Moldova Trade

Subchapters:

  • Business Relationships
  • Foreign direct investment
  • FTAs ​​and Treaties
  • Development Cooperation
  • Prospective fields of study (MOP)

Business relations

Trade relations with the EU

The framework of relations between Moldova and the EU is formed by the Association Agreement, a part of which is also the Deep and Comprehensive Free Trade Zone, which entered into force in 2016. The European Union has become Moldova’s largest trading partner, in 2021 61.1% of Moldovan goods went to the EU export. Most exports of goods to the EU (EU-27) went to Romania (26.5% of total exports), Germany (7.8%) and Italy (7.6%). Imports of goods from EU countries reached 43.9% of total imports in 2021. The majority of imports came from Romania (11.6% of total imports) and Germany (8.6%). The trade balance with EU countries ended with a deficit of EUR 1,35million. The Moldovan economy is limited by quotas for imports into the EU, their abolition would help the reorientation of exports to the EU even more.

2017 2018 2019 2020 2021
Exports from the EU (million EUR) 2,395.00 2,707.20 2,924.80 2,609.00 3,186.30
Imports into the EU (million EUR) 1,556.20 1,828.90 1,780.00 1,617.60 1,835.10
Balance with the EU (million EUR) -838.8 -878.3 -1 144.8 -991.4 -1,351.3

Source: European Commission

Trade relations with the Czech Republic

The turnover of mutual trade exchange for 2021 reached CZK billion, which represents an increase of 20.6% compared to 2020. In 2021, exports to Moldova increased by 20.3% and imports from MD increased by 20.9%. The trade balance remains slightly positive in favor of the Czech Republic. From the point of view of the Czech Republic, MD took 57th place in terms of exports and 62nd place in terms of imports. For Moldova, the Czech Republic ranks 5th among EU countries in terms of trade volume, Moldova’s exports to the Czech Republic accounted for 2.51% of total Moldovan exports, and imports from the Czech Republic accounted for 1.6% of total Moldovan imports. The turnover of mutual trade exchange for the period January to March 2022 increased by 2.9%. Exports increased by 8.2% and imports decreased by 2%. The trade balance is positive in favor of the Czech Republic.

2017 2018 2019 2020 2021
Exports from the Czech Republic (billion CZK) 0.8 1.7 2.5 2.4 2.9
Imports to the Czech Republic (billion CZK) 2 1.2 1.5 2.4 2.9
Balance with the Czech Republic (billion CZK) 0.7 -0.5 -1 -0.1 0.1

Source: businesscarriers.com, Ministry of Industry and Trade of the Czech Republic

Trade relations with countries outside the EU

Among non-EU countries, Moldova’s trade with the CIS countries is significant, in 2021 the CIS countries accounted for 14.8% of Moldovan exports and 26.5% of imports. However, trade relations between Moldova and the CIS are severely disrupted by the war in Ukraine.

2017 2018 2019 2020 2021
Exports from countries outside the EU (million EUR) -808.9 ON ON ON ON
Imports to countries outside the EU (million EUR) 2,205.0 2,649.8 2,835.2 2,665.3 3,060.9
Balance with non-EU countries (million EUR) -3,013.9 ON ON ON ON

Source: EIU, Eurostat

Foreign direct investment

Currently, various investment platforms are operating in Moldova – IT Park Moldova, seven free economic zones and 38 sub-zones, 10 industrial parks and Giurgiulesti International Free Port. According to the data for 2021, the total volume of foreign direct investment reached almost 5 billion USD, of which 86% went to EU countries, 1% to CIS countries and 13% to other countries. The most investments are directed to the field of finance and insurance (31%), trade (26%), manufacturing industry (20%), followed by the information and communications sector (5%), real estate transactions (5%), transport and storage (4% ), construction (3%) and others (6%).

However, foreign investment is affected by the uncertainty associated with the war in Ukraine. Due to the war, the international rating agency Moody’s changed the rating outlook for Moldova from “stable” to “negative”. The government intends to continue to maintain a favorable business climate in Moldova, privileges and guarantees for investors remain in force. The regimes of investment platforms are not changing, and the government is preparing to improve the regulatory framework so that tax incentives are in line with the Association Agreement with the EU. In the context of changes at the regional level, Moldova is trying to create conditions for overcoming challenges and taking advantage of new opportunities. A reassessment of the industry and its potential in new conditions is expected, e.g. some segments of the IT industry and the field of remote services.

The largest Czech investment in Moldova is Prime Energy, which is part of the Czech investment group Emma Capital. Prime Energy distributes electricity on approximately two-thirds of Moldova’s territory. Another Czech investment was realized in 2019, when the PPF financial group bought the Moldovan television PRO TV, as part of a package of Central European televisions. In connection with the energy crisis, opportunities are opening up in the field of energy efficiency and renewable energy sources.

FTAs and treaties

Treaties with the EU

The framework for trade and economic cooperation is the Association Agreement, which includes the Comprehensive Free Trade Area Agreement (AA/DCFTA), the agreement was signed by both parties on 6/27/2014 in Brussels. The Moldovan Parliament ratified the agreement already on 2 July 2014, the European Parliament ratified the agreement on 12 November 2014 and the Czech Republic on 9 April 2015. The DCFTA establishes a free trade area between the EU and Moldova, in accordance with the principles of the World Trade Organization. Eliminates import duties for most goods traded between the EU and Moldova. An important part of the DCFTA is the alignment of Moldovan trade-related laws with selected EU legislative acts. Nevertheless, Moldova has long been unable to fulfill the existing quotas for duty-free export of agricultural production (especially fruit) to the EU. For some commodities, it exceeds them several times over. For the time being, Moldova cannot export livestock production to the EU, with the exception of honey and caviar. In connection with the war in Ukraine and the stoppage of Moldova’s exports to the CIS countries, a debate is opening on the abolition of quotas for imports into the EU.

On April 28, 2014, the visa requirement for holders of biometric passports was abolished in Moldova.

Contracts with the Czech Republic

Trade between the two countries had its contractual basis in the agreement on trade and economic cooperation (which, however, was canceled due to incompatibility with EU legislation with the consent of both parties). However, other agreements on the avoidance of double taxation and on the promotion and protection of investments from 1999, the aviation agreement and others are still valid. During the visit of the Minister of Foreign Affairs and European Integration A. Stratan in October 2004 in Prague, the Protocol to the Treaty on the Avoidance of Double Taxation and the Prevention of Tax Evasion in the Field of Income and Property Taxes was signed. In May 2011, the Moldovan Parliament ratified the Protocol on the Agreement on the Support and Protection of Investments between the Czech Republic and the MD, which introduces several changes at the request of the Czech Republic and brings this agreement into line with the obligations of the Czech Republic within the EU. The last contractual document, the Agreement on Economic and Industrial Cooperation, was concluded in 2014. Overview of valid contracts.

Developmental cooperation

Moldova is a priority country of the ZRS CR and cooperation takes place on the basis of the Bilateral Development Cooperation Program 2018-2023. Four priority sectors are defined within the approved program, the Czech Development Agency is responsible for their implementation. In the priority sector of sustainable management of natural resources, projects focused on the removal of old ecological burdens and projects for the construction and reconstruction of wastewater treatment plants are ongoing. The implementers of projects in this sector are mainly Czech companies, which, thanks to the obtained references, can subsequently participate in the tenders of other international institutions. In the sector of inclusive social development, the Czech ZRS concentrates on increasing the quality and availability of social services, significant projects aimed at improving home care, social inclusion, support for children with autism and projects aimed at supporting the Ministry of Health, Labor and Social Affairs of the MD in implementing the reform of care for the mentally ill. Other priority sectors are proper democratic governance and agriculture and rural development. In the latter sector, there is long-term support for organic farming and support for increasing farmers’ production.

Small local projects, transformation projects, a B2B project, a program to increase the capacities of universities and projects within the Partnership of the Czech Republic with UNDP are also ongoing in Moldova. The Ministry of Industry and Trade of the Czech Republic with the Aid for Trade program and the Ministry of the Interior of the Czech Republic with the security cooperation program are also active. Since 2020, humanitarian projects aimed at helping to manage the COVID-19 epidemic have been financed in Moldova, and from 2022 also projects aimed at managing the refugee crisis caused by the war in Ukraine. The historically first project of delegated cooperation implemented by the Czech Development Agency in Moldova as a junior partner of GIZ can be considered a success.

Czech companies can participate in tenders announced by the Czech Development Agency, they can submit projects within the framework of the Partnership of the Czech Republic with UNDP, B2B and Aid for Trade programs.

Prospective fields of study (MOP)

The main perspective fields include the agricultural and food industry, the energy industry, the water management and waste industry, the transport industry and infrastructure, ICT, and the healthcare and pharmaceutical industries. As a result of the COVID-19 pandemic, significant problems and the insufficient level of the Moldovan healthcare system have come to the fore. The COVID-19 pandemic has also opened up new challenges in the field of digitization, digital technologies have not been widely used in the past. New challenges were brought by the energy crisis, which highlighted the need for investment in this sector. More information can be found in the Strategic Opportunities Map.

Agricultural and food industry

The agricultural sector still occupies a very important place in the Moldovan economy, both in terms of its share in GDP creation and in terms of the share of economically active population working in the sector. In the field of plant production, the development of irrigation infrastructure, the expansion of the area of ​​greenhouses and the development of post-harvest infrastructure are needed. Equipment and technology are required to store, process, package and transport fresh produce. Demand for organic products is growing, creating opportunities for organic farming. Other specialized opportunities include winery product quality and safety services, new winery equipment, vineyard planting and winery expansion into the tourism industry.

Energy industry

Moldova aims to increase energy efficiency and security, investments in the production of heat, electricity, cogeneration units and in securing electricity transmission and distribution networks are requested. Interest is also growing in innovative and alternative energy projects and renewable energy sources. The EU and the EIB plan to invest in a program to increase energy efficiency. The topic is primarily an increase in energy efficiency in the residential sector, industry, transport and agriculture. There is a growing interest in the energy use of agricultural waste, with an emphasis on winemaking waste. There is also a long-term interest in gas boilers for heating, in technologies for the use of biomass and in equipment for the processing of biogas, especially from waste produced on farms in animal production.

Water management and waste industry

One of the priorities of the water supply and sanitation strategy of Moldova for the period 2011-2028 is to address the critical state of the technical infrastructure, i.e. unsatisfactory technical condition of the system of sewage treatment plants, sewage and water distribution systems. The main sources of funding are allocations from the state budget and, above all, funds from international institutions. In January 2022, the World Bank approved the financing of investments to increase water security and improve sanitation in the amount of more than EUR 44 million. Possibilities include, for example, the construction of drinking water treatment/purification stations, the construction or modernization of regional and municipal water purification systems, or the construction of suitable individual wastewater treatment plant systems in areas with low population density. Other possibilities are in the field of waste management, the construction of regional landfills is planned.

Transport industry and infrastructure

An extensive national road rehabilitation program is underway with the support of international financial institutions, especially the EIB and the EBRD. Priority will be given to investments in road sections that are part of the Trans-European transport network. In the area of ​​rail transport, the government’s priority is to improve regional rail connectivity by purchasing new locomotives and renewing the existing rail infrastructure, with the government again relying on financial support from the EBRD and the EIB. Other needs are in the area of ​​improving transport services, in the development of public transport services, freight and security services, in the development of logistics services and the construction of modern warehouses. There are also opportunities in the field of intelligent transport systems. The State Road Administration has started implementing some intelligent transport system technologies into its road network,

ICT

The ICT industry in Moldova is the most dynamic and fastest growing economic sector, accounting for more than 7% of the country’s total GDP. In recent years, information and communication technologies have become one of the few positive factors of economic growth. The digital transformation of society and the digitization of public services is a government priority. There is a qualitative transformation of the ICT sector from access networks and Internet services to IT products and services with higher added value, oriented towards export. In addition to the favorable fiscal regime, another incentive to encourage the ICT sector is the government’s support for the creation of digital solutions for non-IT sectors, as well as the accelerated digitization of public services. Moldova plans to use the rapidly developing IT sector and technological possibilities to digitally transform winemaking, agriculture, tourism, green manufacturing,

Healthcare and pharmaceutical industry

The coronavirus pandemic has exposed all the weaknesses of the Moldovan healthcare system, government officials are openly speaking about the catastrophic situation in hospitals, where often only outdated equipment from the Soviet Union is available. During the pandemic, the EU alone allocated more than €127 million in grants to strengthen the response to the COVID-19 pandemic, improve the resilience of the health system and support recovery. The healthcare system is also affected by the energy crisis, hospitals are heated with natural gas, which is becoming more expensive. There are opportunities both in the modernization of buildings and in the provision of all equipment, for example the lack of diagnostic equipment is problematic.

Moldova Trade