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Today's paper. Last Updated: 06/02/2012

Moldovan Defense Plants Hit the Skids

CHISINAU, Moldova -- Workers at the Alfa television plant in Chisinau rarely get paid in lei, the Moldovan national currency. Instead, each month, they receive a Tebas television set they can sell on the street for about $200, or about six times the national average wage.


And these employees are some of the lucky ones in Moldova's military-industrial complex. Since the collapse of the Soviet Union, some 70 percent of the work force in a sector that accounted for one-sixth of the country's economy have been laid off as orders, especially from Moscow, have come to a virtual standstill.


The Alfa plant, which used to produce guidance systems for the Soviet air-defense system, is part of an earnest but little-funded government effort to convert its military enterprises to civilian use. Other plants that once turned out radar for fighters, navigation equipment for submarines and memory chips for nuclear missiles, now make microwaves, medical instruments and car parts.


"We would like to modernize these enterprises so they start producing things Moldova needs," Moldova's President Mircea Snegur said in an interview. "These plants are able to make high-tech equipment, and they have a very professional staff. We have no right give up the huge human potential these enterprises possess."


Yet government officials acknowledge the uphill battle they -- like other Soviet-bloc countries -- face in trying to turn around the 11 industrial firms and seven research institutes in the military sector, which have laid off tens of thousands of workers since 1991. In the military electronics industry alone, half of its 30,000 workers have lost their jobs in the last three years, according to official statistics.


"Military plants are our tragedy," Economics Minister Valeriu Bobutac said in an interview. "It's our painful problem. These plants are dying, and we are trying to revive them."


One of the major problems is the eroding client base for military hardware. "Recently we had a small order from the Russian Defense Ministry," said Yury Sainus, an engineer at the Alfa plant, whose air-guidance-system production line now usually stands idle. "We completed the order on time, but the Russians said they don't have money to pay for it."


Unlike in Russia, which has listed a number of defense firms among so-called "strategic enterprises" that cannot be privatized, Moldova is looking explicitly to foreign investors to help revive the plants and convert them to peacetime output.


"To tell you the truth, the projects to restore high-tech production are very expensive, and Moldova does not have the money to implement them," Bobutac said. "If we are not able to do anything soon, we will have to dismantle the equipment and sell the buildings to anybody who wants to buy them."


The current government privatization program allows for up to 40 percent of foreign ownership in the former military plants. Snegur said, however, that some unfinished military construction projects could be sold off in full "to bring foreign investment, modern equipment and provide jobs for the people."


Alexander Panov, director of the Print privatization agency, said his company had already divided and auctioned off three unfinished military plants to local and foreign investors.


"They plan to use the buildings for production of consumer goods," Panov said, although he provided no further details.


Several European experts have spent a year examining six military plants to "see what could be done to turn them around," said Jo Declercq, project coordinator with the European Union's Technical Assistance to the Commonwealth of Independent States program.


"We tried to find at least one type of product that can be successfully sold on the market," Declercq said, adding that when the assessments are complete TACIS will assist in finding potential European investors for the chosen enterprises.


In the meantime, with a smaller work force and little money, the plants are struggling to survive in the new market economy by turning to new types of products. The Mezon plant that made computer chips in Soviet times now produces medical instruments.


The Alfa plant, Moldova's success story, makes television sets in a partnership with the Dutch electronics giant Philips, and microwaves in a joint venture with America's Emerson. Most are successfully sold in Russia and Romania, said Sergei Budco, Alfa's technical director. "I don't think we will ever produce for the military again," he said.


Some in government, however, believe there is still a chance to maintain military exports, especially of avionics.


Bobutac said Moldova has received several proposals for military purchases, among them from Iran.


"To produce kettles at a plant that is able to produce the avionics for the space industry is ridiculous," Bobutac said. "Iran has an interest in Moldova, in what used to be the military-industrial complex. And we would like to continue production of high-tech equipment and sell it for real money."




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