EUROPEAN MOLDOVA // Deputy Prime Minister: Entrepreneurs looking for income, opportunities and stability, which they find on EU market

*Republic of Moldova applied to join the European Union on 3 March 2022

*The Republic of Moldova obtained the status of candidate country for accession to the European Union on 23 June 2022

*The European Council decided on 14 December 2023 to open negotiations with the Republic of Moldova on accession to the European Union

*Republic of Moldova is under assessing the degree of compliance of national legislation with that of the European Union, a first step towards the accession of our country to the EU

*Authorities aim for Moldova to join the European Union by 2030

Interview with Moldpres State News Agency by Deputy Prime Minister, Minister of Economic Development and Digitisation Dumitru Alaiba

MOLDPRES: Deputy Prime Minister Dumitru Alaiba, Moldova's economy has been marked by major changes over the last 10 - 15 years. For example, from exports that used to be largely oriented towards the Eastern market, today about 65% of our products are sold on the European Union market, which has become our main trading partner. What explains this change?

Dumitru Alaiba: Rеpublica Moldova has shown to all that it can be turned into a good thing through daily actions and efforts. A concrete еxеmplе is the major change in the foreign trade over the last 15 years. If in 2009, 75% of Moldova's trade was with Russia and the Commonwealth of Independent States (CIS), today the situation has changed - 70% of our trade relations are with the countries of the European Union, EFTA, the UK and North America. Trade with Russia currently accounts for only 3% of the total.

I want to mention one very important thing, from my point of view: this growth is mostly due to our partners, who have understood the advantages of a market with clear rules and fair competition, such as the EU market. Due to the size and predictability of the EU rules, our businessmen have been working hard to set trade relations with importers and producers in this more than generous potential market.

Entrepreneurs are looking for income, opportunities and stability, which they find in the EU market, although to benefit from them it requires joint effort and continuous development, adapting to changing market requirements, such as rules on the use of plastic in packaging.

Since the signing of the Association Agreement/DCFTA between Moldova and the EU 9 years ago, exports to the EU have increased significantly, accounting for about 65% of total Moldovan exports. The European Union has thus become Moldova's most important economic partner, as evidenced by the fact that trade between the two sides has continued to grow steadily since 2017 and Moldovan exports to the EU have increased significantly compared to the previous period.

Imports from the EU also experienced an increase in 2023. The implementation of the DCFTA has helped to overcome some of Moldova's foreign trade problems.

MOLDPRES: Although about 65% of our exports go to the EU, statistics show that the number of Moldovan companies exporting to the EU is only 1,825. What actions are the authorities taking to increase the volume of exports to the EU and to facilitate the access of Moldovan entrepreneurs to the EU market?

Dumitru Alaiba: About 2,000 Moldovan companies are currently exporting to the European Union. But this number, which at first glance may not seem very significant, should be taken into account because many of these companies operate as intermediaries for thousands of smaller businesses that produce large volumes and prefer to work with commercial partners of larger size. 

Statistical data is the most accurate barometer, showing a steady increase in the number of companies exporting to the EU in recent years: from 1,243 in 2015 to 1,825 in 2023. Moreover, in 2023, the share of exporting companies to the EU reached 76% of the total number of exporting companies in Moldova, showing a growing and natural interest in the European market. What I mean, in other words, is that the figure of 1,825 export companies should be evaluated in the context of our current economic capacities and realities.

MOLDPRES: The European Union market offers a higher price for our products, but also has higher quality requirements. What conditions must local entrepreneurs meet in order to enter the EU market and what solutions do the authorities come up with to support them?

Dumitru Alaiba: Last year, the Government approved the Action Plan for Competitiveness and Trade 2027 (PACC-2027), a strategic document that aims to support entrepreneurs in the context of the European market. PACC-2027 includes innovative initiatives such as promoting ESG elements and strengthening the business support infrastructure, such as consulting companies, hubs and training programmes.

To support entrepreneurs in their efforts to offer competitive products, we promote digitisation and the implementation of advanced technologies at enterprise level. This not only reduces costs and optimises processes, but also contributes to compliance with the standards required by the European market. We also provide essential support to entrepreneurs through SME support programmes, facilitating their access to finance and knowledge, such as the government's "373" entrepreneur support and investment programme, and other SME support programmes through the Entrepreneurship Development Organisation.

MOLDPRES: You recently said that Moldova needs an annual economic growth of 8-10% over the next decade to really develop. Could closer ties with the EU help us achieve more robust economic growth? Do you have an economic growth forecast for 2024?

Dumitru Alaiba: Closer integration with the EU opens up new opportunities for market access, investment and know-how, which can boost economic growth. The competitive advantages offered by the European market, as well as the facilitation of trade and investment will contribute to achieving the economic growth target of 8-10% per year.

As for the forecast for economic growth in 2024, this may be influenced by several factors, including developments in the global and regional economy, government policies and implemented reforms.

MOLDPRES: Investments are vital for Moldova. What is the Government doing to attract foreign investors?

Dumitru Alaiba: Today's investments are the key to economic growth. In other words, the Republic of Moldova has a very high need for investment, which is an important part of the solution to bring our economy to a sustainable growth path, with well-paid jobs, innovations and opportunities and new businesses.

We are fully committed to creating and ensuring a favourable environment for both local and foreign investors. We are working to stabilise the economic situation and to solve crucial structural problems such as the shortage of skilled labour. 

We have passed several laws to facilitate the business environment, including by reducing red tape and digitisation.

MOLDPRES: What exactly can we propose to foreign companies to open a business in Moldova?

Dumitru Alaiba: In terms of our proposals for foreign companies interested in opening business in the Republic of Moldova, we have what to offer investors:

- Advantageous income tax: our unique tax model in Europe supports profit reinvestment and business growth;

- Stability and predictability: by extending the IT Park until 2035 with 7% tax, we offer an attractive environment for investors;

- Accessible workforce: citizens from 47 countries can work in Moldova without a work permit, enriching the talent market.

- Cutting red tape: by 2023 we have removed bureaucratic barriers worth around 1 billion lei. We continue in 2024;

- Digitisation: more than half of public services for entrepreneurs are now online, with a target of 75% by the end of the year.

Free Trade Agreement with the European Union - the force transforming our economy, the signing of the Free Trade Agreement with EFTA countries, the liberalisation of the UK market for our agricultural products and the negotiations for a new Free Trade Agreement with Turkey are other firm steps towards strengthening our global economic presence.

MOLDPRES: The European Union is one of Moldova's main development partners. What is the volume of non-reimbursable assistance provided by the European Union to the Republic of Moldova in recent years and what are the main beneficiary areas?

Dumitru Alaiba: The EU is the main development partner and the largest donor of financial assistance to the Republic of Moldova. The EU supports socio-economic development and reforms in Moldova with financial and technical assistance through the Neighbourhood, Development and International Cooperation Instrument.

In response to the natural gas crisis in autumn 2021, exacerbated by Russia's aggression against Ukraine, the European Union mobilised in April 2022 a macro-financial assistance package for the Republic of Moldova, which is being disbursed over 2022 - 2024 to support the reform agenda as well as key investments. Priority areas cover the economy, institutions, rule of law, security, environment and climate resilience, digital transformation, gender equality and inclusive society.

Also, in February 2024, the Republic of Moldova joined the Digital Europe Programme, which will provide access to a total of €7.5 billion in digitisation programmes until 2027. Beneficiaries are businesses, including SMEs, research and innovation organisations, NGOs, universities, local and central public administration.

In order to facilitate access to these Programmes, the EU has suspended the Republic of Moldova's obligation to pay the annual financial contribution from 2021 onwards under the Multiannual Financial Framework 2021 - 2027. Also, in order to support the Republic of Moldova in implementing the reforms necessary to modernise the state and strengthen the resilience of its institutions, at the initiative of Romania, Germany and France, the Moldova Partnership Platform was launched.

MOLDPRES: In terms of economy, what are the next steps Chisinau needs to take to adjust to European standards and when do you think Moldovan citizens will fully feel the benefits of EU integration?

Dumitru Alaiba: In order to align with European standards in the economic field and to ensure that the citizens of Moldova fully feel the benefits of EU integration, we are already taking several steps. We are investing in the education of entrepreneurs, offering programmes and training to prepare them to operate according to European standards and to succeed in the EU market.

We are also developing specialised consultancy services for companies, to guide them through the process of adapting to European requirements and to help them meet quality and safety standards.

We create efficient mechanisms to facilitate companies' access to finance for investments in modernisation, new technologies and innovation so that they can compete in the European market.

We also promote Moldova's image as a reliable and competitive partner on the European market, which will help attract investment and strengthen trade relations.

By implementing these measures, we can achieve faster alignment with European standards and ensure that citizens fully feel the benefits of EU integration, including through economic growth, job creation and improved quality of life.

Dumitru Alaiba, thank you for the interview!

Reporter: Natalia Sandu