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Moldova 

1 CAN= 13.1491 Moldovan Leu, MDL (11/2014)
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Within the past decade Moldova has transitioned into a stable democracy with greater concentration on further economic integration with the European Union. It is a member of both NATO's  Partnership for Peace Program and the Council of Europe. While there has been recent growth in the country's economy, particularly its service sector, its economy remains dominated by the agricultural sector.


Geography


Land


Territory: 33,851 km2.
Major Borders: Romania, Ukraine.
Major Cities: Chișinău (Capital).
Natural Resources: lignite, phosphorites, gypsum, arable land, limestone.

People
 
  • Population: 3,619,925 (09/2013 est..)
  • Languages: Moldovan (official), Russian, Gagauz.
  • Ethnic Groups: Moldovan (78.2%), Ukrainian (8.4%), Russian (5.8%), Gagauz (4.4%), Bulgarian (1.9%), Other (1.3%).
  • Religious Groups: Eastern Orthodox (98%), Jewish (1.5%), Baptist and other (0.5%).

Government

The current government attributes the country's recent economic success to  greater EU integration. It also favours distancing the country from its traditional reliance on Russian political and economic support. While it is unclear as to whether the leadership will seek full EU membership  someday, many believe that by applying EU business standards there will  be increased foreign investment. A new set of reforms in 2010 were furthermore welcomed by the EU as positive steps in tackling corruption and excessive bureaucratic regulation..

Principal Figures:

  • President: Nicolae Timofti
  • Prime Minister: Lurie Leanca
  • Minister of Foreign Affairs: Natalia Gherman
  • Moldovan Ambassador to Canada:
  • Canadian Consul to Moldova: Franco D. Pillarella (Ambassador to Romania):
  • The Canadian Embassy to Romania covers the countries of Bulgaria and Moldova

Economy


Type


The recent growth in the economy continues to be attributed to greater EU market access for agricultural commodities including local wines, vegetables, and in terms of manufacturing, the small textile sector. Furthermore, owning to Moldova's sizable diaspora and temporary work programs, remittances have been an additional source of income for many of its residents.

Major Industries

Owning to Moldova's small economic size, its main industries tend to be concentrated in the agricultural sector for such goods as; fruits, vegetables, tobacco, and wine. The country has few natural resources and it is a heavy importer of energy from Russian and Ukraine.

Foreign Trade

Moldova's primary export markets are Russia, Romania and Italy, with agricultural goods being dominant. Its main source of imports for miners, fossil fuels, and machinery include Ukraine, Russia, Romania, and Germany.

EU-Moldova Association Agreement 

The EU's increasingly close relationship with the Republic of Moldova goes beyond cooperation, encompassing gradual economic integration and deeper political cooperation. The 2 parties signed an Association Agreement, including the Deep and Comprehensive Free Trade Area (DCFTA), in the margins of the EU summit held on 27 June 2014. Moldova promptly ratified the Agreement on 2 July, and both sides have completed the necessary formalities. Some provisions - including most of the DCFTA section - will therefore apply provisionally from 1 September 2014.

http://eeas.europa.eu/moldova/pdf/quick_guide_eu_md_aa_en.pdf

Trade with Canada

February 20, 2012 marked the 20th anniversary of Canadian-Moldovan diplomatic relations. Bilateral relations are good but modest and are conducted via non-resident missions: Canada, through our Embassy in Bucharest, and Moldova, through its Embassy in Washington D.C. In March 2012, Parliamentary Secretary to the Minister of Foreign Affairs Robert Dechert visited Moldova where he attended President Nicolae Timofti’s sworn in ceremony.

In the fall of 2011, the Canada-Moldova friendship group was established in the Canadian Parliament. An estimated 40,000-50,000 Canadians of Moldovan origin are living in Canada, mainly in Toronto and Montreal. Through its Embassy in Bucharest, Canada participates in small-scale projects aimed at strengthening civil society and human rights in Moldova, supporting, for instance, Moldova’s annual International Human Rights Film Festival in Chisinau.

Canada supports the OSCE-led 5+2 talks as a means of resolving the question of Transdniestria. The 5+2 format involves three mediators (Russia, the OSCE and Ukraine), the parties (Moldova and Transdniestria) and two observers (the USA and the EU). Talks resumed in 2011 after a five-year hiatus. Moldova’s integration into the Euro-Atlantic community is in Canada’s interest as it will contribute directly to the security and stability of the region.

Canadian trade and investment interests in Moldova remain modest. Canadian merchandise exports to Moldova totaled nearly $1.2 million in 2012, remaining unchanged from 2011, with machinery being the top category, followed by fish, and tanning and dye extracts. Canadian merchandise imports from Moldova in 2011 totaled $3.5 million, up from $2.1 million in 2011, and consisting mainly of apparels, plastics and beverages.

Canada-Moldova Foreign Investment Promotion and Protection Agreement (FIPA) Negotiations

In June 2013, Canada and Moldova agreed to begin negotiations towards a Foreign Investment Promotion and Protection Agreement (FIPA). The parties pledged to work together to conclude an agreement in a timely manner. Minister Fast announced the conclusion of negotiations in December 2013.

A bilateral FIPA will provide greater predictability and certainty for Canadian investors considering investment opportunities in Moldova. Canada’s objective in entering these negotiations is to secure a comprehensive, high-quality agreement which will protect investors through the establishment of a framework of legally binding rights and obligations.

Investment Climate 

Over the years, the Government Of Moldova (GOM) has made efforts to lower tax rates, strengthen tax administration, increase transparency and simplify business regulations. However, progress has been slow. Decision-making remains sometimes opaque and the application of laws and regulations inconsistent. While the coalition government provided more transparency and openness to the private sector, public service at lower levels remains problematic. The GOM needs to take more steps to reform public service and improve the quality of administrative performance. Moreover, Moldova must prevent government interference in the private sector, which protects influential individuals, uses governmental powers to pressure businesses for personal or political gains, and selectively applies regulations.

Following the parliamentary elections of July 2009, the GOM approved an Economic Stabilization and Recovery Program (ESRP), which focused on balancing public finances and liberalizing the highly regulated economy. The ESRP received the backing of the International Monetary Fund (IMF) in January 2010 with the approval of a combined three-year US$580 million Extended Credit Facility/Extended Fund Facility to support the country’s economic program by restoring fiscal and external sustainability. Developed in 2009, the ESRP does not represent a substitute for the GOM's longer-term reform agenda. In 2012, The GOM outlined in the National Development Strategy Moldova 2020 seven-priority areas for development and reform in the Strategy: education, access to financing, road infrastructure, business regulation, energy efficiency, justice system and social insurance.

On January 22, 2010, Millennium Challenge Corporation (MCC) CEO Daniel Yohannes and Moldovan Deputy Prime Minister Iurie Leancă signed a five-year, US$262 million Millennium Challenge Corporation (MCC) Compact intended to reduce poverty and accelerate economic growth by improving Moldova's transportation and agricultural sectors. The Compact funds two projects, one for road rehabilitation and the other for a transition to high-value agriculture project, which focuses on rehabilitating centralized irrigation systems, providing technical assistance and providing access to financing for farmers.

The GOM launched the first privatization in Moldova in 1994. It has adopted three separate privatization programs, including privatization via National Patrimonial Bonds (foreigners were not allowed to participate); via cash transactions for both locals and foreigners; and via a program, which involved only cash privatization. The third program began in 1997-1998 and was extended to 2000. The program was later extended with some modifications to the end of 2006. Foreign investors have successfully participated in the third program of privatizations. In 2007, Parliament passed a new privatization law, which introduced a new plan focused on efficiency for privatizing and managing state-owned assets. In 2012, the GOM continued to focus on privatization of state-owned assets, recently releasing a new list of assets subject to privatization. However, the GOM is increasingly emphasizing private and public partnerships as means for companies to have access to state-owned resources, especially in infrastructure-related projects.

The Law on Investment in Entrepreneurship prohibits discrimination against investments based on citizenship, domicile, residence, and place of registration, place of activity, state of origin or any other grounds. The law provides for equitable and level-field conditions for all investors. It rules out discriminatory measures hindering the management, operation, maintenance, utilization, acquisition, extension or disposal of investments. Local companies and foreigners are to be treated equally with regard to licensing, approval, and procurement.

The current government of Moldova has taken renewed interest in creating a more investors friendly environment by seeking international support for its efforts to reduce corruption and streamline bureaucratic regulation. For example, the country is a long standing member of the World Bank’s the Investment Climate Reform Program, which is noted for improving its attractiveness to European investors. Since 1995, the Program has improved Moldova’s permit compliance costs, framework for troubled businesses, and helped its entrepreneurs harmonize their regulations with those of the EU.    

Investment Legal Framework

The main act which regulates the FDI legal framework is Law on investments in entrepreneurial activity which has been enacted in early 2004 (Official Journal of the Republic of Moldova, nr. 64-66 from 23.04.2004). The law establishes a set of important principles and provisions:

 Freedom of investments, according to which investors can place their investments throughout the Republic of Moldova, in any area of business activity, as long as it does not go against the interests of the national security, anti-monopoly legislation, environment protection norms, public health and public order. Under the existing legislation, international treaties on mutual protection and encouragement of investments to which the Republic of Moldova is a party, Moldova shall commit to ensure full security and protection safeguards for all investments, regardless of the type of investment.

 Non-discriminatory investment environment. One of the most important principles of the law is non-discrimination, i.e. equal rights for local and foreign investors. In the Republic of Moldova, there shall be no discrimination of investments on the basis of citizenship, home, residency, place of business registration, state of origin of the investor or investment or for any other reason. Investors shall enjoy fair and equal treatment in running their business, without discrimination that would hinder management, operation, maintenance, use, capitalization, acquisition, growth or disposal of investments.

 Transparency. Public authorities that intend to, or are in the process of developing investment policies shall organize public consultations prior to enforcing these policies, publish them, or make them publicly available along with the background notes in case the implementation process is underway. Public authorities shall be required to respond to any inquiries and provide information, as requested by any investor, or any other evidence affecting investments or investment activity.

 Investors’ compliance with obligations. In running their investment activities, investors shall be required to respect the international treaties to which Moldova is a party, this law and other effective legislation, standards (norms, regulations) adopted to enforce the law.

 Guarantees for the observance of investors’ rights meaning the obligation of state and public officials to respect all the rights of the foreign and local investors. Public authorities shall be required to respect the investors’ rights provided by law. Should any public authority prejudice any of the investors’ rights, the investor shall have all legal grounds to claim repair or removal of the prejudice.

 Safeguards against investment expropriation or similar practices In case these practices occur, the public benefit and compensation payable should be established under the law on expropriation on the grounds of delivering a public benefit.

 Safeguards for repairing the prejudices: Investors shall be entitled to claim repair of the prejudices caused through violation of their rights. The compensation shall be equivalent to the actual scope of damages at the time of its occurrence.

 Amiable settlement of investment disputes: referring to a competent court of the Republic of Moldova, or with due consent of parties, to an arbitration court: ad-hoc or institutionalized arbitration court.

 Special provisions related to foreign investors and foreign investments which include the following: registration, operation and liquidation of companies with foreign investments, re-registration of companies with foreign investment, branches and representation offices, social insurance and social security, remittance of cash and goods obtained as a result of foreign investment, real estate regime, safeguarding the recognition of the right of subrogation.

Investment Incentives

According to Moldovan legislation, enterprises registered in Moldova benefit from tax incentives towards investments:

 the enterprises whose social capital exceeds US$ 250,000 are subject to 50% exemption of income tax payment for a period of 5 consecutive years.
 the enterprises whose social capital exceeds US$ 2,000,000 exempted of income tax payment for a period of 3 consecutive years. with the condition that at least 80% of the exempted profit tax, is invested in own production or Government programs for economic development; enterprises benefiting from these incentives do not have any public debts; the enterprises have not benefited or do not benefit from above-mentioned incentives.
 the enterprises, whose term of action of above-mentioned incentives has expired, are exempted from income tax payment for a period of 3 consecutive fiscal periods, by reduction of taxable income with 50% of the investments made in long-term material assets (with the exception of auto vehicles, office furniture and assets with general house holding destination), including long-term material assets purchased on the basis of a leasing contract, but not more than the taxable income.

New Government Tax Initiative

In May 2007 were launched three major reform activities in order to liberalize the economic activity and to promote a stimulating tax policy: a program of capital legalization, tax amnesty and a reform of the legal entities taxation system. According to the mentioned economic liberalization initiative, the reinvested income of companies is taxed at 0% rate, while profits distributed to stockholders or used for other purposes are taxed at 15%.

Free Economic Zones

Free Economic Zones (FEZ) are territories where domestic and foreign investors can carry out entrepreneurial activities on preferential terms. FEZs have the status of an independent customs territory and benefit from favorable tax, customs, currency, visa, labor and other regimes. Currently in Moldova there are 6 Free Economic Zones (FEZ):

 "Expo-Business-Chisinau" (located in capital Chisinau)
 ”Ungheni” – 107 km out of Chisinau
 "Tvardita" – 115 km out of Chisinau
 "Otaci-Business" – 220 km out of Chisinau
 "Vulkanesti" – 200 km out of Chisinau
 “Taraclia" – 153 km out of Chisinau

Investment Opportunities by sectors

IT sector

 Development of hardware and embedded software for the control of technological processes, telecommunications, special purposes;
 Software applications for business;
 Customized software;
 Encryption and data protection software.

Electrical and radio-electronics sector

After decades of activity in the sector, Moldovan companies have obtained particular expertise in the technologies described below:

 Hybrid electronics with thin layers, hybrid circuits
 SMT
 Semi-conducting structures, Silicon with integrated microcircuits
 Wire networks, including multi-layers networks
 Assembling electronic devices
 Material technologies and electronic structures
 Electronic and optic-electronic devices
 Micro-sensors and micro-converters
 Metallic micro-fibre, semiconductors, thermo-electrics and devices based on thermo-electrics

It is strategically important for Moldovan electronic industry to attract investments in the following sectors:

 Telecom networks
 Fibre optics
 Electronics for consumption
 Industrial electronics
 Semi-conducting electronics
 Medical electronics
 Assembly technologies
 Integrated circuits
 Circuits for automobiles
 Power electronics
 Converters etc

Constructions and real estate

The construction industry, along with other industries creates the country's investment potential, accounting 9-10% of GDP. The availability of local raw materials presents a significant advantage for the development of the sector. Raw materials deposits are sufficient for satisfying Moldova's needs, certain quantities are also exported, such as: limestone, granite, natural stone, clay, raw materials for brick manufacturing, etc. 

Tourism

The geographical location of Moldova, its climacteric conditions and natural recreational resources are preconditions for the tourism to become one of the most profitable branches of the national economy. Notwithstanding a decrease in the number of tourists that have visited Moldova in the past few years, resulting from the decrease in transit tourists, a structural change of this industry is noticeable, and namely the diversification of countries where tourists are coming from.

In 2006 about 67,826 Moldavians have traveled abroad, while close to 14239 of foreign people have visited the country, the greatest number of tourists has come from Turkey, Ukraine, Russia, USA, Romania, Belarus, Germany, Italy, Bulgaria, Netherlands and Austria.

At present Moldova may propose foreign tourists the following main types of tourism products: rural tourism, national and "wine path" tourism, and business tourism. All of these services are available throughout the year and offer a relatively low price.

Rural Tourism. This type of service allows tourists to "roam" the picturesque places of Moldova, to get an insight into the historic culture and current customs, traditions and rural way of life.

National Tours. Moldova is a small country with distances from its Northernmost and Southernmost points being 350 km, and from the East to the West - 150 km. Tourists coming to Moldova have the possibility to see the whole country within a relatively short period of time.

Wine Path Tours. Moldova has rich traditions and a well-developed vine growing and wine producing industry. On wine routes, which spread out like a web starting from Chisinau, visitors can appreciate, along with European wines like Chardonnay, Pinot, Riesling, Cabernet, and Aligote, the local, high quality wines like Rara Neagra, Feteasca, Plavai, etc. Excursions to world renowned underground wine cellars such as: Cricova, Purcari, Ciumai, Romanesti, Cojusna, Milestii Mici, etc., are organized for tourists.

Business Tourism. This type of tourism is new for Moldova, as it involves the organization of various events (meetings, conferences, seminars, symposiums, etc.) on the territory of the Republic. The favorable geographical location, traditional hospitality and relatively low prices are good preconditions for the development of this type of tourism.




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Current day's noon foreign exchange rates from the Bank of Canada. Published at about 12:30 ET.


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