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Technical University of Moldova

Foreign Direct Investments in Economy of the Republic of Moldova

BA 111 Dumbrav Cristi Mogldea Vadim

Dynamics of FDI in the Republic of Moldova. The obstacles met by the Republic of Moldova in attracting FDI. What are the solutions?

Today's investments are tomorrow's profits and jobs after tomorrow.

[Helmut Schmidt]

Advantages that the direct foreign investments offer: Access to new technologies ; New jobs ; Development of new economic sectors ; Development of human capital ; Support to local companies to access new export markets ;

The major risks are:

Stronger competition that local companies face when offering lower quality products. Salaries offered by the foreign companies are usually higher than the average salaries in the country. Free capital transfers reduce the stability of the national currency. Establishment of high monopoly prices by the companies existing on the territory.

At the beginning of the 90s, Republic of Moldova had to face new economic conditions Lack of natural resources; No Foreign Investment; No development;

Stock of FDI
Estonia Croatia Latvia

Bulgaria Kazakhstan Romania Azerbaijan Russia Bosnia and Herzegovina Macedonia, TFYR Serbia and Montenegro Georgia Turkmenistan Armenia Ucraine Albania Republic of Moldova Belarus Kyrgyzstan

Uzbekistan 0 1000 2000 3000 4000 5000 6000 7000 8000 9000 10000

FDI Inflows(net)



Enter of Lukoil
Mil. USD



0 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008


Geographical Structure of FDI

9.5 11.3 9.5

Netherlands Russia Cyprus

Italy 7.9

Great Britain Germany USA Romania France Ukraine

21.5 3.9 4 4.8



FDI by Sector (2010)

Finance Processing Industries 1.2 2.8 1 1.3 8.9 17.9 18 7.9 22 Wholesale & Retail Trade Energy, Gas and Water

Real Estate Transactions

Transport and Comuncations Hotels and Restaurants Construction


Other Activities

The biggest foreign investors in the Republic of Moldova

Company Societe Generale Lukoil Europe Ltd. Union Fenosa Lafarge France Telecom MI Veneto Banca METRO Group A.G. Danube Logistics Mabanaft A.G. WNISEF KNAUF Country of origin France Russia Spain France France Italy Germany Netherlands Germany USA Germany Field of activity Banking sector Oil products Energetic sector Building materials industry Telecommunications Banking sector Wholesale Logistics Oil products Food industry, glass production, banking sector Constructions

analyzes for attracting FDI

Neighboring with EU; Favorable climate conditions; Bilingual business environment (Romanian and Russian); Well developed banking system; Favorable geographical location of the country; Cheap labor force; The existence of trade preferences offered by European Union;

Macroeconomic instability, high inflation rate; Poor infrastructure; Lack of natural resources; High energy import dependence; Influence of external factors on national economy; Raising deficit of skilled labor force; Lack of transparency and bureaucracy; Low development of scientific and technological economic sectors; Insufficient development of consulting and information services for attracting investment and export promotion;

State policy oriented towards European integration; High level of consumption; Selling government property using various means, including public-private partnership; De-capitalized assets which have a development potential, including infrastructure; Conditions for developing a new financial institutions and instruments;

Presence of administrative obstacles for attracting of investments; High regional competition for attracting investments; High labor migration mobility in the region; Reduced state capacities in financing investments in infrastructure; Lack of domestic resources for investments; Growing prices for energy resources;

The main reasons for failing to attract FDI are:

Lack of a strategy for attracting the investments in the beginning of the transition period; Lack of own natural resources; High level of corruption and bureaucracy; High competition among the regions states for attracting foreign capital;

Create a clear concept referring to the role of foreign investments for the Republic of Moldova; Define and approve the economic fields which require investments; Create a competitive environment with the participation of foreign investors; Elaborate a viable legal database and assure a trustful and transparent legal system and mechanism for enforcing this legislation; Invest in infrastructure.; Evaluate the policies for attracting FDI, which constitutes a solution for a long term success in attracting foreign investments;