Assessing Competitiveness In Moldova's Economy - Economic Growth

Development Alternatives, Inc. Moldova Competitiveness Assessment: The Wine Cluster
Russia recently introduced GOST R standards pertaining to wine. 10 Exporters that lack
GOST R accreditation are liable to have their shipments tested at the border. The larger
wineries do not appear to have significant problems in obtaining certification. While some of
the smaller wineries consider the cost of compliance to be high, obtaining the certificate is
relatively straightforward, and unlikely to add perceptibly to the unit cost of wine destined
for the Russian market. The larger wineries facilitate the process by sponsoring visits of
Russian inspectors, who can certify that their facilities comply with standards. Russian
labeling requirements differ little from those in other markets, with the exception of a
required expiration date, which is unusual for wine. However, labeling requirements
apparently change frequently, with little notice to exporters. In 2002, for example, Moldovan
exporters incurred costs for redesign and reprinting of labels to cope with changing
requirements in at least two instances.
The European Union requires a VI 1 certificate from an accredited institution for its wine
imports. There is one laboratory in Moldova accredited to issue VI 1 certificates. It is
government controlled, supervised by the Department of Moldvin; this laboratory has at
times (2002) had problems in meeting the annual recertification requirements. Laboratory
charges are significant, especially in light of the export volumes to the EU. EU guidelines for
wine labeling include restrictions on wording and terminology.
Moldovan wineries have had difficulty in meeting some of the EU standards, particularly in
terms of tolerance thresholds, permissible deviations of the actual alcohol content from
stated levels. A large part of the problem is the difficulty of ensuring uniform quality of
inputs sourced from many smallholder suppliers.
Finance and Credit
Efforts to transform the Moldovan wine industry, to upgrade grape production and modernize
winemaking facilities to improve quality, are financially demanding. For example, the cost of
planting and maintaining a vineyard during the four years until it bears fruit is estimated to fall in the
region of US$10,000 per hectare. Similarly, the required investment in equipment to improve
quality and ensure uniformity is high. Finally, the seasonal nature of production, as for all
agribusiness, implies specific needs for working capital, which has been estimated at US$8-
10 million for the larger wineries.
The underdeveloped state of the Moldovan banking system prevents it from playing the
required role in smoothing the transformation of the Moldovan wine industry. No foreign
banks are present in the country, and the local banking system is too fragmented, with most
banks below optimal asset size. Moreover, banks are governed by a plethora of Central Bank
restrictions on transactions. For example, regulations permit wineries to obtain U.S.-dollar
denominated loans, at rates of 6-7 percent, only for imports, such corks, labels, or bottles. For
other purposes, wineries (as other companies) are limited to Moldovan leu-denominated
loans at nominal interest rates of 16-18 percent. Estimates put the additional cost per bottle
exported from this particular regulation at 3 to 4 percent.
10 GOST R 51159-98: General specifications for wine; GOST R 51165-98: Sparkling wines standards; GOST R
51875-2002: Standards relating to wine materials and cognacs.
July 2004 • DRAFT Page 11