Well known, it is the effort of Republic of Moldova to become a member of European Union in the last few years, especially after 2007 when Romania became a member. The geographic distance is no more a problem, the real challenge for Moldova is to align the national economy and business legislation to the EU standards. In October 2011, in order to facilitate this process, The European Business Association was created in Moldova, set up by 10 big companies operating in Moldova with the consensus of European Union. The goal of EBA, is to favor this process of change, by providing help and proposals to the Moldovan government and to the companies that operate in Moldova, in order to reach all the main requirements for being competitive and being part of European Union Market.
How EBA operates and how EBA is trying to realize these targets? The EBA Administrator, Mrs. Mariana Rufa, provided me the answer and other useful information, during a meeting held at the EBA office in Chisinau.
Mrs. Rufa started with an overview of Moldova economy, by telling that Moldova is poor in terms of energetic resources, that it imports prevalently from Russia. Moreover, before 2006 Moldova had big problems in terms of trade deficit and the balance of payment was steadily negative. All the exportation of goods were for the Eastern European market, but after 2006 in the contest of European Union, Moldova has undertaken a trade diversification and has begun to re-shift part of its export to the Western Market. The positive effect of this politics was surprising, in 2006 there has been a "big bang" in export, and in 2011 the export increased by 44%, compared to the year before and in the same period the GDP (Gross Domestic Product) increased by 6.4%. These results must be taken seriously because they testify an economic growth while most of the countries of the world are facing an economic downturn.
In this new framework, the activity of EBA can contribute to speed up this process of change. Like Mrs. Rufa said, the work of organization is focused around three interconnected areas: lobby activities, by creating a better business environment for the companies; services provider, by offering a certain range of services in order to promote the business; resource center, by supporting its members and stakeholders.
However, for creating a better business environment, before there is the need to identify the problems faced by the companies, so EBA launched a survey for all the members, where the companies are asked to list all the issues regarding their activities. The results was that the main problems regard taxes, custom fees and bureaucracy. About custom fees, often the companies discover new terms or new burdens at the moment of the importation or exportation, and the business man does not know about them. At the present, in EBA a specialized team has been working on a set of customs proposals to present to the government. Sometimes the customs fee are up to 30%, therefore, though if, setting up a new company in Moldova is cheap and fast, and the taxation on the companies is relatively low or sometimes absent, the presence of high customs fee can discourage the investments and consequently the foreign investment in the country.
In case of custom fees, the main problem regards the imports. The exports are not taxed, conversely the imports are taxed, this is a typical protectionism policy, generally forbidden in the global market but accepted by the WTO (World Trade Organization). Another similar form of protectionism, is the general prohibition for the people non-resident in Moldova to buy land, this regulation is a sort of protection for the small and local farmers. The protectionism can be positive for a developing country as Moldova in this phase but with the due attention, and in this scenario EBA is doing its job with the proposal of a new custom and tax code.
The other two activities of EBA, like Mrs. Rufa said are becoming always more important, namely service provider and resource center. EBA provides trainings to its members and consultancy services, like law and financial consultancy, the services offered are of sure reliability because two founders of the organization are consultancy companies. In the last period, the government has undertaken a politics of modernization of the country, that foresees investment in infrastructure and a set of economic and social reforms, in order to get align with the requirements of European Union and to attract foreign companies. In the banking sectors, the Moldovan banks started to adopt the BASILEA guidelines in terms of banking regulation and with the new accounting law, from this year the IFRS (International Financial Reporting Standards) will become mandatory for listed companies and financial institutions. Two important changes, but fundamentally for competing in the global market.
EBA operates and collaborates with the Minister of the Economy, but also with other organization, including MIEPO (Moldovan Investment and Export Promotion), that is a public non-profit institution and its main objectives are export promotion and Foreign direct investment attraction. The effort for opening the doors of Moldova to the international Market is huge, but when the companies come they do not need only a good business environment but they need labor force and this labor force should be qualified.
In the labor market, the first issue is the strong emigration, around one million of Moldovan citizens work abroad, and the Moldovan Population is 3,559,500. Thus, who will work in the factories?
The second issue and mostly important is related to the academic education. Moldovan education system up to the high school is really good, all the students are at least bilingual and most of them speak three languages. Regarding the academic education in the universities, the lack of funds don't permit to the university to implement new programs of specialization or enlarge the academic offer, and even the best professors will not teach in an institution where they do not receive a high wage. The consequence is that sometimes the programs offered are outdated and no in line with the needs of the companies. Hence, the education system needs a reform as well and EBA is trying to work on it.
EBA is a young organization, always more companies are joining to it and this testify the good job done so far, part of which will be accomplished in the future, but the important must be that it will keep working for Moldova and for the Moldovan people.
Francesco Ruberto