The Association Agreement between the Republic of Moldova and the European Union, signed on September 1st, 2014 as a consequence of the declared European course of the Republic of Moldova, provoked a series of reforms in the legislative, economic, and social domain, and also a series of contradictory discussions. The “European road” opened for Moldovans literally, through the opportunity to travel with a biometrical passport, without visa in European space. But what other development opportunities for Moldova does the Association Agreement offer? And, especially, what changes have been registered in the economy of the country at the same time with the implementation of the provisions of the Association Agreement? With the goal to provide useful information for the Moldovan business environment, Magenta Consulting carried out a survey which presents the results of commercial relations between the RM and the EU that are foreseen in the agreement Deep and Comprehensive Free Trade Area (DCFTA).
DCFTA and the potential of trade relations between RM and EU
Trade relations between the Republic of Moldova and the EU are foreseen in the agreement called Deep and Comprehensive Free Trade Area (DCFTA). This agreement has the goal to establish trade relations between RM and the EU based on mutually advantageous conditions for both sides. The advantages are in eliminating import and export customs fees in the trade of products among these sides. Through the implementation of DCFTA is being facilitated the access of autochthonous products on the EU market, which implies their quality compliance to the European standards. The process of complying is a long term one and needs applying of economic reforms that will influence directly the activity of companies in Moldova.
A recent survey by Magenta Consulting in the domain of specialization of companies from Moldova, carried out in January 2016, indicates that approximately 9% of the companies from RM have selected export as a dominant trade activity, 23% of them are preponderantly import companies, and more than a half of companies (68%) do not practice any of these trade activities.
Profile of exporting companies from the RM and of those importing to the RM, %
The analysis of companies’ characteristics show that 70% of exporting companies, as well as 85% of those importing are concentrated in Chisinau, taking into consideration that the majority of companies in the country are located in Chisinau. 90% of the exporting companies, as well as 90% of the importing companies are LLCs. According to the type of enterprises, the survey shows that micro-enterprises (<9 employees) and small enterprise (<49 employees) carry out trade activities to a higher extent compared to large enterprises (<249 employees), given the fact that the number of small enterprises is higher than that of large ones. About a third of the companies from the domain of services declared that export was the main trade activity; almost the same share was also obtained by the companies from the domain of trade. 21% of the exporting companies are part of the production sector, and 16% of agriculture and food industry.
The results of DCFTA implementation in Moldova
The Ministry of Economy in partnership with the EU Delegation in the Republic of Moldova will launch a National Information and Communication Campaign regarding DCFTA, which was declared at the beginning of March 2016 at the conference “Efficient information for the business from Moldova”. The results of the survey carried out by Magenta Consulting before the launch of the information campaign shows that 23% of the companies in Moldova know about the DCFTA, out of which 14% state it firmly, and 9% have heard, but do not know details. The most informed enterprises are the medium enterprises (25%), those located in the South of the Republic of Moldova (29%), which have a legal organizational form of Joint-stock company or Limited liability company and work in the domains of transports and communication, as well as processing industry and trade.
Notoriety of the DCFTA among companies in Moldova, %
The enterprises from RM were asked how they appreciated the opportunity to export to the European Union after the implementation of the DCFTA. In general, 15% of companies showed a positive attitude towards the implementation of DCFTA, out of which 8% of enterprises began to export more to the EU after DCFTA, and 5% do not export to the EU, but intend to do so in the future. Out of the companies which increased the amount of their exports, the majority are medium enterprises with the legal organizational form of Joint-stock company which work in the domain of processing industry (14%), being located in Chisinau (13%). The production capacity in order to export more was increased mostly by companies from the domain of agriculture (10%). The survey found that the companies that do not export to the EU, but intend to, work in the domain of services and trade. On the other hand, the enterprises which do not export to the EU and do not intend to, are from the domain of constructions and transport and communication. 5% of companies believe that the quality standards and high competition from the EU will decrease the amount of export. This opinion is shared more by the companies from the South of Moldova, peasant households and enterprises from agriculture.
Assessment of opportunities to export to the EU after the implementation of DCFTA, %
Methodology: The survey was carried out by Magenta Consulting and underwent two stages. During the first stage (September 22 – October 8, 2015) the survey included a stratified multistage probabilistic sample of 1129 respondents, with an error margin of +/-3%, at a level of confidence of 95%. The data was gathered from the questionnaires that were collected through face to face interviewing.
The survey during the second stage (January 14-21, 2016) was carried out on a stratified multistage probabilistic sample of 492 companies with an error margin of +/-4%, at a level of confidence of 95%. The data was collected through phone interviewing (CATI).