HomeReportsBureau of Economic and Business Affairs2020 Investment Climate Statements…Moldova

# 					2020 Investment Climate Statements: Moldova			

 In this section										/

													EXECUTIVE SUMMARY											

                -  EXECUTIVE SUMMARY 
                -  1. Openness To, and Restrictions Upon, Foreign Investment   
                -  2. Bilateral Investment and Taxation Treaties   
                -  3. Legal Regime   
                -  4. Industrial Policies   
                -  5. Protection of Property Rights   
                -  6. Financial Sector   
                -  7. State-Owned Enterprises   
                -  8. Responsible Business Conduct   
                -  9. Corruption   
                -  10. Political and Security Environment   
                -  11. Labor Policies and Practices   
                -  12. U.S. International Development Finance Corporation (DFC) and Other Investment Insurance Programs   
                -  13. Foreign Direct Investment and Foreign Portfolio Investment Statistics   
                -  14. Contact for More Information   

## EXECUTIVE SUMMARY

Since gaining independence in 1991, Moldova has made some progress in adopting free-market economic reform and enshrining democratic principles in its institutions. However, its investment climate still presents significant challenges. Recent events have underscored these vulnerabilities. Moldova’s tumultuous political situation in 2019 hindered foreign investment. In early 2020, the government successfully completed a $178 million IMF program and implemented some necessary financial sector reforms. The economic consequences of the COVID-19 pandemic also hit the country hard, as Moldova’s unemployment increased, diaspora returned, and remittances plummeted. Additional progress is unlikely ahead of the November 2020 presidential elections.

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. Moldova ranks 120 out of 180 on the Transparency International Corruption Perceptions Index. Major investment climate concerns in 2020 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.

Thanks to negotiations linked to Moldova’s WTO accession, modern commercial legislation has been adopted in accordance with WTO rules. 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. For example, an environmental tax is applied on bottles and other packaging of imported goods, but not levied on bottles and packaging produced in Moldova. Additionally, the government may liberally cite public security or general social welfare as reasons to intervene in the economy in contravention of its declared respect for market principles. There are reports of problems with customs valuation of goods, specifically that the Customs Service has been applying the maximum possible values to imported goods, even if their actual purchase value was far lower.

In June 2014, Moldova signed an Association Agreement (AA) with the European Union (EU), including a Deep and Comprehensive Free Trade Agreement (DCFTA), committing the government to a course of reforms to bring its governmental, regulatory, and business practices in line with EU standards. The DCFTA has helped integrate Moldova further into the European common market and created more opportunities for investment in Moldova as a bridge between Western and Eastern European markets. The Government approved an Action Plan for the implementation of AA/DCFTA in 2017-2019. With the COVID-19 crisis taking its toll, Moldova’s GDP is projected to decrease by 4.1 percent in 2020.

Following the inconclusive February 2019 parliamentary elections and ensuing political uncertainty, the government’s main policy accomplishment was completing the IMF program. Although enough EU-required reforms were completed to receive the first of the three tranches of EUR 100 million in macro financial assistance, the government failed to meet requirements for the second and third tranches.

While a number of large foreign companies have taken advantage of tax breaks in the country’s free economic zones, foreign direct investment (FDI) remains low. Finance, automotive, light industry, agriculture, food processing, wine, and real estate have historically attracted foreign investment. Largely through USAID programs, Embassy Chisinau has supported the development of a number of these emerging sectors, yet risks remain.. The National Strategy for Investment Attraction and Export Promotion 2016-2020 identified seven priority sectors for investment and export promotion: agriculture and food processing, automotive, business services such as business process outsourcing (BPO), clothing and footwear, electronics, information and communication technologies (ICT), and machinery.

Private investors, including several U.S. companies, have shown strong interest in the information and communications technology (ICT) sector, especially after Moldova established a preferential tax regime for the sector. Improvements in the strength and transparency of the financial sector also helped attract interest. Many U.S. businesses have also explored opportunities in the agricultural and energy sectors.

							1. Openness To, and Restrictions Upon, Foreign Investment					

**Policies Towards Foreign Direct Investment**

One of the poorest countries in Europe, Moldova relies heavily on foreign trade and remittances from workers abroad for its economic growth. Under Moldovan law, foreign companies enjoy national treatment in most respects. In principle, the government views FDI as vital for sustainable economic growth and poverty reduction. In 2019, the government tried to attract more foreign investors, but a lack of qualified labor and the continued emigration of qualified, working-age Moldovans undermined those efforts. The COVID-19 crisis will disproportionally affect foreign investment as low-skilled diaspora return to Moldova – adding to unemployment numbers – and remittances are expected to sharply decline.

Moldova ratified its Association Agreement with the EU in 2016, with the intent of bringing closer political association and economic integration with the EU. The DCFTA, a component of the Association Agreement, provides for mutual elimination of customs duties on industrial and most agricultural products and for further liberalization of the services market. It also addresses other barriers to trade and reforms in economic governance, with the goal of strengthening transparency and competition and adopting EU product standards. Given its small economy, Moldova has relied on a liberalized trade and investment strategy to increase the export of its goods and services to the EU.

A member of the WTO since 2001, Moldova has signed bilateral and multilateral free trade agreements, including:

- Commonwealth of Independent States (CIS) Free Trade Agreement
- Central European Free Trade Agreement
- EU DCFTA
- Turkey

Since September 2013, Moldova has faced a Russian ban on its alcoholic beverage exports, which is significant given its substantial wine industry. After signing the Association Agreement and DCFTA in 2014, Russia imposed trade bans on Moldova’s exports of fruit, canned products, and fresh and processed meat as a means to impact Moldova’s economy and foreign policy. These Russian trade bans drove Moldova to expand to new export markets, and, despite the COVID-19 pandemic, the EU continues to be the country’s largest export destination, absorbing more than half of all Moldovan exports. Nonetheless, Moldova’s Socialist-led government has renewed efforts to expand trade with Russia. In 2020, Moldova also participated as an observer in the Eurasian Economic Union meeting.

In addition to priority sectors, the government has identified in its national development strategy “Moldova 2020” seven priority public sector areas for development and reform: education; access to financing; road infrastructure; business regulation; energy efficiency; justice system; and social insurance. The government has made a formal commitment to accelerate the country’s development by making the economy more capital-intensive, sustainable, and knowledge-based. Thus far the government has not fully completed its commitments under the Plan. In fall 2019, the government published an overall Action Plan for 2020-2021 and committed to implement outstanding AA/DCFTA requirements.

**Limits on Foreign Control and Right to Private Ownership and Establishment**

There are no formal limits on foreign control of property and land, with the significant exception that foreigners are expressly prohibited from owning agricultural or forest land, even via a locally-domiciled corporation or business. However, foreigners are permitted to buy all other forms of property in Moldova, including land plots under privatized enterprises and land designated for construction.

Moldova does not have a formal investment screening mechanism for inbound foreign investment but is working on putting in place a mechanism to screen for risks to national security. Under Moldovan law, foreign companies enjoy national treatment in most respects. The Law on Investment in Entrepreneurship prohibits discrimination against investments based on citizenship, domicile, residence, place of registration, place of activity, state of origin, or any other grounds. The law provides for equitable conditions for all investors and rules out discriminatory measures hindering management, operation, maintenance, utilization, acquisition, extension, or disposal of investments. Local companies and foreigners are to be treated equally with regard to licensing, approval, and procurement. Companies registered in questionable tax havens are technically prohibited from holding shares in commercial banks.

By statute, special forms of legal organizations and certain activities require a minimum of capital to be invested (e.g., MDL 20,000 (USD 1,125) for joint stock companies, MDL 15 million (USD 844,000) for insurance companies, and MDL 100 million (USD 5.6 million) for banks).

Moldovan law restricts the right to purchase agricultural and forest land to Moldovan citizens. Foreigners may become owners of such land only through inheritance and may only transfer the land to Moldovan citizens. In 2006, Parliament further restricted the right of sale and purchase of agricultural land to the state, Moldovan citizens, and legal entities without foreign capital. There are reportedly Moldovan-registered companies with foreign capital known to own agricultural land by means of loopholes in the previous law. The only straightforward option available to foreigners who wish to use agricultural land in Moldova is to lease the land.

**Other Investment Policy Reviews**

The latest Investment Policy Review of Moldova was conducted by the United Nations Conference on Trade and Development (UNCTAD) as part of a broader South-East Europe Review in 2017 and can be accessed at: https://unctad.org/en/PublicationsLibrary/diaepcb2017d6_en.pdf

https://unctad.org/en/PublicationsLibrary/diaepcb2017d6_en.pdf

Moldova underwent a trade policy review by the World Trade Organization (WTO) in October 2015: https://www.wto.org/english/tratop_e/tpr_e/tp423_e.htm

**Business Facilitation**

Moldova has an investment promotion agency to assist prospective investors with information about business registration or industrial sectors, facilitate contact with relevant authorities, and organize study visits. The Investment Agency has an investment guide available on its website: invest.gov.md

The government has established a special council for promoting investment projects of national importance and to tackle red tape limiting larger investment, and has taken steps over the years to simplify and streamline the process of business registration and licensing, lower tax rates, strengthen tax administration, and increase transparency.

Business registration is overseen by the Public Services Agency, created in 2017 as a result of the merger of the State Registration Chamber, Licensing Chamber, Land Registry, Civil Records Service, and State Information Center Registry.

By law, registration should take three days for a standard procedure or four hours for an expedited procedure and is done in two stages. The first stage involves submission of an application and a set of documents, the range of which may vary depending on the legal form of the business (LLC, joint-stock company, sole proprietorship, etc.). At the second stage, the Agency issues a registration certificate and a unique identification number for the business, conferring full legal capacity to the entity. In 2010, the government introduced the “one-stop-shop” principle, under which businesses are relieved of the requirement to register separately with fiscal, statistical, social security, or health insurance authorities. There are currently no procedures for online business registration. Certain types of activity listed in the law on licensing require businesses to be first licensed by public authorities.

In 2006, the Moldovan Parliament ratified the 1961 Hague Convention on Abolishing the Requirement for Legalization for Foreign Public Documents. Acceptance of U.S. apostilles applied on official documents simplifies the legalization of official documents issued in the United States that are required in the process of business registration.

**Outward Investment**

Moldova does not have an official policy or mechanism for promoting or incentivizing outward investment.

							2. Bilateral Investment and Taxation Treaties					

Moldova has signed bilateral investment protection and promotion agreements with 44 countries. In addition to the United States, these include: Albania, Austria, Azerbaijan, Belarus, Belgium, Bosnia and Herzegovina, Bulgaria, Canada, China, Croatia, Cyprus, the Czech Republic, Estonia, Finland, France, Georgia, Germany, Greece, Hungary, Iran, Israel, Italy, Kuwait, Kyrgyzstan, Latvia, Lithuania, Luxembourg, Montenegro, the Netherlands, Poland, Qatar, Romania, Russia, Slovakia, Slovenia, Spain, Switzerland, Tajikistan, Turkey, Ukraine, United Arab Emirates, the United Kingdom, and Uzbekistan.

Moldova has a bilateral treaty with the United States on the Encouragement and Reciprocal Protection of Investment. Moldova has not signed a separate bilateral taxation treaty with the United States; however, the U.S. Government applies to former Soviet republics, including Moldova, the Convention on Matters of Taxation signed with the USSR on June 20, 1973, which also deals with avoidance of double taxation.

Moldova has signed 50 double taxation avoidance treaties with the following countries: Albania, Armenia, Austria, Azerbaijan, Belarus, Belgium, Bosnia and Herzegovina, Bulgaria, Canada, China, Croatia Cyprus, the Czech Republic, Estonia, Finland, Georgia, Germany, Greece, Hungary, Ireland, Israel, Italy, Japan, Kazakhstan, Kuwait, Kyrgyzstan, Latvia, Lithuania, Luxembourg, Macedonia, Malta, Montenegro, the Netherlands, Oman, Poland, Portugal, Romania, Russia, Serbia, Slovakia, Slovenia, Spain, Tajikistan, Turkey, Turkmenistan, Ukraine, United Arab Emirates, the United Kingdom, and Uzbekistan.

Moldova has signed free trade agreements with 43 countries, among them member states of the Commonwealth of Independent States (CIS) and the Central European Free Trade Agreement (CEFTA), and Turkey. Moldova has also undertaken FTAs with China, the United Kingdom and the European Free Trade Area (EFTA). In 2008, Moldova moved from the extended generalized system of preferences (GSP-plus) with the EU to autonomous trade preferences, which expanded the duty-free access of Moldovan goods to EU markets. In September 2014, the Deep and Comprehensive Free Trade Agreement (DCFTA) supplanted the Autonomous Trade Preferences regime.

							3. Legal Regime					

**Transparency of the Regulatory System**

The Prime Minister chairs an Economic Council, which liaises with the Moldovan business community to discuss government proposals and gather ideas to improve Moldova’s economy, especially in response to the COVID-19 crisis. Laws and regulations are published in the official gazette called Monitorul Oficial, while a database of laws and regulations is available online at http://www.legis.md.

The Foreign Investors Association (FIA) was established in 2004 with the support of the OECD. FIA engages in a dialogue with the government on topics related to the investment climate and produces an annual publication of concerns and recommendations to improve the investment climate. In 2006, the American Chamber of Commerce (AmCham) registered in Moldova, presenting another voice for the business community. In 2011, a group of ten large EU investors founded the European Business Association (EBA). These are the three largest foreign business associations, and they regularly engage in policy discussions with the government.

All regulations and governmental decisions related to business activity have been published in a special business registry, “Register of Regulations on Business Activity,” to raise the awareness of businesspeople about their rights, increase the transparency of business regulations, and help fight corruption. The government has an approved list of business permits and authorizations. Government agencies and inspectors cannot issue any form of documents not included in the list.

The Moldovan government generally publishes significant laws in draft form for public comment. Draft laws are also available on-line, on the website of Moldovan Parliament. Business and trade associations provide other opportunities for comment. A significant exception to this norm is a mechanism that allows Parliament to also propose draft laws.. The working group of the State Commission for Regulation of Entrepreneurial Activity, which was established as a filter to eliminate excessive business regulations, meets to vet draft governmental regulations dealing with entrepreneurship. The working group’s meetings are open to interested businesses and the agenda is published online: https://mei.gov.md/ro/agenda.

Nevertheless, bureaucratic procedures are not always transparent, and red tape often makes processing registrations, ownership, and other procedures unnecessarily long, costly, and burdensome. Discretionary decisions by government officials provide room for abuse and corruption. While the government adopted laws to improve the business climate and reduce excessive state controls and regulation, effective implementation is insufficient.  This inconsistent application of laws and regulations undermines fair competition and adds uncertainty for less politically-connected businesses, particularly small- and medium-sized businesses as well as new entrants. Moldova committed to implementing International Financial Reporting Standards (IFRS) in 2008. Use of IFRS is required by law for all public interest entities (financial entities, investment funds, insurance companies, private pension funds, and publicly listed entities) and national accounting standards (which approximate IFRS in many ways) are used by other firms, although many use IFRS as well due to foreign ownership.

Moldova committed to implementing International Financial Reporting Standards (IFRS) in 2008. Use of IFRS is required by law for all public interest entities (financial entities, investment funds, insurance companies, private pension funds, and publicly listed entities) and national accounting standards (which approximate IFRS in many ways) are used by other firms, although many use IFRS as well due to foreign ownership.

Moldova has a “one stop window” which provides clear and uniform rules for the release of information and standardized documents for business registration.

A law simplifying the system of inspectorates and various inspection bodies was adopted in 2017 to increase efficiency and reduce regulatory burden. Through the reformation of inspection bodies, the government intends to reorganize the state inspection agencies for better planning and monitoring of inspectors’ activity. By reducing the number of inspection agencies and introducing risk-based criteria for inspections, the government seeks to improve the business climate by reducing the opportunity for inspections to be used for political purposes.

**International Regulatory Considerations**

The EU Association Agreement (AA), including a Deep Comprehensive Free Trade Area (DCFTA), has binding regulatory provisions committing Moldova to a reform agenda and to approximating domestic legislation to EU standards in a range of areas, including corporate law, labor, consumer protection, competition and market surveillance, general product safety, tax, energy, customs duties, public procurement, intellectual property rights, and others. Under the DCFTA, Moldova will gradually abolish duties and quotas in mutual trade in goods and services. It will also eliminate non-tariff barriers by adopting EU rules on health and safety standards, intellectual property rights, and other fields. The agreement contains a timeframe for implementation, with phase-ins up to ten years.

Moldova has been a member of the World Trade Organization (WTO) since 2001 and, as such, is a signatory to the General Agreement on Trade in Services (GATS), the Agreement on Trade Related Investment Measures (TRIMs) and the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). These agreements contain major investment-related commitments, such as opening to the establishment of foreign service providers, prohibiting local content, trade-balancing, and domestic sales requirements (TRIMs), and protection of intellectual property(TRIPS). No major WTO TRIMS inconsistencies have been reported.

As a WTO member, Moldova must notify draft technical regulations to the WTO Committee on Technical Barriers to Trade. In 2016, Moldova ratified the WTO Trade Facilitation Agreement and adopted a number of measures to conform to WTO requirements.

The government has undertaken incremental steps since 2017 on a draft Customs Code, which would merge existing separate laws on customs procedures and goods crossing national borders and approximate national customs rules to the EU Customs Code. In 2017, the government changed customs rules to align with the EU Authorized Economic Operator requirements and Approved Exporter conditions.

Thanks to negotiations linked to Moldova’s WTO accession, modern commercial legislation has been adopted in accordance with WTO rules. 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. For example, an environmental tax is applied on bottles and other packaging of imported goods, but not levied on bottles and packaging produced in Moldova. Additionally, the government may liberally cite public security or general social welfare as reasons to intervene in the economy in contravention of its declared respect for market principles. There are reports of problems with customs valuation of goods, specifically that the Customs Service has been applying the maximum possible values to imported goods, even if their actual purchase value was far lower. This has increased customs revenues but disadvantaged importers.

**Legal System and Judicial Independence**

Moldova has a civil law legal system with codified laws that govern different aspects of life, including business, trade, and economy. The country’s legal framework consists of its constitution, organic and ordinary laws passed by the Parliament, and administrative acts issued by the government and other public authorities. Although Moldovan courts are constitutionally independent, their structures have facilitated government and political interference; the courts suffer from inefficiency and low public trust.

The court system consists of lower courts (i.e., trial courts), four courts of appeal, the Supreme Court of Justice, and a separate Constitutional Court.

Moldova is preparing a new justice reform strategy in 2020 to build on its 2016 reform strategy Parliament passed amendments in 2016 “optimizing” the country’s court system as part of broader justice sector reforms intended to reduce the number of trial courts in Moldova from 40 to 15. Specialized courts such as the Commercial Circumscription Court and Military Court were eliminated. Five trial courts from Chisinau were conceptually merged into one — the Chisinau trial court – although in 2018 the “merged” Chisinau trial court was further reorganized to specialize across five districts (investigative and contravention; criminal; administrative; bankruptcy; and civil, which includes adjudication of commercial disputes). The government’s court optimization plan is scheduled to be fully implemented by 2027.

The 2016 reforms created two specialized quasi-independent prosecution offices. The Anticorruption Prosecution Office is responsible for investigating and prosecuting corruption, bribery and abuse of power by public officials, and money laundering. The Prosecution Office on Combating Organized Crime and Special Cases investigates and prosecutes organized, transnational and particular complex crimes, including tax evasion, smuggling, intellectual property offenses, trafficking in persons, and narcotics. In 2017-2019, the Moldovan Prosecution Service continued the implementation of reforms under a law on the prosecution service passed in 2016. The Prosecutor General’s Office (PGO) guided and led the drafting of new regulations for the specialized prosecution offices, regional, district and municipal offices.

**Laws and Regulations on Foreign Direct Investment**

In addition to its international agreements, Moldovan laws affecting FDI include the Civil Code, the Law on Property, the Law on Investment in Entrepreneurship, the Law on Entrepreneurship and Enterprises, the Law on Joint Stock Companies, the Law on Small Business Support, the Law on Financial Institutions, the Law on Franchising, the Tax Code, the Customs Code, the Law on Licensing Certain Activities, and the Law on Insolvency.

The current Law on Investment in Entrepreneurship came into effect in 2004. It was designed to be compatible with European standards in its definitions of types of local and foreign investment. It provides guarantees of investors’ rights, prohibitions against expropriation or similar actions, and for payment of damages if investors’ rights are violated. The law permits FDI in all sectors of the economy, while certain activities require a business license.

**Competition and Anti-Trust Laws**

In 2012, Parliament passed a law on competition in line with EU practice and legislation. The National Competition Agency was subsequently renamed the Competition Council. The Competition Council oversees compliance with competition and state-aid provisions and initiates examination of alleged violation of competition laws. The Competition Council may request cessation of action, prescribe behavioral or structural remedies, and apply fines.

**Expropriation and Compensation**

The government has had a history of depriving investors, both national and foreign, of their businesses in various forms. Many of them have sued the government at the European Court for Human Rights for violation of the right to fair trial and of the respect for property, or in international arbitral tribunals.

The Law on Investment in Entrepreneurship states that investments cannot be subject to expropriation or to measures with a similar effect. However, an investment may be expropriated if done for purposes of public utility, is not discriminatory, and just compensation is provided. If a public authority violates an investor’s rights, the investor is entitled to compensation equivalent to the actual damages at the time of occurrence, including any lost profits.

The government has given no indication of intent to discriminate against U.S. investments, companies or representatives by expropriation, or of intent to expropriate property owned by citizens of other countries. No particular sectors are at greater risk of expropriation or similar actions in Moldova.

Since 2001, the government has cancelled several privatizations, citing the failure of investors to meet investment schedules or irregularities committed during the privatization process. While the government agreed to repay investors in such disputes, investors have had to apply to the European Court of Human Rights (ECHR) to enforce compensation payments. The government has complied with the ECHR rulings in these instances.

**Dispute Settlement**

***ICSID Convention and New York Convention***

In 2011, Moldova ratified the Convention on the International Center for the Settlement of Investment Disputes (ICSID – Washington Convention). The country also ratified the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards. Domestic courts recognize and enforce foreign arbitral awards. Moldova is also a party to the Geneva European Convention on International Commercial Arbitration of April 21, 1961, and the Paris Agreement relating to the application of the European Convention on International Commercial Arbitration of December 17, 1962.

***Investor-State Dispute Settlement***

Moldova is signatory to a number of bilateral investment treaties (see chapter 3 above), including the U.S.-Moldovan Treaty Concerning the Encouragement and Reciprocal Protection of Investment, which includes access to international arbitration for investment disputes.

Local courts recognize and enforce foreign arbitral awards against the government. There are no known cases when the Moldovan government denied voluntary payment under an arbitral award rendered against it.

***International Commercial Arbitration and Foreign Courts***

Private parties may choose alternative dispute resolution mechanisms instead of going to courts. Moldovan law provides the options of mediation and arbitration. The arbitration legislation is modeled after UNCITRAL rules. There are a number of arbitration bodies available in Moldova, including the arbitration court of the Moldovan Chamber of Commerce and Industry. The American Chamber of Commerce in Moldova (AmCham Moldova) has established the Chisinau Court of International Commercial Arbitration (CACIC) under its auspices.

Recognition and enforcement of foreign judgments are regulated by a complex framework of documents, including the Code for Civil Procedures, international conventions and bilateral treaties. Therefore, depending on the nationality of the court, Moldovan courts may apply different legal norms in examining the enforcement of foreign judgments. However, as a rule, foreign judgments are enforceable in Moldova on the basis of reciprocity and subject to New York Convention obligations.

Moldova’s court system generally enjoys a low level of public trust and is perceived to be vulnerable to acts of corruption, while court processes lack transparency. The overall expectation in court hearings involving representatives of public authorities, including economic entities, is that final court rulings will be in favor of state representatives. While arbitration is often seen as a preferable option to the courts, the courts must still enforce the arbitral decision. Investors have at times been discouraged by the slow pace of court enforcement of arbitral awards and the judge’s perceived discretion over the arbitral decision.

**Bankruptcy Regulations**

In terms of resolving insolvency, the World Bank ranks Moldova 67th out of 190 economies in the 2020 Doing Business Index; it takes creditors on average 2.8 years to recover their credit. . This is below the regional average and trails EU members in Central and Eastern Europe. The country has changed its insolvency law to introduce expedited insolvency proceedings, including by granting priority to secured creditors, introducing new restructuring mechanisms, reducing opportunities for appeals, adding moratorium provisions, establishing strict statutory periods in the proceedings, and enhancing the role of insolvency administrators.

							4. Industrial Policies					

**Investment Incentives**

Investment incentives are applicable for all Moldovan-registered businesses, irrespective of the country of origin of the investment. Certain incentives apply only in specially-designated areas such as free economic zones and industrial parks. Until 2021, Moldovan legislation allows employees of IT companies to benefit from incentives on personal income tax and social security contributions. Also, a 2017 law on information technology parks established a single tax for residents of the digital IT parks, calculated as the maximum between 7 percent from sales and 30 percent from the national average forecasted salary multiplied by the number of employees. There is also a range of tax incentives applicable if businesses meet certain requirements. Among those incentives are the following: value-added tax (VAT) and customs exemptions on long-term assets included in share capital; deferment of VAT liabilities on imports of materials used in manufacturing export-bound products; lower VAT rates for the hospitality and restaurant businesses; and lower social contributions and VAT rates for agricultural businesses.

**Foreign Trade Zones/Free Ports/Trade Facilitation**

At present, seven free economic zones (FEZs), one international free port – Giurgiulesti – and one international free airport – Marculesti – are registered in Moldova. According to Moldovan law, these zones support job creation, attraction of foreign and domestic investments, and export-oriented production. The Law on Free Economic Zones regulates FEZ activity. Foreigners have the same investment opportunities as local entities. FEZ commercial entities enjoy the following advantages: 25 percent exemption from income tax; 50 percent exemption from tax on income from exports; for investments of more than USD 1 million, a three-year exemption from tax on income resulting from exports; and for investments of more than USD 5 million, a five-year exemption from tax on income from exports; zero value-added tax; exemption from excises; and a stand-still guarantee against any new changes in the law for 10 years. In addition, residents investing at least USD 200 million in the FEZ are afforded a stand-still guarantee regarding new regulatory changes for the entire period of operation in the FEZ, but such protection cannot extend beyond 20 years.

The government also passed a 2008 law creating ten industrial parks with the aim of attracting investments in industrial projects. Businesses operating in those parks do not receive any special tax treatment, but typically have access to ready-to-use production facilities, offices and lower office rents for 25 to 30 years. Typically, these are idle premises of former industrial State-owned enterprises.

Similar to the FEZs, the Giurgiulesti Free International Port, Moldova’s only port accessible to sea-going vessels, was established in 2005, to be sunsetted in 2030. Commercial residents of the port enjoy the following advantages: 25 percent exemption from income tax for the first 10 years following the first year when taxable income is reported; 50 percent exemption from tax on income for the remaining years; exemption from value-added tax and excises on imports and exports outside Moldova’s customs territory; zero valued-added tax on imports from Moldova; and a stand-still guarantee for commercial residents regarding any regulatory changes until February 17, 2030.

The Marculesti International Free Airport, a former military air base, was established in 2008 as a free enterprise zone for a 25-year period to develop cargo air transport. Airport management is also interested in turning Marculesti into a regional hub for low-cost passenger airlines.

**Performance and Data Localization Requirements**

All incentives are applied uniformly to domestic and foreign investors. The Law on Investment in Entrepreneurship, in effect since 2004, does not protect new investors from legislative changes.

No requirements exist for investors to purchase from local sources or to export a certain percentage of their output.

The Embassy is not aware of any reports of forced data localization or special requirements targeting foreign IT providers. However, companies maintaining servers with customer databases outside Moldova have to comply with cumbersome domestic procedures related to protection of personally identifiable information. The Ministry of Economy and Infrastructure is responsible for developing strategies and policies on electronic communication. The National Regulatory Agency for Electronic Communications and Information Technology (ANRCETI) is responsible for regulations and oversight. The National Center for Personal Data Protection (NCPDP) is the supervisory body for personal data processing.

No limitations exist on access to foreign exchange in relation to a company’s exports. There are no special requirements that nationals own shares of a company. Both joint ventures and wholly foreign-owned companies may be set up in Moldova.

In fact, while not an official policy, in sectors of the economy that require large investments, experienced management, and technical expertise such as energy or telecommunications, the government has shown preference for experienced foreign investors over local investors. In other sectors, foreign and local investors formally receive equal treatment.

Moldovan law allows investments in any area of the country, in any sector, provided that national security interests, anti-monopoly legislation, environmental protection, public health, and public order are respected.

Some performance requirements are connected to tax incentives, but are enforced equitably and described in the Tax Code and related governmental decisions and instructions. Foreign investors are required to disclose the same information as local investors. Moldova has no discriminatory visa, residence, or work-permit requirements inhibiting foreign investors’ mobility in Moldova. The government has set up a one-stop shop for foreigners applying for Moldovan residence and work permits in an effort to streamline a complicated procedure.

Moldova has a liberal commercial regime with more than 100 countries. According to the Tax Code, Moldovan exports are exempt from value added tax. Although there are no formal import price controls, there are reports that Moldovan Customs Service may make arbitrary price assessments on certain types of imported goods for revenue-enhancing purposes.

							5. Protection of Property Rights					

**Real Property**

Moldova’s laws protect all property rights. There is a national cadastral office, which registers all ownership titles in the real estate registry. However, the mortgage market is still underdeveloped. In addition, the judicial sector remains weak and does not always fully guarantee the property rights of citizens and foreign investors.

In the World Bank’s Doing Business Index Moldova ranks 22nd among 190 economies on the ease of registering property.

**Intellectual Property Rights**

Despite efforts to improve its intellectual property rights (IPR) regime and set up relevant executive structures in the government, Moldova does not fully enforce its IPR laws due to conflicts of interest, lack of resources, and a low level of awareness and training among law enforcement agencies. The concept of IPR is largely unrecognized by the population. The country has an agency for the protection of IPR, the State Agency on Intellectual Property (AGEPI), which continues working on improving the legal framework and adjusting it to EU norms, increasing public awareness, and building capacity in law enforcement. Under the AA/DCFTA, the government is working to bring Moldova’s practices in line with the EU.

Moldova is party to the majority of international treaties on IPR, including the World Trade Organization (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) and 26 World Intellectual Property (WIPO) treaties, including the Berne Convention, the Paris Convention, the Patent Cooperation Treaty (PCT), the WIPO Copyright Treaty, and the WIPO Performances and Phonograms Treaty.

Along with other public institutions, AGEPI works on fulfilling Moldova’s IPR obligations as provided by the 2017-2019 National Action Plan for the implementation of the Association Agreement. In 2018, Moldova adopted the third Action Plan on the implementation of the National Strategy on Intellectual Property through 2020.  While some progress is being reported, there are still many outstanding issues related to geographical Igdications (GIs) that need to be addressed.

In 2018, AGEPI was reorganized and consolidated . Efforts have been made to improve access to, and the quality of, IPR services.  AGEPI created a free and publicly available online IPR database, which can be found at www.db.agepi.md. AGEPI also recently launched an online application filing system, which accounts for over 45 percent of national IPR application filings. In 2019, AGEPI held its first basic IPR e-course on its IPR e-learning platform and continued integration into regional and international IT platforms, including e-PCT, which is an online portal for filing and managing PCT applications.

Moldova’s criminal code prohibits the unauthorized disclosure of trade secrets. A new law for the protection of pharmaceutical and medicinal product data came into force on January 1, 2020, the aim of which is to guarantee the confidentiality, non-disclosure, and non-reliance of data submitted during the course of obtaining regulatory and market approval of the products .

Moldovan authorities, including Customs, the Ministry of Interior, and the General Prosecutor’s Office track statistics for IPR violations annually, but such reports are not readily available online . To improve IPR enforcement, Moldovan authorities are developing an IPR Information System to track the exchange of IPR data between agencies, including AGEPI, Customs, Prosecution, Police, the Agency for Consumer Protection and Market Surveillance, and the Agency for Court Administration. The system is expected to become operational in 2020.

A report containing statistical and analytical data on IPR enforcement collected from all relevant stakeholders is released annually by the IPR Enforcement Observatory established by AGEPI. The 2019 Report is available in English and Romanian languages on the Observatory web-site: http://observatorpi.md/studii-rapoarte/raport-na%C8%9Bional/ .

Moldova is not listed in the U.S. Trade Representative (USTR) Special 301 Report, nor is it included on the Notorious Markets List.

For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at www.wipo.int/directory/en.

							6. Financial Sector					

**Capital Markets and Portfolio Investment**

Moldova’s securities market is underdeveloped. Official National Bank of Moldova (NBM) statistics include data on portfolio investments, yet there is a lack of open-source information fully reflect the trends and relevance of these investments. NBM data shows that most portfolio investments target banks, while the National Statistics Bureau does not differentiate between foreign direct investment and portfolio investments of less than 10 percent in a company.

Laws, governmental decisions, NBM regulations, and Stock Exchange regulations provide the framework for capital markets and portfolio investment in Moldova. The government began regulatory reform in this area in 2007 with a view to spurring the development of the weak non-banking financial market. Since 2008, two bodies in particular – the NBM and the National Commission for Financial Markets – have regulated financial and capital markets.

Foreign investors are not restricted from obtaining credit from local banks, the main source of business financing. However, access to credit continues to be difficult, especially for SMEs, in light of stringent lending practices; this has been exacerbated by the COVID-19 pandemic. Local commercial banks provide mostly short-term, high-interest loans and require large amounts of collateral, reflecting the country’s perceived high economic risk. Progress in lending activity suffered a sharp reversal in 2015 in the wake of the late-2014 banking crisis, triggered by a massive bank fraud, which severely weakened the banking system. Extreme monetary tightening by the NBM in the wake of significant currency flight connected to the resulting bank bailouts led to prohibitively high interest rates, which dipped below 9 percent in 2019.

Large investments can rarely be financed through a single bank and require a bank consortium. Recent years have seen growth in leasing and micro-financing, leading to calls for clear regulation of the non-bank financial sector. As a result, Parliament passed a new law on the non-bank financial sector, which entered into effect on October 1, 2018. Raiffeisen Leasing remains the only international leasing company which has opened a representative office in Moldova.

Even prior to the COVID-19 pandemic, the private sector’s access to credit instruments has been limited by the insufficiency of long-term funding, high interest rates, and unrealistic lending forecasts by banks. Financing through local private investment funds is virtually non-existent. A few U.S. investment funds have been active on the Moldovan market. The government adopted a 2018-2022 strategy for the development of the non-banking financial sector aimed at bolstering the capital markets combined with prudential supervision. A new Central Securities Depository was established under the supervision of the National Bank of Moldova to bring greater transparency and integrity to ownership and the recordkeeping associated with it.

Acting as an independent regulatory agency, the National Commission for Financial Markets (NCFM) supervises the securities market, insurance sector and non-bank financial institutions. A new capital markets law adopting EU regulations came into effect in 2013. It was designed to open up capital markets to foreign investors, strengthen NCFM’s powers of independent regulator, and set higher capital requirements on capital market participants.

**Money and Banking System**

In 2014, a crisis at three Moldovan banks (which resulted in their closure and the loss of USD 1.2 billion), two of them among the country’s largest, undermined confidence in the banking system. The role of a Moldovan bank in the “Russian Laundromat” case, estimated to have laundered from USD 20 to 80 billion, further underscored these challenges. The crisis shook Moldova’s banking system, causing some foreign correspondent banks to terminate ties with Moldovan banks and others to significantly tighten their lending.

In March 2020, Moldova successfully completed its first $178 million IMF program after implementing reforms to its financial and banking sectors. As a result of these reforms, the financial sector is better prepared to withstand the economic impact of the COVID-19 crisis. There is a high degree of capital and liquidity, and an overall reduction of non-performing loans to approximately 8 percent. Moldovan banks remain the main, albeit currently limited, source of business financing. The non-bank financial institutions however have been gaining sizable market share, especially in individual and SME lending, where banks have been encumbered by prudential banking rules. Bank assets account for about 44 percent of GDP. Banks are also the largest loan providers, with loans amounting to approximately USD 2.3 billion. The COVID-19 crisis slowed down bank lending in 2020.

Moldova currently has 11 commercial banks. The NBM regulates the commercial bank sector and reports to Parliament. Foreign bank subsidiaries must register in Moldova and operate under the local banking legislation. Although the integrity of true bank ownership records is questionable, foreign investors’ share in Moldovan banks’ capital is approximately 87 percent of total capital, and includes such major foreign investors as OTP Bank (Hungary), Erste Bank (Austria), Banca Transilvania (Romania) and Doverie Holding (Bulgaria).

As of December 31, 2019, total bank assets were MDL 90.6 billion (USD 5.16 billion) and 90 percent of total assets in the financial sector. Moldova’s three largest commercial banks account for more than 65 percent of the total bank assets, as follows: Moldova Agroindbank – MDL 25.8 billion (USD 1.47 billion); Moldindconbank – MDL 18.4 billion (USD 1.05 billion); and Victoriabank – MDL 14.7 billion (USD 834.0 million). To prevent another crisis, the NBM instituted special monitoring of these top three banks over concerns about the transparency of bank shareholders; this monitoring was lifted in April 2020.

After 2016, the Moldovan Parliament adopted legislation that would strengthen the independence of decision making at the NCFM and NBM – to help address systemic supervisory problems that had a negative effect on Moldova’s financial sector. To strengthen the system of tracking shares and shareholders, with USAID assistance, authorities put in place a law establishing the aforementioned Centralized Securities Depository. In addition, all bank shares must be sold and purchased on the Moldovan Stock Exchange. These measures have improved the transparency and reliability of the financial sector.

NBM’s Banking Law of 2018 and the Bank Recovery and Resolution Law from 2016 bring the financial sector closer to harmonization with EU standards, including through the application of stronger risk-based supervision to banks, increased enforcement powers and monetary penalties applied to banks, structures to address problem banks, and strengthening the NBM’s ability to conduct risk assessments. Also, NBM required banks to increase their credit loss provisioning and take urgent action to reinforce internal risk management as well as procedures on related-party financing. In addition, the NBM developed a methodology to better identify the related parties at banks.

Local authorities have not announced any intention to implement blockchain technologies in banking transactions. In 2017, the NBM warned domestic investors of the highly speculative nature of virtual currencies and their use as means of payment. Authorities in the breakaway region of Transnistria have passed a law encouraging the use of blockchain technologies for mining cryptocurrencies in specially created economic zones; however, this development is not expected to have any direct impact on Moldova’s financial sector.

**Foreign Exchange and Remittances**

***Foreign Exchange***

Moldova accepted Article VIII of the IMF Charter in 1995, which required liberalization of foreign exchange operations. There are no restrictions on the conversion or transfer of funds associated with foreign investment in Moldova. After the payment of taxes, foreign investors are permitted to repatriate residual funds. Residual fund transfers are not subject to any other duties or taxes and do not require special permissions. Moldova’s central bank uses a floating exchange rate regime and intervenes only to smooth sharp fluctuations.

Between late 2014 and early 2016, the national currency, the leu (plural lei), depreciated following challenges in the political environment, Russian bans on Moldovan food exports, and falling remittances from Russia, which impacted Moldova’s balance of payments. A massive banking fraud and a subsequent bailout program further undermined the leu, which depreciated by 36 percent. Since 2016, the National Bank has been pursuing a tight monetary policy that has contributed to a strengthening of the leu. In 2019, the national currency exchange rate fluctuated, but stabilized toward the end of the year.

***Remittance Policies***

No significant delays in the remittances of investment returns have been reported. Domestic commercial banks have accounts in leading multinational banks, and foreign investors enjoy the right to repatriate their earnings.

The Moldovan leu is the only accepted legal tender in the retail and service sectors in Moldova. Foreign exchange regulation of the NBM allows foreigners and residents to use foreign currencies in some current and capital transactions in the territory of Moldova. Generally, there are no difficulties associated with the exchange of foreign or local currency in Moldova.

**Sovereign Wealth Funds**

The embassy is not aware of any sovereign wealth funds run by the government of Moldova.

							7. State-Owned Enterprises					

Since gaining independence in 1992, Moldova has privatized most State-owned enterprises (SOEs), and most sectors of the economy are almost entirely in private hands. However, the government still fully or partially controls some enterprises operating in a variety of economic sectors. The major SOEs are northern electricity grids, Chisinau heating companies, fixed-line telephone operator Moldtelecom, and the state railway company. The government keeps a registry of state-owned assets, which is available on the website on the Public Property Agency https://app.gov.md/ro/advanced-page-type/registrul-patrimoniului-public.

SOEs are governed by the law on stock companies and the law on state enterprises as well as a number of governmental decisions. SOEs have boards of directors usually comprised of representatives of the line ministry, the Ministry of Economy and Infrastructure, and the Ministry of Finance. As a rule, SOEs report to the respective ministries, with those registered as joint stock companies being required to make their financial reports public. Moldova does not incorporate references to the OECD Guidelines on Corporate Governance for SOEs in its normative acts.

Moldovan legislation does not formally discriminate between SOEs and private-run businesses. By law, governmental authorities must provide a level legal and economic playing field to all enterprises. However, SOEs are generally seen as better positioned to influence decision-makers than private sector competitors. In some cases, SOEs have allegedly used these advantages to prevent open competition in individual sectors.

The Law on Entrepreneurship and Enterprises has a list of activities restricted solely to SOEs, which includes, among others, human and animal medical research, manufacture of orders and medals, postal services (except express mail), sale and production of combat equipment and weapons, minting, and real estate registration.

**Privatization Program**

Moldova launched the first of several waves of privatization in 1994. In 2007, Parliament passed a new law governing management and privatization of SOEs. Two major privatizations in 2013 – of the then-largest bank, Banca de Economii, and the 49-year concession of the Chisinau Airport – subsequently proved highly controversial. Privatization efforts in 2014 and 2015 emphasized public-private partnerships as means for companies to gain access to SOEs in infrastructure-related projects. In 2018, the government held several rounds of privatization, selling its stake in 19 companies, including airline Air Moldova and gas interconnector Vestmoldtransgaz. In 2019, the government finished privatizing state tobacco company Tutun CTC, then announced a moratorium on all further privatizations, following controversies over past sales . The government plans to resume privatization efforts in 2020, including the state telephone company Moldtelecom, as well as state railway and northern power distribution companies RED Nord and FEE Nord.

To date, Moldova has conducted privatizations through open tenders organized at the stock exchange, open to interested investors. The government may also use open outcry auctions for some properties, so-called investment or commercial tenders to sell entire companies to buyers taking on investment commitments, or to the highest bidders or public-private partnerships for infrastructure related projects. The government publishes privatization announcements on the website of the Public Property Agency www.app.gov.md and in the official journal *Monitorul Oficial*.

							8. Responsible Business Conduct					

While Moldovan legislation deals with issues pertaining to environment, workers’ rights, social fairness or governance, there is little awareness of the concept of the due diligence approach to ensuring responsible business conduct. The country’s corporate culture and private sector are still at an early stage of development and still seeking to define the nature of interactions between private business, government authorities, broader stakeholders, and the public at large. There is no governmental policy to encourage enterprises to follow OECD or UN Guidelines in this area.

Foreign companies operating in Moldova are gradually introducing the concept of corporate social responsibility as an aspect of responsible business conduct. However, the Soviet-era notion of a paternalistic government responsible for maintaining the social welfare for all citizens remains quite widespread. AmCham Moldova has set a leading example, with its corporate members engaging in a forestation project, in the rehabilitation of medical facilities, and in Christmas collection projects for orphanages.

							9. Corruption					

While Moldova has taken steps to adopt European and international standards to combat corruption and organized crime, corruption remains a major problem.

In 2012-13, the government enacted a series of anti-corruption amendments. This package included new legislation on “integrity testing” related to a disciplinary liability law for judges. It also extended confiscation and illicit enrichment statutes in the Moldovan Criminal Code as per the United Nations Convention against Corruption (UNCAC). The Constitutional Court subsequently restricted integrity testing (e.g., excluding random testing as “entrapment”), but enactment of these reforms substantially augmented Moldova’s corruption-fighting toolkit.

The National Anticorruption Center (NAC), created in 2012, focuses on investigating public corruption and bribery crimes, and is subordinated to the Parliament (the CCECC had been organized under the executive branch). Moldovan judges, who had previously enjoyed full immunity from corruption investigations, can now be prosecuted for crimes of corruption without prior permission from their self-governing body, although the Superior Council of Magistrates still must approve any search or arrest warrant against a judge.

The government has developed and enacted a series of laws designed to address legislative gaps such as the Law on Preventing and Combating Corruption, the Law on Conflict of Interests, and the Law on the Code of Conduct for Public Servants. The Criminal Code criminalizes two forms of public sector corruption: passive and active. These statutes apply only to corrupt acts and bribery committed by public officials. In 2016, Moldova continued the reform of the prosecution system through adoption of the Law on the Prosecution Service, and created two specialized prosecution agencies – the Anticorruption Prosecution Office (APO) and the Prosecution Office for Combating Organized Crime and Special Cases (PCCOCS). Beginning in 2015, specialized prosecution offices began to investigate and prosecute individuals allegedly involved in the “billion dollar” banking theft and a series of high-profile bribery, corruption, and tax evasion cases, though with only limited progress. These offices face multiple challenges, including lack of independent budgets, high workload, external interference, and serious questions about their independence, transparency and impartiality.

In 2018, APO and PCCOCS started recruitment for seconding investigators to their offices. According to the 2016 prosecution reform law, these investigators are responsible for supporting prosecutors to investigate complex corruption cases. However, even with a nearly-full complement of seconded investigators, APO still relies on NAC investigators to conduct many corruption-related investigations and prosecutions. Also in 2018, a new statutorily-created agency, the Criminal Assets Recovery Agency (CARA), began operating as a specialized unit within NAC. The selection and appointment of the agency’s leadership is coordinated through a competitive process by the NAC. The agency continues to grow and has demonstrated increased capacity to detect, track, seize and recover criminal proceeds throughout 2019.

In 2016, Parliament passed the Law on the National Integrity Authority (NIA) and the Law on Disclosure of Assets and Conflict of Interest by public officials. The NIA became operational in 2018. The director, deputy director, and all inspectors are hired in competitive processes, but the agency has not yet hired a full complement of inspectors. NIA continues to lack staff and sufficient resources to fulfill its mission. The issuance of “integrity certificates” to individuals with well-known ties to the billion dollar heist further degraded the organization’s reputation.

Moldova’s 2017-2020 National Integrity and Anticorruption Strategy was drafted and passed following public consultations, and is structured along the “integrity pillars” concept that aims to strengthen the integrity climate among civil servants at all levels. It includes a role for civil society organizations (CSOs) through alternative monitoring reports and promoting integrity standards in the private sector. The strategy addresses the complexity of corruption by employing sector-based experts to evaluate specific integrity problems encountered by different vulnerable sectors of public administration. Moldova is expected to begin developing a new strategy during 2020, led by NAC and the Ministry of Justice.

Moldovan law requires private companies to establish internal codes of conduct that prohibit corruption and corrupt behavior. Moldova’s Criminal Code also includes articles addressing private sector corruption, combatting economic crime, criminal responsibility of public officials, active and passive corruption, and trading of influence. This largely aligns Moldovan statutory law with international anti-bribery standards by criminalizing the acts of promising, offering, or giving a bribe to a public official. Anti-corruption laws also extend culpability to family members. A new illicit enrichment law was added in 2013, but its potential as an effective anti-corruption tool is severely constricted by the Constitutional Court’s interpretation of a constitutional provision creating a presumption in the law that assets possessed by a person were lawfully acquired. In 2017, the Anticorruption Prosecution Office started the only illicit enrichment case initiated in Moldova to date, against a prominent chief judge involved in the construction of private apartments. The criminal case remains unresolved, as the judge has resigned from the judiciary.

The country has laws regulating conflicts of interest in awarding contracts and the government procurement process; however these laws are not assessed as widely or effectively enforced. In 2016, Parliament added two new statutes to the Criminal Code criminalizing the misuse of international assistance funds. These provisions provide a statutory basis for prosecutors to investigate and prosecute misuse of international donor assistance by Moldovan public officials in public acquisitions, technical assistance programs, and grants

Despite the established anti-corruption framework, the number of anti-corruption prosecutions has not met international expectations (given corruption perceptions), and enforcement of existing legislation is widely deemed insufficient. In 2019, Moldova ranked 120 out of 180 (falling from 117 the prior year) among countries evaluated in the Transparency International Corruption Perceptions Index.

A Transparency International Global Corruption Barometer (GCB) survey published in 2017 showed that 84 percent of Moldovans thought the government was doing badly in fighting corruption. Globally, Moldova is among the top countries where people perceive public authorities to be most corrupt; almost 70 percent say people working in public sector institutions (the President’s office, Parliament, central government, tax inspection, police, the judiciary and local government) are assessed by those polled as highly corrupt. Almost 50 percent of Moldovans say they had to pay bribes over the past 12 months when coming in contact with public authorities. The latest GCB survey concluded that Moldova needs genuine and urgent measures to address corruption. Negative ratings of official efforts to curb corruption suggest that more must be done to reduce public sector graft and clean up institutions to act in the public interest.

The Freedom House Moldova “Nations in Transit Report” 2018 concluded the government has focused more on improving the legal framework than on implementing it. The report found anti-corruption initiatives did not contribute to tackling endemic corruption or the de-politicization of public institutions and regulatory agencies. Public competitions have been mostly non-transparent and based on controversial regulations or political loyalty to, or membership in, the ruling political group, rather than on the basis of merit. The investigation into the “billion-dollar” banking sector theft has yielded few results. Official data reported that by the end of 2018, only USD 100 million has been recovered, mainly from taxes, credits, and the sale of assets belonging to the three banks liquidated following the theft. The stolen assets have not been recovered, there remains no assurance that significant remaining funds will be recovered.

Freedom House’s most recent report, *Democracy in Retreat:****Freedom in the World 2019*, found Moldova continues to be only “partially free,” earning 58/100 points for political rights/civil liberties, 3 points less than the prior year. The decline was due largely to perceptions of ongoing corruption. According to the 2020 Heritage Foundation’s Economic Freedom Index, Moldova’s economic freedom score was 62.0, making its economy 87th, just ahead of Belarus (88) and behind Samoa (86). Its overall score increased by 2.9 points, with improvements in government integrity and government spending. Regionally, Moldova is ranked 40 of 45 countries in Europe, and its overall score is well below the regional average and approximately equal to the world average. In the rule of law area, Heritage indicated property rights are undermined by a weak and corrupt judiciary.

Opinion surveys conducted by reputable pollsters like the International Republican Institute (IRI) consistently show over 95 percent of Moldovans see corruption as a big problem for the country. Moldovans name the top corrupt institutions as: 1) Parliament; 2) public servants, including the police; 3) the judiciary; 4) top government officials; 5) political parties and their leaders.

In 2007, Moldova ratified the United Nations Convention Against Corruption, subsequently adopting amendments to its domestic anti-corruption legislation. Moldova does not adhere to the Organization for Economic Cooperation and Development (OECD) Convention on Combating Bribery. However, Moldova is part of two regional anti-corruption initiatives: the Stability Pact Anti-Corruption Initiative for South East Europe (SPAI), and the Group of States against Corruption (GRECO) of the Council of Europe. Moldova cooperates closely with the OECD through SPAI and with GRECO, especially on country evaluations. In 1999, Moldova signed the Council of Europe’s Criminal Law Convention on Corruption and Civil Law Convention on Corruption. Moldova ratified both conventions in 2003. In 2020, Moldova joined OECD’s Istanbul Anti-Corruption Action Plan.

*Resources to Report Corruption*

Ruslan FloceaDirectorNational Anti-Corruption CenterBul. Stefan cel Mare si Sfant 168, Chisinau MD2004, MoldovaTel. +373 22-257 257 (secretariat)/800-55555 (hotline)/22-257 333 (special line) secretariat@cna.md

Lilia CarasciucExecutive DirectorTransparency International MoldovaStrada 31August 1989 nr. 98, of.205, Chisinau MD2004, MoldovaTel. +373-22 203-484(office)/800-10 000 (hotline)office@transparency.md

							10. Political and Security Environment					

Levels of street crime and other types of violent crime are equal or lower in Moldova than in neighboring countries and businesses typically only employ the most basic security procedures to safeguard their personnel.  Moldova has not had significant instances of transnational terrorism.  While there have been occasional instances of political violence in the past decade, these cases have typically been directed against Moldovan state institutions and have not generally impacted the international business community in Moldova.  There have been no significant instances of political violence in the last four years and all recent large demonstrations have been peaceful.

The Embassy has received no reports over the past ten years of politically-motivated damage to business projects or installations in Moldova. In 2015 and early 2016, there was public outcry over the political class’ failure to prevent (or even facilitate) massive bank fraud where nearly 15 percent of GDP disappeared from the country’s then-three largest banks. Round-the-clock anti-government protests culminated in January 2016 in clashes with riot police when protesters tried to prevent Parliament from voting in a new government. The clashes were limited and did not turn into full-blown violence or cause extensive damage that would affect businesses in any way, and the government remained in power.

After parliamentary elections in 2019, there was a standoff between the outgoing government and a new majority coalition of opposition parties. The new coalition peacefully assumed power after calls for calm and restraint by the international community.

Separatists control the Transnistria region of Moldova, located between the Nistru River and the eastern border with Ukraine. Although a brief armed conflict took place in 1991-1992, the sides signed a cease-fire in July 1992. Local authorities in Transnistria maintain a separate monetary unit, the Transnistrian ruble and a separate customs system. Despite the political separation, economic cooperation takes place in various sectors. The government has implemented measures requiring businesses in Transnistria to register with Moldovan authorities. The Organization for Security and Cooperation in Europe (OSCE), with Russia, and Ukraine acting as guarantors/mediators and the United States and EU as observers, supports negotiations between Moldova and the separatist region Transnistria (known as the “5+2” format). Throughout the years, progress has been inconsistent, with talks stalling in 2006 and formally resuming in late November 2011. Important achievements in the past few years include the resumption of rail freight traffic through Transnistria, the opening of a bridge across the Nistru river, Transnistrian-registered vehicles gaining access to international traffic, issuance of Moldovan apostilles on Transnistrian-issued higher education diplomas, and the operation of Latin Script schools in Transnistria.

							11. Labor Policies and Practices					

For years, Moldova prided itself on its skilled labor force, including numerous workers with specialized and technical skills. However, many skilled workers have left Moldova for better paying jobs in other countries. This has led to shortages of skilled workers in Moldova. There are imbalances in the labor market arising from a general lack of workers with vocational training that employers need, on one hand, and lack of job opportunities for academically educated people, on the other. Labor shortages are reported in manufacturing, engineering, and IT. Low birth rates, emigration, and an aging population, coupled with a lack of immigration, represent a challenge to Moldova’s labor pool more generally. Around a fifth of the labor force is estimated to work abroad (around 800,000). According to World Bank population projections, if current emigration trends continue, Moldova will lose another 20 percent of its population by 2050.

Official unemployment was 5.1 percent in 2019, which is misleading given the low labor participation rate of 42.3 percent, owing to large numbers of Moldovans migrating abroad, which reduces the number of job seekers at home. Youth unemployment is more than double the national average at 10,4 percent. Employment in Moldova is largely based on agriculture, low productivity sectors, and crafts. Approximately 17 percent of the working population is employed in the informal economy; the non-agricultural workforce in the informal economy is 12 percent.

Moldova’s Constitution guarantees the right to establish or join a trade union. Trade unions have influence in the large and mostly State-owned enterprises and have historically negotiated for strong labor relations, minimum wage, and basic worker rights. Unions also have a say in negotiating collective labor agreements in various industries. Unions are less active and effective in small private companies. Moldova is a signatory to numerous conventions on the protection of workers’ rights. The country has moved toward adopting international standards in labor laws and regulations. In recent years, the government made changes to labor legislation in favor of employers and somewhat reducing unions’ input on issues related to hiring and firing personnel. Nevertheless, labor legislation is stringent in matters dealing with severance payments or leave, regulations that some foreign investors view as an impediment to labor flexibility and as putting a heavy burden on employers.

The government has drafted legislation to modernize the labor market, with a focus on skills development and vocational education training reform.

The Moldovan General Federation of Trade Unions has been a member of the ILO since 1992, and has been affiliated with the International Confederation of Free Unions (ICFU) since 1997. The Federation split into two separate unions in 2000, but merged in 2007, forming the National Trade Union Confederation (CNSM), which obtained membership in the International Trade Union Confederation in 2010.

							12. U.S. International Development Finance Corporation (DFC) and Other Investment Insurance Programs					

In 1992, the Moldovan and U.S. governments signed an investment incentive agreement that exempts DFC’s predecessor, Overseas Private Investment Corporation (OPIC), from Moldovan taxes on loan interest and fees. OPIC became active in Moldova in September 1997. Since then, OPIC has provided a number of financial and insurance products, including political risk insurance, to U.S. businesses operating in Moldova in such fields as agribusiness, telecommunications, banking, consulting, transportation logistics, and finance.

The U.S. Export-Import Bank (EXIM) provides U.S. companies exporting to Moldova with short- and medium-term financing in the public and private sectors under its insurance, loan, and loan guarantee programs. In 2000, EXIM and Moldova signed a Framework Guarantee Agreement setting the terms for the Government of Moldova to issue sovereign guarantees to facilitate EXIM financing U.S. exports to Moldova. Also in 2000, EXIM and Moldova signed a Project Incentive Agreement that enabled EXIM to consider financing U.S. exports for creditworthy private sector projects in Moldova on a non-sovereign risk basis.

In 2002, EXIM signed a memorandum of cooperation with the Black Sea Trade and Development Bank. Under the memorandum, EXIM’s financing can be used to support exports of U.S. goods and services to any country located in the Black Sea region, including Albania, Armenia, Azerbaijan, Bulgaria, Georgia, Greece, Moldova, Romania, Russia, Turkey, and Ukraine. The agreement enables the Black Sea Trade Development Bank to act as obligor or guarantor of specific transactions and provides for parallel financing arrangements.

Moldova is eligible for U.S. Trade and Development Agency (USTDA) funding for feasibility studies, orientation visits, specialized training grants, business workshops, and other forms of technical assistance with U.S. export potential.

Institutions such as the European Bank for Reconstruction and Development and the World Bank are active in Moldova in both the private and public sectors, offering various financial tools for both insurance and credit. Moldova is a member of the World Bank Group, including the Multilateral Investment Guarantee Agency (MIGA), which promotes foreign direct investment into developing countries by insuring investors against political risk, advising governments on attracting investment, sharing information through on-line investment information services, and mediating disputes between investors and governments. Moldova is also eligible for project and trade financing from the Black Sea Trade and Development Bank, and benefits from loans extended by the EU’s European Investment Bank and the Council of Europe Development Bank.

							13. Foreign Direct Investment and Foreign Portfolio Investment Statistics					

* National Bureau of Statistics and National Bank of Moldova are the primary source of the information. The FDI figure is preliminary.

**Table 4: Sources of Portfolio Investment**Note: Moldova does not submit data for the IMF’s Coordinated Portfolio Investment Survey (CPIS). However, according to the National Bank of Moldova, the preliminary figure for total portfolio investment in 2019 amounted to USD 11.2 million. A breakdown by country for all portfolio investments is not available.

							14. Contact for More Information					

U.S. Embassy Chisinau, MoldovaStr. Alexei Mateevici 103,Chisinau MD 2009, MoldovaMain switchboard +373 (22) 40 83 00Fax: +373 (22) 23 30 74/40 84 10chisinaucommerce@state.gov

## View report by:

### On This Page

                    -  EXECUTIVE SUMMARY 
                    -  1. Openness To, and Restrictions Upon, Foreign Investment   
                    -  2. Bilateral Investment and Taxation Treaties   
                    -  3. Legal Regime   
                    -  4. Industrial Policies   
                    -  5. Protection of Property Rights   
                    -  6. Financial Sector   
                    -  7. State-Owned Enterprises   
                    -  8. Responsible Business Conduct   
                    -  9. Corruption   
                    -  10. Political and Security Environment   
                    -  11. Labor Policies and Practices   
                    -  12. U.S. International Development Finance Corporation (DFC) and Other Investment Insurance Programs   
                    -  13. Foreign Direct Investment and Foreign Portfolio Investment Statistics   
                    -  14. Contact for More Information   

Tags

Bureau of Economic and Business AffairsBureau of European and Eurasian AffairsMoldova

Back to Top

01 / Select a Year

02 / Select Sections	

                  -  Select All Sections 

03 / Select Countries You can add more than one country or area.

                - White House
                - USA.gov
                - Office of the Inspector General
                - Archives
                - Contact Us

follow us
FacebookXInstagramYouTubeFlickrGovDelivery

              - Privacy Policy
              - Accessibility Statement
              - Copyright Information
              - FOIA
              - No FEAR Act

## U.S. Department *of* State

#### The Lessons of 1989: Freedom and Our Future