U.S. Department of State

II. Country Assessments - Moldova

Political Overview

In spring 2002, large demonstrations in the capital city of Chisinau tested the democratic credentials of the new Moldovan government led by the Communist Party. Citizens protested against the government's decision to place Russian on par with Moldovan as the country's language, including in the schools, to re-write the school history curriculum and to limit religious freedoms. The Government of Moldova (GOM) ultimately relented and agreed to Council of Europe (CoE) mediation. Following COE mediation, it registered the Metropolitan Church of Bessarabia, imposed a moratorium on extending the use of Russian, and refrained from changing the history curriculum. The Moldovan Government agreed to consult parliament and society regarding changes to the constitution and it continued to investigate the disappearance of an opposition Member of Parliament. The Moldovan Government is also reviewing the CoE's recommendations concerning draft legislation governing the national public broadcasting company.

The secessionist regime maintains control of Transnistria region of Moldova, the core industrial area and home to a majority of its ethnic Russian population. In July 2002 OSCE, Russian, and Ukrainian mediators arrived at a blueprint for reuniting Moldova under a federal system, but talks have stalled since then. Four trainloads of munitions of the Organized Group of Russian Forces left Transnistria, as Russia continues with its sporadic steps to fulfill its commitment under the 1999 OSCE Istanbul summit to remove its forces and weapons from Transnistria. The Governor of the autonomous region of Gagauzia resigned in July, citing pressure from the central government.

Economic Overview

Moldova remains the poorest country in Europe, with GDP per capita at $406. After protracted negotiations with the Moldovan Government, primarily over its mushrooming debt burden, the International Monetary Fund (IMF) and World Bank resumed lending to Moldova in July. The 2002 inflation rate is estimated at 8 percent; and, the budget deficit for 2002 is estimated to be 1.2 percent of GDP. The Moldovan leu depreciated 6.5 percent against the U.S. dollar from January 1, 2002 to December 1, 2002. Imports increased more rapidly than exports during the first half of 2002 as Moldova's terms of trade worsened, as higher-priced energy imports outpaced the value of Moldova's main exports -- agricultural and agro-processing goods. The debt/revenue ratio remained worrisome at 42 percent. Privatization results were mixed: several medium size companies and two wineries were privatized, but the Moldovan Government did not succeed in privatizing its key large, state enterprises, notably MoldTelecom. Sporadic and ineffective enforcement of the law combined with economic and political uncertainty continues to discourage foreign direct investment. Moldova will continue to require economic assistance from the international community for the foreseeable future.

Overview of U.S. Government Assistance

In FY 2002, the U.S. Government provided an estimated $66.65 million in assistance to Moldova:

• $35.82 million in FREEDOM Support Act (FSA) assistance

• $5.47 million in U.S. Department of Agriculture (USDA) food aid;

• $6.44 million in other U.S. Government assistance, and

• privately donated and Defense Department excess commodities valued at $18.82 million.

Agricultural post-land-privatization activities and energy-sector privatization continued to be the main focus of U.S. assistance. Law enforcement, anti-trafficking, border control and non-proliferation were also emphasized in FY 2002. Military-to-military cooperation remained strong, through Partnership for Peace (PFP) exercises, International Military Education and Training (IMET) funds, and Bilateral Affairs Operations collaboration with Moldova.

Training and Exchange Programs

Since 1993, U.S. Government-funded exchange programs have brought over 2,650 Moldovan citizens to the United States for short-term professional or long-term academic training, including approximately 325 in FY 2002. These programs give participants an opportunity to develop their skills and establish valuable contacts with U.S. counterparts.

U.S. Department of State - Public Diplomacy Exchanges: In FY 2002, approximately 280 Moldovans traveled to the United States under exchange programs run by the Bureau of Educational and Cultural Affairs (ECA). This includes 40 high school participants on the academic-year Future Leaders' Exchange (FLEX) Program. FLEX alumni observed Earth Day by coordinating a group of high school students and children from an orphanage to plant trees in deforested area near the town of Edinetsight. FSA funded eight Undergraduate students, and seven Muskie/FSA Graduate fellows on one or two year degree programs. The Community Connections program brought 120 Moldovan entrepreneurs and professionals to the U.S. on internship and training programs. Over 40 Moldovan public and private sector leaders traveled to the U.S. on the International Visitors (IV) program. Among the highlights of the 2002 IV Program were projects in which nine members of the Moldovan Parliament learned about the legislative process in the United States, and the Deputy Prime Minister and Minister of Agriculture acquired information about humanitarian assistance and agriculture in the United States. In FY 2002, the U.S. Embassy Alumni Resource Center expanded its activities creating favorable conditions for United States Government program alumni to share their knowledge and American experience with the Moldovan public. In addition, 11 American specialists visited Moldova as speakers and university professors. Program topics included legislative and budget processes, minorities' issues, academic accreditation, agricultural reform, and small business development.

U.S. Department of State - Civic Education Programs: The University of Iowa administered a grant from the ECA Bureau to improve civic education instruction in Moldova. Civic education curricular materials emphasizing issues of concern to youth (censorship, status of women, consumer behavior, employment and civic society) were developed. A team of six Moldovan teachers in collaboration with three curriculum specialists from the University of Iowa developed a ninth-grade civic education curriculum, and published 11,000 copies of the student materials and 500 copies of the teacher's guide for use in schools throughout Moldova.

U.S. Department of Agriculture (USDA) - Cochran Fellowship Program: USDA's Cochran Program continued to support agricultural reform in Moldova by organizing short-term exchange programs for Moldovan agriculturists. In FY 2002, the Program provided training for 13 participants in World Trade Organization (WTO) and agricultural policy, plant protection and quarantine, and wheat milling. Two Cochran alumni received a multi-year World Bank grant in the amount of $5 million to establish a national extension service modeled on the North Carolina Cooperative Extension. Other Cochran participants continue to work for private agricultural entities, governmental agencies, or NGOs, effecting positive changes at the individual, local and national levels. Many Cochran alumni have been appointed to prominent positions in Moldovan Government, including the Director General of the Department of Privatization and the Deputy Minister of Agriculture. Moldova's Prime Minister Vasile Tarlev was a Cochran Fellow in 1993, when he worked as a chief engineer for Bucuria JSC.

U.S. Department of Commerce - Special American Business Internship Training (SABIT) Program: In FY 2002, a total of six Moldovans traveled to the United States under the SABIT Program for one-month internships in the areas of environmental technologies, transportation infrastructure, standards in telecommunications and plastics. A SABIT alumnus founded the International Small and Medium Business Association, which connects SME owners in Ukraine, Moldova, and Romania. The President of Moldova's Small Business Association, a SABIT alumnus, held the first teleconference between Moldova's Prime Minister and small business owners. This business advocacy forum will now meet regularly with Moldovan government Ministers.

Democracy Programs

U.S. Department of State - Democracy Funds Small Grants Program: In FY 2002, the U.S. Embassy's Democracy Commission awarded 51 grants totaling approximately $250,000 to Moldovan NGOs and independent media outlets. Project topics included civic education; environmental protection; and human rights, including the rights of women, children, and minorities; anti-trafficking; NGO capacity building; and development of community information and training centers. The awards assisted the grantees in organizing seminars, workshops, and roundtable discussions, producing newsletters, newspaper supplements and other publications, developing and producing television programs. Some grants were issued to purchase core equipment for NGOs to enhance their long-term viability.

U.S. Department of State - Internet Access and Training Program (IATP): IATP provides equipment and training for the establishment of public-access Internet centers in areas where Internet access is difficult or unavailable. In FY 2002, IATP's network expanded to include 11 public-access Internet facilities across Moldova.

USAID Rule-of-Law Programs: In FY 2002, the Rule of Law Project educated citizens on their legal rights and responsibilities, provided free legal consultations and representation, and increased the capacity of the legal system to respond more effectively by improving the knowledge level of judges, lawyers, and other legal professionals. The Balti Legal Clinic provided 427 legal consultations during its first year of operation. This resulted in 214 administrative actions and the filing of 12 lawsuits on behalf of the clinic's clients.  The Traveling Lawyer Program had a lawyer visit villages in the Orhei Judet region once a week to provide legal advice and assistance, thus giving legal assistance to 787 rural inhabitants who otherwise would have no access to a lawyer. The Environmental Public Advocacy Center offered legal environmental consul to rural communities and initiated on their behalf 18 lawsuits and 33 administrative actions. The Judicial Training Center organized 12 training sessions for judges and other legal professionals.  The Law Center helped local lawyers remain literate in the rapidly evolving legal system in Moldova by offering 20 seminars on newly passed legislation. 

U.S. Department of State - Bureau of Population, Refugees and Migration (PRM) - Support for IOM Anti-Trafficking Activities: In FY 2002, through the International Organization for Migration (IOM), PRM provided support for a shelter for returned trafficking victims in Moldova. The shelter is providing limited reintegration assistance, medical care and counseling.

Economic Development Programs

U.S. Department of Treasury - Technical Advisors: After not having a permanent presence in Moldova since 1999, the Treasury Department assigned an experienced government debt advisor to Moldova in 2002. The advisor's work plan focused on two objectives: improving market operations to reestablish the domestic government securities market; and helping the Ministry of Finance (MoF) to develop a coherent debt management strategy. Initially, the advisor's work concentrated in supporting the Moldovan Government's plans to deal with a serious spike in its debt service that occurred in June 2002. After protracted negotiations, the Moldovan Government negotiated a transaction with the principal bond-holders that extends the maturity of this external bond issue for an additional seven years, while providing budgetary relief in the form of reduced coupon rates. With Moldova having resolved its most pressing problem, the advisor assisted the MoF in reviewing Moldova's other financial obligations, primarily debt assumed on behalf of the state-owned gas distribution utility and official debt. The Moldovan Government believes debt relief, in the form of maturity extensions at below-market rates (to produce NPV savings), is appropriate for these liabilities. As Moldova seeks to negotiate a reduction of its debt, significant additional analysis will need to be provided to creditors. The Treasury advisor will provide macroeconomic analysis in support of Moldova's case for debt relief.

USAID Loan Portfolio Guarantee (LPG) Program: USAID's Micro-Enterprise and Small Business LPG Program helps mobilize credit for micro-enterprises and small businesses by utilizing the formal financial sector on the basis of a risk-sharing arrangement. Three Moldovan financial institutions - Agroindbank, Fincombank, and Victoriabank - have been part of the LPG program since FY2000. During the program's two years of operation, approximately 600 loans totaling $5 million have been provided to micro-enterprises and small businesses. Moldova's Agroindbank has one of the best performance records among USAID's LPG programs throughout Central and Eastern Europe.

USAID Small and Medium-Sized Enterprise (SME) Development Programs: USAID's BIZPRO project addresses the country's high unemployment rates, especially in smaller communities, by promoting SME development. The project facilitates SMEs' access to business skills, information, and financial resources, which they do not have in-house. Hotlines and business associations have been established in strategic locations to allow entrepreneurs to obtain immediate answers to operational question and easily access market information. The associations also serve as a galvanizing point for small businessmen to organize and lobby public policy decisions that will impact their business environment. BIZPRO has also improved access to financing by forming partnership agreements with micro financing institutions.

USAID Fiscal Reform Programs: In FY 2002, work continued with the State Tax Service to implement Title V of the Tax Code, which clarifies the administrative process by which taxes are collected. In the first ten months of 2002, tax revenues increased by 21.1 percent, compared with the same period in 2001. USAID also provided Parliament with analysis of a number of tax and budget proposals. Its close cooperation with Parliament was key to the adoption of the Civil Code, which outlines how enterprises conduct business with each other and with the Government. The Treasury and Debt Departments of the Ministry of Finance profited from a re-organization proposed by USAID. Using an analysis prepared by the project, the Ministry of Finance successfully renegotiated and rescheduled in 2002 its debt service obligations - paying the full amount would have absorbed 75 percent of the State Budget revenue for the year. The Ministry of Finance also gained control over the process of undertaking new debt. In 2001, external debt was reduced and in 2002 all new debt is on preferential terms. In 2002, USAID began phasing out its fiscal reform programs.

USAID Banking Reform Project: USAID's Banking Reform Project ended on 17 May 2002. The final stage of the Moldovan Bank Supervision Project focused on the National Bank of Moldova's (NBM) on-site bank supervision process. USAID developed an accreditation program for NBM inspectors, it revised the NBM Inspection Manual, and it enhanced NBM's on-site and off-site supervision functions. The cumulative result was that NBM received a determination of compliance with the Basel Committee's "Core Principles of Effective Banking Supervision." USAID also continued training NBM's Accounting Department in International Accounting Standards. USAID also helped to develop contemporary role for Bankers' Association.

USAID Financial Management Training and Advisory Activity: In November 2001, FMTAA project established the "Continuing Professional Education Center for Accounting, Audit, and Financial Management" (CIPC) to provide training and advisory services to practicing accountants, financiers, auditors, consultants, and financial managers of various levels.  In FY 2002, FMTAA held 300 seminars across Moldova, and trained 4,759 participants in relevant subject matters.  FMTAA also promoted the use of information technology in the accounting field by working with software vendors and users in tailoring solutions to users' needs and providing training to over 119 participants.

USAID Telecommunications Regulatory Reform: The National Agency for the Regulation of Telecommunications and Informatics was established in 2000. USAID continues to provide support to this nascent regulatory body by developing its capacity to perform the functions of an independent regulator, including the development of licensing procedures, tariff and rate-setting policies, and other essential functions.

USAID Local Government Reform Project (LGRP): In FY 2002, LGRP added 23 new Local Government Partners (LGPs). The program helped the LGPs develop participatory community strategic plans as well as give them basic financial management training, office automation, and technical assistance. LGRP efforts have improved community fiscal management and allowed local governments to introduce new or improved municipal services that were identified by citizens and local officials as priorities in their respective strategic plans. LGRP initiated 15 micro-demonstration projects that provided small matching grants and technical assistance in the areas of water supply, heating, and solid waste management. It is currently developing a comprehensive Manual on Efficient Water Supply Operations based on the demonstration projects to rollout some of the lessons learned. LGRP's institutional partners are the National League of Mayors, the Association of Mayors and Local Communities, the Moldovan Association of Water Utilities and "Raza Soarelui," an NGO committed to increasing transparency in government. The LGRP has worked to strengthen the mayor's associations so the communities can pool their experiences and have a "hands-on" approach to solving their own problems, and not have to wait for or be dependent on the central government.

USAID Private Farmers Assistance Program (PFAP): In January 2001, USAID launched PFAP to provide post-privatization assistance the agricultural sector, which is the core economic sector in Moldova. The project focuses on four areas: (1) improving the policy, legal and regulatory environment; (2) developing rural enterprises, with an emphasis on business cooperatives; (3) expanding the availability of agricultural inputs and services; and (4) completing the privatization of collective farms. In FY 2002, PFAP helped draft 50 laws, regulations and other normative acts on the development of private agricultural enterprises, of which 24 were enacted; it facilitated promulgation and implementation of the Law on Business Cooperatives and strengthened over 205 Savings and Credit Associations (SCAs). PFAP also organized training for landowners and enterprises on topics such as lease relations, sales contracts, accounting, marketing, business planning, grants policies and leadership skills; and provided consultations and legal advice to almost 500,000 people and 45,000 enterprises (in 2001- 2002). In 2002, PFAP helped establish a network of 10 modern private Mechanical Services Centers that purchased new agricultural equipment worth $2 million. PFAP also supports the formation and development of a network of NGOs to provide continuing business and legal support to private farmers and enterprises in rural communities throughout Moldova. In FY 2002, PFAP made special efforts to strengthen the Agricultural Producers' Associations and their National Union, which are the leading organizations promoting the interests of private agribusiness in Moldova.

USAID Private Farmer Commercialization Program (PFCP): In February 2001, USAID began to implement a three-year PFCP program to build on the success of the USAID land privatization program and the USAID-funded agricultural partnership program implemented by the Citizens' Network for Foreign Affairs (CNFA). PFCP links newly landed private farmers with access to essential inputs, credit, and output markets, as well as technical assistance, thus improving the economic well being of private farmers at the village level. In particular, PFCP focuses on value added and market development projects. During FY 2002, PFCP developed one farm service center, one marketing, and two value-added projects. Partnerships created with USAID-funded CNFA assistance are now directly contributing to the economic well being of an estimated 30,000 Moldovan private farmers. During 2002, 30 new farm stores were opened, bringing the total number of stores to 45. These stores are providing small-packaged inputs and machinery services to private farmers, with each store serving from 1,000 to 2,000 farmers. Training seminars for farm-store customers were an integral part of the farm store development program. More than 7,600 private farmers received organized training on topics important for rural businesses, in numerous seminars presented at village farm stores. Additionally, more than 100,000 farm store customers have received one-on-one consultations from store agronomists, leading to higher crop yields and increased farm income. In addition, loan activity in support of PFCP continued in private-farmer credit-fund programs with AgroIndbank and FinComBank. As a result, 62 loans totaling $559,655 were made to private farmers for equipment and small-scale processing. The loan program was expanded to include micro lending for land purchases financed through SCAs. Under this new SCA program, 29 land loans averaging $1,300 were made. These initial land mortgages are helping to develop and standardize Moldova's land market.

USAID Agriculture Volunteers Program (AVP): In FY 2002, AVP volunteers worked on improving Moldova's organizational capacity to manage capital, with a special emphasis on improved business planning techniques and management practices. In FY 2002, 38 out of 42 planned AVP assignments were completed, including assignments in the following areas: cooperative formation and the development of milk receiving station locations, credit training at Savings and Credit Associations, assistance to two farm service centers and farm stores in business management, and the delivery of business development training to 6 farmers' cooperatives and associations. USAID is optimistic that the success of these models will lead to replication by other farmers' groups and will help provide better systems of input distribution and credit to farmers, as well as linking farmers to effective output markets.

USAID - Partnership for Food Industry Development (PFID): During FY 2002, PFID improved raw material supply to the food industry by working with the Moldovan Institute of Animal Husbandry and Veterinary Medicine (INZMV) on developing an out-grower scheme to distribute improved breeds of piglets to 257 farmers. PFID also worked with INZMV to establish an Internet accessible database, which provides food producers information on raw material sources, standards, supplies and equipment. INZMV also has provided tailored training and know how transfer to 117 producers throughout Moldova. The program is expected to result in increased earnings, employment, and exports in the food industry. U.S.-based technical specialists conducted several seminars allowing local specialists to successfully complete Seafood Sanitation Control Procedures and Hazard Analysis for Critical Control Point (HACCP) training. Seminars included meat and poultry HACCP workshops; markets, branding and other marketing topics; and cold chain management. Four Moldovan specialists were certified as trainers for Seafood HACCP and four for Meat and Poultry HACCP.

Western NIS Enterprise Fund (WNISEF): During its six years of operation in Moldova, the USAID-supported WNISEF has invested over $14 million in Moldovan companies. The Fund's portfolio currently includes a glass manufacturing company, an agricultural distribution center, a beer and soft drinks producer, a micro lending institution and the largest commercial bank in the country. In FY 2002, WNISEF improved corporate governance at its portfolio companies, leading to innovative product introductions, new marketing strategies, rationalized corporate structures, improved profitability, as well as making great strides in strengthening and deepening management teams. The results were excellent, and the companies continued to show impressive performance on the regional market in terms of growth, competitive position, and profitability. In FY 2002, WNISEF expanded its micro-enterprise lending efforts and committed an additional $1.5 million to transform and expand the Micro-Enterprise Credit of Moldova finance company into a full-service bank. The Fund also succeeded in attracting a foreign strategic investor to one of its portfolio companies—Vitanta-Intravest, a leading Moldovan beer and soft drinks manufacturer. WNISEF's portfolio companies employ over 2,100 people and are expected to contribute over 160 million lei (over $11 million) to the Moldova budget in taxes, excises, custom duties and social contributions in FY 2002. In FY 2002, 31 employees from WNISEF portfolio companies in Moldova participated in seven seminars in areas including human resource management; networking; sales skills; public speaking; media relations; and company growth though merger, acquisition and IPO. The Fund hosted CEO seminars for top managers of the portfolio companies to assist them in networking among business leaders with a common vision and learning from the experience of successful managers from different businesses. Overall, in FY 2002 WNISEF has provided nearly $35,000 in technical assistance funds (management information system, consulting, and training) to its portfolio companies in Moldova.

U.S. Department of Commerce - Commercial Law Development Program (CLDP): In FY 2002, CLDP provided technical assistance to the Moldovan Parliament, Ministry of Justice, and court system drafting legislation as Moldova transitions towards implementing its WTO obligations. A strong focus was placed on intellectual property, customs, and rules of origin legislation. CLDP also funded Moldovan participation in Stability Pact meetings, a core process in moving Moldova towards European integration.

U.S. Department of Commerce - Business Information Service for the NIS (BISNIS): As a result of a BISNIS-sponsored exhibition of U.S. companies in FY 2001, a U.S. company won a Moldovan Government tender to supply medical equipment in FY 2002. BISNIS's strong relationship with the Moldovan Department of Privatization allowed for the timely publishing of tenders to BISNIS clients as well as foster greater transparency and greater competition in the Moldovan market. In collaboration with Peace Corps volunteers, BISNIS identified several investment projects in Hincesti and Chisinau. The American Chamber of Commerce in Moldova had faltered, but in FY 2002 BISNIS provided it with counseling allowing it to resume its activities as an advocate for improved foreign investment climate in Moldova.

U.S. Export-Import (Ex-Im) Bank: In FY 2002, Ex-Im Bank did not have any opportunities to provide support for U.S. exports to Moldova. To date, there have been no transactions approved under the Framework Government Guarantee Agreement or the Project Incentive Agreement, both of which were signed by Moldova in 2000.

Energy and Environmental Sector Programs

USAID Power-Sector Privatization Activity: In FY 2002, the Moldovan Government publicly reaffirmed its commitment to privatize the two remaining state-owned power distribution companies by adopting a series of legislative amendments designed to raise the standard for qualifying investors. The Moldovan Government requested that USAID act as a transaction advisor. USAID has completed a study of investor interest in the Moldovan energy sector that produced encouraging results. However, controversial decisions taken by the Moldovan state auditing authorities and judiciary vis-�-vis the legality of the acquisition of three power distribution companies by Spanish utility Union Fenosa in February 2000 have the potential to significantly hamper the prospects of this privatization.

USAID Power-Sector Regulatory Assistance: USAID continued to assist in raising the professional competence of the National Agency for Energy Regulation (ANRE), the sector's regulatory agency. In 2002, ANRE completed its first independent tariff review following a tariff increase application by Union Fenosa, owner of three power distribution companies privatized in February 2000. ANRE is also developing successful partnerships with 23 regional regulators through the Energy Regulators Regional Association and with the Iowa Utilities Board.

USAID Municipal Network for Energy Efficiency: A regional USAID-sponsored program of assistance designed to promote the competence of municipal authorities and other energy-sector stakeholders to manage their energy consumption requirements expanded its activity this year. This activity assists participating members in developing internal policy and management frameworks for the introduction of energy efficiency measures and investments. In addition, USAID developed a series of legislative amendments designed to improve the investor outlook of the heating sector, as a preamble to larger-scale engagements designed to reform the now-bankrupt sector, planned in the coming years.

Social-Sector Programs

USAID Moldova/Romania Cross-Border Tuberculosis (TB ) Initiative: Epidemiological evidence has shown a high prevalence of TB in Romania (122 per 100,000 inhabitants in 2001), and alarming increases in Moldova. In response, USAID launched the Romania/Moldova Cross-Border Initiative, which focuses on two key components necessary for implementation of the international protocol for shorter-course TB therapy: the proper management of TB pharmaceuticals and strengthening the laboratory capacities for diagnosing TB. In addition, a drug information center focusing on the proper registration and use of tuberculosis drugs will be established in Moldova. During 2002, TB drug management and laboratory assessments for Moldova were completed. Training and workshops dealt with issues of TB drug management and TB drug procurement. Technical assistance also continued in the following areas: (1) developing uniform bidding documents and procedures; (2) rationalizing competitive procurement procedures; (3) rationalizing TB drug distribution systems; (4) developing mechanisms for drug selection to improve the TB drug management system; (5) developing drug management information systems. As a result of this initiative, USAID-Moldova has initiated the design of a tuberculosis control program specifically for Moldova.

USAID Weatherization Program: USAID worked to improve the energy efficiency of institutional buildings that serve vulnerable segments of the population (e.g., orphanages, hospitals, and special schools). These activities are primarily directed at improving the thermal insulation properties of buildings, thereby reducing heat consumption levels required to maintain acceptable levels of comfort. Aside from the immediate benefit of reducing human suffering among those most vulnerable, these activities provide experience to institutions and to local companies contracted to perform the renovation services. Training in the development of such energy efficiency projects from an economically sustainable perspective is incorporated into those activities.

USAID Counterpart Low-Income Energy and Social Assistance Project (LIESAP): LIESAP, a new USAID-funded activity in Moldova, started in the second half of FY 2002.  The purpose of this activity is to improve the information technology and data management capacity of the Moldovan National House for Social Insurance (MNHSI). LIESAP support assisted MNHSI in efficiently tracking and managing data on recipients of social assistance, assessing the options for the transition to a system of social assistance eligibility based on means-testing (as opposed to the current category-based system), and financing nominal targeted compensations for electricity consumption to eligible low-income consumers.  To date, the activity has provided the National House for Social Insurance (NHSI), including its branch offices, with modern computer equipment and software worth a total of $100,000. This has allowed NHSI to register significant progress advancing the concept of means-testing implementation in Moldova, particularly through the new unified application form for social assistance, developed with the technical assistance of Counterpart International.

Security, Regional Stability, and Law Enforcement Programs

U.S. Department of Defense - Cooperative Threat Reduction - Defense and Military Contacts: These efforts seek to promote the U.S. Government's counterproliferation, demilitarization, and defense reform objectives by fostering dialogue and cooperation with counterpart militaries. FY 2002 activities included senior leader visits including the Deputy Commander of the U.S. European Command (EUCOM), communications exchanges, a peacekeeping operations support exchange, and a visit by Moldovan officials to understand how the U.S. responds to nuclear, chemical, and biological terrorist incidents.

U.S. Department of Defense - Counterproliferation Programs: The DOD/FBI Counterproliferation Program provided an estimated $655,000 in assistance to Moldova, including criminal investigations/operations training and an integration exercise for Moldovan officials.

U.S. Department of Defense (DoD) - Partnership for Peace (PFP): Moldova played an active role in PFP exercises and conferences in FY 2002 with an estimated $240,450 allocated for PFP activities. About 160 Moldovans took part in five PFP exercises while another 42 participated in PFP conferences, workshops, and seminars.

U.S. Department of Defense - Bilateral Affairs Office (BAO): The BAO in Moldova, which was originally called the Military Liaison Team (MLT), began operations in late January 1999. In FY 2002, the MLT was merged with the Office of Defense Cooperation and became known as the BAO. In FY 2002, the BAO spent $350,000 conducting 43 activities with the Moldovan army; 17 of these were familiarization visits to Germany or the United States, and the remaining 26 were visits of U.S. contact teams to Moldova. A total of 985 Moldovan soldiers participated in all types of BAO-sponsored activities for 2002. In addition, $48,000 in humanitarian funding was used for hepatitis B, spinal meningitis and measles/mumps/rubella inoculations for over 5,200 Moldovan orphans. An additional $2,000 of humanitarian funding was used to purchase dental supplies to treat indigent patients in the Balti community of Northern Moldova.

U.S. Department of State - Foreign Military Financing (FMF): FY 2002 saw a slight decrease in FMF for Moldova to $1.25 million, down from $1.5 million in 2001. Moldova's FY 2002 FMF allocation was spent on a variety of items designed to provide modern equipment and capabilities, interoperable with western militaries. FMF purchases included communications equipment, topographic printing equipment, aero-navigational aids, and funding of transportation for Excess Defense Articles (EDA) vehicles.

U.S. Department of State - International Military Education and Training (IMET) Program: Moldova and the United States have developed a very cooperative security relationship. U.S. military training through IMET helps Moldovan military personnel acquire the skills necessary to operate alongside NATO forces and participate more actively in Partnership for Peace (PFP) activities. Moldova was allocated approximately $850,000 in IMET funding in FY 2002. This allowed 26 Moldovan officers to receive IMET training in FY 2002, bringing the cumulative total to 131 since the beginning of the program. In addition, all IMET-funded English language laboratories were upgraded with additional computers and audio-visual packages, and about 100 Moldovans were trained through two seminars held in Moldova under the Expanded IMET (E-IMET) Program. Moldovan IMET program graduates have consistently assumed positions of increasing responsibility in their home country, with over 85 percent of IMET graduates still serving on active duty.

U.S. Department of State - Military Relocation Program: FY 2002 was a pivotal year for Military Relocation Program assistance activities to enhance Moldova's sovereignty, help prevent proliferation of conventional weapons and promote stable, cooperative relations between Russia and Moldova and the other Eurasian states. The Department of State initiated this program in FY 2001 to facilitate the withdrawal of Russian forces, closure of Russian military bases and removal and or destruction of ammunition, small arms, and military equipment from Moldova pursuant to commitments made at the 1999 Istanbul Summit of the Organization for Security and Cooperation in Europe (OSCE). In FY 2001, Russia fulfilled its Istanbul commitment to withdraw/destroy its equipment in Moldova that is limited by the Treaty on Conventional Armed Forces in Europe (CFE Treaty) by December 31, 2001. That process was monitored by OSCE member governments and completed a month ahead of the deadline. Funds provided by the U.S. and OSCE partners via an OSCE voluntary fund assisted with costs. Implementation of a second Istanbul commitment, the withdrawal of Russian military forces from Moldova by the end of 2002, was the focus of work last year. This process continues to be significantly complicated by the opposition of Transnistrian separatists, which Russia has so far failed to resolve in a way that permits unobstructed fulfillment of the commitment. Further, Russian withdrawal will require the withdrawal or disposal of some 40,000 tons of stored munitions and 40,000 small arms.

Russia withdrew an initial three trainloads of equipment in late 2001, despite Transnistrian opposition. However, hopes that FY 2002 would see the fulfillment of the Russian withdrawal commitment by December 31 were repeatedly stymied by lack of progress in Russian / Transnistrian cooperation. The U.S. and other OSCE governments made good on their pledge to assist this complicated process financially, and U.S. and European assistance permitted to portable destruction systems to be brought into the region. The Transnistrians continued to obstruct their use through 2002; however, by fall 2002, the Russians were able to withdraw a number of trainloads of munitions and other equipment by rail. By the time of the December 2002 OSCE Ministerial in Porto it was clear that Russia would not meet the December 31, 2002 withdrawal deadline. At the Ministerial, the Russians stated that they would complete the withdrawal as soon as possible, and intended to do so by the end of 2003, provided necessary conditions are in place. The Russians also underscored to U.S. and other OSCE diplomats the importance of OSCE financial assistance in completing the process. Efforts are on-going to achieve full withdrawal. US assistance contributions to the OSCE remain available if activities resume.

U.S. Department of State - Export Control and Related Border Security (EXBS) Program: The State Department provided an estimated $1.5 million in FREEDOM Support Act-funded EXBS assistance in FY 2002 to enhance capabilities of the border control and other law enforcement agencies in Moldova to prevent weapons proliferation and other illicit trafficking. EXBS assistance was focused on the detection, identification, interdiction and investigation of illegal transfers of weapons and weapons materials. EXBS programs aim to establish a system to detect and prevent the smuggling of nuclear materials and munitions through Moldova. The EXBS Program Advisor at the U.S. Embassy in Chisinau worked closely with the Moldovan Customs Service and Border Guard to develop and implement border control projects including infrastructure development and upgrades at strategic border points of entry. EXBS assistance provided in FY 2002 included an estimated $900,000 in equipment including: miscellaneous inspection and detection equipment, vehicles, computers and other equipment for Moldovan Customs and Border Guards. A significant portion of this equipment is for use in border monitoring in the secessionist region of Transnistria, with a focus on the movement of munitions and contraband. Approximately $400,000 of this EXBS funding was used for mobile containers to provide working space for Moldovan Customs and Border Guard officials along the Moldova-Ukraine border. (Although Moldovan and Ukrainian officials continue to address the issue of joint Moldovan-Ukrainian border posts, no resolution has yet been reached.) In FY 2002, EXBS efforts also focused on increasing coordination among the indigenous border control agencies to enhance overall enforcement of export controls and training assistance included integrity awareness training. The EXBS Program also provided funding to the U.S. Department of Energy for the maintenance of existing radiation detectors and procurement and installation of new ones; and to the U.S. Department of Commerce (DOC) for a workshop on Advanced Licensing Practices and Procedures. In addition, DOC representatives helped their Moldovan counterparts draft export control implementing regulations, which were ratified by the Moldovan Parliament in April 2002. The U.S. Embassy, in coordination with the Moldovan Department of Civil Defense, also continued efforts in FY 2002 to create a "first responder" unit for incidents related to weapons of mass destruction (WMD).

U.S. Department of State - Nonproliferation and Disarmament Fund (NDF): The NDF permits rapid response to unanticipated non-proliferation opportunities or emergencies worldwide. In FY 2002, NDF provided $500,000 to contribute to Moldova's efforts to destroy Soviet-era munitions and rocket propellant oxidizer.

U.S. Department of State - Support for the Civilian Research and Development Foundation (CRDF): In FY 2002, the CRDF initiated two new Cooperative Grant Program awards, totaling $120,000, to Moldovan scientists and funded six travel grants for Moldovan applied scientists to meet with potential U.S. partners and participate in trade shows. A Moldovan First Steps to Market (FSTM) project grant - a self-directed market-assessment project - was awarded in 2002. In addition, CRDF received seven proposals from U.S.-Moldovan research teams in response to a Special Competition for Research on Minimizing the Effects of Terrorist Acts on Civilian Populations. CRDF also continued support for the Moldovan Research and Development Association (MRDA), an independent science funding organization patterned on the NSF and a CRDF-supported model in Armenia. In August 2002, CRDF and MRDA announced five Long-Term Travel grants for young Moldovan scientists to conduct three months of research at U.S. universities. Additionally, CRDF and MRDA received 78 proposals for the Moldovan-U.S. Bilateral Grants Program II. This is a 20% increase over the BGP I, held in 2001, evidence of success from the Institution Building Program and increased numbers of proposals from the host country. During FY 2002, at the request of the Department of State, CRDF continued its work to help the transition of former Moldovan defense companies to civilian commercial activity. Under a special program created for four such enterprises, CRDF has arranged for representatives of those enterprises to attend trade shows in the United States and specialized technology transfer training, and organized a capabilities assessment of one of the firms by U.S. business and technical experts to help that firm choose a target technology area. This program is expanding to at least four additional Moldovan defense enterprises.

U.S. Department of State - Anti-Crime Training and Technical Assistance (ACTTA) Program: In FY 2002, ACTTA continued to expand in Moldova, focusing primarily on combating trafficking, corruption, and narcotics, as well as overall law enforcement development. The Ministry of Internal Affairs (MVD), Office of the Prosecutor General, Department of Customs, and the Office of the Border Guards were the primary recipients of this assistance, which consisted primarily of instruction, conferences, and material assistance. Specific areas of instruction included courses in anti-narcotics and basic law enforcement techniques. Through the Justice Department's ACTTA-funded International Criminal Investigative Training and Assistance Program (DOJ/ICITAP), a classroom at the police academy was renovated and is available as a venue for U.S. Government law enforcement training in Moldova. In addition, prosecutors, judges, and investigators participated in courses and conferences at the International Law Enforcement Academy (ILEA) in Budapest, covering transnational organized crime, the role of the public prosecutor, transnational money laundering, and criminal procedure reform. The U.S. Embassy's EXBS Advisor oversaw ACTTA-funded equipment disbursements for the Moldovan Border Guards and Customs, improving Moldova's capabilities to secure its porous borders against munitions, narcotics smuggling, and trafficking in women. The ACTTA Program also helped improve coordination between the MVD and various non-governmental organizations, many of which are U.S. Government-funded, in the battle against trafficking in women. ACTTA continued its support for an anti-trafficking center in Chisinau that increased exchanges of information with law enforcement authorities. A U.S. Treasury Department financial crimes project focused on strengthening anti-money laundering legislation and the ability of the Government of Moldova to enforce anti-money laundering laws. In addition, a U.S. Customs Service advisor implemented a customs seals program to help Moldova secure its border with Ukraine. Programs anticipated for FY 2003 include placement of a DOJ/OPDAT Resident Legal Advisor to build on the anti-corruption effort in Moldova. In addition, the Center for the Prevention of Trafficking in Women will be expanded.

U.S. Department of Justice - Overseas Prosecutorial Development Assistance and Training (OPDAT): In FY 2002, the American Bar Association's Central European and Eurasian Law Initiative (ABA/CEELI) continued to post a Criminal Law Liaison in Chisinau to provide support and technical assistance to Moldova's defense bar, with a particular focus on continuing legal education. ABA/CEELI also coordinated a project to furnish research and professional input on sentencing and alternative sentencing guidelines; a paper produced by ABA/CEELI exploring the new guidelines that will become effective in 2003 was used in Advocacy Training courses and roundtable discussions. In FY 2003, OPDAT plans to place a Resident Legal Advisor at Embassy Chisinau to provide criminal law assistance in the anti-corruption and human trafficking areas.

Humanitarian Programs

USAID Counterpart Humanitarian Assistance Program (CHAP): In FY 2002 CHAP conducted 13 deliveries of humanitarian assistance, equivalent to 11.5 forty-foot maritime containers and valued at $1.282 million. This assistance was provided to 273 social service providers, including 92 NGOs, 14 medical organizations, 88 peasant farms, 34 boarding houses/schools, 26 governmental and four non-governmental educational institutions, five disaster preparedness/emergency service providers and other organizations in medicine, education, and social assistance areas. Humanitarian assistance was also made available to children from large and/or low-income families, orphans, veterans, and the elderly. CHAP successfully implemented the distribution of 92 wheelchairs among the disabled in the southern region of Moldova. All together, these organizations served a total target population of 120,525 vulnerable people throughout the country. The humanitarian assistance was delivered under the form of medical/household/office equipment, outfitting, supplies and furniture, wheelchairs, books, clothing, footwear, and food. A total of 205 spot-checks were conducted to ensure proper distribution and use of assistance. During FY 2002, CHAP conducted three training workshops to increase the capacity of five local NGO partners in the areas of organizational management, strategic planning, fundraising, project management, financial management and accounting for NGOs.

U.S. Department of Agriculture (USDA) - Food Aid: In FY 2002, USDA food assistance amounted to $5.47 million, with a total of 12,760 metric tons in donated commodities. The majority of the donated food commodities were distributed by the private voluntary organization International Partnership for Human Development (IPHD) to pre-school children, mothers and infants, and vulnerable elderly. Under the Global Food for Education program, IPHD sold the remaining portion of the commodities locally and used the funds to purchase and distribute coal to 350 schools during the winter.

U.S. Department of State - Coordinator's Office Humanitarian Assistance: In FY 2002, the Humanitarian Programs Division of the Office of the Coordinator of U.S. Assistance to Europe and Eurasia delivered $18.92 million in U.S. Defense Department excess and privately donated humanitarian commodities to Moldova at a cost of $1.19 million to the U.S. Government. This assistance included pharmaceuticals collected and distributed by the U.S. private voluntary organizations Heart to Heart and CitiHope, as well as relief supplies collected and distributed by Counterpart International.

U.S. Department of Defense - U.S. European Command (EUCOM) Humanitarian Assistance: In FY 2002, the EUCOM Humanitarian Assistance Program delivered $65,000 in fire fighting equipment and vehicles and general purpose vehicles to Moldova's Ministry of Emergency Situations. In addition, the National Civil Protection Training Center and two fire stations were upgraded at a cost of $355,000.

Cross-Sectoral Programs

Peace Corps: In FY 2002, the Peace Corps had 100 volunteers (PCVs) in Moldova involved in the following areas: teaching English language and health-related topics to students, both in the classroom and in non-formal education settings; working with teachers and health educators to develop new teaching resources and conduct seminars and workshops; assisting NGOs, cooperatives and municipalities through organizational strengthening and networking activities; working with agricultural producers, marketers cooperatives and advising groups to improve their abilities, profitability and access to information. PCVs provided direct training and services to 2,885 men, 3,945 women, 6,148 boys and 8,922 girls. They also worked with almost 800 service providers (including teachers, health educators and providers, NGO and agricultural agency personnel) in 101 schools, 55 NGOs, and 16 health centers in 225 communities in Moldova. In addition, PCVs and their Moldovan partners developed and implemented a total of $128,561 in Small Project Assistance grants. In addition, PCVs assisted their partners with obtaining resources and grants from a large number of international donors. Working with a broad range of community groups to address local needs, Peace Corps plans to have slightly increased placement numbers in the coming years and will continue its emphasis on meeting needs at the village level and within resource-poor communities.

Eurasia Foundation: In FY 2002, the Eurasia Foundation restarted its operations in Moldova, awarding three grants for a total of $63,000. Grants were focused on private enterprise development to ensure accelerated development and growth of private enterprises; public administration and policy, aiming at more effective, responsive, and accountable local government; and civil society to provide for increased citizen participation in political and economic decision-making.

Preview of FY 2003 Programs

In FY 2003, USAID post-privatization activities in the agricultural sector will be a top priority because of the continued importance of agriculture for economic growth. Important follow-on activities in agricultural marketing will target the lack of job opportunities in rural areas, which is a contributing factor to the trafficking in women problem. Support for energy-sector privatization and restructuring will continue. USAID's Local Government Reform Program will sustain activities empowering local government and increasing public participation in the reform process.

In FY 2003, efforts under the Export Control and Related Border Security (EXBS) Program will be focused on continuing to enhance internal Moldova interagency cooperation, communications infrastructure to allow enforcement officials to talk to interdiction teams on the ground and at various border points of entry (POEs) on a more real-time basis, and on expanding the necessary border infrastructure at strategic POEs. In many cases, border posts lack even the most rudimentary communications equipment for effective communication with their HQ or interagency licensing counterparts in Chisinau. U.S. Customs Service is scheduled to conduct an International Border Interdiction (IBIT) course on border operations and interdiction techniques in Hidalgo, Texas during spring 2003 for Moldovan Customs and Border Guard officials. EXBS assistance will also support follow-up to the ratification of export control implementing regulations, including both printing and on-line publication of Moldova's export control laws, implementing regulations and international control lists.

In FY 2003, Moldova may become a member of the multilateral International Science and Technology Center (ISTC) in Moscow making it eligible for assistance from Department of State funds for ISTC research projects that engage former Soviet WMD experts in peaceful scientific endeavors. The goal of the program is to reduce risks of weapons expertise proliferation.

Assistance in the law enforcement field will focus on anti-corruption, trafficking in persons, border control, and provision of necessary law enforcement equipment. INL-funded programs will tackle the trafficking problem, as well as anti-corruption efforts. Specific projects include the development of a computerized tracking system at ports of entry, secondment of a Resident Legal Advisor to Chisinau, and continued support for a local NGO that maintains a Center for the Prevention of Trafficking in Women.

The Moldovan Government has agreed with the U.S. Government's suggestion to funnel the majority of FMF/FMS and IMET assistance into improving its peacekeeping (PK) and special-forces (SF) capabilities. The goal is to increase the PK capability to a point where Moldova can send units to PK operations to replace units from countries engaged militarily in the global war on terror. The goal of improving the SF capability is to provide the Moldovan Army with the skills and equipment to handle a low-level terrorist threat in Moldova.