Assessing Competitiveness In Moldova's Economy - Economic Growth
Assessing Competitiveness In Moldova's Economy - Economic Growth
Assessing Competitiveness In Moldova's Economy - Economic Growth
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Development Alternatives, <strong>In</strong>c. / BIZPRO Moldova Moldova <strong>Competitiveness</strong> Assessment<br />
INTRODUCTION<br />
This report summarizes the findings of an assessment of competitiveness in the Moldovan<br />
economy requested by USAID under the umbrella of the BIZPRO/Moldova project,<br />
implemented by Development Alternatives, <strong>In</strong>c. (DAI). BIZPRO staff and visiting consultants<br />
conducted this assessment over a period of four weeks in May 2004, although related activities<br />
are continuing. This analysis of strategic competitiveness issues relied on DAI’s Market-Driven<br />
<strong>Competitiveness</strong> Appraisal (MDCA), which links competitive performance to evolving market<br />
architectures in terms of demand patterns and preferences, rules and incentives, and competitor<br />
behavior. The MDCA seeks to identify strategic priorities as a basis for building consensus. This<br />
report represents an interim step in a continuing effort to foster competitiveness and productivity<br />
growth in the Moldovan economy.<br />
Part I offers a succinct summary of the findings on issues that cut across the economy—the<br />
policy environment, the market architectures, and quality assurance system. It also provides<br />
highlights of the analysis for clusters selected for closer scrutiny on the basis of performance<br />
indicators, in particular their performance in competitive export markets. These clusters include<br />
wine; agribusiness, especially fruit and nuts; light industry (textiles and apparel, leather goods);<br />
and information and communications technology. Part II presents more detailed reports on<br />
crosscutting issues and assessments of the selected clusters.<br />
COMPETITIVENESS FOR MOLDOVA:THE KEY TO PROSPERITY<br />
The path to prosperity for Moldova lies in rapid productivity growth for both labor and capital.<br />
Sustained productivity growth is the mark of competitiveness. On that score, Moldova’s<br />
economy on the whole falls short. The country today is Europe’s poorest. A growing number of<br />
Moldovans are working abroad: at the current rate, workers’ remittances may equal gross foreign<br />
exchange earnings from all merchandise exports in 2004. Outside of their traditional markets to<br />
the East, Moldova’s exporters are competing primarily on the basis of low wages for an often<br />
highly skilled labor force. At the same time, low labor costs do not protect Moldovan producers<br />
of consumer goods for the domestic market against increasing competition from imports. Neither<br />
exporters nor enterprises competing with imports get much help from the government, which<br />
continues to hew to policies virtually designed to increase the cost of doing business and to sap<br />
the country’s competitive potential.<br />
Yet the picture is by no means all bleak. <strong>In</strong> a difficult environment, some of Moldova’s<br />
enterprises increasingly manage to compete successfully, to survive and even prosper in<br />
competitive markets. The country’s exports to the EU 15 are gaining market share in growing<br />
and stable markets there. Apparel producers are moving along the upgrade path from just sewing,<br />
to cutting and sewing, and on to private label production. The need to meet quality standards and<br />
certification requirements in new markets is putting increasing pressure on the country’s quality<br />
assurance infrastructure, which shows some signs of responding, albeit hesitantly.<br />
July 2004 • Draft Page 1