Moldova – where we are now and where do we go?

During its course, the Moldovan economy has undergone many tests of resilience and sustainability. At the crossroads of the two poles of economic development, West and East, and being in a continuous dilemma between choosing a “correct” geopolitical strategy, the economy and the investment climate of the Republic of Moldova became dependent and profoundly influenced by external vectors, both from the East and the West, vectors that have led to the deterioration of the country’s image to foreign investors, and rarely to its improvement.

Foreign investments for such a small country as the Republic of Moldova are vital, especially as these investments can catalyze the industrialization process in the country. Credibility in the sustainability of an economy is extremely important for a foreign investor when he wants to direct capital to a foreign country. The statistics provided by national institutions, but also international ones, are the ones that influence the investor’s decision. Thus, analyzing the socio-economic situation in the Republic of Moldova according to the national data provided by the National Bureau of Statistics and the data reflected in various international reports by world-renowned institutions, there are serious divergences.

Those positive changes that are being discussed today are not seen either in the public environment or in the business environment. Why can not foreign capital be attracted by credibility? Why is Moldovan citizenship “sold” for at least € 100,000? Why have other equally small states renounced the interests of a group of people in favor of the entire society and have the power to develop? Questions to which today, unfortunately, no one is committed to providing a public response.

In confirming the above questions, there are various international reports that break the myth of “It’s Already Better!”. The AOAMP believes that in order to form an objective image, the economic situation of the Republic of Moldova should be passed through the filter of international organizations.

1. Index of Economic Freedom

Index of Economic Freedom measures the impact of freedom and free markets around the world, analyzing the correlation between economic freedom and economic progress. Four major pillars that influence the evolution or involution of an economy are taken into account: the rule of law, governance, policy efficiency and the opening of markets.

This index ranks Moldova on the 97th place in the world and ranked 40th out of 44 countries in the region of Europe, the average of the scores being far below the global and regional average, thus obtaining the status of MOSTLY UNFREE. The score of 59.1 registered in 2018 is slightly lower than the average of the region (68.6) and it does not experience considerable improvements in the last period, with a stagnation (with a year-to-year variation practically insignificant). The report concludes that, in theory, the Moldovan economy should be more prosperous, but it is influenced by weak administrative capacity and numerous political interests. The biggest problems identified are the integrity of the Government and the efficiency of the justice system.

2. Global Competitiveness Report

The Global Competitiveness Report is designed to help policy-makers, business people and other stakeholders around the world to shape their economic strategies and form an overview of the economies they are interested in.

The position of the Republic of Moldova in this report can be characterized as a modest one, ranking 88 out of 140 analyzed states. The most problematic sectors identified are infrastructure (road quality ranks 130th out of 140), macroeconomic stability (119th out of 140), financial system (128th out of 140, SME finance and credibility business banks ranked 121 and 134 respectively), market size (126 out of 140) and innovation capacity (105 out of 140). Moreover, comparing the 2018 and 2017 positions, we find that Moldova has fallen in the rankings. According to the 2017 competitiveness report, the biggest impediments to launching a business were corruption, policy unpredictability and government instability.

3. Regional Risks for Doing Business

This report presents the top 5 risks at regional and country level that those who want to launch a business can face. Analyzing this report, the Republic of Moldova has the following risks:

– involuntary migration on a large scale;
– profound social instability;
– the failure of national governance;
– the shock of energy prices;
– unemployment or sub-employment and inter-state conflicts.

4. Worldwide Governance Indicators

This report looks at aggregated and individual governance indicators for over 200 countries and territories for six dimensions of governance: voice and responsibility; political stability and the absence of violence; government effectiveness; the quality of regulations; rule of law and corruption control. It is an indicator that takes fewer factors into account, but it resembles the Economic Freedom Indicators. This indicator is measured from 0-100, 100 representing the maximum score that can be obtained.

Analyzing the 2017 report, Moldova has seen positive developments in some chapters such as regulatory quality and governance efficiency (from 33 to 34 points). Despite these advances, other indicators have experienced a considerable decline, reaching the 2007 level or even considerably worse. Thus, unlike in 2012, in 2017 the voice (free expression of citizens) experienced a decrease of the score by about 2 pp; political stability declined by 4 positions in 2017 compared to 2007 (39 points out of 100); the indicator reflecting the state of the rule of law experienced progress in 2010, registering a score of 46, but it was erased by political decision-makers, reaching a score of 38; corruption control fell below the 2007 score, with a score of 27 out of 100.

Worldwide Governance Indicators

Source: Worldwide Governance Indicators Report.

5. Corruption Perception Index

In 2018, the Republic of Moldova recorded a CPI score of 33 points, ranked 117 out of 180 countries, and ranks among countries like Nigeria and Pakistan, a situation that should put the authorities of the Republic of Moldova on guard.

AOAMP considers that Moldova’s image suffers now more than in other periods. The statistics presented above show us with certainty that … it’s worse. A number of other indicators or reports could be provided as an example. A number of other indicators or reports could be provided as an example. The absolute increase of pensions and salaries showed that the Moldovan society is subject of manipulation through numerous instruments that are held by a group of persons. The wave of fake news from home must awake us. The business environment is the driving force of an economy, which is why policy politics and regulation in this area should be the number one priority for current policy makers. The many problems currently faced by the Republic of Moldova and the involution we are living with are striking and measures against this situation should not be expected.

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