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Moldova Business

Business and Economics

According to COUNTRYAAH, Moldova is one of Europe's poorest countries. The country has a favorable climate and good agricultural land but has no major mineral deposits. As a result, the economy has become heavily dependent on agriculture, with fruits, vegetables, wine and tobacco as important products. Agriculture's share of GDP is clearly the highest in Europe. The existing industry mainly produces food and agricultural implements. In recent years, emigration has been great and money from foreign-born Moldavians has become an important income.

Business of Moldova

In the first half of the 1990s, Moldova had an annual growth rate of about 6 percent, but the international financial crisis in 2008–09 halted growth and GDP fell by about 6 percent. During the 2010s, the economy has recovered, but it is still hampered by political instability, corruption and great concern about energy supplies from the Russian Federation as well as the political uncertainty surrounding Transnistria.

Background

Like the other sub-republics of the former Soviet Union, the Moldovan business sector was subordinated to Moscow. The largest and most important companies outside the agricultural sector were controlled directly by the all-union ministries of industry. Only in food production and other consumer goods production did local authorities exert any greater influence. One of the most imminent tasks after independence was to increase Moldova's economic independence and introduce a market economy. However, relatively slow progress was made, and only in 1992 was a cautious privatization program started. Despite this, independence came to mean a major change for the economy. The previous strong orientation towards the other Union republics in the Soviet Union has been broken, at the same time as the nutritional structure has undergone a radical change for efficiency reasons. When the Russian Federation began to take market prices for its energy exports in the early 1990s, the country faced major financial problems, and together with the radical institutional changes, Moldova's GDP per capita fell by an average of 17 percent per year from 1990 to 1998.

During the 00s, Moldova has repeatedly been in dispute with the Russian Federation on energy prices. On several occasions this has led to the Russian Federation canceling deliveries.

Agriculture

Agriculture is the most important sector of Moldova's economy. The good black soils, which make up 3/4 of the area used, and a favorable climate constitute good conditions for arable farming. Crops grown include cereals (mainly maize), root vegetables, vegetables, fruits and grapes. Tobacco is also an important crop. Other important agricultural products are dairy products and pork. In 1991, there were 696 collective farms and 389 state farms, which together had over 2.3 million hectares of agricultural land. As a result of attempts to reform the economy, efforts have been made to increase the importance of private agriculture. According to a 1992 decision, up to 94 percent of state and collective agricultural land can be used for family or commercial large farms. The remaining 6 per cent has been allocated for educational and research purposes. At the end of 1992, only 10 percent of the area used was in private hands. In 1997, a law was passed enabling the sale of agricultural land, but there is considerable political disagreement about privatization.

Raw material resources and energy supply

Moldova is poor on industrially useful raw materials and minerals. Production mainly comprises industrial minerals (cement, clay, plaster, lime, stone and gravel) for the construction industry. Almost the entire need for metals must be imported or met through recycling.

Particularly noticeable to the economy is the large dependence on imports in terms of fossil fuels. Within the country, energy is produced from biofuels, crude oil and hydropower, corresponding to only 4 percent of total energy production (2009). No petroleum reservoirs of exploitable scope are known. Imports are completely dominated by natural gas and oil products, including for electricity generation in thermal power plants. A national program for the production of bioenergy from agricultural waste is under construction under the UN review. The goal is to reach 20 percent electricity generation from renewable sources by 2020.

Industry

Moldova has a weakly developed industry. Within the framework of the Soviet economy, Moldova was primarily a supplier of agricultural products. Even after independence, the food industry is the dominant industry sector. The textile and clothing industry is also represented, and during the 1990s, the country's textile exports to the EU countries increased sharply. A large part of the country's heavy engineering industry is located in the transnistrian eruption region, east of the Dnestr River.

Foreign trade

Moldova is very dependent on foreign trade, but since then it has had a trade deficit. Trade with the former Soviet Union's republics still dominates trade flows across Moldova's borders; The Russian Federation accounts for just over half of total trade and Ukraine accounts for 1/4. Independence, however, has meant an initial reorientation towards the rest of Europe, where Romania has become the largest trading partner. Exports are dominated by agricultural products and foodstuffs, with tobacco and cotton fabrics as other important elements. Imports are dominated by energy (oil, gas and electricity) and industrial goods.

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