Moldova's designated PM proposes new vision for harnessing state-owned assets

Designated Prime Minister Vasile Tofan is proposing a new approach to managing and capitalizing on state-owned assets, noting that numerous buildings and land plots are underused or poorly managed, which deprives the state budget of significant revenues.

According to the designated PM, the state holds tens and even hundreds of thousands of square meters of space which, in many cases, are abandoned, degraded or rented out at below-market prices.

“This is a very important subject and I am glad you raised it, because I believe it will be one of the battles we need to fight. I think there will be quite a lot of public criticism: some of it in good faith and some of it manipulative, because there are people who do not want order to be brought to this area. How do I see the situation? I will use very simple words and be very direct. There are tens of thousands, hundreds of thousands of square meters of spaces owned by the state. Unfortunately, these spaces are very often at best underutilized, to use a more cautious term. Very often, unfortunately, they are also abused. For example, they are rented out at prices below market level. And unfortunately, I must admit that, in many cases, those who manage these spaces, possibly, I assume, from what I hear, are compensated under the table for this difference. We need to acknowledge this problem. The state is not a good manager. We see far too many ruins in Chisinau and in other cities, underused spaces, spaces rented out to all sorts of affiliated companies. At the same time, I understand very well that people do not trust privatization. People will immediately come out and say: ‘Look, they want to sell everything that’s left.’ I understand this reaction,” Vasile Tofan said today in parliament.

To change this situation, the designated prime minister proposes launching pilot privatization projects, conducted through fully transparent auctions, so that citizens’ trust in this process can be rebuilt.

“Therefore, I believe we must approach this problem in a practical way. We need to select a few pilot assets. Show them and say: ‘Dear people, look at this ruin that has been standing here for 35 years and will stand here for another 35 years, if we leave it with the Public Property Agency. It does no good to anyone; it is not a space that can be brought back into the productive economic circuit. We need to take this ruin, photograph it, show it to everyone and say: ‘Look, this ruin belongs to us, the people of Moldova. We must organize an auction designed in such a way that 95 per cent of people trust that it is done honestly.’ If you ask me, I think we should experiment with Dutch auctions. Let’s set up a very clear procedure. We start from a very high price, I don’t know, 10 million euros for an asset that may be worth 2 million euros. The price starts at 10 million. This gives everyone enough time to get informed, to follow the auction and see when interest begins to appear. Every day we must promote this auction and say: ‘Look, this is a very good asset. Now the price is 10 million, soon it will start to go down.’ And every week the price goes down: 9.5 million, 9 million, 8.5 million, 8 million. And at some point, if we believe in the free market and if we believe there are courageous entrepreneurs, I think someone will come honestly and say: ‘3.5 million. Sold.’ This is just a hypothetical example. I believe that, if we organize a few such extremely transparent auctions, in which people believe, then we will gain people’s trust that such things can be done correctly. After that, we can move forward and communicate: ‘Let’s scale up this model.’ I personally want to oversee these auctions, because I understand how deep people’s mistrust is,” Vasile Tofan noted.

The designated PM estimated that selling just three major assets at a price of around 10 million euros each could bring about 30 million euros into the budget, equivalent to roughly 600 million lei. He compared this amount to the revenues expected from raising the value added tax (VAT) on medicines from 8 per cent to 20 per cent, stating that he prefers the efficient capitalization of public assets over increasing the tax burden on the population.

“Allow me to give you a few figures. If we find, for example, three spaces that are sold for 10 million euros each – and believe me, there are many such assets in our country, including buildings and land plots – then we are talking about 30 million euros. And 30 million euros means approximately 600 million lei. You asked about medicines. Do you know what the fiscal impact of increasing VAT from 8 to 20 per cent is? I will tell you: about 600 million lei. So, we have a choice between honestly selling three ruins to entrepreneurs who will build something there, invest, create value and jobs, or raising the VAT on medicines from 8 to 20 per cent. It is, of course, a somewhat forced dichotomy, but I want you to understand how I think. I can no longer tolerate seeing these ruins in Chisinau and in other cities and pretending that the Public Property Agency is sitting on them like a broody hen, that the state keeps them and does not give them to anyone. I believe this is an abuse of public property. A public asset that sits in ruin and decays for 30 years no longer serves the interest of the people. On the contrary, it is an abuse against the people. And I want to say very clearly: I will be very determined. I am not afraid. I am not afraid of criticism, I am not afraid of attacks, I am not afraid of anything. Everyone will say that I am coming there to abuse and to sell public property. I am not afraid. I will do everything transparently. This will bring a lot of money into the budget and then people will say: ‘We trust you. Thank you for having the courage to do this, to capitalize on all these ruins and bring money to the state,’” Vasile Tofan concluded.