Sectorial Strategy of Economic Growth and Poverty Reduction in the Transport Sector
Introduction
As a main pillar of the Government’s Interim Poverty Reduction Strategy is the continuous and long-term economic growth. The foundation of this pillar can only be a solid infrastructure.
The Government considers that developing the infrastructure and improving the services that concern it is a prior sector in the strategy of economic growth and poverty reduction.
Together with its direct influence on increasing the living standards, improving the infrastructure has also a fundamental importance for economic growth and country’s development, because it reduces the production costs, simplifies the trade and increases the competition level in economy.
Moldova’s economy depends heavily on agriculture and agro-industry. About 70 per cent of the exports of the Republic of Moldova are the agricultural products. The major objective of the Government regarding agriculture is to improve the access of the agricultural producers and suppliers to the market. As a result, the country’s economy imposes the creation of a transport industry and a well-developed road and railway network.
Development of the economic infrastructure has a strategic importance for country’s economic growth and development by simplifying the trade, lowering production costs and increasing the competition level of economy. The objective consists in gradual creation of modem infrastructure network (communication, energy, roads, ports, airports, etc.) and creation of an effective system of management and administration.
Improving the investment climate in transport sector and efficient administration of the infrastructure might release the limited resources and transform the traditional sectors of the country’s economy, by facilitating their competitiveness. At the same time, the development of this sector generates labour opportunities and contributes to unemployment reduction by promoting the construction industry.
Considering the existing problems, country’s economy modernization and development needs a complex approach and settlement of many tasks that might be the basis of elaborating the sectorial strategy as a component part of the SEGPR. The main concept of the strategy is confirmed by the legislation in force and government programmes with description and development of the provisions of these documents complied with the necessities and nature of the infrastructure.
The main purposes of the Sectorial Strategy are:
In the economy: (I) growth of GDP and revenues to the State budget by lowering the operational expenses in the transport branch, a fact that will positively influence other branches of the national economy; (II) decreasing the losses and profits omitted as a result of unsatisfactory technical state of roads.
In the social sphere: (I) increasing the living and cultural standards of the population by satisfying the demands on transport and traffic, lowering the goods’ and services’ costs by lowering the transport expenses of using the roads, decreasing the time of passengers in traffic; (II) – diminishing the social tension in the society by creating additional jobs in the road sector; (III) decreasing the number of accidents and diminishing the negative impact on the environment by improving the traffic conditions on roads.
Evolution of the Infrastructure in the Transition Period. Achievements and Problems.
The economic crisis from the beginning of ’90 stopped the activity in almost all the branches of the real sector of the national economy,which in its turn had a negative impact on all economic agents from the transport sphere, as well as from the other spheres of the infrastructure. Wearing out the fleet of the means of transport in the conditions of reduced possibilities of its renewing diminished essentially the quality of the transport services and led to high prices, due to increasing the operational expenses.
Yearly decrease of the financial resources allocated for maintaining and repairing the roads, which are, at present, just 8-10 per cent of the necessity, has initiated a continuous degradation process of the public roads network from the republic.
Freight Traffic
The following Table presents the evolution of freight traffic since Independence.
Prognosis regarding the traffic made in 1995 presumed an increase of the traffic closed to the rate of GDP growth, both for road and rail traffics. In reality, the efforts for reorganization made in 1995, obviously, did not justify the expectations regarding the volume of freight traffic. In 1995, the total traffic for the year 2001 was estimated to be more than double of what it actually came to be.
Data from the table reflect the economic decline observed in Moldova over the last decade, which indicates that in 2000 the road freight transport (tons) has gone down to 7 per cent of its 1985 level and respectively to 18 per cent if measured in freight distance (ton-km). The railways faired similarly with a 12 per cent traffic level measured in tons and 9 per cent if measured in ton-km.
Tons and Ton-km Carried by Road and RailYears
1990 / 1995 / 1996 / 1997 / 1998 / 1999 / 2000
Transported Tons / million of tons
Road/highway / 262.8 / 41.0 / 33.0 / 32.7 / 27.6 / 21.4 / 21.0
Railway / 65.4 / 13.2 / 12.5 / 12.8 / 11.1 / 6.6 / 8.2
Modal split / %
Roads / 80.1 / 75.6 / 72.5 / 71.9 / 71.3 / 76.4 / 71.9
Railway / 19.9 / 24.4 / 27.5 / 28.1 / 28.7 / 23.6 / 28.1
Index / % (1985 = 100)
Roads / 84 / 13 / 11 / 10 / 9 / 7 / 7
Railway / 92 / 19 / 18 / 18 / 16 / 9 / 12
1990 / 1995 / 1996 / 1997 / 1998 / 1999 / 2000
Ton-km Carried / million of ton-km
Roads / 6,305 / 1,159 / 992 / 1,028 / 1,018 / 1,156 / 1,088
Railway / 15,007 / 3,134 / 2,897 / 2,937 / 2,575 / 1,191 / 1,513
Modal split / %
Roads / 29.6 / 27.0 / 25.5 / 25.9 / 28.3 / 49.3 / 41.8
Railway / 70.4 / 73.0 / 74.5 / 74.1 / 71.7 / 50.7 / 58.2
Index / % (1985 = 100)
Roads / 102 / 19 / 16 / 17 / 17 / 19 / 18
Railway / 90 / 19 / 17 / 18 / 15 / 7 / 9
River traffic is negligible with about 20 thousand tons or 180,000 ton-km yearly traffic. Airfreight lies by about 1800 tons.
Passenger traffic shows a small decline as freight in the 1990s.
While there seems to be an upturn for road transport after the all-time low of 1999, the railways are in further decline. The consultants for the railway restructuring study forecast a continuous decline of passenger traffic into the year 2005 when total passengers volume will stagnate at around 5.5 million and output will decrease to 220 million passenger-km. This decrease may partly be explained by the shift of the railway long distance journeys to the aviation and road sectors.
Road Transport Industry
Since 1995, 100% of the road freight transport industry has been privatized and 80% of the road passenger transport is in private hands. International road freight transport is organized under the International Association of Road Hauliers of Moldova (ATA), established in 1992 and which currently unites some 160 members with a total fleet more than 4300 vehicles.
The road transport operators face problems, apart from the sharp decrease of transported goods and unsatisfied condition of the roads, due to: (i) the limited number of permits made available for transiting across European countries; (ii) the complex and expensive procedures for access to the road transport market (visas for professional drivers are short and their price is high).
Roads Administration
“The Moldovan transport sector’s major decline is especially noticeable in the road transport sub-sector. It is typified by falling traffic and a critical shortage of road maintenance funds. Consequently,…the infrastructure is seriously deteriorated. The country’s economy is highly dependent on road transport and it is clear that if economic recovery is to take place, the overall decline must be arrested and reversed.” This paragraph was written in the 1995 Transport Sector Review, and how much more true is it today!
Contractors for road construction and road maintenance are partly privatized and have transformed into joint stock companies. Those 38 contractors for road maintenance have a State major capital (80-90%).
In conditions when the expenditures for road administration constitute just USA $ 6 million, a profitable development of the road construction and maintenance can not be accomplished. This is also a cause of loosing the high-qualified personnel looking for jobs in the neighboring countries.
The total length of 3690 km of national roads, even if it represents 35.1 per cent of the length of the public roads, constitutes the major road network: 68 per cent of the total road traffic takes place on it.
As for the technical state of this network, it can be mentioned that 78.2 per cent have an out of date exploitation period, presenting a non-corresponding state, 900 km of which are in poor condition.
Local roads, which are 6813 km long, have a very heterogeneous structure. Thus, 46.0 % (3134 km) are paved roads, 8.6 % (588 km) are from ground, 37.6 % (2560 km) represent roads with modern covering and over 88% (2065 km) have an out of date exploitation period, 2000 km of which are in poor condition.
There are also over 40 localities in the Republic, which have no access with modern covering to the public network and which in the period of difficult atmospheric conditions are practically isolated with negative economic and social consequences.
At this time, landslides affect 26 sectors on the national roads and 79 sectors on the local roads, with a total length of 13.5 km. On the public road network, 14 deteriorated bridges represent a danger for the road traffic.
At the end of 1990s, the developing level and technical state of the public road network constituted the State’s pride.
Evolution of the structural technical state of the national roads between 1992-2000 is presented in the following table and diagram:
Years / Analyzed length of roads /T e c h n i c a l S t r u c t u r a l S t a t e
Good / Fair / Poor / Extremely poorkm / % / Km / % / km / % / km / %
1994 / 1252,9 / 422,6 / 33,73 / 328,6 / 26,23 / 501,7 / 40,04 / - / -
1996 / 1866,1 / 251,8 / 13,50 / 680,0 / 36,44 / 871,5 / 46,70 / 62,8 / 3,36
2000 / 2814 / 343,0 / 12,21 / 911.0 / 32,36 / 1334,0 / 47,40 / 226,0 / 8,03
In the existing situation, a fundamental condition, which might maintain the road exploitation possibility is a capital repairing in time (for asphalt concrete roads - periodically between 10-15 years and for macadam roads – 6-8 years). But this condition has not been fulfilled during the last 10 years.
In the case when existing roads are in continuous degradation, each unallocated leu increases the price cost of the hauler’s transportation by 2-3 lei. Therefore, the economy based on road reparation and road maintenance is not only unprofitable but is also increasing the total cost of goods due to growth of the transport services price.
In 2001, due to the unsatisfactory state of the roads, roads users spent with 774 million lei more than in the situation if the roads were in good technical condition.
Comparing these additional expenditures to the 84 million lei of the total budget for public roads in 2002 it results that losses for the national roads are about 9.2 times bigger then total expenditures for the public network.
The management of the road security continues to be a problem, despite the fact that the rate of fatal accidents seems to be stable during the last three years, as it is shown in the following table:
Year
/Number of Road Accidents
/Injured persons
/Fatal Accidents
1990
/9049
/6687
/1127
1991
/5052
/5554
/968
1992
/3739
/4198
/755
1993
/2436
/2704
/422
1994
/2646
/2975
/540
1995
/2690
/3062
/543
1996
/3208
/3717
/554
1997
/3412
/3986
/569
1998
/3037
/3619
/492
1999
/2669
/3096
/395
2000
/2581
/3148
/406
2001
/2762
/3388
/419
2002
/2899
/3505
/412
2003 /three months
/378
/465
/61
The total number of deceased referred to one million of vehicles is about 1120 and the number of deceased referred to one million of population – 120 persons, which exceeds by far this index from European countries.
Only in January (on 2 and 15) 2003, 5 persons died and 13 were injured in two accidents on the Chisinau-Hincesti and Balti-Straseni routes. During three months of 2003, 59 children were injured, two of whom died in 53 road accidents.
This domain needs additional investigations and major efforts, beginning with horizontal and vertical traffic lighting of the road network and a much more severe control of the drivers’ behavior by the police, in order to reduce the road accidents.
In order to satisfy the exigencies of passengers and freight transportation, which are growing yearly, continuous developing of the road traffic imposes road construction, maintenance and exploitation, in superior technical conditions, with a maximum efficiency. Technical state of road covering influences directly and decisively the road hauliers, because the way of presenting the road surface determines the level of motor fuel, lubricants, tyres, spare parts consumption, users’ comfort, traffic security, etc.
Railways
Since the Soviet Union had collapsed, the railways were passed under the jurisdiction of the Republic of Moldova in compliance with the Parliament Decision of July 10, 1991 and is, at present, under the subordination of the Ministry of Transport and Communications of the Republic of Moldova.
At this time, the Magistrale railways of the Republic of Moldova include the natural monopoly branches that are under the State property and are being represented by the State Contractor “Moldovan Railways” (CFM). At present, the CFM is an integral monopolist in offering and managing the infrastructure’s capacities, railway transportation and train traffic.
The Republic of Moldova ensures a railway network of general use of 2.6 km for 10,000 habitants, its average density being around 33 km for 1000 square km. The length of the exploited railway lines is 1121 km, including 1107 km with broad gauge (1520 mm). The Moldovan Magistrale railways pass from east (Kuciurgan bordered with Ukraine) through the capital of Moldova to west (Ungheni bordered with Romania), from east (Bender) to south (Giurgiulesti bordered with Ukraine and Romania) and from west to the north gate of the country (from Ungheni to Balti and far to the north – Ocnita and east -Slobodca). There are no electrified lines on the CFM network.
Most railway stations serve both as passengers and as freight traffic, with varying degrees of commercial emphasis. The locomotive and carriage depots are a component part of the CFM, as well as other structural and manufacturing sub-divisions. Besides these, the CFM owns a list of objects of departmental health protection, as well as other socio-cultural and municipal objects planned to be passed to local public administration. The total number of railway employees is about 13,000 people. In order to carry out the operational activities, the CFM owns 162 locomotives for the main activity, 440 passenger coaches and 10,000 freight coaches. The amount of the CFM’s fixed funds is 4,7 milliard lei, the wear and tear exceeds 65%.
At present, the CFM has a profitable activity on the conditions of the Memorandum-Agreement with Creditor Council concluded in August 2000 for five years, which stipulates the space out payments of the historical debts and contractor’s restructuring. Over the years 2000-2002, the passenger traffic has reached stabilization at 355 million passenger-km and a growth of freight traffic to 2751,4 mil. net tons-km, after their sharp decline. The financial results after three years of the CFM’s activity within the Memorandum-Agreement offer a moderate optimism.
Civil Aviation
Moldova has three civil airports: Chisinau, Balti and Cahul. Only Chisinau airport, which is classified as international has regular scheduled flights to and from international destinations. It is opened 24 hours a day with customs control, air security checks and air survival equipment. There are no internal flights. The present airport of Chisinau, situated approximately 15 km from the center of the city was originally built in 1960. The airport terminal has been recently refurbished under an EBRD loan. It is now able to serve 425 passengers per hour. The airport’s runway can receive planes up to the Airbus 310. An autonomous State Enterprise with a well functioning team manages the airport. It contributes annually about US $ 700,000 to the Government’s budget from taxes on ticket sales and landing fees.
Total passenger volume was about 254,000 passengers in 2001, which represents as increase of 12% as compared with traffic in 1999.
Due to its central location between Eastern and Western Europe, Chisinau airport could be an excellent hub for international freight forwarders such as FedEx, UPS and DHL. It is still under use, is open 24 hours a day, and has an adequate infrastructure and Air Traffic Control, although the runways would have to be strengthened to receive wide-body jets. If successful in its bid this could transform Chisinau airport within the next two to three years and create jobs for sorting parcels, servicing the large number of aircrafts involved, and for developing spin-off airport operations.
Trade and Transport Facilitation
Trade and Transport still suffer from corrupt practices within the customs services, lack of modern and transparent border procedures based on interagency cooperation, and insufficient cross-border and regional cooperation and information sharing. The Government through its Moldovan Customs Department is preparing a Strategic Plan for (i) the modernization the Customs information; (ii) upgrading the capacity and effectiveness of border points; (iii) improving mechanisms of interaction and cooperation between border control agencies and the trade and transport communities; and (iv) implementing a set of new customs procedures. The Government is also considering a pre-shipment inspection scheme to facilitate trade while minimizing opportunities for fraud and fiscal evasion related to import operations.
The Bank is currently preparing a project for Trade and Transport Facilitation in South East Europe (TTFSE), which aims at reduction of non-tariff costs to trade and transport and preventing smuggling and corruption at border crossing, through the following measures: (i) modernization of customs procedures and operations; (ii) upgrading of information systems and border crossing facilities; (iii) strengthening border inter-agency awareness and cooperation; (v) improving private-public interactions and delivery of transport and trade services; and (vi) strengthening regional cooperation.
Telecommunications
The State Enterprise “Moldtelecom” was created as a result of restructuring the telecommunications sector of the Republic of Moldova in 1993. In 1999 it was restructured as a Joint Stock Company, the State being the founder and the only shareholder.
”Moldtelecom” is the National Operator of telecommunications in the Republic of Moldova and now manages a fix telephonic network of 676,6 thousand lines through 39 subsidiaries, situated in administrative-territorial units of the Republic of Moldova.
During ten years since it was created, a continuous increase of all activity’s index of ”Moldtelecom” has been registered. Telephonic density (the number of lines per 100 habitants) has grown from 11.7 to 17.5, including in the rural area from 6.7 to 8.6
The economic index had also a significant growth.
I n d e x / Y e a r s1998 / 1999 / 2000 / 2001 / 2002
Income, million lei / 273,4 / 416,8 / 625,6 / 755,1
Assessment in budget, million lei / 40,3 / 37,8 / 134,4 / 160,2
Capital investments, million lei / 112,3 / 124,7 / 424,7 / 220,0
Profit, million lei / 12,3 / 46,9 / 88,9 / 109,0
The objectives, which are imposed for mail and telecommunications fields for ensuring the population with safe service, are: