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Moldova: Transport Sector Review Update With emphasis on the Road Sector 1 What triggered the paper? • The request of the Government in 2001for a Road Project supported by the Bank, as a priority in Gov.’s development agenda (therefore the paper’s emphasis on the road sub-sector) • The need for the Bank to renew its knowledge of the sector, and start a Transport policy dialogue 2 What is the background? • Moldova – landlocked country, highly trade dependent (over 90% of GDP), gateway between FSU countries and the West • Economy largely based on agriculture and agroindustry (over 30% of GDP) • Access to regional markets is a strategic priority, dependent on a well functioning transport industry and a solid transport infrastructure • Gov. made the first steps by joining WTO and the Stability Pact for SEE in 2001 3 What are the findings? • Transport sector has not been a priority for Gov., IFIs • No National Transport Strategy covering all sub-sectors; (proposed to be drafted within the WG 4 under PRSP) • Low share of Transport in public expenditures: 2.3 % in the annual budget; about 0.5 % of GDP • Progress of reforms in the T sector is lagging behind, including (i) defining a new role of the Gov, and (ii) increasing private sector participation • MOT civil servants have jobs in the private sector • Railways reforms started with separation of services, plans to eliminate cross-subsidies, commercialization • Private entrepreneurship started in trucking; constraints in access to international markets due to (i) low level of professionalism, (ii) inadequate roads infrastructure 4 What are the findings (cont)? • Road management has not been divested from MOT, conflicting roles as policy maker, contractor, and supervisor • The construction industry only partly private • Trade and transport suffer from corrupt practices of Customs and other border agencies, lack of modern and transparent border procedures • Unclear rules of game in Civil Aviation: privatization started, sustainability questionable • Urban Transport in crisis in Chisinau: drastically declining services & high budget constraints to the Municipality 5 Issues in Road Management • Critical shortage of road maintenance funds • 78% of the national roads and 88% of the local roads have reached the end of their economic life and are technically outdated > exponential deterioration • Inadequate road network conditions > high transportation costs > reduced competitiveness 6 Evolution of Road Condition % 50 45 40 35 30 25 20 15 10 5 0 1992 Good 1994 Fair Poor 1996 1998 Extremely Poor 7 Road Density Moldova Ukraine Romania Poland Germany 16 14 12 10 8 6 4 2 0 France (km per 1000 population) 8 km per square km 1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0 Moldova Ukraine Romania Poland Germany France Road Density (km per square km) 9 Issues in Road Management • Moldova loses between US$10-20 million/year by not maintaining the roads • Moldova spends 0.25% of GNP on roads compared with an average of 1.2% in 36 countries • Gov. lacks fiscal discipline on budget allocation for road maintenance > “second generation” road fund proposed by MOT • Road safety management is an issue (high rate of fatal accidents: 1120 deaths/mil rd veh 10 1.4 1.2 1 0.8 0.6 0.4 0.2 0 Li th ua ni a Es to ni a La tv ia R om an ia G eo rg ia M ol do va % of GDP Maintenance Expenditure for National Roads as percentage of GDP 11 Recommendations • (i) maintenance, (ii) maintenance, (iii) maintenance, particularly for the road sector • On Railways: address the PSO problem; implement restructuring of CFM; update legislation • On Roads: create an autonomous and financially independent Road Authority; increase maintenance budget; create a modern mechanism for rd. financing; investigate the cause for high accident causes • A possible Bank financed operation in the road sector to address the major issues identified by the Study 12 Next Steps • Continue the sector dialogue with the Government in support of defining its National Transport Strategy • Address the transport priorities in the context of the up-coming PRSP • Discuss the draft with the Government • Disseminate the revised paper in the context of PRSP WG 4 (infrastructure) • Identify transport stakeholders for the Participation & Consultation process of the PRSP 13