Background

Last Thursday part of my training included an excellent presentation by an employee of the Urban Institute. He is a former PCV himself, and later served as a PC Country Director in three nations. Anyway, it was one of the best non-language trainings I’ve received.

The part that most interested me concerned the Moldovan economy and how it can move forward, or at the very least out of its current position as the poorest nation in Europe. Currently 6-900,000 citizens of Moldova work outside the country. Considering that the national population is only slightly more than 4 million, a considerable percentage of the workforce is employed outside the national economy. Essentially, there are no jobs to be found here – or at least not high paying ones – so Moldovans go abroad to get them.

Case-in-point, my host father earns about $100 per month working at a phone company, and my mother makes $40 per month as a music teacher at a school. Currently, my host father is on “vacation” from his phone job because there happens to be a construction job available right now that pays better. When the construction job is over, so will be his vacation and he’ll return to the lower-paying telecom employment. A few years ago, he spent a year in Portugal working construction and both of his parents are there now also employed in construction.

The money earned overseas finds its way back (legally or illegally) to Moldova - $1 billion in 2004 alone – usually to support family living here. If this money were invested it might help pull the nation out of its downward economic spiral, but most of it is spent on food and other necessities of life, and not infrequently on large houses. This last commodity is often viewed as a sound investment, for the government has not (yet) taken peoples’ homes, whereas investments in businesses are subject to the expenses of corruption, arcane tax laws, and sometimes the whims of local and national officials.

[Incidentally, in a couple years (I think) Romania will become part of the EU and because Moldova and Romania used to have overlapping borders, some Moldovans are entitled to Romanian as well as Moldovan passports. Should Romania become part of the EU, Moldovans with Romanian passports will be able to travel and work freely in virtually any European nation, as opposed to the current necessity of securing work visas from host countries (if the work is going to be done legally). This is both good and bad. Good because some Moldovans will be able to secure better jobs more easily and potentially send more money home; bad because more Moldovans may flee their homeland, perhaps permanently.]

One suggested reform by the Urban Institute is for the government to make it more attractive for locals to invest locally in things that will provide ongoing sources of revenue, i.e. small businesses. This doesn’t necessarily mean that the government should create large business parks or tax breaks, but at least a fair shot at making a profit. In a sense, “If you build it, they will come.” In American, 65% of local taxes are spent locally, for which citizens receive police and fire protection, decent roads, schools, and hospitals. In Moldova, 5% of local taxes are spent locally. Meaning, there is a very top-heavy government system in this former Soviet republic and little chance for even the best local officials to drastically change things for the better.