Foreign direct investment (FDI) in Moldova

FDI in Figures

According to the 2021 World Investment Report by UNCTAD, FDI inflows to Moldova amounted to USD 55 million in 2020, down from USD 503 million in the previous year, following the global economic crisis triggered by the Covid-19 pandemic. The total stock of FDI was estimated at USD 4.8 billion in the same year. The bulk of FDI comes from EU countries. The National Strategy for Investment Attraction and Export Promotion 2016-2020 identified seven priority sectors for investment and export promotion: agriculture and food, automotive, business services such as business process outsourcing (BPO), clothing and footwear, electronics, information and communication technologies (ICT), and machinery.
 
Generally, the Moldovan economic and political environment is not particularly attractive to investors. The country faces several challenges, including the need to fight corruption, improve the investment climate, remove obstacles for exporters, convert remittances into productive investments and develop a reliable financial sector. Administrative and judicial reforms are also needed. On the other hand, the country could be a bridge between Western and Eastern European markets, and foreign companies enjoy national treatment in most sectors. Moldova ranks 48th out of 190 economies in terms of ease of doing business in the World Bank's latest Doing Business report (losing one position compared to the previous edition). With "Law 174/2021", the Moldovan Parliament approved the rules on control of investments into sectors important for the security of the state, including energy, water, transport, AI, aviation security activities, management of airports and other infrastructures, weapons, etc. Prior to investing in a relevant sector, any potential investor is obliged to obtain approval from the Council for Promotion of Investment Projects of National Importance.

What to consider if you invest in Moldova

Strong Points

Moldova's main strong points in terms of attracting FDI are:

- Skilled and low-cost labour;
- Privatizations of a number of companies underway;
- Investor-friendly taxes and duties;
- Agricultural potential (wine, dried fruits, vegetables, sunflower, wheat).

Weak Points

The main weak points of the country impeding FDI incude:

- high level of poverty;
- an important size of its informal sector;
- dependence on remittances from expatriate workers;
- political instability and social tensions;
- high level of corruption, weak governance and clientelism;
- the secessionist aspirations of Transnistria.

Government Measures to Motivate or Restrict FDI

Moldova, consistently ranked as one of the poorest countries in Europe, relies heavily on investment, foreign trade and remittances for its economic growth.

The current Law on Investment in Entrepreneurship came into effect in 2004. It was designed to be compatible with European legislative standards and defines types of local and foreign investment. It also provides guarantees for respect of investors' rights, non-application of expropriation or actions similar to expropriation, and for payment of damages in the event of investors' rights being violated. The law permits investment in all sectors of the economy, while certain activities require a business license.

The government promotes the following industries as attractive for foreign investment through the Moldovan Investment and Export Promotion Organization (MIEPO): agriculture, automotive, ICT, medicine, renewable energy and textiles. Description of the sectors can be found on the MIEPO website.

The government established a number of mesures in order to promote investments in the country. Companies investing USD 250,000 can benefit from tax deduction for the first 5 years. Income tax has also been lowered. The government promotes equality amongst international and local investors and the fact that there is no limit to capital invested.

Free  economic  zones  (FEZ)  are  parts  of  the  customs  territory  of Moldova,  separated  economically,  and  strictly  bounded  on  the  entire  area,  where  certain  types  of entrepreneurial  activities  are  allowed   on   preferential   conditions   to   local   and   foreign   investors. There  are  seven  Free  Economic  Zones  (FEZs)  in  Moldova  at  present.

For more information, refer to the Invest in Moldova website.

Bilateral investment conventions signed by Moldova

The Republic of Moldova has signed numerous Bilateral Investment Treaties that may be found on the UNCTAD's Investment policy hub website.