CHISINAU, March 21, 2016 - The World Bank Group office in Moldova launched the Moldova Trade Study report which assesses Moldova’s foreign trade performance and offers policy recommendations to boost exports.
As a small and open economy, job-creation in Moldova depends on trade. The economy has become more open over the last 20 years, and the value of trade has quadrupled. However, Moldova has not been able to fully benefit from foreign trade opportunities.
World Bank Country Manager for Moldova, Mr. Alexander Kremer, underlines: “What this study really shows is how much Moldova’s export prospects depend upon reforms inside Moldova. Stopping hassles at the border and cutting red tape for business are much more important for Moldova’s exports than international trade agreements.”
The study presents its findings in four parts. First part is focusing on Moldova’s trade competitiveness, by looking at four dimensions of competitiveness - growth, diversification, quality upgrading, and survival. Also, it spots and analyses the development constraints such as the role of backbone services, access to finance, the business environment, and institutional quality. Second note looks at Moldova’s different trade policy options. It examines the impact of alternative trade policy scenarios on GDP growth, trade growth, and inequality, third part examines the challenges of the agricultural sector in Moldova, while fourth assesses the impact of free economic zones on the Moldovan trade. The main findings and recommendations of the Moldova Trade Study report are as follows:
- Exports have been growing: the sum of exports plus imports expanded substantially, from US$1,250 million in 2000 to US$7,800 million in 2013.
- Diversification of markets and products accounted for much of export growth.
- Foreign direct investment (FDI), crucial to boost export competitiveness, declined after 2007, and remained at a disappointing 3.11 percent of GDP in 2013.
- Moldova’s free economic zones were important in attracting FDI.
- Structural business climate reforms are more likely to retain FDI and encourage investment and innovation than tax incentives.
- Corruption damages firms’ productivity.
- Deepening trade and investment integration is crucial for the country’s long-term development prospects.
- The DCFTA is a great opportunity: more because it should drive reforms inside Moldova than because it offers greatly improved access to EU markets.
- The agriculture and agro-food sector is an important driver of Moldova’s international trade, export competitiveness and poverty-reduction.
- Moldova’s agriculture sector has been performing rather unevenly as growth has been slow and highly variable, mainly due to the sector’s vulnerability to the weather.
Since Moldova joined the World Bank in 1992, over US$1 billion has been allocated to approximately 60 projects in the country. Currently, the World Bank portfolio includes 9 active projects with a total commitment of US$335.5 million. Areas of support include regulatory reform and business development, education, social assistance, e-governance, healthcare, agriculture, local roads, environment, and other.
The International Finance Corporation (IFC) committed portfolio in Moldova is US$60.2 million (US$57.2 million outstanding). Portfolio composition is 83 percent loans and 17 percent equity and quasi-equity. The Multilateral Investment Guarantee Agency has provided guarantees totaling US$95 million. Both institutions are members of the World Bank Group.