VZCZCXYZ0008
RR RUEHWEB

DE RUEHCH #0041/01 0220656
ZNR UUUUU ZZH
R 220656Z JAN 09
FM AMEMBASSY CHISINAU
TO SECSTATE WASHDC 7531

UNCLAS CHISINAU 000041 
 
STATE FOR EUR/UMB 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: EAID ECON EFIN PREL MD
SUBJECT:  PRIVATIZATION PROCEEDS FOR THE CAMPAIGN 
WAR CHEST? 
 
¶1.  (SBU) SUMMARY:  In December 2008 the 
Government of Moldova (GOM) decided to amend the 
2008 state budget by increasing revenues, 
expenditures and the deficit.  This followed an 
announcement in November that revenues from 
privatization had exceeded expectations and that 
the GOM would sell additional assets worth MDL 4 
billion (USD 400 million) from a total of 89 
companies and direct the additional funds to 
economic projects and development.  The opposition 
questioned whether the additional funding would 
serve the targeted purposes or supplement the 
ruling Party of Communists' (PCRM) campaign war 
chest for the 2009 spring elections.  The lack of 
transparency in privatizations, the sudden 
announcement of tenders with short deadlines for 
bidding and the apparent failure of privatizations 
to achieve market-value bids have led to 
accusations by opposition parties of corruption. 
END SUMMARY. 
 
2008 BUDGET AMENDMENT IN DECEMBER 
--------------------------------- 
 
¶2.  (U) On December 8, 2008, at an extraordinary 
meeting, the GOM decided to recommend amending the 
2008 state budget due to surplus revenue from 
privatization during the year and plans for 
additional sales.  The GOM proposed increasing 
budget revenues by Moldovan lei (MDL) 570.2 
million (USD 55 million), expenditures by MDL 
965.3 million (USD 93 million, and the deficit by 
MDL 495 million (USD 48 million).  The GOM 
submitted this proposal to the Parliament for 
consideration on December 9 and Parliament 
approved the amendment on December 19, 2008.  The 
supplementary funding primarily targets economic 
development.  It allocates MDL 369.5 million to 
the transportation sector (including Giurgiulesti 
port on the Danube River and the construction of a 
railroad line from the port to the town of Cahul), 
MDL 98.6 million to agriculture, and MDL 92.6 
million to the energy sector.  The amendment also 
increases funding for education, health, culture, 
sport and youth; for public order and national 
security; for national defense; for servicing the 
state debt; and for support of local budgets. 
 
PRIVATIZATION AND OPPOSITION PROTEST 
------------------------------------ 
 
¶3.  (SBU) In late November, the GOM announced the 
sale of 89 companies with assets worth MDL 4 
billion (USD 400 million), including 14 companies 
fully owned by the state and 44 companies in which 
the state had a majority share.  On December 17, 
the opposition party Our Moldova Alliance (AMN) 
protested in downtown Chisinau outside the 
government's headquarters against the "groundless" 
privatization of state property.  About 100 
protesters carried banners saying "Stop the 
Privatization of State-Owned Assets," "No 
Corruption," "The Communists are Plundering the 
State," and "The PCRM is Like the Bird Flu."  At 
the protest, AMN members claimed that the money 
received from the sale of state assets would be 
used by the PCRM for its electoral campaign in the 
spring.  They noted that the GOM had elected to 
privatize additional assets during the world 
economic crisis, although the GOM would likely 
have earned more by waiting for better economic 
times. 
¶4.  (U)  At a press conference on December 16, 
2008, Prime Minister Zinaida Greceanii had stated 
that the GOM was not going to suspend the 
privatization program and not a single object 
would be privatized at an under-rated price. 
Regarding two major assets of the GOM, she noted 
that "we are not going to put up Banca de Economii 
(savings bank) or Moldtelecom for privatization - 
until good conditions are ripe for this and until 
attractive offers come to us." 
PRIVATIZATION DEALS OR STEALS? 
-----------------------------_ 
 
¶5.  (SBU) The GOM recommended a seven-hectare site 
in the city center of Chisinau on Vasile Lupu 
Street to the U.S. Embassy for a new embassy 
compound (NEC).  Emboffs and GOM officials have 
been discussing the possibility of the USG's 
acquiring the site for months.  On December 30, 
 
2008, Embassy staff discovered that the Public 
Property Agency had posted the site on its website 
for privatization on December 29, 2008.  The 
announcement requested submissions by January 30, 
2009 and contained a requirement that the minimum 
accepted price was MDL 88.6 million (USD 8.8 
million) and a bank guarantee had to be submitted 
when bidding.  The timing of the announcement was 
particularly suspicious, since the GOM shut down 
for holidays from January 1 to January 11, 2009. 
Many businesses followed suit and closed for the 
first eleven days of January 2009.  Interested 
bidders could only seriously begin preparation of 
the documentation required, including securing 
financing, for a bid on January 12, 2009, unless 
they had prior knowledge of the tender and began 
preparing before the announcement. 
 
¶6.  (SBU)  The GOM added the Codru Hotel complex 
in downtown Chisinau to the list of assets subject 
to privatization on November 12.  The GOM 
announced the sale of the Codru Hotel to Daranian 
Holding company, registered in Cyprus, for MDL 
50.3 (USD 4,8 million)on December 23, 2008. 
According to the GOM, three bidders competed for 
the tender.  In an interview published on January 
11, 2009, Mihai Ghimpu, the president of the 
Liberal Party, accused the government of selling 
property worth billions of lei at ridiculously low 
prices to obscure firms that could be controlled 
by the Party of Communists.  He noted that the 
most recent example was the sale of the Codru 
Hotel at a price ten times below its fair market 
value.  He lamented that the government was 
stealing property in a country where people got 
the lowest salaries and pensions in Europe. 
 
¶7.  (SBU)  On December 26, 2008, an opposition 
party, Moldova Noastra Alliance (AMN) accused the 
GOM of corruption in the privatization of state 
assets in a statement read in Parliament.  The AMN 
statement said, "[t]he sales of assets of the last 
six months tell of the fact that we're witnessing 
a new 'prihvatization' (a pun implying theft which 
was often used by the Communists in the late 90s) 
on a big scale, and well managed by the mafia clan 
ruling the country." 
COMMENT 
------- 
 
¶8.  (SBU) The recent, large privatization of the 
Codru Hotel and the lack of transparency in the 
sale of governmental assets continue to fuel 
speculation of corrupt privatizations and of funds 
ending up in the PCRM's campaign war chest for 
upcoming elections.  The GOM claimed that current 
budget revenues were above projection because of 
additional proceeds from privatization, taxes and 
fees.  The revenue in 2008 from privatizing public 
property totaled MDL 934 million (USD 90 million) 
and exceeded planned receipts for 2008 by a factor 
of five.  The budget for 2009 foresees income of 
only MDL 350 million from privatization.  The 
significant increase in privatization revenues in 
2008 and the fact that the report on the 2008 
state budget will not be publically available 
until summer 2009 support accusations of 
corruption against the GOM in its privatization 
program. 
 
¶9.  (SBU) Local observers had expected the PCRM to 
do everything possible to ensure for itself a 
sizable victory in the upcoming national 
parliamentary elections.  That expectation seems 
to have been realized:  the ruling party is 
harassing opposition parties to decrease their 
chances of winning; media, especially broadcast 
media, carry little information about opposition 
politicians; and the proceeds from privatization 
may be enriching the PCRM. 
CHAUDHRY