What is the investment climate in Moldova: conditions and advantages of investments

The economy of the Republic of Moldova has experienced various times and crisis situations, which prompted the Ministry of Finance to pay special attention to development. At the present time, all efforts are being made to achieve the goal of creating a favorable investment climate. For this, the tools for attracting investors are being improved, strategies for business development and product promotion on the international market are being developed.

Let us consider in more detail the issues facing companies and what is the state of the investment climate in Moldova at this time.

Features of the economic state of Moldova

Having gone through many crises, economic pressures, even devastation, Moldova ended up at the bottom of the ladder in the league of poorest countries in Europe.
The business climate is now enhanced although there is still an economic dependence on the remittances of expats working abroad. All this makes investments vital for the development of the country and the improvement of its economic situation.

Investments are necessary for new activities and services to emerge. The government and local entrepreneurs therefore focus their efforts on attracting both foreign and local investment. They create favorable conditions for cooperation:

• a wide field for investments across different sectors;
• comfortable production conditions – technological development and good logistical access;
• strong legal framework to protect investors and their capital.

Moldova is open for investment, is actively working to expand international financial relations and boost the country’s economy.

6 tasks that are being worked on in Moldova to increase interest in investment

Attracting investors is a strategic goal of the country and individual enterprises. In order to make a successful partnership and create a suitable investment environment, it is important to improve performance in some categories. These include:

1. Infrastructure. The availability of a working infrastructure for production facilities, equipment, highways for transportation – all of which is necessary for a business. Therefore, Moldova is actively working on this, and in the field of ICT, the republic is in 6th place in the table for the low cost of fixed communications.
2. Qualified personnel. Essential for investors to make investments, they must see a promising business – a direction that is relevant to the market with an appropriate professional team of specialists. Therefore, more and more often entrepreneurs pay special attention to the development of their employees – they send them to advanced training courses and provide developmental training. The multilingual skills of the staff are a key feature.
3. Trust in government agencies. The implementation and development of many projects requires the participation of government agencies for example in obtaining various permits – for construction, export or import of goods. Cooperation with government agencies must be credible in order to be sure that the task can be solved without problems and delays. They are also working on this aspect in Moldova, updating business support in the state sphere.
4. Openness of the economy. This category includes the level of integration of the country into the world economy, that is, exports. Exports have increased in Moldova and in 2020 the value of exported products amounted to 2.48 billion dollars. Trade relations have been established with Romania, Germany, Italy, Ukraine, Turkey, Russia and other countries. The country has 43 trade agreements, and can sell goods of different categories – food, raw materials, IT technologies, textiles.
5. Legislation. Also, for successful investment in a country, it is worth understanding whether the law is here to guard the interests of investors. The legislative framework is also being improved in Moldova – many laws have been created to protect the freedom of investor activity, on non-discrimination of investors and on the transparency of transactions. There are also laws that protect investors in disputable situations – securing rights and damages.
6. Country ratings. Of course, investors are convinced by the international rating and the country’s position in the world. If the external assessment shows the growth of indicators and the strengthening of the economic position, then such a country is more readily considered for investment. This task still needs further attention but the Republic of Moldova has has made great strides in this area too – it took 48th place out of 190 countries in the “Doing Business 2020” ranking and 13th in terms of a stable economy for starting a business.

In Moldova, they focus on improving the country’s image and therefore do everything possible to create mutually beneficial conditions for foreign investors. We stimulate investments by improving performance and highlighting the positive aspects that the Republic has or was able to achieve. In particular, these factors apply:

• advantageous strategic location of the country;
• fertile soils and cultivation of many crops;
• qualified workforce;
• participation in trade relations with other countries.

As a result, we have free access to the EU without paying customs duties for 7200 groups of goods.

Legislation and investment

The government has introduced many acts to improve the investment climate. In recent years, the creation and launch of laws that are aimed at the protection and safety of investors has been actively promoted. Of particular importance to regulation of investment relations the following legal areas are of note:

• on investments in entrepreneurial activity;
• concerning electronic documents and digital signatures;
• regarding leases;
• covering electronic commerce;
• as well as microfinance organizations.

Also, laws that are aimed at improving the domestic economy help to balance the economic condition for the convenience of investors.

The norms of the tax system are also important. They are also working to adjust it to the benefit enterprises in order to raise their status for investment. Within the framework of free economic zones, special tax and customs benefits that include income tax, VAT, excise and customs duties. Last year, Moldovan Prime Minister Ion Chicu said that the Republic has ambitious plans for sensible taxes and unprecedented openness in trade with the whole world.

Investment flows

Step by step, the principles of transparent and honest business are being rooted in Moldova. Investment statistics confirm the improvement in the business environment.

In 2018, the inflow of foreign direct investment to Moldova amounted to US $ 196 million, which is 31.3% more than in the previous year. An increase of 31 percent is a testimonial to the improvement in the investment climate. In 2019 there were also noticeable increases in performance. 70% of all investments were capital from the EU countries. In two years, the growth of foreign investment amounted to 225%, reaching $501.6 million.

Funding contributes to:

• growth in the export of IT services by 40-50% per year
• infrastructure development – reconstruction of strategic facilities and modernization of production facilities
• improving the energy security of the country.

In 2020, they managed to attract 1.2 thousand foreign investors from 70 countries, and this during a pandemic! Cooperation affected Japan, the Baltic States, Cuba, Brazil.

At the moment there are 18 industrial sites, 10 industrial parks with preferential taxation and 7 free economic zones in the republic. Also in Moldova, a model of an IT park has been established, which is recognized in the world as a successful model for beneficial economic activity.

Particular emphasis is placed on attracting investment flows in industrial sectors, the financial sector and retail.

Benefits from investing in Moldovan business projects.

The investment climate has improved significantly over 10 years. Now there are many financial companies that provide investors with favorable conditions and prospects. Our national investment fund also contributes to the strengthening of relations between Moldova and foreign investors. We select projects for investors that meet their high demands and interests.

It is profitable to finance Moldovan projects because:

1. We have different areas of business and you can choose the area that interests and in which the investor specializes. These are IT technologies, electronics, energy, light industry, agricultural products, agricultural activities, mechanical engineering or the creative sphere. The wide field of production and trade spheres allows you to make contributions to the industry with which you have common ground. There is no need for a detailed study of a new direction without interest in it. There is also a segment of socially significant and environmental projects in which you can also invest.
2. The republic has a convenient geographic location for deliveries. It is located practically in the center of Europe at the intersection of trade routes, across the EU and the CIS, delivery by land transport just takes 2 days. There is also an exit to the sea through the port of Giurgiulesti. You can optimize logistics and ensure a stable supply of products.
3. In terms of indicators, stability in the development of the country is noticeable. The rise in the ratings, the strengthening of trade relations – all this gives rise to confidence in financial aspects.
4. The protection of investors’ funds is paramount and this has been facilitated by relevant laws and regulations.
5. The digitalization of business projects is rapidly developing in Moldova. This allows you to conduct business in a simplified system – digital signatures make it possible to conclude transactions remotely and organize electronic commerce. The digitization of government services also improves the convenience of doing business.
6. Fiscal opportunities allow you to get the maximum profit without losing a significant share of taxes. The taxation system has become more conducive to business processes. Income tax is 12%, and 6% for residents of Free Economic Zones.
7. Moldovan companies have competent employees. When an investor invests his capital in a project, he seeks to entrust it to responsible individuals with extensive experience. Our fund selects projects for investment with professional teams – a sufficient workforce, well skilled in their sector, the presence of strategic thinking, the ability to solve unforeseen issues and cope with emerging problems. In Moldova, 80% of the population speaks several languages, hence the companies have multilingual staff. Also, an undeniable advantage of doing business in Moldova is the affordable cost of renting premises. This reduces operating costs. Another factor ensuring low costs is due to low wages in this region.

Business in the republic is profitable because of other factors:

• a low level of bureaucracy with a 70% reduction in controlling authorities;
• fast business establishment with a reduced number of documents required for registration;
• tax incentives and tax exemptions;
• subsidizing jobs – when creating a job for every 100, the government pays 40 thousand lei.

If it is important for you to take advantage of all these advantages and access to the export market with an audience of 800 million consumers, then our investment fund will help you realize profitable financing. We will select a project with parameters that are important for your company when making an investment. We will take into account all the characteristics such as the scope of activity, the scale of the business, and conditions of sale. We will find a project in which you, if you wish, will become a full-fledged partner or just an investor with a claim to a share of income.

You can rely on the National Investment Fund in resolving any investment-related issues – searching for a project, analyzing and checking it, settling legal issues and preparing for a deal.