regulatory
approximation to the EU acquis in trade and
trade-related areas (as identified in the preparation for the DCFTA), in parallel to the ongoing DCFTA negotiations; implement in
particular the law on State aid; and implement energy sector reform in line
with the Energy Community commitments.

·
Step up the reform of the public administration
and start implementing the decentralisation strategy, with a view to
strengthening institutional capacity, efficient use of public resources and
optimization of local administration.

·
Continue the privatisation process, in
particular for remaining large state-owned enterprises.

·
Take steps to strengthen shareholder transparency
in the banking sector.

·
Take further steps to improve the business
environment, including treatment of and registration procedures for foreign
investors, and countering the grey economy.

2.         Political
dialogue and reform

Deep and
sustainable democracy

In March 2012,
the Constitutional Court validated the election of Nicolae Timofti as President of the Republic, ending a long period of political and constitutional deadlock and
paving the way for political stabilisation and large-scale reforms. However, in
February 2013 the battle royal that broke out into the open between the members
of the ruling coalition called into question the benefits achieved during 2012.
In the
Autonomous Territorial Unit of Gagauzia, no serious violations were registered
during the legislative elections of September 2012, according to the chairwoman
of the Gagauz Central Electoral Commission. Neither the Council of Europe nor
the OSCE had sent international observer missions.

In October 2012, a ban on
the use in Moldova of the Communist symbols entered into force, an issue
on which the Venice Commission and the OSCE Office for Democratic Institutions and Human
Rights adopted in March 2013 a joint amicus curiae brief at Moldova’s request. VC/ODIHR expressed the view that the blanket prohibition including the
automatic cessation without judicial review of the activities of the Party of
Communists in case of repeat violations were clearly contrary to international
standards.

With the support of a joint EU and Council of Europe
project, the Central Electoral Commission worked to reform the system of financing of political parties and
prepared a draft law on the subject. However, a competing draft law on
political parties and electoral campaign financing was registered in
Parliament.

In line with OSCE/ODIHR (Office
for Democratic Institutions and Human Rights) recommendations, the electronic
voter register was launched and further extended during the local
by-elections of November 2012.

The right of LGBT persons to freedom
of assembly
and other fundamental rights remained an issue. While Moldovan Government
showed increasing commitment to protect the rights of LGBT persons, and
the May 2012 Gay Pride conference in Chisinau could be peacefully conducted,
the resilience of homophobic sentiments in some parts of Moldovan society
remained a concern. The
European Court of Human Rights found Moldova in violation of Convention
provisions as a result of bans on LGBT public events. Homophobic
decisions by local authorities in Belts and some other municipalities, prohibiting the “aggressive
propaganda of non-traditional sexual orientations” raised similar concerns.
The government took steps to have these decisions revoked, repealed, or
overturned through due legal processes, which in some cases are still going on.

In April, the Audiovisual
Coordination Council withdrew the broadcasting license of the opposition
television channel NIT for alleged failure to comply with the principle of pluralism.
The appeal of the NIT channel was postponed several times until it was dismissed
by the Chisinau Court of Appeal in February 2013. Both the withdrawal of the
license as well as the lengthy court procedure raised questions as to the
independence of the Audiovisual Coordination Council and of the judiciary.

The new law on freedom
of expression started to be used by the judiciary, which thus caught up
with last year’s important legislative improvements. Rules for reporting on
election campaigning in the media were amended. The journalist code of ethics,
developed by the self-regulating Press Council, entered into force. No progress
was made however in the reform of the broadcasting code, and of the public
broadcaster.

While little progress was
recorded with regard to the investigation of the riots following the
presidential elections in April 2009, Moldova embarked on a major review of the
criminal procedure code and other reforms, such as a review of the law on
ombudsman and the civil code, to address most of the structural torture and
ill-treatment related problems identified by the Council of Europe's
Committee for the Prevention of Torture. The number of complaints for
ill-treatment continued to rise during the early months of 2012. While this
rise is not an absolute indicator of an increase in violence in police custody,
the continuing rise of reports of abuse in detention is a serious cause for
concern.

Considerable
efforts have been made to reform the justice sector, although the
General Prosecutor's Office is yet to undergo serious reform. A national action
plan to implement the justice sector reform strategy 2011-2016 was adopted in
February. The EU committed EUR 70 million to support this fundamental reform.
The Ministry of Justice established a permanent mechanism to coordinate and
monitor its implementation. In July, the Parliament adopted a first package of
laws (amending the laws on courts organisation, on judges’ status, on the
Supreme Council of Magistrates, on the Supreme Court of Justice, and on judges’
selection and career). It also amended the criminal and the civil procedure
codes in order to increase the efficiency and transparency of the litigation
process.

Some
progress was achieved in the field of anti-corruption, despite some
political bickering. A comprehensive anti-corruption strategy and a two-year
action plan (2012-2013) were adopted by the Centre for Combating Economic
Crimes and Corruption (CCECC), in consultation with civil society. Although a
comprehensive reform strategy document has not yet been adopted, legislative
amendments aligned Moldova’s legal framework with the main international
instruments. In October, the CCECC was reformed into a National Anti-Corruption
Centre, relieved from fighting economic crime and directly subordinated to
Parliament. Another important step was the creation of the National Integrity
Commission for civil servants. In March, the Parliament abolished the
Economic Court of Appeal and significantly reduced the competences of
first-instance Economic Courts, widely perceived as being prone to of
corruption.

The Ministry
of Interior initiated a deep institutional reform - including the
absorption and transformation of the Border Police, vigorously pursued by a
revamped management. A Reform Centre and a Strategic Advisory Council were
established to supervise this complex reform. Key legislation such as draft
laws on police, on carabineer troops, on the use of firearms, and on the
containment of assemblies awaits adoption.

Other human
rights and fundamental freedoms

In May 2012, the third
round of the EU-Moldova human rights dialogue confirmed Moldova’s political will to foster human rights and the rule of law; as a transparency measure, Moldova agreed to invite Member States and civil society representatives as observers. In March, it accepted most of the remaining 17
recommendations (out of 122) of its first UN Universal Periodic Review that it
had not accepted already in 2011. It reworked
accordingly its National Human Rights Action Plan of 2011, incorporating also
comments from the international community; these amendments await approval by
the government before being referred to Parliament. In August, a working group
was established to match priorities and funding possibilities to ensure the
Action Plan’s effective implementation.

Access to justice was substantially improved over the reporting period, as the system
of free legal aid became applicable to civil law cases, in addition to criminal law cases.

In May, after five years
of efforts, the anti-discrimination law ('law on ensuring equality') was
adopted. The Moldovan Government gave assurances that the law was comprehensive
and in particular addressed discrimination against LGBT persons, as required by
Moldova's international obligations. The comprehensiveness of the Law will
have to be assessed on the basis of implementing legislation and guidelines yet
to be adopted. Training of judges and law enforcement officers was started. The
fact that the Equality Council to be established under the law would not be
given sanctioning powers raised concerns across civil society and the international
community. There were no new developments regarding the ratification of
Protocol 12 to the ECHR.

In August, the law on
social inclusion of persons with disabilities was published. It
recognised that persons with disabilities enjoy equal legal capacity and
introduced requirements to end plenary guardianship (“substituted
decision-making”) arrangements, and to provide reasonable accommodation.

In April 2012, amendments
to the law on HIV/AIDS significantly improved non-discrimination
guarantees and strengthened privacy, confidentiality and data protection
guarantees. Residence bans for persons with HIV/AIDS as well HIV/AIDS testing
in the context of immigration or application for a residence permit, were
abolished.

Amendments
to the national action plan in support of Roma inclusion
established a network of community mediators to assist Roma people in
interfacing with public services. As from January 2013, fifteen Roma community
mediators, funded from the State budget, will be dispatched to the regions.

In February,
amendments to the law on religious communities were published. They left
open a number of issues, including the requirement
that religious communities are established by citizens of Moldova and a provision recognising the ‘particular role’ of the Orthodox Church.

As regards domestic
violence - often linked with gender discrimination -, more protection
orders were issued, but the low level of enforcement persisted. They were
rarely issued within 24 hours as required by law.

The Lanzarote Convention
on Prevention of Abuse and Sexual Exploitation of children was ratified;
national legislation is awaiting adjustment.

In
June 2012, the Parliament outvoted a presidential veto on the introduction of
mandatory chemical castration for paedophile sex offenders. In this
connection, the Government ordered that other domestic law be brought into
compliance with the new law, which may mean amendments eroding Moldova’s Patients’ Right Act, which requires informed consent in the carrying out of any
intervention in the health field.

A law
on integration of migrants and refugees entered into force in July 2012.
The provisions of the law, while satisfactory as regards refugees and other
persons enjoying one form of protection, appear to be restrictive when it comes
to access by foreigners to their social-economic rights. Moldova ratified the two UN statelessness Conventions. The protection standards contained in
the new version of the law on the legal status of foreigners are high and
constitute a model for the region and beyond.

Other
Governance related issues

With support from the
World Bank, the Government has embarked on an ambitious public administration
reform program, aimed at strengthening institutional capacity of the public
administration for better policymaking, policy implementation, and efficient
use of public resources. It further extended the deadlines
for implementing the central public service reform strategy, approved in
2006, for two more years (2012-2013). The decentralisation strategy
adopted in April 2012 aims at providing more autonomy, powers and capabilities
to local authorities, on the basis of fiscal decentralisation; the related
action plan for 2012-2015 started to be implemented. Reform of local
administration is urgently needed, in view of the relatively high number of
local administration units relative to area and population, but reform makes
little headway due to resistance from local and regional governments.

In September 2012, the
Parliament approved the civil society development strategy for
2012-2015 and the action plan for its implementation. A new unit responsible for
cooperation with civil society, including representatives of the Government and
civil society, was set up. Regular
consultations with civil society continued via the National Participation
Council, of which a majority of members are part of the Eastern Partnership
Civil Society Forum National Platform. Relations between civil society and many
ministries are good, but concerns were raised in relation to others, in particular
in the context of the negotiations with the EU on a Deep and Comprehensive Free
Trade Area.

Cooperation on foreign and security policy, conflict prevention and
crisis management

In
2012 Moldova aligned with 56 out of 62 EU CFSP declarations it was invited to
support (63 out of 82 in 2011). Moldova expanded its cooperation with the EU in
the area of security and defence policy, signing in December an
Agreement establishing the framework for its participation in EU crisis
management operations, and submitting proposals for contributions to the EUCAP
NESTOR (Regional Maritime Capacity Building for the Horn of Africa and the Western Indian Ocean) operation.

Good progress was made as
regards cooperation on the Transnistrian issue. Five official meetings
of the '5+2' forum showed the resilience of the reinstated negotiating process.
In the course of 2012 the '5+2' reached agreement on two important documents:
“Principles and Procedures for the Conduct of Negotiations” and on a
comprehensive agenda for the negotiating process. The bilateral
confidence-building expert groups, except the one on demilitarisation and
security, worked very actively as compared to previous years and achieved some
progress, albeit often limited, in all areas under discussion. New working
groups, and a sub-group on human rights, were established. Goods transportation
by rail through the Transnistrian region was resumed, including a mechanism for
joint customs inspections of cargo. The EU stepped up its financial and
technical support to confidence-building from EUR 2 to EUR 12 million in 2012.

Moldova continued to participate constructively in the work of the EU
Border Assistance Mission to Moldova and Ukraine (EUBAM). With EUBAM
support, the customs authorities and border guard service of Moldova continued to enhance their professional capacities, as well as inter-agency cooperation
within the country and with Ukraine. EUBAM continued to support the demarcation
of the state border with Ukraine, as well as the joint pilot
project launched with Ukraine in February 2012, establishing joint control on Ukraine’s territory of the “Briceni-Rososhany” border section.

3.         ECONOMIC AND SOCIAL REFORM

Macroeconomic framework and functioning market economy[2]

The strong recovery from
the 2009 recession came to a halt in 2012, as weakening EU activity and adverse
weather conditions affected the economy. Real GDP contracted by 0.1%
year-on-year in the first three quarters of the year after a 6.8% growth in
2011 as external and domestic demand subsided and investment fell. Feeble EU
demand hit merchandise exports and industrial production and the summer drought
took its toll on the agricultural sector, where production plummeted by 22% in 2012.

Weakening domestic demand,
coupled with lower food prices on global markets, contributed to significant
moderation of. Headline inflation bottomed out at 3.7% year-on-year in June,
after peaking at 9.2% in August 2011. However, since then rising global
commodity prices and the weak harvest in the country have caused inflation to
accelerate. The low inflation in the first half of the year and slowing
domestic activity prompted the central bank to cut its key policy rate by a cumulative
400 basis points in early 2012 to a record low of 4.5% but this was
insufficient to boost the economy.

Irrespective of the
weaker-than-expected economic growth, the authorities have retained a cautious fiscal
stance, trying to stick to the initial ambitious fiscal deficit target. The
budget revision in July raised the deficit plan to 1.3% of GDP from the
previous 0.9%, also including sizable corrective measures to address fiscal
slippages in early 2012 and a weaker economy. The tight fiscal policies should
keep public debt under control.

The current account
deficit remains high, reflecting a weak export base. However, it is likely to
contract considerably in 2012 due to lower import demand as domestic activity
moderated, weakening exports to the EU market as well as resilient remittances.
The current account deficit nearly halved in the first three quarters of 2012.
At the same time, its financing has worsened in the first half due to a
significant decline of foreign direct investment (FDI), but the central bank’s
gradual accumulation of foreign exchange reserves as well as good progress with
the IMF programme mitigate external vulnerabilities to a large extent.

Social
situation, employment and poverty reduction

The unemployment rate is thought to have declined from 6.7%
in 2011 to an estimated 5.6% in 2012.

Moldova carried out important reforms on social protection,
such as the abolishment (since July 2011) of nominal
compensations and its replacement with a new cash-benefits system was
implemented. A law on social inclusion of disabled persons was approved in
March. Moldova
developed and delivered new social services for disabled persons
including mobile teams, personal assistance, and short-break foster care. The
Parliament approved a law obliging providers of social services to be
accredited every five years.

A pension
reform launched in 2011, with the support of the EU and the World Bank, was
continued in 2012, with the aim of increasing the
minimum duration of mandatory contributions and the retirement age for certain categories.
This reform should notably help addressing the un-sustainability of the current
system that poses a serious risk for the public finances.

Social
dialogue was strengthened, with functional sector
councils organized in four sectors: construction, agriculture, information
technologies, and transport.

4.         Trade-related issues, market and
regulatory reform

The EU is Moldova's main trading partner accounting for more than 50% of its trade volume in 2011[3]. Bilateral trade flows
increased and during the first eleven months of 2012 amounted to EUR 2.7
billion. EU exports to Moldova consisted mainly of mineral fuels, electrical
machinery and equipment. EU imports from Moldova consisted mainly of electrical
machinery and equipment, clothing and animal and vegetal fats and oils. Since 2008, exports from Moldova to the EU benefit from the
autonomous trade preferences (ATPs) which offer free access to the EU market
for nearly all products originating in the Moldova except for certain
agricultural products for which limited concessions have been given. ATPs will
be automatically replaced by the DCFTA provisions once it enters into force.

Moldova has showed its willingness and readiness to advance in negotiating
DCFTA with the EU. The DCFTA negotiations were launched in February 2012 will provide a framework for improving the trade and
trade-related environment and further attracting investment to the country,
with the objective of strengthening Moldova's economic competitiveness and
diversify its export base. Further progress was achieved in implementing
the DCFTA-related key recommendations as described below.

A bilateral Agreement on the protection of Geographical
Indications for Agricultural Products and Foodstuffs was ratified by Moldova and concluded by the EU
in December, and is expected to contribute
significantly to the diversification of wine production in Moldova.

Moldova further reduced technical barriers to trade:
the law on standardisation was amended and the law on accreditation and
conformity assessment entered into force. Amendments to the law on metrology
were made. A twinning project on accreditation and conformity assessment
started in June. This should further advance the progress in this area. A twinning project on
standardisation and metrology is expected to start in 2013. In July, Moldova amended the Civil Code and other laws in respect of liability for defective
products. A law on the industrial security of hazardous industrial objects was
adopted in May.

The modernisation of the
Moldovan Customs Service continued in 2012, with support from EUBAM (EU
Border Assistance Mission). Customs revenues form an important part of the
government budget. The dependence of the Government on customs revenues for
financing its budget constitutes a barrier to simplifying customs procedures,
although progress has been made. Moldova has shown tangible achievements as
regards facilitation of traffic and trade flows by improving communication
towards the travelling public and economic operators, through amending rules
and regulations, and promulgating relevant information. Nevertheless, further
efforts are needed for the complete implementation of the single window concept
in all customs houses. Moldova introduced the concept of reliable economic
agent and has started to implement the local clearance procedure. Moldova has improved the use of the pre-arrival information exchange system (PAIES) with Ukraine. Key performance indicators such as the detection of customs irregularities and
enhanced use of PAIES have led to partial achievement of objectives and
expected results of the PAIES project. Despite progress in reforming the
Customs Service, businesses reported complicated and costly customs procedures.
The risk of corruption at the local level appears to remain high. For fighting
fraud, Moldova examined the possibility of replacing criminal penalties for
smuggling of goods with fines. Given the potential negative impact on
investigations and sanctioning of cases involving smuggling of excisable goods,
the EU will continue to follow developments in this area closely.

In
line with its food safety strategy and the 2012 National Programme for Law
Harmonisation, Moldova took further steps to approximate with EU sanitary
and phyto-sanitary (SPS) standards. It transposed twelve pieces of EU acquis
into national legislation. In May, the Parliament adopted a general food safety
law which, inter alia, establishes a food safety agency. A law on animal
identification and traceability entered into force in January. Moldova continued training SPS experts including with TAIEX support. The Commission
approved residue monitoring plans for aquaculture and poultry products, which
is a pre-condition for possible future exports of these products.

The
World Bank recognised Moldova’s progress in working to improve its business
climate in the areas of insolvency procedures and investor protection.
Compared to the previous year, Moldova slightly improved its ranking to 83rd
place[4]
(out of 185) in the ease of doing business ranking in the World Bank’s ‘Doing
Business 2013’ annual report. Moldovan efforts were also reflected in the
Global Competitiveness Report where Moldova went up five places to position 87
out of 144 states assessed. Despite this progress further reforms are still
needed inter alia in countering the grey economy in the retail sector,
and streamlining of the legislation.

In the area of financial
services, Moldova adopted amendments to 53 legislative acts, including the
law on the National Bank. The law on payment services and electronic money was
adopted in May. In January, the banking system started to apply new
accounting standards according to the international financial reporting system.
As of January 2013, the banks are implementing the IBAN code (international
bank account number) to perform cross-border transfers. Non-transparent
ownership in the banking sector remains an area of concern and needs to be
addressed through legislative reforms to strengthen shareholder transparency.
The National Commission for Financial Markets
and the National Bank developed and approved a Joint Action Plan for regulation
and supervision of the non-banking financial institutions.

Other key areas

Regarding tax reform,
Moldova put in place a web-portal, including a ‘bar-code’ and an ‘e-statements’
information systems, facilitating interaction between taxpayers and the tax
administration. Notwithstanding the measures taken in 2008 to simplify and
accelerate VAT refunds and the increase in the budget allocations to that end,
foreign and local investors still face difficulties in getting overdue VAT
refunds. Further tax reform is needed to ease the investment climate. In the
context of gradual harmonisation of national tax policy with the EU tax policy,
Moldova increased excise duties for alcoholic
beverages
and cigarettes

In July, Parliament
adopted a new Competition Law, which contains provisions on antitrust
and mergers, following EU rules closely. The Law on State Aid, meant to bring
Moldovan law into line with the EU acquis, was adopted by Parliament in
June 2012.

In February, the
Government approved a Regulation on the registration of works protected by
copyright and related rights. To bring the national legal framework into line
with the new law on copyright and related rights, legal amendments were adopted
in May. The new Regulation on the activity of patent attorneys entered into
force in July. In April, Moldova replaced its membership in the Eurasian Patent
Organisation with a bilateral cooperation agreement. In April, the twinning
project supporting the implementation and enforcement of intellectual
property rights ended.

Moldova continued implementation of its public procurement
action plan 2011-2013. The Agency for Public Procurement benefited from an
EU-funded twinning project that helped to draft secondary legislation for
approximation with EU Directives. As of August 2012 it is mandatory to apply
the Common Procurement Vocabulary.

Moldova approved a Strategic Development Programme of
the National Bureau of Statistics for 2012-14 and started addressing the
recommendations from the global assessment of the statistical system carried
out in 2012. The Law on the Population Census was adopted; the census itself
was postponed from 2012 to 2014. Moldova has started preparations for this
census and needs to ensure that sufficient resources are made available. The preliminary results from the 2011
Agricultural Census were disseminated. The Consumer Price Index was improved in
line with EU standards; the national classification of economic activities was
revised to correspond to the EU’s NACE Rev.2 and is currently being implemented.
Moldova improved the methodologies of Labour Market Statistics, the Time Use
Survey and Social Statistics.

In June, the law on state
control over enterprise activity was adopted, listing entities
authorised to carry out controls and laying down procedures for them. In
September, Moldova adopted a strategy for the development of the SME sector for
the period 2012-2020 together with an action plan to implement this strategy
for the years 2012-2014. This strategy – which follows on to the recommendations
of the SME Policy Assessment – sets out the following key priorities:
adjustment of the normative and regulatory framework to match SMEs' needs;
improvement of access to finance; development of human capital through
promotion of competences and entrepreneurial culture; increasing SMEs'
competitiveness and stimulating the innovation spirit; facilitation of SMEs'
development in the local regions; and business partnership development.

In January, a Consumer Protection Agency was established,
replacing the main State Inspectorate for Market Surveillance. Moldova prepared a Strategy for Consumer Protection 2013-2020 which was expected to be
adopted by the Government at the beginning of 2013.

Progress
has been made in the area of public internal financial control (PIFC).
The legal and regulatory framework is in place and Moldova, with the aid of EU
twinning support, has started the process of implementation. Moldova also launched a communication strategy to support PIFC implementation.

No progress was noted in
the areas of movement of capital and current payments, company law and
external audit.

5.         Cooperation on justice, freedom and
security

Cooperation between the EU and Moldova further evolved
under the Mobility Partnership. A number of new initiatives were
launched in areas such as consolidation of migration management capacities and
diaspora-oriented projects.  The extended migration profile is expected to be
published in the spring of 2013. The Mobility
Partnership High-Level Meeting in November in Brussels took stock of the
implementation of the Mobility Partnership and discussed the results of the
evaluation exercise carried out in 2012, based on a comprehensive and
far-reaching evaluation report.

Moldova made good progress in adopting and implementing migration
and asylum-related legislation, and in establishing an efficient migration
management system. Laws on integration of foreigners, on accession to the
Convention on the Status of Stateless Persons and on accession to the
Convention on the Reduction of Statelessness entered into force. The Government
started to implement a new procedure for the determining
the status of stateless persons, following ratification of the UN Statelessness
Conventions and subsequent amendments to the legal framework. An important remaining gap in the asylum procedure concerns
the lack of travel documents for refugees, as issuing of refugee travel
documents was delayed. The Government launched the process of preparing travel
documents for refugees, which are, however, expected to be issued only in
several months’ time.

In the context of the visa
dialogue, the Commission’s Third Report adopted in June concluded that the
benchmarks for the first phase (legislative and policy framework) of the Action
Plan on Visa Liberalisation (VLAP) were met and that the assessment of the
benchmarks under the second phase (implementation) could therefore be launched.
The Commission also adopted in August 2012 a Report to the European Parliament
and to the Council on possible migratory and security impacts on the EU of
future visa liberalisation for Moldova. In November, the Council lent its
support to the conclusions of the June report, paving the way for an assessment
of Moldova's progress in the second phase of the Action Plan on Visa Liberalisation.

Implementation of the EU-Moldova visa facilitation and
readmission agreements continued, and was monitored at the meetings of the
respective joint committees. In June, amendments to the EU- Moldova visa
facilitation agreement were signed, and ratified by Moldova in October.

The
Moldovan Border Guard Service (MDBGS), with EUBAM support, continued
implementation of reforms aimed at advancing towards the establishment of a law-enforcement
agency according to EU standards. Important steps
were taken for the implementation of the national strategy and action plan on
integrated border management for 2011-2013. The new Law on the state
border and the Law on border police, as well as amendments to the Code of
Offences, entered into force in July. Thus, the legal framework for solid
border management aiming to approximate with the Schengen Borders Code
(Regulation (EC) No 562/2006) and other relevant EU legislation was put in
place.

As a result of the EU-funded project on support for the
introduction of biometric passports, the Moldovan authorities issued
exclusively biometric passports in line with International Civil Aviation
Organisation (ICAO) standards to their citizens (including in the Moldovan
embassies and consulates).

Moldova made progress in the fight against
organised crime. The legislative and policy framework on preventing and
fighting organised crime was established. The Law on organised
crime was adopted in March (entering into force in September), as well as the
Strategy and the accompanying Action Plan for 2011-2016 (approved by the
Government in 2011), largely in line with the European and international
standards. A Cooperation Agreement between CEPOL (European Police College) and the Academy “Stefan Cel Mare” of the Ministry of Interior was signed in
December.

The Centre for Fighting Trafficking in Human Beings
became fully operational. An updated action plan for 2012-2013 on combating
trafficking in human beings was approved in July.

Regarding
the fight against terrorism, the majority of UN and Council of Europe
Conventions have already been ratified and entered into force. In April, the
Law on preventing and fighting money laundering and the financing of terrorism
was amended to address shortcomings identified in the third MONEYVAL evaluation
report and to implement international conventions.

Moldova made progress in the fight against illegal drugs.
During the April Dialogue on Drugs with Moldova, Azerbaijan, Georgia and
Ukraine in Brussels the first evaluation of the drugs strategy and action plan
was announced, as well as the development of a new drugs strategy and action
plan. In July, Moldova and the
European Monitoring Centre for Drugs and Drug Addiction (EMCDDA) signed a
Memorandum of Understanding in the field of combating drug trafficking. Moldova attended the treatment demand indicator expert meeting, and the European
Information Network on Drugs and Drug Addiction (Reitox) Academy on monitoring
and evaluation of drug policies in Riga in October. Exchange of information on
new psychoactive substances also took place.

In
August, the National Centre for Personal Data Protection launched the personal
data controllers filing register to ensure implementation of the Law on personal
data protection (entered into force in April), according to which the
personal data controllers are obliged to notify the Centre before processing
personal data. The Centre began drafting the National Strategy on the
protection of personal data for the period 2013-2017.

Eurojust
finalised the Evaluation Report on data protection; further institutional steps
towards the start of negotiations for a cooperation agreement between Eurojust
and Moldova were launched.

As
regards judicial cooperation, the legislative framework in the area of
mutual legal assistance is largely in place. In March, Parliament adopted
the Law on special investigating activity and, in April, amendments to the
criminal procedure code.In December, Moldova ratified the second Additional
Protocol to the Council of Europe Convention on Mutual Assistance in Criminal
Matters. Regarding civil matters, there were no
developments in respect of Moldova’s accession to some Hague Conventions, such
as those on judicial assistance (1965 Convention on the Service Abroad of
Judicial and Extrajudicial Documents in Civil or Commercial Matters and 1970
Convention on the Taking of Evidence Abroad in Civil or Commercial Matters) and
on child protection (1996 Convention on Jurisdiction, Applicable Law,
Recognition, Enforcement and Cooperation in respect of Parental Responsibility
and Measures for the Protection of Children).

6.         Transport, energy,
environment, the information society, research and innovation

Progress was made in the
road transport sector. Moldova started implementing the national road
safety strategy 2011-2020 and the Road Sector Programme co-financed by the EU
and international financial institutions. Moldova took further steps to bring
the railway sector closer to EU legal and regulatory standards. In April, the
structure of ‘Moldovan Railways’ (CFM) was modified to separate infrastructure
management from railway operations. However, further reforms in the opening of
the market and setting-up of institutional regulatory structure are needed. A
substantial increase in revenues from freight traffic was registered in 2012.
Freight traffic through the Transnistrian region was restarted in spring 2012,
but due to a number of barriers the volume of traffic was limited.

Moldova carried out important reforms in the field of aviation. The Civil
Aviation Authority (CAA) was established in May to strengthen aviation safety.
The EU-Moldova Common Aviation Area Agreement was signed in June, aiming to
gradually integrate Moldova into the European common aviation market. The EU
plans to provide technical assistance to the Moldovan aviation authorities in
order to harmonise the legal and regulatory framework within the agreed time
frame.

Regarding maritime
transport, the Government took steps to improve the sector’s performance. The
Moldovan fleet continued to figure in the high risk category of the black list
of the Paris Memorandum of Understanding on Port State Control, but a number of
ships have been removed from the Moldovan register and pre-registration control
procedures were improved. In June, the Government approved a new code for
inland shipping which is expected to be adopted in 2013.

In January
2013, the government adopted, following public consultations, the updated energy
strategy until 2030. The sector is still marked by low energy
efficiency, high dependence on a single supplier (Gazprom) and accumulated gas
debts to Gazprom. Negotiations with Gazprom on gas supply, transit and the
accumulated debt (also related to ‘Transnistria’) continued. Moldova further implemented its Energy Community obligations; derogation for unbundling in the gas sector was granted, until 1 January 2020. In May, the regulator increased electricity
tariffs. Moldova pursued heat sector restructuring and addressing debts in this
sector. Preparations for major energy infrastructure
projects continued including the Ungheni-Iasi gas interconnection and the Balti-Suceava
high-voltage electric line. Together with Ukraine and Romania, Moldova also continued preparations for possible
synchronous interconnection of the Moldovan and Ukrainian power systems to the European
Network of Transmission System Operators for Electricity, the continental European power
system. For this project, EU cross-border cooperation support is planned. Draft laws on natural gas, heat and renewable energy
law are in preparation. Moldova prepared drafts of a national energy efficiency
action plan 2012-2014 and a national renewable action plan 2012-2020. It also
drafted an incentives package, including on feed-in tariffs, for increased use
of renewable energy sources. In June, an energy
efficiency fund was established. Moldova implemented energy efficiency and
renewable energy projects including on enhancing biomass use in cities. The
EU energy reform budget support programme (EUR 42.6 million), focusing on
energy efficiency and renewable energy, is being implemented.

As regards climate
change, Moldova participated in preparations for the forthcoming regional
EU Clima East project (EUR 18 million) that will be implemented in the period
2013-2016. Moldova is encouraged to build capacity and engage in
the new carbon market mechanism to be developed following the 17th
and 18th sessions of the United Nations Framework Convention on
Climate Change Conference of the Parties. It is also encouraged to make
additional efforts to fully implement the Cancun and Durban agreements and
in particular devise a low-carbon development strategy.

In the field of environment,
institutional capacity and resources to ensure strategic planning and
implementation still pose challenges. More than 20 pieces of legislation are in
preparation, mainly with external assistance. The EU’s Sector Policy Support in
the water sector requires more attention.

The Regional
Environmental Centre-Moldova improved its
performance. It has a stable financial outlook for the years to come and is
supported by the Ministry of Environment.

In May, Moldova signed with the European Commission an Administrative Arrangement on Civil Protection,
committing the partners to strengthening their cooperation in disaster
prevention, preparedness and response. Moldova continued to participate in the
Eastern Partnership flagship project on prevention, preparedness and response
to natural and man-made disasters (PPRD East). As a part of the programme Moldova is contributing to the development of Electronic Regional Risk Atlas. Relevant
Moldavian institutions are involved in respective activities and the
development phase of the atlas is close to completing in the country. Moldova is encouraged to take advantage of the guiding document on Risk Assessment Policy
for the EaP region produced under the PPRD East programme.

Moldova is among the 168 governments that
adopted the "Hyogo Framework for Action: Building the Resilience of
Nations and Communities to Disasters", but work on Disaster Risk Reduction
is still only at the beginning and it will require considerable further effort
to develop capacities and processes.

Regarding the information
society, the national regulator ANRCETI strengthened its position
and dealt with market analysis, accounting separation for the incumbent JSC
‘Moldtelecom’ and management of numbering resources. ANRCETI adopted the
regulation on number portability (to be implemented for both fixed and mobile
networks in 2013). In February, ANRCETI published the final versions of the
cost calculation models for call termination in fixed and mobile networks. The
models’ approach is based on the recommended by the Commission. Throughout
2012, ANRCETI acted as temporary chair of a newly established network of EaP
regulators for electronic communications (until the formal appointment of chair
in the 1st official plenary meeting of the network in March 2013).

In April, the Audiovisual
Coordination Council withdrew the broadcasting licence of the opposition
television channel NIT, thus undermining media pluralism. The appeal of the NIT
channel was postponed several times until it was dismissed by the Chisinau
Court of Appeal in February 2013. Moldova amended rules relating to reporting
on election campaigning during the election period. The journalist code of
ethics, developed by the self-regulating Press Council, entered into force.
Little progress was made in reforming the public broadcaster TRM and the broadcasting
code.

Moldova’s research and innovation policy focused on EU
integration. A major success in this respect was the country’s association to
the EU’s Seventh Framework Programme for Research and Technological
Development (FP7) as from 1 January 2012. The Moldovan research and innovation
system is marked by a centralised structure, whereby the Academy of Sciences fulfils a role close to that of a Ministry of Science. The Academy is the main public
research organisation in the country; it allocates most of the governmental
funding for research and development. The Academy adopted a comprehensive
action plan to prepare the research community for the opportunities of FP7
association. 26 public and private institutions participate in 27 projects
under FP7. A total EU contribution to these projects amounts to EUR 76 million,
of which EUR 2.6 million went to the Moldovan partners. The Moldovan partners
have been most active in collaborative research projects in ICT and health, and
in international research infrastructure projects.

7.         People-to-people contacts, education and health

Reform of the education
sector is a high priority. Moldova spends a high percentage (around 9%) of
GDP on education, but output and quality of education are poor in relation to
resources spent due to their inefficient use and an inadequate match between
education and the needs of the labour market. Efforts to optimise the use of
resources meet with considerable social resistance as they affect small rural
communities, minorities and teachers disproportionately. The sector strategy
“Education – 2020”, with clear priorities regarding the development of all
levels of the education system in Moldova from both short and long-term
perspectives, is still under consideration by the Government. The revised Code
of Education remained under public discussion. Further reforms are necessary on
the third cycle (doctoral studies), where the Bologna process requirements have
not yet been extended.

Further reforms are also needed in the vocational
education and training (VET) sector, which will benefit from increased EU support, both
through a technical assistance project "support
for the vocational education and training sector", as well as a VET Sector
Budget Support Programme currently under preparation. A VET Strategy was
adopted in January 2013.

Moldova confirmed its high interest in the
Tempus programme. In 2012, nine additional Tempus projects involving the
country were selected. To date, all the 33 higher education institutions in the
country have participated in a Tempus project; the Tempus programme made
significant contributions towards the modernisation of the higher education
system. Moldova continued its active
participation in the Erasmus Mundus programme with the award of seven
new scholarships for Erasmus Mundus join Masters courses and further 190 grants
for short-term mobility organised within a university consortium. Ten Moldovan
institutions and 16 individual researchers participated in Marie Curie
Actions, supporting researchers’ training, mobility and career
development.  One additional project (support to the Association of professors
and researchers on European integration) was selected under the Jean Monnet Programme
in 2012.

Moldovan
youth and youth organisations continue to benefit from the Youth in Action
Programme. For 2012 and 2013, the European Neighbourhood and Partnership
Instrument (EMPI) is providing additional funds to the Youth in Action
Programme to increase cooperation among young people, youth workers and youth
organisations from the EU and the Eastern Partnership neighbouring countries.
In 2012, the setting up of the Eastern Partnership Youth Window within the
Youth in Action Programme nearly tripled the number of young Moldovan
participants in the programme. 303 projects were
selected in 2012 involving 987 young citizens of Moldova.

Substantive progress was
made on cultural policy regulation. Drafting of a law on culture
accompanied by a national strategy on cultural developments is on-going. A
national programme for the compuerisation of cultural products was approved. In
April, Moldova adopted a law on protection of the national movable cultural
heritage. Following the adoption of a regulation concerning the conservation
and restoration of historic monuments, Moldova established an agency for the
protection of archaeological heritage. An institute for the protection of
monuments and a national agency for cinema are to be created. Efforts should be
pursued to improve coordination between the different institutions in charge of
heritage protection. Moldova participated in six projects under the Eastern
Partnership Culture Programme.

Moldova continued implementing its health reform
programmes. The EU budget support was topped up by EUR
6.0 million under the Eastern Partnership Integration and Cooperation programme
2012 funds, thus reaching EUR 49.45 million. The country continued
restructuring its primary health care services and the hospital sector. The
average salary of health professionals increased by approximately 10%, but the availability of sufficient financial means and health
workers remained a challenge. The first twinning project in the health
sector is under preparation. The country continued
addressing HIV/AIDS and tuberculosis challenges. In 2012, despite being
invited, Moldova did not participate in the
Commission’s HIV/AIDS think tank. Moldova adopted a strategy for prevention and
control of non-communicable diseases and programmes on tobacco and
alcohol control.  Moldovan health workers were
trained. The country prepared an assessment of the state of approximation of
its health legislation compared to the EU health acquis. Chisinau and Tiraspol cooperated well in the health sector.

[1]               The EU-Moldova ENP Action Plan should be replaced by
the Association Agenda in the course of 2013.

[2] Figures on GDP, inflation, trade and employment are generally from
Eurostat based on data supplied by the national statistical offices; or IMF or Commission
Staff estimates, as indicated in the Statistical Annex. When other data sources
are used these are then indicated.

[3] Data for 2012 was not available at the time of writing.

[4] Comparison
was made with the ‘Doing Business 2012‘ranking which was adjusted for changes
in methodology and any revision of data due to corrections. For more
information see http://www.doingbusiness.org

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