Identifying potential investment projects

A number of potential joint Moldovan-Czech investment projects have been identified within this project. The analysis of the most advantageous sectors for Czech investment bases on various criteria. These criteria are the degree of priority of various sectors as seen by the Moldovan government, level of profitability, degree of risks and market growth potential.

In 2005 the Moldovan Government has adopted the Program regarding facilitation of the investment activity “ProInvest” for the period 2005-2006. The goal of the Program was to stabilize the domestic business climate and to increase the trust of the potential and effective investors, as well as to prove the Governmental commitment to advance the business environment reforms. The “ProInvest” Program defined the following sectors priority in attracting investments:

1. Software development;

2. manufacturing of new building materials;

3. production of virus-free vineyard and fruit tree saplings; 4. development of telecommunication and IT infrastructure; 5. pharmaceuticals;

6. manufacture of electric and electronic appliances, equipment and machinery.

In 2007-2008 these priority sectors are likely to be maintained and others (such as food-processing) to be added. The beneficiaries of the Program are the investors starting up a business in one of the priority sectors. Being beneficiary of the ProInvest program and holding the Investors Cards issued by the Ministry of Economy and Trade is advantageous for the reason that the Ministry facilitates directly the registering of the companies and starting of the activity and no bureaucratic delays and red-tape are admitted. We believe that the Czech companies have expertise and resources relevant for many of the six sectors and when combined with advantages of Moldovan companies could result in successful joint investment projects. The projects will be described with more detailed information to be found in the Annex 3.

For instance, let’s take the first sector (software development), which is growing constantly thanks to both internal and external demand. Moldova is a country of good IT-professionals and good educational infrastructure. In 2005 about 1,200 IT-specialists graduated colleges and universities and about 2000 were matriculated. Currently there are about 60 actively working software companies based in Moldova. Obviously, this sector is not very capital intensive and may be attractive for the Czech capital.

Another interesting sector for joint investment projects may be the manufacturing of the new building materials. In the Czech exporters’ directory there are 113 companies specialized in production of “articles of stone, plaster, cement, asbestos, mica or similar materials; ceramic products; glass and glassware“ among which Moldovan companies can find potential partners.44 _{We believe that combining the} outstanding technical expertise of the Czech companies in this sector with Moldovan advantages will result in successful joint projects. The advantages that Moldovan companies enjoy are the existing innovative ideas, cheap labor and abundance of mineral raw material, good geographic position and free trade agreements to reach many regional markets. The construction sector is buoyant in Moldova (a 20% growth in 2006) as well as in Romania (18.6%) and Ukraine (9.8%) and will probably preserve a high growing pace in the future. A concrete technical project in this area was proposed by a Moldovan company which looks for resources for implementing in practice an innovative “Quadropress” for manufacturing building materials. More technical information on this project is provided in the Annex 3.1.

44_{http://exporters.czechtrade.cz/en/.}

62 Services and food industry are the fastest growing sectors in Moldovan economy. In these sectors there are a number of potential niches for investment. We have identified the launching of a chain of traditional Czech pubs in Moldova as the most interesting. This project is attractive because the consumption of beer in Moldova has been growing quickly and despite the competitive environment (presence of Moldovan, Romanian, Ukrainian, Russian and other producers on the domestic market) the market still has a large unexploited potential. More information on this potential investment project is provided in the Annex 3.2. Other very interesting bilateral projects may result from the fact that Moldova is a net importer of energy resources and its energy needs will only grow in the future. As energy prices are going up, any investment in domestic capacities of energy production will be very much welcomed in Moldova. This country is endowed with necessary factors – cheap labor and large plots of land - for producing bio-fuel for both domestic and foreign consumption. In the Annex 3.3 there is a brief description of a potential plant for producing bio-diesel and bio-ethanol in the Republic of Moldova.

Currently a law on private-public partnership is being developed in Moldova and this will allow for starting up projects with both commercial and public purposes. For instance, the provision of safe drinking water is currently a serious problem in many Moldovan villages and towns and this provides a niche for an interesting project. The Czech Republic has good technical expertise in equipment for water filtration while in Moldova there is a demand for water treatment stations. In most of Moldova’s cities and villages, groundwater is contaminated as a result of agricultural misuse of mineral fertilizers, pesticides and inefficient treatment of agro-industrial wastes. About 57% of rural wells are polluted with nitrogen compounds, pesticides, hydrogen sulphide and fluorides. Nitrates, ammonium, pesticides, as well as heavy metals, are also detectable in surface waters. The drinking water in a good half of the village wells is estimated to be polluted with agricultural chemicals or their decay products. The public demand for redressing this situation is increasing but the government is not able to respond to it. This is an opportunity for a potential Moldovan-Czech company to be established in order to provide these services. More technical details are provided in the Annex 3.4.

Moldova has significant comparative advantages and traditions in cultivating crops used for extraction of essential oils as well as in cultivation of medical plants. The Annex 3 describes a potential investment project proposed by a Moldovan company specialized in production, procession and commercialization of ethereal-oleaginous and medical plants and production of essential oils for cosmetics and pharmaceuticals industries. The company is currently is looking for a foreign partner in order to increase production scale and explore new markets.

Obviously, Moldova’s strongest advantages are in the wine-making sector. However this sector is highly competitive and potential projects Moldovan-Czech will have to produce unique outputs with exceptional consumer features. The project, which meets this condition, is presented in the Annex 3.6. The main idea is to produce for both internal market and for export low-alcoholic carbonated beverages. The project proposal seems to be very attractive in financial terms as well as in terms of long-term market potential.

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