Is the Republic of Moldova attractive for investors?

Despite the modest economic development registered by the Republic of Moldova in the last period, it remains one of the poorest countries in Europe. With a moderate business climate and low productivity, Moldova’s economy is compromised and highly dependent on annual remittances from over 1 million Moldovans abroad. Thus, foreign investments attracted in Moldova are vital for the sustainable development of the country.

The impact of foreign investment on a country’s economy is undeniable: the chain of effects generates a series of consequences for both goods and services, as well as consumption, while stimulating demand and supply. Investments catalyze the emergence of new economic activities and aim at obtaining the indispensable goods and services for a viable and prosperous economy.

“In order to attract foreign investments in Moldova’s economy, there is a need for several factors to increase the interest of investors, which, however, are not present in Moldova, factors such as the non-existent infrastructure, the low degree of openness of the economy, the lack of credibility in state institutions, the unpredictability of the laws and a country rating below expectations, facts that deteriorate the image of the country to foreign investors”, says AOAMP president, Alexei Repede.

The above map confirms that the investment climate is not well developed in Moldova, our country being classified as a risky state in terms of launching a business. This is evidenced by both, the position of the Republic of Moldova in international ratings and the direct comparison of macroeconomic and performance indicators in attracting FDI between countries.

Analyzing the evolution of FDI over the last 17 years, we are seeing an upward trend in the foreign direct investment flow until 2008, when a maximum of about $ 700 million was reached. After 2008, the value of FDI has been drastically reduced, reaching $ 200 million in 2009. This reduction was mainly due to the global economic crisis, but also to the fact that various decisions and laws were taken in Moldova that led to the deterioration of the country’s image. Moreover, the theft of the billion can not remain unmentioned , which undeniably had a major impact on the credibility of Moldova lately.

The degree of penetration of foreign capital into the economy is represented in a suggestive manner by the level of FDI stock per capita. The Republic of Moldova has a low level of FDI / capita. Compared with other countries in the region, Ukraine, for example, has accumulated a stock of $ 3919.4 per capita, Romania – $ 8910.5 per capita, while Moldova $ 2229.2.

With reference to international rankings, which present the index on a country’s investment attractiveness, some of these indexes should be mentioned. Thus, according to a World Bank data, „Doing Business 2018”, in 2017, after the ease of doing business, Moldova ranked 63rd out of 189. Another important index characterizing the country’s investment attractiveness is the index of economic freedom, calculated by the Heritage Foundation. According to this index, in 2018, Moldova ranked 97th  out of 165 countries and was placed into the category of “mostly unfree” countries.

Thus, further orientation toward business development and investment climate improvement will have positive effects on the Republic of Moldova competitiveness in attracting foreign investments, which will be expressed by increasing exports, increasing number of reliable companies motivated to implement innovations, capable of creating attractive jobs, ensure higher productivity and export-oriented competitive production. Inevitably, this will be reflected in the improvement of the macroeconomic indicators and further advancement of the Republic of Moldova in international rankings.

AOAMP believes that, in order to achieve the above, it is absolutely necessary to create and substantiate a favorable environment for foreign investors to inject large amounts of capital into the country’s infrastructure. Even if the Moldovan authorities are trying but really, they are imitating some economic and legal reforms, they fail to advance in rankings, but more, we are losing positions in most of the reports made by world-renowned institutions, because countries are in a constant competition regarding further liberalization of the movement of people, goods and capital, including attracting investments, which should put the authorities of the Republic of Moldova on guard.

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