Economic policy advice to the Moldovan Government

Project description

Title: Economic policy advice to the Moldovan Government
Commissioned by: German Federal Ministry for Economic Cooperation and Development (BMZ)
Country: Republic of Moldova
Lead executing agency: Moldovan State Chancellery
Overall term: 2016 to 2018

Moldova’s debut at the ExpoReal 2017 trade fair in Munich, Germany, with its own stand. © Vera Illisoi

Context

Economic development in the Republic of Moldova has so far failed to bring about broad-based, sustainable growth. Poor employment prospects and limited confidence in the state’s ability to carry out reforms are prompting some sections of the population to leave the country in search of work elsewhere. In terms of its natural resources, labour force and infrastructure, the Republic of Moldova fares poorly compared to some of its neighbours in the region. Deficits in the judicial system weaken the foundations for economic investment.
The aim of reforms is to raise the country’s profile as a location for business and investment and make it a more attractive commercial proposition. Priorities include improving the overall business and investment climate, attracting potential investors (both local and international) and providing support to those who have already invested in the country. Key arguments that play in Moldova’s favour are the low wage levels compared to the rest of Europe and the fact that it is a signatory to numerous international free trade agreements.

Objective

Public policy-makers promote private sector investment geared towards boosting employment.

Opening of the Fujikura subsidiary in the Moldovan capital Chişinău. © Prime Minister’s Press Office

Approach

The project provides advisory services to the Cabinet of the Prime Minister, the State Chancellery and the Ministry of Economy and Infrastructure, as well as to the Moldovan Investment and Export Promotion Organization, which reports to the Ministry. It also supports the Parliamentary Committee on Economy, Budget and Finance. The economic policy advice focuses primarily on the capital Chişinău. The promotion of individual locations for investment also extends to other regions of the country, in particular those where development is lagging behind.
A combined financing agreement was also concluded with the Swiss Agency for Development and Cooperation (SDC) as a third-party funding provider for the ongoing project. This extends the project’s advisory services on economic policy and investment promotion to include more regions and topics.
The advisory services cover three areas:

  • Improving conditions for investment
    Proposals for reforms designed to overcome bureaucratic and technical hurdles to investment and to simplify investment requirements are being drawn up. The involvement of the business community and its institutions plays a pivotal role here.
     
  • Strengthening services aimed at promoting investment
    The Moldovan Government receives support to promote potential and existing job-creating investment projects by offering demand-driven services. Besides providing information materials, the services include assistance to the investing companies on an individual basis.
     
  • Reinforcing regional support structures
    At a regional level, institutions (such as regional development agencies) receive support to develop services both for local small and medium-sized enterprises and for people at a high risk of falling into poverty.

The GFA Consulting Group and Berlin Economics are assisting the project in strengthening its investment promotion services. Feasibility studies are being drawn up for three business locations.
Particip GmbH and AVENSA (Moldova) are helping with the economic policy side of the project to further improve the country’s business climate.
 

Cluster development delegation trip: meeting with the Ministry for Economic Affairs and Energy of the State of Brandenburg and Brandenburg Invest in Potsdam. © Olesea Ghedrovici, BMZ/GIZ project

Results

The project has assisted foreign companies in the automotive supply, textile and agricultural sectors to set up business in Moldova. This has created several thousand jobs, particularly in manufacturing. GIZ works with the Moldovan Investment and Export Promotion Organization to support and advise these companies. For example, cable harnesses for passenger vehicles and textile products are now being exported on behalf of well-known car manufacturers and suppliers. A number of local firms are benefiting from new business contacts and have secured contracts to supply items such as soft toys, apples and metal goods.
The Moldovan Government and Parliament have benefited from advice on drafting more than 40 governmental decisions and laws to improve the business climate. For example, tax legislation has been made more conducive to investment, customs regulations have been modified to facilitate business and the process for registering new companies has been simplified.