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Political turmoil, budgetary risks, slow reform affect Moldova's investment climate - US State Dept

Political turmoil, budgetary risks, slow reform affect Moldova's investment climate - US State Dept Chisinau aerial view Source: Chisinau city all FB page

CHISINAU (Moldova), July 23 (SeeNews) - Moldova's attractiveness for investment is affected by the political uncertainty in the country, macroeconomic risks and by a slow pace of reforms, the US Department of State said.

Major investment climate concerns in 2021 include ongoing political uncertainty, macroeconomic and budgetary risks related to the Covid-19 crisis, external budget support, foreign malign economic and financial pressure, and a lack of domestic consensus to maintain reform momentum, the State Department said in its report on the investment climate in Moldova published on Wednesday.

The interim government in Moldova is not empowered to implement meaningful reforms or address local business concerns; with no visible end to the ongoing political crisis in sight, it is uncertain when a new permanent government will be in place, the report showed.

The State Department also noted that the government continues to deal with the fallout from massive bank fraud in 2014, when more than a billion dollars was stolen from Moldova’s state coffers.

"More efforts are needed to implement reforms, investigate, and prosecute those responsible, and tackle the pervasive corruption that continues to undermine public trust and slow economic development," the report reads.

The main challenges to the business climate remain the lack of effective and equitable implementation of laws and regulations, and arbitrary, non-transparent decisions by government officials to give domestic producers an edge over foreign competitors in certain areas, it added.

While some large foreign companies have taken advantage of tax breaks in the country’s free economic zones, foreign direct investment (FDI) remains low, the report showed. Finance, automotive, light industry, agriculture, food processing, IT, wine, and real estate have historically attracted foreign investment in Moldova. Private investors, including several U.S. companies, have shown strong interest in the ICT sector, especially after Moldova established a preferential tax regime for the sector. Many U.S. businesses have explored opportunities in the agricultural and energy sectors, it added.

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