Four years ago, Moldova and the European Union signed the Association Agreement, which led to the creation of a Deep and Comprehensive Free Trade Area (DCFTA) between both parties. The opportunities offered by DCFTA in these years have allowed export growth and the creation of at least 15,000 new jobs in our country.
To celebrate this anniversary, several regional businesses, business associations, and entrepreneurs met in Comrat. Businessmen from Gagauzia spoke about how the EU helped them to develop their business and what impact the implementation of DCFTA had on their work.
What is DCFTA, really?
In essence, the creation of a Deep and Comprehensive Free Trade Area was aimed at removing tariff and non-tariff barriers of trade between Moldova and the EU. According to an Expert-Grup analysis, after four years of DCFTA implementation, the European Union remains the most important and reliable trading partner for domestic producers.
More than two-thirds of all Moldovan exports reach the EU and their net increase reached 367 million euros in the period 2015-2017. This increase led to the creation of at least 15,000 new jobs in our country. Expert-Grup specialists believe that in the absence of DCFTA, our state budget would have lost over 7 billion lei in revenue and the private sector would have lost at least 320 million euros in fixed capital investment.
- 2/3 of exports ⇒ EU
- ⇑ 367 million euros increase
- 15,000 new jobs
- ⇓ 7 billion lei from the budget – LOSSES AVAILABLE
- ⇓ 320 million euros from the private sector – losses EVITA
“The potential of opportunities offered by DCFTA for Moldovan enterprises is yet to be fully explored. Free access to the European Union market gives companies the opportunity to grow, and we encourage them to make every effort to do this,” says Vasile Plămădeală, Trade Counselor at the EU Delegation in Moldova.
“It is therefore essential that the Moldovan authorities support businesses in fully capitalizing on the benefits offered by DCFTA by creating better business conditions and implementing the necessary trade-related reforms,” he adds.
“What soldier does not want to be general?”
Ivan Cambur was of the same opinion, Executive Director of the Gagauzia Business Association “Next”. He says that DCFTA has so far been a positive experience for businessmen in Gagauzia. “Many companies in the region have received EU aid. I think this agreement provides a great incentive for young people to stay in their country and to invest. It is important that entrepreneurs with start-up ideas and the beginners are supported,” says Ivan Cambur.
He believes that in the last four years, entrepreneurs from Gagauzia and from the rest of the country have been able to find out how many financing opportunities exist and especially that they are accessible. In addition, people who have had the courage to set up a business have understood that there are real chances to reach international markets.
“What soldier does not want to be general? Many companies have not looked at their business as an international one, but lately they have begun to think and turn to outside markets. I notice that access to information has increased. During these years many study visits were organized abroad.”
Businesses from different regions of the country, present at the Comrat event, shared their experience of accessing European grants and using the opportunities offered by DCFTA. Larisa and Gheorghe Cerven, owners of a small vineyard in Vulcanesti, Gagauzia, tell the story of how they managed to reduce their energy bill thanks to a European grant. With the money they received, they bought and installed solar panels on the roof of their inn. “In addition, thanks to this support, we have managed to create five new jobs in winery and five other jobs in the tourist inn. Our workers are all inhabitants of Vulcanesti and now they can build a future home,” says Larisa Cerven.
The potential of DCFTA has not been explored fully
Contrary to expectations, the biggest effects of trade liberalization with the EU were observed in the case of agri-food exports, although initially these products were not considered sufficiently competitive on the EU market. Thus, exports of agri-food increased by 44%, compared with the 11% increase in industrial exports, according to the Expert-Grup analysis.
The free trade agreement also had more profound macroeconomic implications, boosting economic growth, budget revenues, imports and investment, and employment. Thus, the DCFTA’s contribution to growth in exports to the EU, estimated at 410 million dollars between 2015-2017, has boosted GDP growth by 7% or about 1.5 billion dollars.
Economists say the potential of DCFTA has not yet been fully explored, especially since the first implementation period has been marked by the banking crisis, the political crisis, and the drought in 2015. “Therefore, in the years to come, the effects of DCFTA will be much more significant”, declared the Expert-Grup experts.
The EU announced its support to overcome the pandemic crisis in Moldova
The European Union (EU) will re-direct 87 million euros of funds available from other existing assistance programmes to overcome the consequences of the crisis provoked by COVID-19 in the Republic of Moldova, announced Moldova’s Ministry of Foreign Affairs.
The assistance through the Moldova-EU bilateral programme will be provided in addition to a previously announced regional programme. The latter includes 140 million euros total funds that have been allocated by the EU to all the countries in the Eastern Partnership (EAP), out of which 30 million euros are designated to support the countries’ medical systems, about 11.3 million are allocated to support people from socially vulnerable categories and about 100 million aim to help economies recover, especially when it comes to small and medium-sized enterprises (SMEs). “Today’s package responds both to the immediate needs of the health systems, as well as to longer term needs of the most vulnerable groups in society and small and medium-sized enterprises, which are the backbone of the economies in the six countries,” said Commissioner for Neighbourhood and Enlargement Negotiations Olivér Várhelyi.
“As part of its global response to the coronavirus outbreak, the European Commission stands by Eastern Partner countries and has re-allocated €140 million for the most immediate needs including the Republic of Moldova,” is stated in a press release of the Delegation of the European Union to the Republic of Moldova.
The European Commission is working with the World Health Organisation (WHO) to ensure the health systems with necessary supplies such as sets of gloves, masks and sterilisers. Also, the funds will support national health administrations to train medical and laboratory staff and carry out awareness raising measures to the wider population.
The EU has made available small grants to civil society organisations across the region. These funds aim supporting local schools with distance learning and target the most affected parts of the populations. “This is in addition to the already ongoing support through the EU Civil Society Facility for Moldova that is already providing €20 million free of charge to create social services for the most vulnerable members of the society in Moldova and supporting people with special needs to start their own business in Moldova,” is said in the same statement.
Also, the EU is working closely with International Financial Institutions (IFIs) and relevant financing institutions from EU Member States, providing a coordinated European response for the economies. Namely, the support includes launching programmes to facilitate, simplify and accelerate the access of SMEs to various credit funds, providing grants to innovative start-ups, mobilising de-risking instruments to facilitate the provision of liquidity, etc. More information can be found here.
“We greatly appreciate the assistance provided by the EU during this difficult time, which comes to support the country’s efforts to overcome the pandemic crisis and its consequences. In particular, we welcome the systemic and long-term approach, which includes both immediate measures for the health system and vulnerable persons with social needs, as well as a comprehensive programme for economy recovery,” Foreign Minister Oleg Țulea stated.
On April 8, the European Commission launched its “Team Europe” package to support partner countries in the fight against the coronavirus pandemic and its consequences. It aims to combine resources from the EU, its Member States, and financial institutions, in particular the European Investment Bank and the European Bank for Reconstruction and Development. The overall support figure reaches more than 20 billion euros. According to the European Commission, the focus is on the people most at risk: children, women, the elderly, and disabled people, as well as migrants, refugees, internally displaced persons and their host communities.
Commission for Emergency Situations: first pay medical insurance, then enter the country
Starting April 1, all persons returning from abroad are be obliged to commit to buy medical insurance before taking their first step on the Moldovan land. This decision was taken by the Commission for Emergency Situations of the Republic of Moldova.
On March 31, the official mechanism of bringing home the Moldovan citizens who have been blocked abroad was approved.
According to the provision no. 10 approved by the Commission for Emergency Situations, the Ministry of Foreign Affairs and European Integration is in charge of making the lists of Moldovan citizens who have been blocked abroad, the Civil Aeronautical Authority must coordinate the charter flights organisation, while the airline operators have to verify the insurance status of the persons and admit on board only those who paid the compulsory health insurance fee through the governmental system mpay.gov.md.
Therefore, all persons arriving from abroad are obliged to buy medical insurance, regardless of where they come from and whether they arrive by air or by land. Citizens who intend to cross the state border by air have to pay the compulsory health insurance fee before entering the country, while those who cross the state border by land are obliged to fill in a declaration that the fee will be paid within 72 hours.
The Party of Action and Solidarity (PAS) notified the Court of Appeal regarding the decision of the Commission for Emergency Situations, saying that the decision is unconstitutional and illegal. “There is no such legal provision that allows the authorities to prohibit people from returning to their home. They are citizens of the Republic of Moldova and such pretexts that if you do not have medical insurance you cannot take a plane ticket and you cannot land in Moldova are intolerable,” said Maia Sandu, the PAS leader, for Jurnal TV.
The measure regarding the health insurance fee payment was commented by the political expert Dionis Cenuşă as well. The specialist says that there is a violation of fundamental human rights.
“Restricting Moldovans’ access to the country if they do not pay for healthcare insurance may have serious implications concerning human rights. […] It is true that the authorities can apply restrictions, including on how Moldovan citizens can return to the country. But, at the same time, the law clearly states that restrictions should not be applied according to a series of criteria, including that of social origin. In other words, when the Commission decided to introduce a payment obligation for healthcare, it automatically produces effects on the people who are forced to return to the country, because they are economic migrants. Therefore, the adopted measure has a discriminatory effect on the principle of social origin because Moldovan emigrants are targeted and, at the same time, because they may be lacking financial resources upon returning to the country,” stated the political expert.
On the other hand, Prime Minister Ion Chicu claimed that all citizens of the Republic of Moldova are obliged to pay the health insurance fee and that Moldovans who come back from abroad are not an exception. “This is not a discrimination, it is about law enforcement,” the prime minister declared for TV8.
The restrictive measure is especially important now, when thousands of Moldovan citizens have lost their jobs abroad and their source of income. Instead of finding the optimal solutions to protect these citizens and ensure their possibility to return home safely, the authorities restrict their constitutional right by conditioning the borders crossing.
The health insurance annual payment in Moldova is currently 4 056 lei (about 204 euro).
In the coronavirus economic crisis: attempts to help the most affected sectors
The National Extraordinary Public Health Commission issued recently a decision, according to which the activity of shops, restaurants, fitness centres, concert halls, theatres, cinemas, museums must be stopped by April 1. The adopted measure is related to the state of emergency declared by the Parliament of the Republic of Moldova throughout the territory of the country until May 15.
As a consequence, business associations from Moldova called for adoption of supporting measures to help companies mitigate the negative effects of the coronavirus outbreak. An online petition addressed to the Government of the Republic of Moldova was signed by thousands of citizens.
“The most powerful hit will be recorded in the case of small and medium-sized enterprises. Considering their vulnerability, the impact can be irrecoverable. Many of them will suffer major losses, some will partially or completely cease their activity, others may go bankrupt. Such areas as services, leisure, tourism, hotel, restaurants, catering, retail, event organisers and many others will be affected by quarantine and preventive measures,” the petition stated.
Government’s list of actions
On March 19, Prime Minister Ion Chicu announced a list of measures that will be taken to help business entities from Moldova during the pandemic situation. Among them are such measures as:
- postponing income tax payments;
- reducing VAT taxes for restaurant, hotels and catering companies;
- introducing a moratorium for tax controls;
- cancelling the compulsory audit of the individual financial statements for the year 2019;
- offering the possibility of commercial banks to reschedule mortgages for individuals and provide loans under more favourable conditions;
- increasing the Government Intervention Fund by 150 million lei, for offering bank lending guarantees to strategic economic entities, etc.
“The extraordinary situation requires extraordinary measures. The crisis will generate losses, but together we will identify solutions to reduce losses. […] At the moment, the budget incomes are at a normal level, being 14% higher than compared to the similar period of last year. We need to identify adequate policies and measures to minimise the effects of this crisis,” said Ion Chicu during the meeting with business associations, as a Government statement reported.
The National Bank of Moldova (NBM) announced that the institution will continue to use all available tools to meet the objectives of price stability and consolidation of the banking sector, which, at the moment, is declared as being well capitalised and resilient.
However, economic experts say that the pandemic could affect the labor market and that the authorities have little room to financially help the business environment, as it is the case in European countries, but it could resort to external loans.
Companies’ mitigation measures
Andrei Crigan who is an economist and business consultant, said that especially small and medium-sized enterprises (SME) are subject to lower incomes under the pandemic conditions, due to the pressure exercised by fixed costs such as rent, utilities and salaries.
According to the economist, companies must make crisis plans, analysing cost cutting, contract re-negotiations and losses minimisation opportunities. “In this period, the most important thing is the association with other entrepreneurs in order to exchange experience, observation of what others are doing to protect themselves, merging efforts and distributing the expenses together,” explained the specialist.
Also, Crigan stated that it is premature to talk about how much money the state will need in order to support the business environment.
In this regard, companies are advised to take more and more into account digital marketing activities in order to survive in such hard conditions. Offer home delivery possibilities, invest in digital promotion through social media and in situational marketing through corporate social responsibility are just some of them. Additionally, companies shall try to switch to online payment methods and active use of contactless bank cards, so as to reduce the risks of COVID-19 transmission.
Specific industries’ problems
Not all companies can switch to online environment though. Economic expert at Expert-Grup, Iurie Morcotîlo, said that companies oriented to the internal market, such as hotels, restaurants, shops, will be affected in the short term, because the main revenues come from direct contact with people.
In the long run, exports-oriented enterprises will be affected, because consumer demand among importing countries will decrease. “We must acknowledge that public finances this year will be suffering significantly, as the volume of tax collections will be lower than anticipated at the beginning of the year. The state budget will have to be revised and many initially planned expenditures will not be disbursed,” the expert claimed.
According to the economic expert, there is a reserve fund for exceptional situations, but not for business support, while the Government could resort to external credits or increasing the domestic debt, if the volume of expenses will grow.
Not all companies took the necessary preventive measures related to the COVID-19 pandemic situation. Activists are alarmed that work on some construction sites wasn’t stopped, as well as in many factories and service providing companies, whereas protecting equipment wasn’t distributed to employees.
More than 24 thousand people have signed an online petition signalling the increase in food prices and asking the authorities to take measures to protect the citizens. Meanwhile, on social networks people claim that they have observed an increase in prices for vegetables, fruits, dairy products, meat, hygiene products and disinfectants.
On the other hand, some Moldovan companies continue to help those who fight coronavirus nowadays. Businesses donate money to hospitals in the country, support educational project of developing online learning platforms, provide e-books for free, offer free psychological consultations for doctors, cosmetic producers focus all their resources to producing disinfectants.
Despite the losses they face during this period, several restaurants and food producing companies offer free food to doctors, taxi drivers bring doctors to work for free, young musicians organise live concerts online and groups of volunteers are organised to take care of their elderly neighbours by going to stores or pharmacies instead of them. Everyone who can afford it is advised to stay home.
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