Launching a business in the Republic of Moldova

In order to ensure a certain financial stability, many people decide to launch their own business. In some countries, these initiatives are encouraged and supported by leaders, and in others, the needs of potential future entrepreneurs are ignored. How hard it would be to admit it , but in the Republic of Moldova initiating a business is an extremely difficult task, even if those in power have another vision in this respect. It is also difficult to maintain the business in the first years after it was created. Below I will highlight a few factors that must be taken into account before starting on this path.

Business registration and bureaucracy

In 2014, the Government of the Republic of Moldova simplified the registration procedure for Small and Medium Sized Enterprises (SMEs). Therefore, the applicants have to go to the “One – Stop Shop” of the State Registration Chamber, for filing and receiving information on the state registration. The bureaucratic process, however, has not been canceled by anyone. To get some papers, you often need to wait weeks or even months. Even if recently, it was introduced the possibility to request online all the necessary documents for starting a business, through the “One Stop Shop” program, the utility of this system has not yet been effectively felt by entrepreneurs, because the system is not functional and does not provide all the information needed for entrepreneurs. Therefore, often, in order to speed up the process, both beginners and experienced entrepreneurs are forced to pay bribes.

Only when the bureaucracy will be annihilated, things will start to move in the right direction. This is a barrier that leads  to giving up on the idea of doing business.

Excessive taxation and restrictive legislation

From the moment of setting up a business, the entrepreneur becomes responsible for paying numerous taxes, fees and other mandatory payments. Many times, the entrepreneur is in a situation where his business is still at a loss, but he has to pay already a multitude of taxes imposed by the state. Some unannounced controls block the institution’s activity in a record time. It is also important that taxes are excessively high and mandatory payments are always subject to numerous changes. Legislation is not “friendly” to business people and is very permissive when it comes to state institutions or even adopts a preferential character in relation to some businesses, generating unfair competition. Thus, in the context of unfair justice, the activity of which raises many questions, the entrepreneur is put at a disadvantage from the start.

Quite often, the tax burden causes many entrepreneurs to end their business. State-owned commissions just come to find violations and apply fines, but do not provide recommendations on how a complicated situation can be overcome. This practice is extremely destructive.

Political pressure

To resist the so-called Moldovan entrepreneurial environment, you need to be flexible, otherwise you are “liquidated”. The level of corruption is very high, and without bribes it is difficult to activate. Even if, apparently, we are witnessing an activation of law institutions, fighting the phenomenon of giving and taking bribes is far from being won. At the helm of the Republic of Moldova there are some politicians interested, first of all, to gain wealth,  and often they try to do this on the back of small entrepreneurs who hardly manage to resist on a market where competition is unfair.

In confirmation of the mentioned before,  the studies of world institutions such as the World Bank or the World Economic Forum, which rank the Moldovan economy 89th out of 137 states analyzed from the point of view of the complexity of the impediments encountered in the opening of a business, Moldovan economy is aligned to emerging states like Nepal, Namibia and Kenya. Thus, among the most pressing issues are: corruption, political instability, access to finance and bureaucracy.

Prospective areas

It is known that the SME sector serves as a basis for the development of the national economy. International experience clearly demonstrates that SMEs have a substantial contribution to GDP growth, job creation and stimulating the development of a competitive economy. The National Bureau of Statistics informs that 53.6 thousands of small and medium enterprises have been registered in Moldova in 2017, which is 98.6% of the total number of enterprises. Also according to the NBS, the most profitable business last year was in the fields of construction, transportation and storage, agriculture, forestry and fishing, manufacturing, wholesale and retail trade and repair of motor vehicles.

Until political decision-makers in the Republic of Moldova will realize that the SME sector is vital to the country’s economy, initiating a business here will always be a difficult and risky mission.

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