WB says Moldova needs a second economic growth locomotive

Moldova's first generator of economic grow, the one based on remittances and consumption stimulation, will not be able anymore to produce the same results as before the economic crisis. So the country needs an alternative locomotive for economic growth, according to a new Country Economic Memorandum, published by the Moldovan World Bank Office on Tuesday. Dino Merotto, senior economist for Moldova, stated at a event held to launch the Memorandum that the economic growth seen by Moldova before the crisis had not been accompanied by creation of new jobs. A part of Moldova's labor force fled the country to seek better jobs abroad, while those who stayed are aging and thus losing capacity to show high productivity rates. “In order to create new jobs and have high productivity levels Moldova needs investment”, said Dino Merotto. The WB economist highlighted a number of deficiencies existing in Moldova's business environment, including burdensome business regulations, restrictive practices, a lack of competitiveness and monopolies in certain areas, and increased transportation and export costs. Meanwhile, over 30 percent of Moldovan companies surveyed consider transportation-related deficiencies to be the biggest impediment to economic growth. Businesses also complain about limited access to services, including those provided by the government. The Memorandum recommends liberalizing transport routes for carriers and facilitating their accession to the market; improving regulations and enhancing transparency in the transportation area; removing all the old standards for food safety and immediately adopting EU standards instead, enhancing at the same time food quality; and reducing the burden of inspections on businesses, in particular in customs clearance procedures, by adopting a risk-based approach. Attending the event, Valeriu Prohnitchi, director of the think-tank Expert-Grup, saw some of the recommendations included in the Memorandum as less realistic. For example, he thinks that phasing old food standard out and EU standards in will be more suitable for the Moldovan reality than an immediate replacement. Concerning exports, Prohnitchi said that not only markets should be diversified, but also the range of the exported commodities. Deputy Economy Minister Viorel Gutu agreed that an alternative generator of economic growth was necessary. He also agreed that enhancing food safety standards would partly be a solution, but further reform was needed in that area, including to improve public services, whose time and monetary costs often affected the competitiveness of Moldovan products. Improving roads is also a priority in this respect, he added. To support economic reform in Moldova, over the next few years the World Bank will offer some $50 million in financial assistance. The money will go to support budget expenses and implement projects in the areas of energy, agriculture, health, education, etc. The World Bank's Strategy for Moldova expires in 2012, but will be extended for one more year.