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A Special International Report Prepared byThe Washington Times Advertising Department
Published on April 22, 1999
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Advertisers (1) VictoriaBank
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Investment opportunities abound With a goal of completing privatization by the year 2001, the Moldovan economy seems well on its way to meeting its target. The key is finding foreign investors to help modernize industry and diversify trade. To that end, Moldova's reform-minded government has moved aggressively to create a favorable investment climate. The door is open to several industries - agriculture, telecommunications, pharmaceuticals and energy. Companies investing more than $250,000 are entitled to a 50 percent tax break and investments worth $1 million or higher are exempt from paying corporate taxes for the first three years. There are no customs duties on imports of machinery or equipment and there are no barriers to repatriation of profits. Perhaps most important, labor is highly skilled and inexpensive. Moldova has the third highest GDP in the CIS. As a sturdy, well-established democracy, Moldova can be a springboard to a larger market comprising in Romania and the CIS. Foreign companies encounter less corruption in Moldova than in other countries in the region. Because it is a small market, foreign investors work only with the top decision makers in government. This access to top government officials offers foreign companies additional protection. In its search for investors, Moldovan officials are flexible on price for certain state enterprises in exchange for larger capital investments. "We would even consider selling some companies for one dollar if that foreign company was willing to put a lot of money into modernization," says Chiril Lucinschi, general director of the National Agency for Attracting Investment. This concept was put into practice last fall when the majority stake of Ciment, the country's largest cement producer, was sold to LaFarge of France for a modest $200,000. Under the terms of the contract, the company agreed to invest an additional $12 million. Moldova's privatization goals, says Lucinschi, is to improve quality and boost exports. The energy sector privatization involves opportunities to invest in four state companies. Energy Department officials expect to have the entire sector fully privatized within two years. The privatization effort will enable public utilities to run more efficiently as equipment is upgraded. Although tenders have not yet been announced, the American energy company AES has said it is interested in investing in a thermal station. Redeco International Energy Inc. an American energy exploration company, invested $5 million on projects designed to reduce Moldova's dependence on energy imports. The company has developed two gas fields and one oil field. Recently it found a small amount of oil in the southern part of the country. Redeco was recently sold to Costilla Energy Co. based in Texas. "Moldova has great potential," says William Baron, Chairman of the American Chamber of Commerce in Moldova and co-founder of Redeco. "American companies can make a lot of money there. It has all the ingredients of success. There are US companies in Moldova that are successful." The most comprehensive privatization effort currently underway is land reform. The USAID-funded collective farm privatization program is the most extensive of its kind in the CIS region. By the end of the year 2000, 90 percent of the farms will be privatized. About half of the farms have been privatized so far. Roughly one million people are expected to become land owners. Western specialists say it is clearly the most successful land privatization project ever attempted in the CIS countries. The collective farm privatization may open a whole range of investment opportunities in agribusiness. With excellent weather and soil conditions, and vineyards stretching as far as the eye can see, the wine industry has the potential to become the Sonoma Valley of the East. The privatization of Moldtelecom, the telecommunications company, and Tutun-CTC, the state-owned tobacco company are two other priorities. Both represent substantial investment opportunities. (see accompanying articles). Chisinau International Airport is undergoing a $12 million renovation project refurbishing the main terminal and expanding cargo and passenger capacity. Most of the funding is being provided by the European Bank for Reconstruction and Development. Moldovan officials hope the modernization will attract more foreign investment. Foreign investment in Moldova is valued at about $200 million. Public utilities including electric power, gas and water supply comprise slightly more than half of the foreign investment participation. The food processing industry accounts for about a quarter of foreign investment. Russia, Italy, Germany, the United States, Israel and Romania are the top foreign investors. American investments has a familiar look. McDonald's has opened two restaurants in Chisinau. The restaurants are usually jam-packed with customers. McDonald's plans to stretch its golden arches throughout the country, opening a total of nine restaurants. Coca-Cola has invested $9.5 million into a bottling plant near Chisinau. Several other American companies are also involved in joint ventures with Moldovan enterprises. The American Chamber of Commerce in Moldova is actively encouraging American CEOs to visit Moldova. "The Europeans are very aggressively undertaking business in Moldova," says Baron. "There are opportunities for American companies but they are steadily diminishing. I want to encourage American businesses to invest because now is the time." |
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Table of Contents (1) Moldova: a 'model of democracy' |
