Assessing Competitiveness In Moldova's Economy - Economic Growth

Development Alternatives, Inc. / BIZPRO Moldova Moldova Competitiveness Assessment
However, the restructuring of the sector has created a number of medium-sized companies, often
in the form of joint ventures with partners from EU countries. The owners and managers of these
enterprises are adapting to evolving market architectures, taking steps to upgrade their activities
beyond pure processing services. With these growing capabilities, Moldova’s apparel sector
represents competitive potential; yet structural problems may block its realization.
In 2003, Moldova exported some US$167.6 million of textiles and apparel; textiles accounted for
US$38.4 million of the total, and apparel for the remaining US$129.2 million. Roughly 70
percent of apparel exports go to the EU, and the United States accounts for almost all of the
remainder. For textiles, the EU’s share in total exports is about 60 percent of textiles, with much
of the remainder going to Russia and other CIS countries. Textile exports to the EU consist
primarily of household items, such as bed linens, almost exclusively produced in Transnistria.
Apparel exports are mostly CM (cut and make) processing—or tolling—services for foreign
partners; current estimates put the local value-added in total exports at around 35 percent.
However, several firms have upgraded to include design, and to move into private-label
production.
Competitive Advantages
Moldova would appear to have a competitive advantage on three dimensions, with workers in
effect paying the price for the first two. First, because of excess capacity and low labor costs,
Moldova’s apparel industry offers an attractive combination of productivity and cost. One
method used in the apparel industry is to standardize the value of different pieces of apparel in
terms of the time required for production. As a recent study conducted under the auspices of the
World Bank’s Moldova Trade Diagnostic Study puts it: “International buyers normally know
exactly how many standard minutes their products contain.” 4 Applying these standard minutes to
labor costs makes it possible to adjust for productivity differences. On that score, Moldova’s
apparel industry outperforms its key competitors, including China. Figure 13 shows a
comparison of the cost per standard minute in the apparel industry for selected countries.
4 Heiki Mattila, Case study: Textiles and apparel, Moldova Trade Diagnostic Study, November 2003; p. 11.
July 2004 • Draft Page 22