Trans-Dniester exports down 23.2% due to "economic cold war"

Igor Smirnov, PMR's recently re-elected President, talks to owners of exporting companies in the capital Tiraspol

TIRASPOL (Tiraspol Times) - Speaking to the press, a top government official in Pridnestrovie - also known as Transdniester, or Transnistria - announced that exports for 2006 totalled 23.2 percent less than in the year 2005.

PMR Minister of Economy Helen Chernenko announced the extent of the damage done to the local economy in 2006 as a result of Moldova-Ukraine coordinated economic measures targeted against Pridnestrovie's fragile economy.

" - Our economy suffered $500 million in lost export earnings, and as a result the public budget had to make do with $76 million less in taxes and other foregone government revenue," said Helen Chernenko, adding that "this is an economy cold war which Moldova engages in, against their much smaller neighbor."

Since 3 March 2006, Pridnestrovie has been under customs restrictions, which was imposed by neighboring Ukraine at Moldova's request. The move, which Pridnestrovie's government sees as an economic blockade, has been a serious blow to the area's struggling economy, causing the halt in deliveries of goods to Ukraine and other export markets over the lack of an official Moldovan customs stamp.

Local companies exported 4 billion 432.2 million PMR rubles ($533.9 million), reducing the volume of their output by 23.2%. According to RBC, quoting officially released statistics, in physical terms the total output of industrial production decreased by 26.2%. Although devastating to an economy which is only slightly better than Europe's poorest country, Moldova, the statistic was actually better than expected: During the worst part of 2006, key exporters had ground to a halt, and export losses surpassed 40%.

Chernenko noted that since the year 2000, Pridnestrovie's public budget increased four-fold. Most of this was due to a coordinated process of introducing market reforms and economic liberalizations. Nearly 300 new laws have been introduced in the economic sphere, and privatizations have also played an important role. Since a reform-oriented program of privatizations begun in 2001-2002, more than 120 large companies have successfully been privatized.

Winners and losers

Some of PMR's largest companies and economic sectors were the hardest hit. The biggest loss for the year was suffered by the heavily affected MMZ Steel Works in Rybnisa, with the total value of the iron and steel industry declining by 34.6% compared to 2005. Output fell to 1 billion 947.5 million PMR rubles (equivalent to $234.6 million dollars).

Also in 2006, the value of electricity generation dropped 37.7% to 539.3 million PMR rubles ($65 million), compared to 2005.

Light industry was off by 10.6% to 804.9 million PMR rubles ($97 million).

Production for the electrical industry dropped 25.2% to 229.5 million PMR rubles ($27.6 million).

Three smaller areas of the economy were less affected, and actually managed to continue their upward growth rate which had been begun in 2005 and sustained in 2005.

This was the case of mechanical engineering industry which registered a 16.1% production increase over 2005, finishing the year with an output of 115.9 million PMR rubles ($14 million USD).

Pridnestrovie's food industry grew by 5.5% to 504.4 million PMR rubles ($60.7 million).

Local production of construction materials increased by an impressive 26.9% to 146.6 million PMR rubles ($17.6 million).

Viable economy

The unrecognized Pridnestrovskaia Moldavskaia Respublica is home to most of the heavy industry of the former Moldavian SSR, a constituent part of the Soviet Union, including a steel plant and hydro power station. Pridnestrovie is an industrial-agrarian state, where manufacturing industry occupies an important share of GDP.

The economy, which the British magazine The Economist considers a viable economy in its own right, is diversified and driven by a number of different sectors, in particular rolling ferrous metallurgy, mechanical engineering, metal processing, light industry, food industry, power industry and production of building materials. The second largest textile factory in Europe is located in Tiraspol, Pridnestrovie's capital. Another important textile factory has branches throughout Pridnestrovie and is a subcontractor to Calvin Klein and other well known American and European brands.

Kvint brandy: A venerable Tiraspol export, and one of the young republic's best known brand names

The economy of the republic is characterized by a high level of openness to outside markets and foreign trade. More than 90% of production is exported, including the famous Kvint brand of brandy.

Pridnestrovie also imports a lot, including nearly all fuel and many raw materials. Over the past five years, foreign trade has averaged $1 billion annually.

Pridnestrovie does not produce weapons and is not engaged in the arms trade, be it legally or illegally. There is also no "spillage" from the aging Cold War arms depots located in Kolbasna, near Kamenka in the extreme north of the country. The arms depots belong to Russia and are guarded by Russian troops. Since 2002, Russian military officials have removed and destroyed large parts of the arms. In 2006, an audit revealed that all remaining weapons are fully accounted and that none have left the country in any unauthorized way. No sales have ever taken place of these weapons. Also in 2006, OSCE undertook an international weapons inspection and concluded that the remaining munitions and arms were well guarded and not a risk.

Industrial output is dominated by export from manufacturing enterprises (around 90% between 1997-2002). PMR is a supplier of ferrous metal, machine-building products, light and food industry, electrical power, specialty construction materials and woodworking products. The new and emerging country is an important supplier of electrical cabling, winding wire, electric insulating material, explosion-proof engines, power transformers, AC generators, laminates and laminated bakelite insulations, molds for shoe production, and low-voltage electrical devices and pumps.

Trade with 99 countries worldwide

Today, Pridnestrovie has trade relations with a total of 99 countries worldwide. In 1992, following the cease fire with Moldova, Pridnestrovie only traded with 15 ex-Soviet republics and 13 other countries. This grew to a total of 76 countries by the year 2000, including 11 former Soviet republics.

" - The growth of the amount of partners is an evidence for the active market politic of the enterprises, and rising of the competitive capacity of their goods in foreign markets," says the political party Renewal in an official statement. "It also illustrates the fact that foreign countries are beginning to trust PMR and consider it a reliable partner."

Italy, Germany and the United States are important export markets for Pridnestrovie. Nevertheless, the bulk of the production still goes to the geographically closer CIS countries, with Russia - the largest country in the region and territorially the largest in the world - also being the largest market for Pridnestrovie's exporters. Other notable countries for PMR's foreign trade include Switzerland, Romania, Great Britain, Poland, Cyprus and Turkey.

The Russian market takes the bulk of Pridnestrovie's output in machines and equipment, alcohol, chemicals, food and agricultural goods.

Just over forty international joint ventures operate in Pridnestrovie. Partners include companies from Bulgaria, Canada, Hungary, Germany, Ireland, Poland, Russia, and Italy; employing nearly 6,000 people in total.

The leading industry is steel, due to the MMZ steel factory (part of the Russian Metalloinvest holding) in Rybnitsa, which accounts for about 50% of the country's budget revenue. The largest company in the textile industry is Tirotex, the second largest textile company in Europe. The energy sector is dominated by the international companies. The largest power company, M-GRES (Kuchurgan power station), is located in Dnestrovsk and owned by Inter RAO UES, the joint subsidiary of RAO UES and Rosenergoatom. Gas transmission and distribution company Tiraspoltransgas is owned by Gazprom, the world's largest energy company. The local banking sector consists of 8 commercial banks, including Gazprombank. The oldest alcohol producer Kvint, located in Tiraspol, produces and exports brandy, wines and vodka.

Among other important local companies are counted Gazex, Tiraslaminat, Ortex, Rida, Interdnestrcom, Mixoil Tiras, Romtek, Transtelecom, Terri-Pa, Intercentre Lux, Sheriff, Tirpa, Floare, Gazprolimerservis, Dnestr-avto, Aleksandr Suvorov, Electromash, Moldavizolit, Elektroapparatniy Zavod, S.M. Kirov, Rybnitsa pump factory, Moldavkabel, Elektroapparatura, Odema, Vestra, Dubossary Garment Factory, Rybnitsa Knitting Factory, Tigina Shoes, Danastr, Metlacs and the recently created company Pridnestroviegazrealozatia.

See also:
» As trade relations expand, international diplomatic relations are next
» Victim of blockade, PMR's largest company forced to cut output almost 40%

On the web:
» PMR Chamber of Commerce and Industry