The World Bank Group office in Chisinau, Moldova, released the “Moldova Trade Study” report on Monday that assesses the country’s foreign trade performance and offers policy recommendations to boost exports.
As a small and open economy, job-creation in Moldova, a former Soviet republic, depends on trade, the report noted. The economy has become more open over the last 20 years and the value of trade has quadrupled, but Moldova has not been able to fully benefit from foreign trade opportunities, the report surmised.
Alexander Kremer, World Bank country manager for Moldova, said, “What this study really shows is how much Moldova’s export prospects depend upon reforms inside Moldova. Stopping hassles at the border and cutting red tape for business are much more important for Moldova’s exports than international trade agreements.”
In a section focusing on Moldova’s trade competitiveness, the report cites four dimensions — growth, diversification, quality upgrading and survival. It points out development constraints such as the role of backbone services, access to finance, the business environment and institutional quality.
The study also delves into Moldova’s trade policy options. It examines the impact of alternative trade policy scenarios on gross domestic product growth, trade growth and inequality. In addition, the report examines the challenges of the agricultural sector in Moldova, and assesses the impact of free economic zones on Moldovan trade.
Among the key findings of the study are that the sum of exports plus imports expanded substantially, to $7.8 million in 2013 from $1.25 million in 2000. Diversification of markets and products accounted for much of export growth. According to the CIA World Factbook, key export categories include textiles, foodstuffs and machinery, with top markets being Romania, Russia, Italy, Germany and Belarus.
The study said foreign direct investment is crucial to boost export competitiveness, which declined after 2007 and the global economic downturn, and remained at 3.11 percent of GDP in 2013. Moldova’s free economic zones were important in attracting FDI, it noted, while structural business climate reforms are more likely to retain FDI and encourage investment and innovation than tax incentives.
Moldova has expressed interest in joining the European Union and the study cites the European Union-Ukraine Deep and Comprehensive Free Trade Area as offering a strong opportunity to drive reforms in Moldova and improved access to EU markets.
Since Moldova joined the World Bank in 1992, more than $1 billion has been allocated to about 60 projects in the country. Areas of support include regulatory reform and business development, education, social assistance, e-governance, health care, agriculture, local roads and environment.