Assessing Competitiveness In Moldova's Economy - Economic Growth

More documents

Recommendations

Info

Development Alternatives, Inc. / BIZPRO Moldova Moldova Competitiveness Assessment Quality assurance and standards compliance Moldova’s systems for ensuring and certifying compliance with quality standards are complex and have yet to evolve to meet the needs of global markets. The quality architecture is still shaped primarily by the needs and requirements of the traditional markets in CIS countries, which adhere to the same GOST standards (based on the Gosstandart agency of Russia) and recognize the Moldova Standard (MS) mark. In addition, Russia recognizes several test laboratories and certification bodies in Chisinau for specific products that require further testing. The MS mark is not recognized anywhere else in the world. Moldova has adopted some 200 international standards, but its testing and certification institutions are not recognized internationally. As long as Moldova’s exporters to the West rely on or work through foreign partners, compliance with applicable standards is their responsibility, but improvements in the country’s quality infrastructure are essential for moving into higher value-added exports. Transport and logistics There are no Moldovan companies that offer more than one transport mode, plus cargo handling, and related information services. There are three types of road transport (trucking) service providers: (1) operators with multilateral permits that allow them into Europe, with some equipment complying with EURO standards; (2) operators with aging equipment for CIS and non-EU markets, using bilateral permits; and (3) domestic operators with obsolete equipment. Excess capacity is endemic in the latter two, yet service levels are inadequate. As a result, a significant proportion of exporters and producers operate their own trucks—40 percent of respondents in a recent survey. Railroad connections are oriented mostly toward the east, and incompatible gauges (Russian versus European) complicate the task of serving as a hub. Railroad freight rates are relatively high, and shipments to the east are reportedly subject to pilferage. Airfreight activities are limited, partly because Moldova is close to its markets, and partly because most of its exports have a relatively low value-to-volume ratio. Air cargo handling is a monopoly of the airport in Chisinau, and existing cargo airlines do not provide reliable service. Financial services Currently, 16 banks are operating in Moldova, with limited assets and activity levels. While several banks have foreign investors, there is no foreign bank operating in Moldova, in part because the Moldovan authorities have imposed restrictions that make it almost impossible to manage a financial institution according to internationally accepted principles. The structure of the banking sector provides inadequate support to international trade, and hampers the development of market institutions needed to forge effective value chains, in particular those involving small and medium-sized enterprises. Strengthening the financial sector and introducing new financial products and services will be critical for building competitiveness in the Moldovan economy. One particular target for development is leasing, which could help alleviate the often desolate situation in the transport sector, and could also contribute to a “re-mechanization” of agricultural production. July 2004 • Draft Page 9
Development Alternatives, Inc. / BIZPRO Moldova Moldova Competitiveness Assessment Factor Conditions Moldova’s drive toward competitiveness can build on three basic factor endowments: (1) the country’s skilled and low-cost labor force, (2) the fertility of its soil and climate, and (3) its location as a link between the West and the East. Moldova’s exporters and producers, competing with imports, have relied heavily on the first. In industries such as apparel, the country’s workers offer a productivity/cost ratio that is higher than that for China. Yet there is a real risk that this advantage is eroding, as the more mobile members of the labor force seek employment abroad, and as the permanent budget crisis begins to threaten the quality of education. In some knowledge-intensive activities, such as software development, the need to work in the shadow sector and dependence on piecemeal outsourcing is contributing to a de-skilling process. What is missing, for the most part, is a strategy that realizes the temporary nature of such an advantage and focuses on rapid upgrading to escape the lowest-cost trap. Moldova is widely thought to have a comparative advantage in agriculture. However, agricultural production and productivity have suffered greatly during the transition—partly as a result of the fragmentation of land holdings in the wake of land privatization, partly because of the deterioration of irrigation systems that have exacerbated the effects of the droughts in 1992, 1994, 1996, and 2000. Finally, the deteriorating transport infrastructure, together with cumbersome customs and bordercrossing procedures, all but negates the location advantage. For example, closeness to markets matters greatly in the fashion apparel industry, yet only if it translates into quick reaction and short shipment times. If poor roads, inadequate road transport, and time-consuming customs clearance procedures lengthen the time to market, a major advantage factor may be irretrievably lost. TOWARD A STRATEGIC FOCUS Interventions to promote enterprise growth offer the greatest chance for success when they seek to enhance both incentives and capacity for innovation, focusing on strategic priorities among key industrial clusters. Priorities for support aimed at raising competitiveness (sustained productivity growth) need to reflect market dynamics and the relative strength of clusters in these markets. 1 Looking to markets to assess competitive performance and potential differs fundamentally from a strategy of “picking winners”—and then rigging the game to ensure they do win. Understanding Moldova’s export performance to identify sectors or clusters with potential requires a focus on the country’s major export markets, the CIS on one side and the EU on the other. With respect to dynamic performance in CIS markets, the patterns for the Russian market, 1 Setting strategic priorities is not purely an analytical process. But the appraisal of market performance, such as changes in market share, in relation to market dynamics, such as (relative) market growth, can provide guidance for further exploration and choice. These two dimensions—relative market growth and growth in market share— define a competitiveness matrix with four quadrants, and adaptation of the venerable Boston matrix of business strategy. July 2004 • Draft Page 10
Page 1 and 2: Assessing Competitiveness In Moldov
Page 3 and 4: Development Alternatives, Inc. / BI
Page 15: Development Alternatives, Inc. / BI
Page 37 and 38: Development Alternatives, Inc. Mold
Page 66 and 67:
Development Alternatives, Inc. Mold
Page 68 and 69:
Page 70 and 71:
Page 72 and 73:
Page 74 and 75:
Page 77 and 78:
Page 79 and 80:
Page 81 and 82:
Page 83 and 84:
Page 85 and 86:
Page 87 and 88:
Page 89 and 90:
Page 91 and 92:
Page 93 and 94:
Page 95 and 96:
Page 97 and 98:
Page 99 and 100:
Page 101 and 102:
Page 103 and 104:
Page 105 and 106:
Page 107 and 108:
Page 109 and 110:
Page 111 and 112:
Page 113 and 114:
Page 115 and 116:
Page 117:
show all

Assessing Competitiveness In Moldova's Economy - Economic Growth

Create successful ePaper yourself

Delete template?

Save as template?