INTERVIEW – Moldova hopes for 600 mln euro in FDI in 2024

“In 2022, the year of the Russian invasion in Ukraine, we had a record-breaking 587 million euro of FDI. Many investors had prepared to dispatch their investments in Moldova and they continued [with their plans] despite the war,” Bejan told SeeNews in an interview last month.

Last year, however, FDI in the country decreased by about 20%.

“We associate the decrease mostly with the conflict in the region and see it as a kind of snowball effect from the previous year,” Bejan said. “We are doing our best now to increase FDI this year, […] but at the same time we have to stay realistic about the situation in the region.”

Ukraine is still an important variable in the investment equation, as the war raging in the neighbouring country is a negative for those who regard Moldova just as a place for building something and producing something, Bejan noted.

However, many investors are making plans to support the reconstruction of Ukraine once the war is over, she went on to say. “The moment when the situation in Ukraine is stable and the war is over, Ukraine will be hungry for workers and construction materials […] We have to not only seize the opportunity, but make sure that we are reasonably prepared to meet the basic needs of the country.”

At the same time, Moldova’s prospects for joining the EU are strong tailwinds for the economy, Bejan stressed. “For us, joining the EU has become one of the most positive directions we are taking that is giving a lot of optimism for the economy.”

Moldova applied for EU membership in March 2022, shortly after Russia launched its invasion of neighbouring Ukraine, and was granted candidate country status in June the same year. In December 2023, the European Council decided to open accession negotiations with the country. In the autumn, Moldova will hold a referendum on accession to the European Union, aiming to make that future governments will not derail it from its European trajectory.

The EU is Moldova’s main trading partner. In 2023, the bloc absorbed 65% of Moldova's exports and accounted for 48% of its imports. In terms of FDI in Moldova, the EU accounts for 83% of the total amount over the last five years.

SHIFT TO INDUSTRY, SERVICES

Primarily an agricultural economy, Moldova is the biggest exporter of plums to the EU and the world's third biggest. Additionally, Moldova is among the top twenty global producers of apples, grapes, apricots, walnuts and wine.

“However, we need to increase the value added,” Bejan said. That is why the country is now looking to boost its food processing industry.

Looking for higher value added, the country has also been trying in the past years to reposition itself as an IT hub and build a service-based economy. To back its IT sector, the government has enforced a 7% flat tax on its turnover, with no other tax levied on either the employer or the employee.

The IT sector has been growing steadily for the past seven years, Bejan said. “This year, sales are expected to exceed 1 billion euro, which for us is a significant milestone.”

Apart from the IT sector, the pro-EU government is offering attractive financial support schemes for machine building and automotive, textile, agrifoods, chemicals and pharma. Investors in these sectors who come up with projects worth more than half a million of euro each will receive half of their investment back through tax breaks, Bejan explained.

SANDBOXES FOR ENERGY COMPANIES

“Two sectors are of strategic importance for Moldova, not only from the point of view of foreign investments, but for any kind of investments - infrastructure and energy, Bejan stressed. "We have seen that energy dependency can create an incredible dependency from a political and economic perspective, so we have to build resilience.”

Before Russia’s invasion of Ukraine, Moldova was entirely dependent on Russian natural gas to meet its needs. However, Moldova stopped buying gas from Gazprom in December 2022 and developed alternative supply routes.

In search of diversification, the government is also looking to boost the development of renewable energy production and energy storage solutions. To provide companies with an opportunity to test innovative solutions, the energy ministry has launched Sandbox - a programme allowing companies to test their products and solutions for energy storage, transmission, or generation without the need to have obtained any certification.

Diversification helps markets mature, and it is not only about energy, Bejan stressed.

“We have hit different embargoes in the past, this happened with our wines years ago, then with our apples. This forced our producers to go to other markets. For one or two years, it was very tough but they managed to diversify and enter the European and Asian markets, reaching record sales in 2023.”

AFTER-CARE FOR INVESTORS

“More than half of FDI comes from investors already in Moldova, who are making profits in Moldova and reinvesting in Moldova,” Bejan said.

A major focus of the agency's activity is investor after-care, she added.

“We want to make sure there are no [administrative] issues in the development of their projects. If they have new projects that they want to develop in Moldova, our priority is to support them.”

($=0.935013 euro)