Assessing Competitiveness In Moldova's Economy - Economic Growth

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Development Alternatives, Inc. / BIZPRO Moldova Moldova Competitiveness Assessment CIS countries, in particular the Central Asian Republics, gained much ground in the 2000-2001 recovery of the Russian market; but Moldova came back with a bumper crop in 2003. There remains much volatility in the Russian market for fresh apples. One of the problems Moldovan producers of fresh apples and other fruit face is their inability to balance seasonal patterns. When their products enter the (Russian) market, it is at the height of the season, when supplies are plentiful and prices drop. There has been some investment in cold storage facilities, but the most promising development is the establishment of controlled atmosphere storage facilities to extend the life of the fruit and allow exporters to even out seasonal fluctuations. The first of these facilities has been constructed with USAID support under the Private Farmer Commercialization Program. The patterns of exports of fresh apples reflect in large part supply restrictions. Of the 130,000 hectares producing apples and other fruit, some 42 percent have been estimated to require significant investments for replanting. However, there are few indications that replanting efforts are under way at any scale similar to that in wine. Apple juice concentrate is a growing market internationally, and Moldovan producers have begun to respond to the emerging opportunities. There has been some investment in new processing technology by some of the larger producers to meet standards. Roughly 70-80 percent of all apple juice is going to the EU. The pattern actually mirrors that of fresh apple exports to Russia: total exports to the EU dropped from US$20.8 million in 1998 to US$2.4 million in 2000, and has since climbed to US$9.9 million. Figure 11: Apples—Moldova and its Competitors in the Russian market July 2004 • Draft Page 19
Development Alternatives, Inc. / BIZPRO Moldova Moldova Competitiveness Assessment Walnuts Moldova is the third largest supplier of shelled walnuts to the EU, and has been holding its market share (while Ukraine has been gaining), as illustrated in Figure 12. The exports to the EU apparently include some processing services, since France is exporting unshelled walnuts to Moldova, roughly worth US$1 million per year. The walnut success story has some serendipitous elements to it. Under the Soviet system, walnuts were not officially recognized as a crop, trees were planted primarily as windbreakers, and production was haphazard. However, Moldovan climatic and soil conditions are ideal, and walnut production has grown rapidly over the last few years, from zero in 1993 to US$22 million in 2003. The low labor costs makes Moldova price-competitive in the market for whole kernels for confectionary production. In addition, the quality of the product, in terms of size and protein content, is high. The value chain goes from producers to regional merchants, who purchase the walnuts and transport them to the processing centers, mostly in Chisinau. The number of processing and exporting centers reportedly rose from 27 in 1998 to 58 in 2000, but the number has since dropped. Most of the remaining 15 enterprises are regional suppliers to a couple of larger exporters. The shelled walnuts are then shipped to the EU, mostly France and Greece. In addition to some of the re-exports of shelled walnuts coming from the EU, there are also reports that significant quantities are coming in from Ukraine, and are then being re-exported to the EU under the preferential arrangement. Trade statistics, however, show relatively small amounts (US$228,000 in 2003). Moreover, the rapid increase in Ukraine’s market presence over the last few years suggests that the country’s exporters have developed their own market channels into the EU. Moldovan producers have some access to the EU market under the Generalized System of Preferences (GSP). The country has received further concessions—the only CIS country to do so—because of its adherence to International Labor Organization (ILO) conventions. Under these rules, walnuts (and other agricultural products) can enter the European market duty-free. This preferential access, combined with the quality of the product and compliance with applicable standards, has played a major role in expanding exports to the EU. July 2004 • Draft Page 20
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Assessing Competitiveness In Moldova's Economy - Economic Growth

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