Moldova's missed chance: the country is no longer interesting to investors
The Republic of Moldova, which has a free trade regime simultaneously with the CIS countries and the European Union, has not been able to convert this advantage into real economic results. Preferences for integration projects will give impetus to development only when order is restored in the state.
This was discussed by Moldovan experts in the field of economics, representatives of the parliamentary and non-parliamentary opposition at the round table “Economic stimulants, competence and political will”, which was held online at the site of the Collective Action Party “Civil Congress”. Representatives of civil society believe that it is necessary to start a public discussion and develop targeted policies and a new vision for the country’s development.
Honey and garlic will not lead you out of poverty
The integration of the CIS free trade zones and DCFTA (Deep and Comprehensive Free Trade Area with the EU in force since 2014) in Moldova is a fait accompli. In this sense, the country is unique - it is a kind of “bridge”, “crossroads”, as experts say. However, this is not enough for success.
“Access to these free trade zones in itself did not generate anything, did not become a source of development, and there is no reason to expect that it will be possible to develop these huge opportunities for our economy without active government participation,” says the former Vice Minister of Economy and Trade of the Republic of Moldova , representative of the "Citizens Congress" Yuri Muntyan.
He states that the structure of exports from the Republic of Moldova has not changed for many years (these are mainly agricultural products), while “citizens, who are the main subject of Moldovan exports, are already transferring to the country, probably, more than the entire total export revenue "
“Crop products, alcoholic and non-alcoholic drinks, processed unprocessed hides, honey, garlic - everything that we export, no matter how much, will not lead us out of poverty, the question must be posed differently. Moldova, as a strip between two huge integration projects, could well become a point of concrete contact. Here, the relevant authorized bodies of the EU and, in particular, the Russian Federation, and, perhaps, even the EurAsEC could locate their representative offices. These free trade zones could serve as prototype hubs for the preparation of products that we already produce. The state should be puzzled by this and start working,” Muntean believes.
Economist Galina Shelar explains why the Moldovan economy is uncompetitive in foreign markets: it is growing due to the service sector, mainly focused on the domestic market of trade and construction, while mainly goods are exported, the production of which is growing slowly, and the range is narrowing. The country tries to export everything it takes to the foreign market, while the domestic market is filled with imported goods with which local products cannot compete.
“We need to raise the question of effectively using the opportunities provided by both integration projects. The problem is us. We do not consider our capabilities, we do not consider the preferences that are given as a result of signed agreements, these preferences do not turn into an internal stimulus for development.
We think only about the benefits we receive, but over 30 years of existence in various integration projects, we do not answer the question of how we ourselves can be of interest to our partners in the East and West, what our country can do for them. We could turn the incentives that both the EU and the CIS give us into internal sources of development. None of these agreements contradict WTO requirements - this means that we can find a compromise,” says Shelar.
She notes that the tools for combining the country’s work in both zones are non-economic and require state will. For example, it would be possible to set the most stringent standard for products that the country wants and can export, and there would be no problems with compatibility, the expert believes.
“We need political stability, the rule of law, the quality and efficiency of government institutions, mental, social and institutional flexibility - all this will enable our country to become more attractive to EU and CIS investors, expand their presence in our economy, and allow our producers to expand their niches: one - in the EU, others - in the CIS area, - Shelar believes. – Now the situation is such that politics determines the economy, and not vice versa.
Moldova has a large number of preferential relations - let me remind you that we also have a free trade zone with the Republic of Turkey and with the countries of Central Europe. But in order to use all these advantages, we must restore order in the country. An obstacle to investment from both the East and the West, especially private ones, is that they have doubts that their property in the Republic of Moldova will be safe. Until we start thinking along these lines, the effectiveness of our integration capabilities, as well as our internal resources, will be continually limited.”
Didn't try hard
Political Analyst Igor Botan believes that Moldova “from a political point of view is not trying very well to remove obstacles and be able to use free trade in both directions, to become attractive for investment.” The expert gave several examples of lost profits from combining two free trade zones.
“Let us remember the CIS summit in October 2002 in Chisinau, when Voronin proposed to Putin to create a Customs Union - because gas prices were 4 times higher than for enterprises in Russia, almost 3 times higher than for enterprises in Belarus, 1,5 .XNUMX times higher than for Ukrainian enterprises. Nothing came of it. A month and a half after the summit, Vladimir Nikolaevich [Voronin] signed the famous decree on European integration, which surprised us then, but we entered into this flow.
In 2013, there was a conference in Chisinau with experts from Romania, Russia, and the Republic of Moldova. We had such generous expectations that the Republic of Moldova, having free trade with the EU and the CIS, could become attractive for investments from the European Union with the creation of added value for exports to the CIS and vice versa - such an interesting crossroads. But in 2013, as we remember, the Russian authorities announced that Moldova is a corrupt state and in this regime it will simply engage in re-exports,” the expert recalled.
He noted that the claims of the eastern partners are known, but the Moldovan authorities “have not worked and are not working to eliminate these obstacles.”
“From discussions with experts from Russia, we know that they are interested in this, but they want to observe online how goods enter and leave Moldova, that nothing abnormal is happening here in terms of possible re-export. I believe that in addition to purely commercial, economic problems, there is also a political factor, and it prevails. But this does not prevent us from voicing problems and using common efforts to try to solve them for the benefit of the country,” Botan said.
On the issue of investment
Experts agreed that Moldova will be attractive for investment when it becomes attractive to live in and when the situation in the country does not depend on the names of politicians. Meanwhile, “surnames” often have a serious impact on the economy.
“We had economic forums with the participation of Russian experts, and the country’s president, Mr. Dodon, participated in them,” Botan said. – The President said that Russian investors would agree to invest up to a billion dollars a year in the economy of the Republic of Moldova. Then all these good-natured plans disappeared. Now Igor Nikolaevich has left politics to personally deal with these problems. The question arises: how should we react to what our politicians say?
This is a big problem. Should we trust them, or should we, as a civil society, unite and apply pressure, ask them, demand to show efficiency, and all together help ensure that the standard of living in this country is, if not very high, then at least tolerable, so that there is any future?”
Former Minister of Economy Alexander Muravsky, speaking about investments, urged not to hope that it will be possible to attract “something big” to Moldova - for such investors, the country, in his opinion, has long lost all attractiveness. He believes that a solution could be cooperation with small promising enterprises, for example, from Eastern Europe, who want to enter foreign markets.
“At the very beginning, we had the traditions of industrial enterprises, there were qualified workers in sufficient quantities - all this is no longer there. We need to decide what kind of investor we are counting on, who could become a catalyst for development. I come to the conclusion that we may need to focus on young, growing foreign companies that have not yet won a place in the sun, that want to go beyond the borders of their country, make a breakthrough in some area, and so on.
They will be the grass that may create an oasis. I don’t think we should count on Sony coming here and building a large TV factory or Honda starting assembling cars here. I believe that we need to change the very paradigm of our attitude towards the issue of investment and decide what can actually be implemented here,” the expert concluded.
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