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

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.

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Approach
The project provides advisory services to the Cabinet of the Prime Minister, the State Chancellery as well as to the Ministry of Economy and 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 whose development is lagging behind. The advisory services cover two fields:

  1. 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.
  2. 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.

The predecessor project has already helped foreign companies become established in the textile and agricultural sectors. GIZ worked with the Moldovan Investment and Export Promotion Organization to support and advise these companies. A number of local firms are benefiting from new business contacts and have secured contracts to supply items such as apples, textiles and metal goods.

Advice was given on the drafting of a dozen or so governmental decisions and legislation to improve the business climate. For example, the minimum capital requirements for private limited companies were reduced, and various tax and customs regulations were also modified to make them more conducive to business.

Key sub-goals in Moldova’s EU approximation process were achieved by working together with numerous other partners. This included contributions to the new education law that provides, among other things, for a business-oriented dual vocational training system.

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.

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© GIZ