Assessing Competitiveness In Moldova's Economy - Economic Growth

Development Alternatives, Inc. Moldova Competitiveness Assessment: The Wine Cluster
Exporters also face some pressure to pay to speed up complex customs clearance procedures.
These pressures are greater for exports to the CIS countries than for those to the EU.
Revenue Repatriation Requirements
Government regulations require that all revenue from the export of wine be repatriated within
90 days. Exporters face fines equivalent to 0.3 percent of the total invoice per day over the
90-day period. While the tax authorities believe that 90 days is sufficient, exporters argue that
more time is required, especially for exports to CIS countries. For example, transit time for
deliveries to distant markets like Vladivostok may take 80 days. Moreover, the practice of
payment only after some part of the shipment has been sold in the market also adds to the
time lag in receiving the revenue.
Nonpayment by the importer can, of course, create serious problems for the exporter.
Wineries therefore have to commit resources to preempt fines through challenges in the legal
system, adding to the cost of production and marketing. The regulatory requirement does not
make much sense, since it is in the interest of the wine exporters to obtain payment as
quickly as possible, given the cost of working capital.
Problems and Responses
The analysis of Moldova’s wine cluster has identified both opportunities for and obstacles to
improving competitive performance. Entrepreneurs in the cluster are taking steps to address
some of the obstacles and to exploit opportunities, yet individual action will be insufficient to
leverage the cluster’s full economic potential for employment and income generation.
Optimal results will require joint action on the part of the private producers in the cluster as
well as of government representatives. The following observations and suggestions are
highly selective; they fall far short of articulating an effective strategy for realizing the
potential of this cluster, because such a strategy cannot be formulated without the active
participation and engagement of all stakeholders. 11
Problem: The style and quality of Moldovan wines are out of step with the requirements and
expectations of existing and emerging premium markets.
Response: Current efforts to improve quality and move toward New World wine styles need to be
accelerated and expanded. See Annex B for specific recommendations.
Problem: Moldovan wines in the Russian markets are outflanked by new entrants in the low- to
medium- price market segment.
Response: Consider a joint marketing campaign along the lines of the “new Moldovan wines,” in
conjunction with efforts to improve quality and style.
Problem: Premium markets in the EU and emerging in the CIS have a preference for dry wines
with an alcohol content of 12 percent, which requires grapes with a 22-23 percent
sugar content.
11 Some of the suggestions reflect or restate recommendations in the wine subsector case study undertaken in
the context of the World Bank’s Trade Diagnostic Study.
July 2004 • DRAFT Page 14