Moldova’s state secretary for the ministry of economy, Alexandru Sonic, tells fDi about the government’s drive to attract foreign investors through its free zones, reform agenda and learning from past mistakes.

Q. To those who don’t know Moldova well, what differentiates it from its neighbours in central and eastern Europe?

A: Moldova is special due to its location, sandwiched between Romania and Ukraine. It is basically at the crossroads of regional flows, connecting east and west. We’re on the border of the EU and are part of the Commonwealth of Independent States. Although Moldova is not in the EU, it is still very much a European country, and you can see that in our approach in the way people interact and our values as well. We are a developing economy, so from an economic and business perspective, that makes us an opportunity. It comes with its quirks, I wouldn’t deny that, but that’s what makes it interesting.

Q. Which sectors offer foreign investors the most interesting opportunities?

A: We think that there’s a great opportunity in developing industrial real estate. We have a lack of modern production units where businesses can come and set up shop, which offers an opportunity for developers to invest. To be able to promote that, we have developed a number of free economic zone areas where we have about 500 hectares of land available for development.

The land is being offered on very attractive terms (up to €3.5 per square metre). In fact the minimum amount permitted under law provided that it is invested in. On top of that, these Special Economic Zones have a special tax regime, where the corporate income tax (CIT) is halved from 12% to 6%. One can also get an effective CIT of 0% for the first five years if you invest $5m, and on top of that there are other benefits of reduced red tape and a very friendly business environment.

We’ve also developed the automotive business quite well, with success stories such as Draexlmaier, which has expanded further east, having previously been operating in Romania. Others include Fujikura Automotive, Lear Corporation, Coroplast, Sumitomo SEBN, Gebauer & Griller, Lafarge and Steinel. We have a labour force participation rate of 42%, meaning a big part of the population is either not officially employed, or could be employed unofficially. We are focused on developing policies to increase the active workforce and bridge that gap. The automotive sector in Moldova employs around 20,000 people, and has a great potential for employment. Furthermore, we have vibrant information and communications technology and business process outsourcing sectors that develop very dynamically.

Moving to the other side of the economy, agriculture is still a big share of the economy. Grain, fruit and wines are a big part of our Soviet past and offer a good opportunity for investors because Moldova has large swathes of highly fertile agricultural land, but our products are not that well-known in certain markets. If we take our wines for example, they offer a great untapped potential where savvy investors can benefit from the quality of the terroir in Moldova, and invest in a product that is under-penetrated in many European markets, offering growth opportunities.

Q. What FDI challenges are you facing and how are you overcoming these?

A: Being small and having some other ways of doing business in the past that haven’t necessarily been updated has been a bit of an issue for people to come set up shop. We now understand much better the needs of international investors. Certainly, we think our new government does from the policy side, [and] the biggest [issue?] in that regard is the reform of the legal system and how it operates, because in the past that has been one of the main concerns for investors. 

Q. Is there anything else you think would be a good introduction to your country for investors?

The biggest and most important aspect is the fact that we have a new government in place. We have had bad reputation in the past, for either not implementing all the right policies or having a lot of corruption. We are putting a lot of emphasis on changing things and ensuring transparency, ensuring investment across the board. With support from the European community and our neighbours, we seek to have a more open environment, which will also help tourism to grow beyond the current level of around 2% to 3% of GDP.

This article is sourced from fDi Magazine
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