Ladies and gentlemen,

Dear Guests,

Honourable Audience!

First of all, I would like to thank the hosts for their invitation to take part in this remarkable forum and to wish all participants a lot of success in the ascendant promotion of policies to access the European Union, based on the more effective domestic socioeconomic reforms.

The Republic of Moldova holds a socially-oriented vector of development. This direction of the county's development is a priority and is reflected both in the Moldovan Constitution and in such documents of national importance as the Economic Growth and Poverty Reduction Paper (EGPRSP), the EU-Moldova Action Plan, the National Programme "Satul Moldovenesc" (Moldovan Village).

I want to note that the Economic Growth and Poverty Reduction Paper (EGPRSP) for 2004-2006, approved by the Moldovan Parliament on 2 December 2004, has entailed the creation of a favourable institutional, legal and organizational framework to develop a society where an individual will play a primary role, with the society, in its turn, satisfying his welfare, healthcare and employment security needs.

Thus, the democratic transformations that take place in Moldova determine the need of a social institution capable of operating at the level of the developed countries' requirements. The Eastern European societies, to which Moldova belongs, still are at a stage of gaining experience of rigorous organisation of development processes. The new independent states are subject to outstanding processes of forming complex social mechanisms aimed to meet new geopolitical rigors.

Today, the national economy represents a system where the institutional structure is constantly adjusted, enjoying a growing legal support from a quality and complexity standpoint, aiming at the continuous modernization and harmonization with the European standards. In this context, the private sector development sees a gradually progressing dynamic, as its efficiency and competitiveness still has an unexplored reserve.

The macroeconomic situation of the country has been improving over the last period. Starting with 2001, a negative trend was stopped, setting firm prerequisites for a socio-economic stabilization and revitalization - over this period, the GDP went up an average 7% per year. Up to the present moment, the GDP increased by more than 43%, going up 7.1% in 2005. The GDP index per capita amounted to 860 dollars, up by about 100 dollars compared to 2004 (766 dollars).

The main indices of the national economy activity confirm the maintaining and enhancing of the economic growth trends. In 2005, the industrial production volume in Moldova grew by 6.3%, with an annual average of approximately 11%, the growth in agriculture was 1% (annual average is 3.6%), 9% in capital investments (annual average is 9.2%), 4.7% in retail sales (annual average is 15.5%), 29% in house commissioning (annual average in 2003-2005 was 20.3%). Exports went up 10.8% (annual average is 18.4%), the average monthly salary of an employee in the national economy grew by 19.5% (annual average is 26.4%) and real salary of an employee went up 6.8% (annual average is 15.1%). As regards the Consumer Price Indices, the decreasing trend established in 2001 has been maintained so far. In 2005, inflation was 11.9%, 0.5% less that the index of 2004 (12.4%). The number of unemployed registered in 2005 (21.7 thousand persons) increased in comparison with the year 2004 (21.0 thousand persons) by 700 people.

In the recent years, the economic situation has created the favourable conditions for a more rapid and successful achievement of social development priorities. The country's leadership made a good use of economic growth to solve many social problems. The economic resources of the country have been channelled as a priority into raising pensions, salaries, social allowances, into financing education and healthcare. During the last years, the dynamics of social expenditures increase has exceeded the dynamic of value growth of the main indices of the economic development of the country.

As a result, some important and clearly social-oriented structural reforms have been promoted and launched over the last years in support of this progressive socioeconomic framework. Thus, in the last years direct social investments increased sixfold. The level of remuneration of population has increased more than threefold, and average pensions grew about fivefold. Guaranteed healthcare was provided to socially vulnerable groups (pensioners, children, and disabled people), an insurance healthcare system was installed, leading to a threefold increase in healthcare investments. Investments in education also increased twofold, the number of students who enjoy state scholarships increased twofold, and investments in science and innovation increased sixfold. A major indicator of the social character of reforms was also the launching of the indexation of money deposits, which had been depreciated as a result of the monetary reform carried out in Moldova in the early 1990s. All these components generated positive results, and determined a gradual decrease of poverty in Moldova. Thus, in 2004 the absolute poverty rate was 26.5%, and the extreme poverty rate was 15%, which actually represents a 14.5% decrease against 2002 in the absolute poverty index, and an 11.5% decrease for extreme poverty.

Nevertheless, there are still many unresolved social issues. The main one is the problem of a high level of disparity between incomes and expenses of different social groups. This issue is usually addressed in 2 ways. The first one is the strengthening of the redistribution of economic resources and goods in favour of the most destitute strata of population. The second path is stimulating economic growth, entrepreneurship and employment.

A special emphasis was placed so far on the redistribution of economic resources, which has reached its maximum, thus the possibilities to move on the first path in Moldova are obviously shrinking. Over the last several years, the state has been consistently correcting the balance of public funds distribution in favour of ill-to-do strata. Some effective instruments were employed for this purpose, including the "Medium term forecast of expenses", and a programme-based budgeting. Moving on the redistribution path may however deter private sector development, entrepreneurial initiative and economic growth, as a result, because the real sector of the economy is the usual source and "donor" of redistribution. In this context, a redirection is needed towards increasing the value of resources to be redistributed by these mechanisms - the emphasis here is placed on the second path.

Thus the main condition for Moldova to settle the social inequality in present and in a near-term perspective is maintaining a sustainable pace of economic growth. It is also important to maintain and improve the tools of resource redistribution and an equitable "social balance".

One needs to note that from a viewpoint of social development and social policy, the "domestic quality" of economic growth is very important. For example, it is possible that economic growth is not accompanied by an increased number of jobs or an improved workforce quality. In that case, we cannot count on important social effects in wage raises and increased employment opportunities. On the opposite, only an economic growth that contains an internal "social quality" may contribute to creating new jobs, increasing qualification and better wages for the employees.

Taking into account these circumstances, the Moldovan Government is leaning towards promoting a policy that will ensure economic growth with a powerful domestic social component.

Basing on the existing national socioeconomic framework, on the knowledge of main stages in the evolving European construction, as well as of its correlation mechanism between economic and social fields allow us to draw important conclusions for Moldova. The evolution of the European social policy can be a model that is worth following, both for its positive effects, and for avoiding mistakes and previous confusions in the future. The model can became viable in our country only if it is creatively applied, giving full consideration to the realities and needs of the Moldovan people in transition to the market economy.

The main priorities configured in the national plan must correspond to European community trends as follows.

1. In its electoral platform, the ruling party has at first put an emphasis on the stabilization of developing processes, concentrating its efforts on fighting poverty, and promoting economic and social stability. The next phase, stated in the new activity programme, consists in modernizing the development parameters towards an increase in the human potential, placing the accents on science and innovation, on advanced information technologies and on high added value fields in general. Moldova does not have strategic resources, and that is why, in the development process the stake is put on the stimulation, growth and best use of human potential. For that reason, in 2004, at the initiative of the Government, the Code of the Republic of Moldova on science and innovation was adopted, practically marking the beginning of a new phase of intense promotion of the value of the human potential in Moldova.

2. Taking into account that over 60% of the Moldovan residents live in rural areas and are mostly engaged in agricultural and food sector, which accounts for nearly 50% of the GDP, increasing the efficiency of this sector will directly contribute to improved social indicators in rural areas. The actions taken in this field until the beginning of 2000's did not allow for their real growth. On the opposite, permanent state subventions, as well as the irrational privatization of the agricultural land provided conditions only for small-scale production. Currently, the emphasis is on the consolidation of agricultural land and passing to producing agricultural goods within large collective farms, created on the basis of private property, and capable of promoting and developing the potential of this sector, having at base a stimulating legal and fiscal framework. In this context, the issue of redirecting and professional re-training of rural residents is gaining momentum. These measures, well structured and coordinated with the processing industry development, can set a foundation for a rural social policy. Only alongside with viable economic measures in agriculture can the necessary resources and adequate conditions for implementing social field programmes appear.
The measures applied in this sphere could lead immediately to opening new jobs and increasing their attractiveness by improving working conditions and raising salaries and by technically upgrading the enterprises using advanced technology. This, in turn, will permit more youth to be employed on a local level, will stop labour migration from Moldova, will regenerate the country's economic potential and will reduce the impact of the social issues. For that, the legislative framework must be updated to favour market economy development, as well as to ensure an adequate investment climate.

3. The policy of stimulating investment in the country's economy remains an important priority for Moldova. Sustainable economic development is inconceivable without a well-structured and well organized investment sector. Using the opportunities provided by an eventual granting of an asymmetric trade regime with the EU within the of Neighbourhood Policy framework, the accession to the Stability Pact for Southeast Europe and especially acceding to the WTO are all extremely important for Moldova in our strife to reach a doubling of foreign and domestic investment in the economy. These will have a direct impact on most of the country's population by stimulating the development of small and medium enterprises, which, in turn, will allow creating many new jobs. In this way, the Moldovan economy got 203 mln dollars of foreign direct investments in 2005, up by 41% compared to 2004.

4. Today Moldova's economic potential is based on capital concentration and GDP production in the region of the city of Chisinau, and a poor polarization in other municipal areas. This does not ensure a homogenous and sustainable development of the country, thus the goal is to develop economic potential of the state by emphasizing the need to increase non-agricultural assets (services, industry) on a regional and local level.
In this context, the state is actively involved in the policy of investment orientation, especially on a local level, by implementing the provisions of the "Moldovan Village" programme, launched by the President of the country in 2005. Recently, to support this programme, the national legislation was amended to establish an institutional framework for its implementation, providing that only a well coordinated regional policy, based on the tremendous European experience in this field, may serve as a basis for a balanced development of the regions and of the state as a whole.

5. An important factor in the complex approach to social problems in Moldova is the issue of gender equality. On that matter, the current leadership has taken every effort to adjust the national legal framework to European standards and to ensure an environment that favours a fruitful and equitable activity of women in our society. A recent example in this regard is the adoption in the second reading on February 9, 2006, of the "Law on ensuring equal chances for women and men". Moreover, the Convention of the Council of Europe on fighting human trafficking, signed on 16 May 2006 in Warsaw, is scheduled for ratification at one of the nearest parliamentary sessions, while Parliament passed the "Law on prevention and fight against human trafficking" in October of 2005. I want to mention here that this issue is approached extremely seriously in Republic of Moldova, bearing in mind that Europe is counting on the government to address it. However, this is not a local problem only, as it bears a bilateral aspect. I will mention in this context that the European authorities should approach this issue at a greater extent on a European level to help reduce the demand for traffic victims in the EU member-states.

6. The history of European integration has clearly shown the primacy of negotiations in adopting decisions of great importance, accepted and implemented by all members of society. Moldova has been vehemently promoting this principle as of late. Only social cohesion - a true social contract - can lead to establishing a stability-centred national consensus. The Moldovan Government has started working on a mid-term and long-term Social Policy, acceptable by all the political forces that could come to power in next years. The policy will be adjusted to the European legal provisions in this field, as it is put together in a completely transparent way, with the involvement of representatives of the civil society, business, political parties and central and local government. Only such an approach may serve as a platform for a real programme of activities in the social sphere, and may improve the situation in the country, having as a model the EU Common Social Policy.

Thank you for your attention.