Assessing Competitiveness In Moldova's Economy - Economic Growth

Development Alternatives, Inc. Moldova Competitiveness Assessment: The ICT Cluster
Evasion of taxes is a possible factor for the shadow market. Other factors may include
protection of intellectual property, overly cumbersome government bureaucracy, or lack of
real legitimacy from the perspective of western companies. While some firms indicate a
strong desire to operate transparently, to have access to larger contracts, this view cannot be
confirmed. Operating in the formal economy will subject companies to higher taxes, customs
duties, higher labor costs, and regulations.
Regardless of the real reasons that companies operate in the shadow market, or whether or
not there is a real desire to legitimize activities, the effect the shadow market has on the
prosperity of the industry includes:
Exposure to exploitation by their foreign customers;
Lack of legal recourse in cases where a dispute arises;
No claim to intellectual property rights or future value of products produced;
Downward pressure on wages;
No retention or propagation of knowledge, as companies emerge and disappear rapidly.
The probability is quite low that the efforts of BIZPRO will draw all companies out of the
shadow market. For those firms expressing an interest in operating openly, there are
numerous opportunities to help these firms avoid and overcome the effects mentioned above.
Response
The overall strategic objective is to increase the competitiveness of the Moldovan ICT
industry. Achievement of this objective will do much to stimulate economic growth and
prosperity in the country, as ICT penetrates and directly affects the competitiveness of other
parts of the economy. A strong, efficient, and competitive ICT sector benefits all industries
and citizens by contributing to productivity, growth of a vibrant middle class, open access to
information, and expansion of knowledge.
The situation is tenuous for Moldova because the further its economy falls behind the
technology curve, the more difficult and costly it
becomes to catch up to the rest of the world.
Moldova is in the middle of a dynamic market
Availability/
Awareness
which is rapidly changing and threatening. Only
by breaking the cycle of low market access, low
investment, low competition, and low
Prosperity/
collaboration can the ICT sector move to a
Profits
Government
position of prosperity.
The vision is to transform the industry from the
vicious cycle to a virtuous circle of increased
awareness and availability of ICT products and
services, greater competition and cooperation
through sector development activities, and
Higher
Demand
Reform
Market
Access/Use
The Virtuous Circle
Greater
Competition
July 2004 • DRAFT Page 13