Assessing Competitiveness In Moldova's Economy - Economic Growth

Development Alternatives, Inc. Moldova Competitiveness Assessment: The ICT Cluster
The Middle East/Africa spends more on ICT relative to per capita income than any other
region.
Internet and e-business continue to gain momentum, with B2B spending up 83 percent.
Offshore outsourcing is a small part of the USD$5 trillion outsourcing market, but
growing at 15 percent per year.
As a result of smaller corporate ICT budgets and overall efforts to cut costs, ICT
development and process outsourcing are shifting to developing countries with highly skilled
lower-cost labor forces. This trend is likely to continue and shift around the world, as capital
finds ever-decreasing factor costs.
Related and Supporting Industries
Types and Locations
There are only a small number of supporting industries for the ICT sector. The most obvious
is telecommunications, including Internet Service Providers (ISP) and Voice over IP. Until
recently, this segment was controlled by the state-owned monopoly, MoldTelecom. To date,
no telecom company has officially entered the market to compete with MoldTelecom. There
are approximately seven ISPs operating in Moldova, with over half the number of subscribers
in Chisinau. There are currently two cellular companies across Moldova. Coverage is
widespread in the country and is generally viewed as high quality. Moldova also has a
number of business service providers offering accountancy and consulting services such as
KPMG and Ernst & Young.
Name brand hardware is available in Moldova at a 5-10 percent higher cost than in the U.S..
Name brands represent about 20 percent of the market, with the remainder covered by clones
and component parts. Most packaged software is sold over the black market at spectacularly
low prices.
Performance and Constraints
Telecommunications costs and capacity are a major constraint to Moldova’s ICT industry.
Years of monopoly ownership have left the Moldovan telecom infrastructure lacking in
quality and coverage. Penetration rates for fixed line telephony are 19.6 percent, mobile
telephony 10 percent, and Internet 1.36 percent. These measures compare poorly with
Western Europe, where rates are 40, 50, and 36 percent, respectively. In Eastern Europe,
penetration averages approximately 28 percent. There are also problems affecting the
development of the telecom services sector:
Lack of a national telecommunications strategy to stimulate investment;
Frequent changes in policies and tactics of state authorities;
Low level of state company efficiency;
Declining foreign sources of capital for telecommunications investments;
Low demand because of low incomes in the population.
July 2004 • DRAFT Page 7