Navigating development in Moldova: The role and challenges of foreign donor organizations

This work derives from a final report produced for the Middle East Institute’s Black Sea Program as part of a U.S. State Department Title VIII fellowship.

A note on methodology

This study on community leadership and social resilience factors in Moldova in the context of the war in Ukraine is based on in-country interviews with 15 Moldovan experts (journalists, political pundits, economists, security consultants, and think tank analysts) and community leaders (mayors, NGO founders, religious leaders, and educational policymakers), conducted in May-August 2023.

Introduction

Walk through Chisinau, Moldova’s capital and largest city, and the prominence of foreign donor organizations quickly becomes apparent. Signs next to construction projects identify the European Union, United States, or other governments as funders, while streets are crowded with the local headquarters of various international bodies, such as the Red Cross or the Organization for Security and Cooperation in Europe (OSCE). Though particularly visible in Chisinau, many fund projects nationwide, and their work is extensive — while it is difficult to find exact numbers, this Moldovan government register estimates that $16 million worth of humanitarian aid alone entered the country in the first three months of the war in Ukraine. My research did not indicate a perception of these donor organizations as intrusive or constituting unwelcome foreign interference. On the contrary, such donor institutions are seen as presently necessary actors in the Moldovan social, economic, and political systems. However, my research and existing literature both indicate that, in some cases, they also complicate the resilience of the communities they operate within by providing inconsistent social support, exacerbating economic inequity between regions of the country, and at times reinforcing a lack of transparency in how aid is distributed.

Local perceptions of foreign donors

My interviewees overall looked positively on foreign donor organizations’ presence in Moldova. Seven of them, when asked about such organizations, considered them either important or completely necessary for Moldova’s continued development. The remainder characterized their work as either a neutral function of life and development in Moldova, an unobtrusive but positive source of funding, or simply not their area of expertise. As one economic expert said, donor organizations’ work in the civil society sector has become “a vibrant, very important element of Moldovan life.” Across the breadth of my research, there were no interviewees who presented donor organizations as an intrusive or negative source of foreign influence, even while most criticized specific aspects of how those organizations work within a Moldovan context.

Four of the experts I interviewed, when asked about the distribution of public and donor funds, noted the lack of a systemic approach and sustainable funding in many donor-funded projects. This is especially an issue for the numerous projects aimed at providing social services, often to vulnerable populations. Donor organizations typically provide funding to establish projects, which are then transferred to underfunded local governments that cannot afford to continue funding them in full. Additionally, access to funding varies by which vulnerable populations are in the international spotlight: Since the beginning of the full-scale Russo-Ukrainian war, there have been numerous initiatives aimed at supporting incoming refugees, but as a founder of a local non-governmental organization (NGO) I interviewed pointed out, there is far less new funding available for projects targeting vulnerable Moldovans. This creates a chaotic and inequitable system of social services where access to support varies widely by location (where projects are currently active), demographics (which groups they are currently targeting), and timeframe (it is comparatively easier to access short-term support and nearly impossible to find medium- or long-term support). Economic inequity increases across the country as a result.

Donor-host government relations

The relationship between donor organizations, the Moldovan government, and local authorities is also an area of sometimes unrealized potential. The current administration’s focus on Europe as well as Moldova’s EU candidate status are both big drivers of foreign investment and interest in the country, with the International Monetary Fund (IMF) and World Bank in particular ramping up support in light of these factors. However, two of the experts I interviewed indicated a sense among Moldovans that there was a lack of transparency in the disbursement of aid through Moldovan public institutions to individual communities. A 2019 study from the Moldovan think tank Expert-Grup concurred with this assessment, concluding that “aid disbursements are much lower compared to aid commitments, revealing a large unexplored potential of EU development aid in Moldova, which is mostly due to governance issues in Moldova.” The authors additionally recommended that donors form partnerships that allow them to work directly with local authorities, especially as local governments are largely trusted by their constituents — respondents in a 2021 report from the Institute of Public Policy (IPP) ranked mayoral offices as the second-most trustworthy out of 13 options, a finding that was similarly borne out in my research. Six of the experts I interviewed said that local authorities, specifically mayors, are where Moldovans turn to first, to address their needs and for financial or social support. The Expert-Grup study also noted that the U.S. Agency for International Development (USAID) was generally more effective at working with local authorities, while the EU and the German development agency Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) had a less successful track record.

Impact on Moldova’s socio-economic divisions

This top-down aid disbursement system, coupled with the prominent role that donor organizations play in Moldova, also exacerbates urban-rural and regional divides. The same Expert-Grup study found that “Chisinau and the Central region, followed by Gagauzia, appear to be the largest beneficiaries of development aid, whereas the Northern and Southern regions overall display lower levels of foreign aid support.” Correspondingly, this map from the United Nations Development Programme (UNDP) reveals many more projects concentrated in Chisinau and the surrounding central region than elsewhere in the country as well as a disproportionate number of projects in Gagauzia (a semi-autonomous ethnic minority majority region in southeastern Moldova). One political expert characterized this as a security problem as much as an issue of economic equity — as the difference in development between Chisinau and the rest of Moldova increases and becomes more visible, the division between regions and the frustrations of those outside the center may also continue to grow. “One day all the foreigners will go home,” she said, “and what will you [the Moldovan government] do then?”

Positive effects on local development and administration

More positively, the current administration in Moldova has improved local authorities’ access to funds for development projects to some degree. Satul European (European Village), a program that allows local authorities to apply directly for funds to improve the infrastructure of their communities, is one example of this trend — in 2023, 492 projects were selected for funding administered by Moldova’s National Office for Regional and Local Development. The program is well-regarded, with four of the experts I interviewed praising the project for its wide geographic distribution of funds, its nonpartisan nature, and the relative efficiency of the application process. While this program still involves local authorities receiving funds through the central government, it allows those local authorities to play a greater role in the aid distribution process by applying simply and directly for project funding, resulting in the aid being distributed more equitably and effectively.

Projects like Satul European are an important step in the right direction for the current Moldovan government, but it is also the responsibility of foreign donor organizations to examine the impact of their work in Moldova, in the context of the lived realities of the communities they serve. As it is, foreign donors play an important role in building resilience in Moldovan communities, providing financial assistance and funding projects with the potential to improve nearly every aspect of life. However, the aid distribution process as currently established complicates the resilience that donor organizations aim to build by exacerbating existing demographic and geographic inequities and reinforcing a top-down aid distribution system that lacks transparency.

Recommendations

In order to rework Moldova’s top-down aid distribution system into something more effective, donor organizations need to work as directly as possible with local authorities, especially mayors, who wield a great deal of trust within their communities. This involves both prioritizing their input and working to increase local authorities’ capacity to identify and apply for project funding. Enabling local authorities to play a greater and more direct role in the aid distribution process could increase transparency by allowing individuals in the community easier access to information about those projects through an authority that they trust. It could also boost the sustainability of donor organizations’ work as projects with short-term funding are often eventually transferred to local government for administration; including local authorities in every step of the funding and administration process is, thus, key to maintaining effective projects over time. Finally, working to increase local authorities’ capacity to find and apply for project funding could provide donor organizations access to areas of the country outside the center.

Foreign donor organizations also need to address the demographic and geographic inequities of their work in Moldova by allowing for medium- and long-term funding of some projects and incorporating new funding targeted at a wide array of vulnerable groups across the country. Funding humanitarian and development projects in Moldova means recognizing that if such programs are to be more sustainable, they need to operate on a funding timeline that reflects the challenges of administering them with only public funds. Additionally, there is a discrepancy between new humanitarian funding available to Ukrainian refugees and that which is available to vulnerable Moldovans, as well as between development projects completed in Chisinau and elsewhere in the country. These are security issues as much as issues of equity, and the frustrations of those outside the center without access to funding need to be acknowledged and inform the approach of donor organizations in Moldova.

Lindsey Grutchfield is a Title VIII Black Sea Research Fellow at the Middle East Institute and a second year MA student at Indiana University's Robert F. Byrnes Russian and East European Institute, where she focuses primarily on Moldova and on issues of migration, identity, and community.

Dogukan Keskinkilic/Anadolu Agency via Getty Images