Moldova: Boosting FDI

By Vlad Spânu

CHISINAU (Moldova.org) -- According to the Moldovan government sources, 2005 brought a record volume of foreign direct investment (FDI). The amount of $260 million was invested last year alone. One third of these investments were in the energy sector and water supply industry, followed by the food processing industry and trade with 20 percent each. In 2005, the main investor was the Metro Group from Germany that invested Euro 30 million to open its wholesale superstore in Chisinau. Other foreign companies that invested significant amounts in the Republic of Moldova in the last decade are France Telecom, Union Fenosa, LaFarge, Sudzucker, EFES, Coca-Cola and Azpetrol. The Azeri company Azerperol pledged to invest a total of $250 million over a three-year period in the construction of the oil and container terminals at the Girgiulesti port on the Danube River.

$260 million in one year is remarkable for this tiny country, considering that in 1991-2003 the cumulative foreign direct investment has reached just $414 million. If calculated per capita Moldova fails far behind its neighbors with just $125 comparative with Hungary--$1,970 per capita, Poland--$920, and even Belarus--$128. So far, the Russian Federation is among the top country from which FDI originates, followed by Spain, USA, the Netherlands, Germany, France, Romania and others.

The government of Moldova has made some progress in reform over the last few years. Formal trade barriers and administrative hurdles with respect to business registration, licensing and tax administration were reduced. The "Guillotine Law" adopted in February 2005 is expected to cut red tape.

Speaking recently about his country's incentives to attract more foreign capital, Igor Dodon, a deputy minister of economy and commerce, specified that those "foreign firms that invest [in Moldova] some $250 thousand are exempt from paying 50 percent income taxes for a grace period of 5 years., and those that invest $2 million and above get a 100 percent exemption for a period of three years".

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