Category Archives: Corruption

High-Level Corruption Threatens Moldova’s European Aspirations

Every April 7, Moldovans take stock of the progress the country has made since the youth protests of April 2009, which popularly became known as the “Twitter Revolution.” Nine years ago, this civil unrest led to the demise of Communist Party rule and ushered in a coalition of pro-European parties into power. However, hopes for a more democratic and accountable government not only failed to materialize, and many perpetrators of the brutal police crackdown in April 2009 have since been promoted to key state positions by the now ruling Democratic Party (Anticoruptie.md, April 7, 2017). This sense of impunity, coupled with poor economic conditions domestically, discourages young Moldovans from investing any hope in their country’s future. According to the latest poll by the International Republican Institute, 76 percent of respondents do not think that young people have a “good future in Moldova,” while 96 percent said “corruption is a big or very big issue” in the country (Iri.org, March 29, 2018). A recent joint report by the European External Action Service and the European Commission stated that “corruption still remains widespread, and independence of justice, law enforcement as well as national anti-corruption authorities need substantial improvement” (Europa.eu, April 5). Thus, endemic corruption and democratic backsliding not only undermine Moldova’s European aspirations, but also create fertile ground for political instability and civil unrest, this time against a nominally pro-European government.

The same European Union report on Moldova’s record of implementing the Association Agreement with the EU recalls that the change of the electoral system in July 2017 went against the recommendation of the Council of Europe’s Venice Commission and the Office for Democratic Institutions and Human Rights of the Organization for Security and Cooperation in Europe (OSCE). European democracy watchdogs have repeatedly warned Moldova not to introduce the mixed electoral system, because it is likely to exacerbate the country’s corruption problem by allowing wealthy businesspeople to influence elections in single-member districts (Venice.coe.int, March 19; see EDM, January 10). This concern is a major reason why the EU is withholding 100 million euros ($124 million) in macro-financial assistance, earmarked for Moldova last year. According to Vice Chair of the European Parliament Committee on Budgets Siegfried Muresan, EU funds would have arrived already had it not been for the controversial change to the electoral system (Europalibera.org, February 1). On a recent visit to Moldova, Muresan emphasized that at least three or four of the ten EU conditions for the first tranche (30 million euros) have not been met (Adevarul.roCotidianul.md, April 6). Indeed the EU-Moldova Memorandum of Understanding sets clear deliverables in terms of public-sector governance, the fight against corruption and money laundering, energy-sector reforms, etc., but it also demands respect for effective democratic mechanisms, including a multi-party parliamentary system and the rule of law (Europa.eu, November 23, 2017). The latter is much more difficult to achieve, and given how the investigation into the billion dollar bank fraud is going (see below), the government appears to be barely trying.

One billion dollars (12 percent of GDP) was siphoned off from three Moldovan banks prior to the 2014 parliamentary elections. “The theft of the century,” as it has come to be known, is a litmus test for the Moldovan justice system. Moldova’s National Bank hired the New York City–based investigative consultancy Kroll to conduct a financial forensic investigation. Already in its first report, presented in April 2015, Kroll identified controversial businessman Ilan Shor, who controlled the three embattled banks, as the main figure behind the fraud. The consultancy firm’s second report, from December 2017, pointed to 77 companies linked to Shor, who is identified as one of, “if not the only beneficiary” of this highly coordinated fraud (Candu.md, May 4, 2015; Bnm.md, December 21, 2017). Yet, despite being convicted by a lower court to seven and a half years in prison in June 2017, Shor appealed the ruling, and the case has been stalled (Deschide.md, April 2, 2018). Shor remains at large, and in the meantime, he became mayor of a large town, took over the leadership of a political party and is gearing up to enter the parliament. Keen observers of Moldovan politics know that this would be impossible without the protection from the head of Moldova’s ruling Democratic Party, oligarch Vlad Plahotniuc, who used Shor’s depositions to imprison Plahotniuc’s political and business rivals (former prime minister Vlad Filat, oligarch Veaceslav Platon and mogul Chiril Lucinschi) in swift closed trials. The symbiotic relationship between Vlad Plahotniuc and Ilan Shor is the embodiment of high-level corruption that makes the EU increasingly frustrated with Moldova.

Endemic corruption, exacerbated by changes to the electoral system, led to Moldova’s demotion from flawed democracy to a hybrid regime, according to the Economist Intelligence Unit’s Democracy Index (The Economist, February 4). The risks of Moldova becoming synonymous with corruption are manifold, yet two main threats stand out. First, if it continues to only pay lip service to fighting corruption, Moldova will fail to advance its European integration efforts. Second, if the highly disputed mixed electoral system indeed produces a rather unrepresentative outcome in the parliamentary elections scheduled for the end of 2018, the country could plunge into another cycle of political instability, which could be exploited by foreign actors such as Russia. With all that in mind, it is nonetheless becoming apparent that the main fault-line in the Moldovan political debate is less of an East-West divide, but rather rivalry between those defending democracy and good governance and those content with clientelism and corruption. Both the nominally pro-EU oligarch Vlad Plahotniuc and the drudgingly pro-Russian President Igor Dodon are, in fact, progenies of Communist Party leader Vladimir Voronin’s regime, which Moldova’s millennial generation rose up against in April 2009, only to grow disheartened a decade later.

 

Note: This article was written for the Washington based Jamestown Foundation and the original can be accessed here.

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Democracy in Moldova: A Cautionary Tale

There is a meme circulating on the Moldovan internet that ironically describes the country’s capital, Chișinău, as a “European city.” Although it is true that Chișinău is a city in Europe, it bears little resemblance to Berlin, Paris, and Rome. Its historical buildings lie abandoned, its citizens have little respect for traffic laws, and its sidewalks fall apart as fast as they are repaired.

Many observers have had high hopes for Moldova. Although it straddles the Russian and European spheres of influence, it is relatively liberal and has close ties with Romania. In Soviet times, it was an agricultural and industrial powerhouse. When massive protests toppled the entrenched Moldovan Communist Party in 2009, Moldova seemed to be on its way to becoming a democratic, prosperous country, perhaps even a member of the European Union.

But the European path, like the sidewalks of Chișinău, has not been smooth. The nominally pro-European Democratic Party has succumbed to corruption and dysfunction. It clings to power despite low approval ratings, largely thanks to its financial resources and its media monopoly. As the 2018 parliamentary elections loom, the Democrats have even collaborated with their supposed enemy, the Russian-aligned Party of Socialists. The two parties have enacted a new electoral system that seems designed to insulate Moldova’s rulers from the demands of its citizens. Political oligopoly threatens democracy in Moldova.

The European dream

The Alliance for European Integration, a coalition of three parties, came into power in 2009 with much fanfare. It set out to reform the Moldovan government and breathe new life into the economy. After years of negotiations, an association agreement with the European Union was eventually signed in 2014.

But the promises of the Alliance were hollow. Mihai Popşoi, vice-president of the Party of Action and Solidarity and a Moldovan political analyst, said in an interview with the HPR that there were warning signs as early as 2010 and 2011. The members of the Alliance took advantage of their new mandate to divide government ministries and public funds between them. Together, they laid the groundwork for a crime so remarkable Moldovans call it “the theft of the century.”

In 2015, it was discovered that $1 billion had gone missing from three of the largest banks in Moldova, an astounding sum for a country with a GDP of $6.5 billion. The government bailed out the banks with taxpayer money. Several prominent figures, including the sitting prime minister, were arrested, but only about $20 million has been recovered. It is a popular belief that some of the culprits are still at large, perhaps even still in government.

Government and opposition

In the aftermath of the scandal, only one of the Alliance parties was left standing: the Democratic Party of Moldova. Bankrolled by Vlad Plahotniuc, a shadowy billionaire, the Democratic Party has single-digit approval ratings but clings to a parliamentary plurality.

Maia Sandu has enjoyed a meteoric rise from an obscure minister of education to a serious presidential challenger. She won 48 percent of the vote against Igor Dodon in the presidential run-off last November, after the Democratic Party withdrew its candidate because of low support. Although, as a pro-European party, the Democrats publicly supported Maia Sandu, the party’s media empire seemed to many to be pushing for Dodon’s election.

Ties between prominent Democrats and Socialists go back decades. Members of both parties were part of the inner circle of the leader of the Moldovan Party of Communists before the 2009 protests. Popşoi argued that Plahotniuc, the chairman of the Democratic Party, fears prosecution for his shady business dealings if an anti-oligarchical party like PAS were to come to power. The Socialists, on the other hand, would preserve the status quo, with a little more pro-Russian rhetoric.

Squeezed between the Socialists, who appeal to disillusioned and pro-Russian voters, and PAS, which is winning the young, pro-European vote, the Democrats were facing an uphill battle. With the 2018 parliamentary elections approaching, they needed to do something radical to stay in power.

If you don’t like the rules…

The Democratic Party decided to change the electoral system. In past elections, Moldova has used proportional representation, meaning parties won seats in Parliament based on the percentage of the national vote they received. This July, the Democrats and the Socialists together voted to replace proportional representation with a mixed system. In 2018, half of parliament will be elected under the old system. The other half will be elected under a first-past-the-post system, similar to that of the United States, in which whoever wins the most votes in a district wins the seat representing that district.

The Democrats and the Socialists pushed the reform through at record speed: from the original proposal to the passage of the final bill, less than five months elapsed. Nicolae Panfil, Program Coordinator for Monitoring Democratic Processes at Promo-LEX, a nonpartisan Moldovan NGO, noted in an interview with the HPR that the rushed and manipulative campaign led to “[complete] chaos.” Attempts by Promo-LEX and other members of civil society to promote debate and slow down the process were mostly ignored.

The new electoral bill also maintains a high threshold for entering Parliament on the proportional tier, despite reducing the number of proportionally elected seats by half. It limits the number of seats small parties, especially parties with decentralized support, can win. A party with 30 percent support across the country would find it hard to win any first-past-the-post seats. And the number of proportional seats they could win is now much lower.

Panfil does not doubt that the new electoral system was adopted because of “pure[ly] political interests.” The reform ensures that both the Democrats and the Socialists will be able to win seats in next year’s parliamentary election, while reducing the number of seats PAS and other opposition parties can hope to win. Popşoi is pessimistic that his party will do well under the new system. The chances of PAS winning power in the upcoming 2018 parliamentary elections are, according to him, “extremely slim.” The system is rigged against them.

A fork in the road

Drawing a parallel to Putin’s Russia, Popşoi argued that the Democrats are offering an implicit bargain to the Moldovan people and to Western donors: stability, a pro-European geopolitical orientation, and maybe even economic growth—but no meaningful democracy. European intervention, when it comes, is often too little and too late. “We [PAS] are being told by our partners in the West that they need us to be much stronger for us to present a real alternative—but it’s really tough when [they] are supporting our opponents … it’s a catch-22.”

Eventually, Moldovans will tire of corruption and poor governance. The younger generation knows the difference between Chișinău and Berlin; they use social media, and many have travelled in Europe. Popşoi warned that, if Moldovans do not have a democratic outlet for their discontent, there could be a Maidan-style uprising against a pro-European government, a novel experiment with potentially dangerous consequences.

The European Union would certainly prefer to see a strong, pro-Western democracy in Moldova. The question is whether it will settle for a stable, nominally pro-European oligarchy.

 

Note: This article is written by  for Harvard Political Review. It is largely based on two interviews, one with Mihai Popşoi, vice-president of the Party of Action and Solidarity and a Moldovan political analyst and another with Nicolae Panfil, Program Coordinator for Monitoring Democratic Processes at Promo-LEX, a nonpartisan Moldovan NGO.