To promote US, foreign, and local investments in Moldova and to work with the Moldovan government and business leaders to foster a more favorable business climate in Moldova.
For the past 15 years, AmCham Moldova has been one of the most valuable and influential stakeholders in the Moldovan business community, actively participating in the public-private dialogue. This way, we remind of the importance of investments in the private sector and of fostering a competitive business climate for the guarantee of a sustainable, inclusive economic growth.
AmCham is a non-governmental non-profit, accredited by the U.S. Chamber of Commerce and belonging to a network of over 130 peer organizations present in over 100 countries, notably affiliated with the EU network of American Chambers of Commerce, ensuring AmCham Moldova’s access to the international business community.
The members of AmCham Moldova are 143 private companies with capital from over 20 countries, including companies with US capital and domestic capital, operating in different industries of the national economy, contributing significantly to the state budget and creating thousands of jobs in the country.
AmCham community accounts for 20% of the total recorded profits in the Moldovan economy, have cumulatively transferred approx. 30% of the total VAT incurred for imports and paid wages almost twice the size of the private sector average; all these contributions occurred in 2019 solely. This quantitative impact speaks to the significant role AmCham members have in raising the state budget.
The diversity and caliber of our members facilitate our access to the best global practices of business regulations. This allows AmCham to gather data on the best business regulatory practices worldwide, to process the information in the local context, and to afterward come up with recommendations to address the challenges of the business community and to stimulate investments in the private sector.
Thus, for 15 years, in a consistent and constructive manner, we are putting forward proposals in multiple packages of legislative recommendations directed at decision makers, in order to serve our mission - that of fostering a favorable climate for entrepreneurial activity through an open dialogue and close cooperation with the Moldovan authorities.
AmCham Moldova’s advocacy agenda is shaped by the concerns and needs of our member companies, strongly correlated with the EU-Moldova Association Agreement Implementation Agenda, thus resulting in more than 80 position papers issued yearly. We strongly believe that the Deep and Comprehensive Free Trade Area is the only viable solution that, if implemented, will improve the ease of doing business in Moldova and will serve as a powerful tool of promoting Moldova as an investment destination and integrating the country into the EU economic circuit.
The Business CORe represents a compendium of major priorities for reform in business that, if addressed, will boost the Moldovan investment climate ranking, and will therefore impulse the attraction and retention of foreign direct investments in the country, as well as prompt the development of local businesses.
At the same time, the Business CORe addresses the biggest challenge of the year – mitigating the economic impact of the COVID-19 pandemic. Although not centered around the pandemic, the document contains a number of proposals aimed at increasing the resilience of the private sector if the crisis persists over time.
The Compendium of Recommendations is not an exhaustive document in the sense that it does not cover all the factors that affect the business climate, but rather represents a set of solutions for improving the regulatory framework of entrepreneurship per se and specific sectors which are vital for shaping a vibrant and sustainable national economy.
Carmina Vicol, President, AmCham Moldova
Thirty years after gaining independence, the Republic of Moldova remains to be the least economically developed country in Central and Eastern Europe (GDP per capita). The perpetuation of the current unsustainable economic pattern, mainly driven by remittances and consumption rather than investment and exports, results in underperformance in improving the quality of life, which will inevitably maintain emigration, thus forming a vicious circle.
This vicious circle can only be broken by a firm adoption of a sustainable model of economic growth, with the private sector as its core and driving force.
The government is expected to fully engage in developing stimulating and inclusive policies, securing institutional independence and transparency, and delivering good-quality and adequate public services, to ensure that the private sector can prosper, innovate and consequently generate more jobs and budget revenue. At present, the share of foreign direct investment in the national gross domestic product is among the lowest in the region – a practical reflection of the country's competitiveness as a destination for investment, in relation to the countries in the region. The accuracy of this indicator is also backed by international rankings on the quality of the business climate, Moldova being perceived less competitive as a destination of doing business than Albania, Armenia, Georgia, Bulgaria, or the Baltic States, these being just a few examples. The favorable business climate, coupled with the targeted attraction of major investments in infrastructure, has led to significant economic growth in the aforementioned countries, ensuring the well-being and the quality of life of their citizens.
To catch up with other countries, Moldova should be ambitious in setting up the economic growth objectives and act determinedly in achieving them. Double digit GDP growth in the short term, coupled with significant increase of exports and a balanced balance of trade, as well as substantial growth in both domestic and foreign direct investment in the medium term should all be targeted with an overall goal to improve the quality of life in Moldova and stem the exodus and brain drain from the country.
Moldova should enter the European Union not as a welfare case but as a growing and prospering country with much to offer to its own people and to the EU community.
AmCham Moldova wants to partner with the newly elected government to revise the National Development Strategy ”Moldova 2030”, in order to establish far more ambitious yet realistic economic targets based on the appropriate set of reforms. In the meantime, we are convinced that the implementation of the compendium of recommendations within this iteration of Business CORe will generate economic impulses that will provide room for the implementation of strategic development objectives.
Ensuring real and effective judicial reform to guarantee fair justice
Notwithstanding all of the financial assistance and expertise provided by the EU and the USA, the justice sector remains to be weak, bribery being perceived as almost an ordinary practice. Judges frequently make decisions in contradiction to Moldovan law, a situation that is substantiated by Moldova’s poor history in the European Court of Human Rights. The level of business trust in the Moldovan court system is also low, as foreign investors feel more harassed than protected by the local judiciary.
Alternative dispute resolution (ADR) and online dispute resolution (ODR) mechanisms are still underdeveloped, due to both the ineffective laws and defective law enforcement. Best recent international and regional practices, especially developed in response to Covid-19 pandemic threats, have proved that robust and efficient ADR/ODR mechanisms help dissolving court backlogs, increase access to justice and distributive justice. The redesign of the judiciary system requires a new configuration of people, processes, technologies, and physical spaces that are user-centered, technology-enabled, sustainable and accessible. 76% of businesses are unsatisfied with the quality of justice (Confidence in the Justice System of the Republic of Moldova LRCM)
Guaranteeing the predictability of the long-term and short-term business regulatory regimes
Doing business in the Republic of Moldova continues to present enormous challenges for investors hoping for a business model with a certain level of predictability of the regulatory framework. This is because the entrepreneur, whilst building a business model that includes product approval, cost formation elements, distribution channels and the tax regime, must be sure that he/she can base his model on a relatively stable and attractive business climate.
Dialoguing with the private sector to align public and private priorities for development
It is essential that any decision affecting the entrepreneurial activity is communicated to and consulted in advance with the business community representatives. The elaboration of the regulatory impact assessment document accompanying the draft decisions must be one of the mandatory steps to be followed in promoting policies with an impact on the business community, both at the level of executive authorities and at the level of Parliament.
The exercise of drafting and consulting draft decisions and regulatory impact assessment documents is to be effective, participatory and geared towards achieving both public and private priorities.
The existence of cumbersome, and, at times, unpredictable and nontransparent procedures of getting permits, authorizations, licenses, and other documents required by authorities impose additional pressure on businesses. The practical effect of several ‘guillotine’ laws has been spoilt in practice by the poor coordination of the business permission process among public authorities and the tendency of the latter to impose restrictive or burdensome rules in circumvention of the law.
The risks engendered by non-compliance to competition requirements may be very high. A company found non-compliant by the Competition Council may be subject to unexpected and disproportionately severe fines, the payment of damages incurred by their competitors or customers due to the anti-competitive behavior, or may be exposed to contractual risk, as most anti-competitive agreements are illegal and therefore inapplicable. Also, not to be ignored is the reputational risk which usually surrounds any major competition case. Intervention of politics and the tendency to extend the political agenda to the market supervision body bring about market uncertainty and make it unreasonably difficult for new participants to assess the competition framework and associated risks. Not the least, exogenous pressure over the Competition Council generates the risk of premature leakage of confidential information on the ongoing investigations and breaches the principle of presumption of innocence.
Personal data protection regulations
The Republic of Moldova has begun the process of implementing the new EU General Data Protection Regulation (GDPR) into the national legislation, making efforts to ensure the extraterritorial application of the GDPR.
The regulatory framework regarding public procurement
Public procurement is an important chapter of public spending, with public authorities being important consumers of goods and services produced by the business community. Increasingly, public procurement is being used as a lever to stimulate economic growth and achieve related policy objectives, such as encouraging innovation and achieving sustainable results at the central and local levels.
That is why public procurement processes must be carried out in a righteous, efficient, fair, and equidistant manner, based on high standards and the national legal framework adjusted to the best international practices. They must also be conducted in clear and transparent procedures, ensuring fair competition among all participants.
The fiscal system is an important part of the activity of any business entity. It is very important to ensure that it is fair, predictable, easy to understand and follow, corresponding to the best regional and international practices, and with a clear and transparent system of implementation of associated procedures, focusing on the taxpayer and digitalization. Tax authorities must continue to consolidate their competencies in ensuring voluntary compliance focusing on their advisory role, and on increasing the degree of satisfaction resulted from interactions between tax payers and public authorities.
Insufficient qualified human resources on the national labor market, generated by mass emigration and the slow adaptation of existing educational programs in educational institutions, continue to be some of the main problems encountered by employers in the recruitment process.
These issues can be partially eradicated by reforming the education system, taking into account the current and future requirements of the economic sector, to prepare graduates to meet the real needs of the private and public sectors in the Republic of Moldova.
Another problem perpetuated over time is the rigidity of the labor market as a factor in discouraging dynamic economic growth.
While acknowledging the beneficial effects of recent efforts to modernize the labor legislation, entrepreneurs emphasize the need to reform the regulatory framework of the labor field, reduce bureaucratic burdens on employers and transpose the best international practices.
Activities aimed at modernizing the Labor Code and related regulations must strive to create conditions that maximize labor productivity while protecting the fundamental rights of employees and ensuring the growth of sectors with a high level of employment.
International trade policy
Although export customs procedures are considered to be more openly facilitated, companies experience delays and over-bureaucratization in the process of issuing certificates of origin. The AEO status is not fully operational due to the lack of designated traffic lines, and the proper management of the queues for trucks. The regulatory requirements and therefore accessory costs on export in postal consignments discourage local manufacturers from actively promoting their products on foreign markets.
One of the main issues that importers complain about is the practice of applying an unjustified increase in customs value to imported goods by using reference values. This particularly concerns the invoice prices of imported goods and transportation costs.
The lack of proper regulations for customs terminals has a significant impact on costs related to the customs clearance procedure.
Food safety and public health
The signing of the Association Agreement between the Republic of Moldova and the European Union boosted the trade between the two parties, largely due to the elimination of tariff and non-tariff barriers, but also due to efforts that brought Moldova's regulatory system closer to the EU. However, the legal framework in Moldova still requires numerous pre-market approvals with health authorities, e.g. coordination of packaging, health warnings, notifying about new products and products with changed composition, submitting ingredients’ lists, annual reporting etc., in addition to the requirements regarding the health certificates and/or the certificates of conformity. These certifications are often redundant, generating bureaucratic, burdensome, and time-consuming processes, and Ukraine already abandoned many of them.
Compensatory levy for private copy
The law on copyright and related rights vaguely explains the application of the private copy levy, and fails to provide an explicit list of the items for which the private copy levy applies.
On the other side, the quantum of the compensatory levy granted by the law to right holders is minimum 3% of imported goods' value, which is one of the highest compensatory levels in the world.
The law has been excessively and abusively interpreted by the beneficiaries of the collected levy (Collective Management Organizations), that claim for the remuneration in amount of minimum 3% on various items, such as smartphones, computers, and other similar devices, pretending that these devices are used for the production of private copies.
Access to finance
According to the World Bank, the domestic credit to private sector (% of GDP) index is 24.8, which is quite a low performance in comparison with the region (Serbia – 54.7). Therefore, more effort is needed to encourage businesses to use credits in order to grow on one hand, and institutional creditors to lend, on the other hand. The relevant SMEs Law No.179/2016 labelled only the potential funding mechanisms for small and medium companies, including innovative start-ups, but the national law failed to further elaborate upon such instruments, disincentivizing the potential market participants to engage in such financing and cover the financing gap of the small business.
Banks and non-bank payment service providers ensure the proper circulation of money in the economy, focusing on electronic (cashless) payments and implementing the best FinTech technologies to become as digital in this as possible.
The insurance sector is underdeveloped and continues to fight against unfair competition. A series of insurance companies are suspected to experience difficulties in complying with prudential regulations, which creates an uneven playing field for the entire sector, with everyone playing according to their own rules.
Facultative pension funds
Sustainable development and the promotion of a green economy are development priorities for the Republic of Moldova. These are reflected in the main policy documents of the Government but are also part of the Republic of Moldova's commitments to external development partners. The Association Agreement with the European Union expressly aims to ensure sustainable development and promote a green economy in our country. The Republic of Moldova is committed to harmonizing its national legislation with the European legislation, and to ensure the integration of environmental protection provisions, rational use of resources and energy efficiency in all sectors of the national economy and social life.
The Republic of Moldova must elaborate its vision and develop a strategy in the short, medium and long term, taking into account the reduction of CO2 emissions by decarbonizing the energy , transport and industrial sectors.
The development and approval of the National Energy and Climate Plan is necessary for setting targets on reducing emissions, the share of clean energy in the energy mix, as well as other measures to reduce pollution and combat the effects of climate change.
Promoting the production of renewable energy will contribute not only to the decarbonization of the sector, but also to the strengthening of energy security.
Although the primary and secondary regulatory framework for promoting the production of energy from renewable sources based on tender was adopted and entered into force in 2018, so far no tender has been launched.
Environmental regulations on waste management
Although historically environmental legislation has not been considered a concern for business, in the light of the state’s commitments to implement the EU environmental law, new obligations are imposed on the private sector.
Regulations on purifying waste water
To create financial mechanisms that encourage local producers to implement the best technologies for managing residual waters that result from production processes
Moldova’s organic sector has considerable potential for growth. Proximity to the EU market offers Moldova’s farmers a competitive advantage, especially thanks to the Deep and Comprehensive Free Trade Area.
There is a persistent need for the development in Moldova of a transparent, efficient and nondiscriminatory market for pharmaceuticals, medical equipment and healthcare services.
A continuous cooperation among all stakeholders - public and private - should center on a common vision of reform in healthcare aimed at granting access to affordable and qualitative health services for Moldovan citizens, thus enforcing the perception that Moldova is a safe place to live and work.
The market for pharmaceutical products and medical services is a specific one, that indeed needs closed supervision and regulation from state authorities. However, excessive and unjustified regulations of the market, related, among others, to price control regulations, authorization, etc., without a proper background analysis and lack of functional control mechanisms, lead to market distortions, reduction of investments, and scarcity of products.
The telecom industry is of an utmost importance to Moldova's economy: it significantly contributes to the gross domestic product, promotes economic growth and digital inclusion, and supports the development of the IT industry.
Nevertheless, the industry encounters significant barriers which could compromise its commitment to further invest in Moldova.
Digital transformation returns to the frontlines of the Government agenda in the COVID-19 period. That was a mind-changing period that started a new era in B2G relations, as digital transformation became a “must” for public services. Nonetheless, some challenges need to be addressed to increase the prospects of B2C and B2G digitalization.