Challenges of the business environment of Moldova

Lately, we are increasingly witnessing a crisis of trust from citizens, but especially from the entrepreneurial environment. The unpredictability of the tax system, large number of procedures required to launch a business, low degree of access to finance,  high interest rates and general blurring situation in the country are the catalysts and key determinants of a weak entrepreneurial ecosystem.

According to the latest World Bank report – Doing Business 2019, Moldova ranks 47th out of 180 analyzed countries, improving its position in recent years. By analyzing the data in the report, we can say that even if numbers are getting higher rankings, in practice, things are the way they were before. It is found that the chapters in which the Republic of Moldova has the worst rankings are: obtaining of the construction authorization (rank 172 of 180),  obtaining electricity, implementation of the contracts, settlement of the insolvency (about 3 years for solving an insolvency process).

Source: Doing Business Report 2019, World Bank.

“Policies adopted by the state should be aimed at facilitating the process of obtaining the necessary authorizations to launch a business, regardless of the field of activity. I believe that it is imperative necessary to develop a country-wide competitiveness strategy, which have to be, in fact, realistic and confronted with the ability of the entrepreneurial environment to develop. Digitalization, improving institutional quality, increase investment in education, in order to correlate the needs of the labor market with education programs (both vocational programs and the higher education), these are some of the main goals that have to be aimed in such a strategy. The main challenges and impediments that the business environment faces are limited access to financial resources, bureaucracy, unfair competition, reduced flexibility to adapt to internal and external market shocks and precarious specific culture. Entrepreneurial education should become a priority that should be outlined by launching more funding programs in support of SMEs. Even if a number of laws were adopted to encourage entrepreneurial initiative and to increase competitiveness among existing entrepreneurs, as well as the relaxation of fiscal procedures, the expected results of these measures were negatively reflected in the statistics, thus, 6.406 new enterprises were opened, and 8.540 companies were closed in the last year”, said Alexei Repede, AOAMP president.

Registered enterprises, period 2000 – 2017

Source: Chamber of State Registration

Closed enterprises, period 2000 – 2017

Source: Chamber of State Registration

The entire bureaucratic process that needs to be followed, generates negative effects and increases the adversity of entrepreneurship among the citizens of the Republic of Moldova, as can be seen in the graphs above. The credibility in the functioning of state institutions is decreasing, which affects both domestic investors and foreign investors. The measures to be pursued must be aimed at enhancing the competitiveness of indigenous companies, encouraging production that would bring higher added value, adopting a protectionist character in relation to importing certain categories of products and supporting national production, building poles of growth in the 3 regions of the country, reducing bureaucracy, building infrastructure objects, encouraging large investments through tax incentives and reducing transaction costs. Only by adopting such measures entrepreneurship will grow and existing companies will make their businesses more efficient and increase their turnover and profits, which will lead to the welfare of the whole country.

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