E.U. enlargement and fight for investments - Commentary

Year 2007 will be of sudden change for economies of western neighbours of Moldova – Romania and Bulgaria, which will become part of the European Union (E.U.) – as well as for the national economy. Moldova turns suddenly from a small country in East Europe into a country that bounders on the E.U. and this status requires an increased attention of Brussels for political and economic developments in Moldova. It means that the E.U. will take care to protect the Moldovan economy from internal and partly external economic shocks through its technical and investment programmes. Also, Moldova could become a „target” for the European business besides the increased attention of official structures in the E.U. These evolutions will be reflected best in the payment balance of Moldova regarding the foreign direct investments. However, the Chisinau government should not rely only on the „status of neighbour” in attracting foreign investors, because though the investments of Europeans will grow, they will be much lower than they could be if a series of additional measures was adopted. Firstly, Moldova must take into account the fact that Ukraine is a neighbour of the E.U. and it has a huge market. A strong industry and natural resources, though Moldova defeats the economic liberalisation regarding several chapters. Of course, huge investments will leave Moldova behind, but Chisinau should get involved in the fight, so that not to fail smaller investments, including for serving of large investment projects with neighbouring states. Moldova does not have other arms but technical ones in this battle: deepening of reforms and development of infrastructure for reduction of business making and building costs, adoption of legislative norms to establish preferential conditions for large investment projects and non-discrimination adoption of these conditions, further promotion of fiscal and juridical reform, qualitative fight against corruption. Secondly, the government should think seriously about border area with the E.U. – cities of Lipcani, Costeşti, Ungheni, Leova, Cantemir, Cahul, and the future Giurgiulesti port. These localities could turn into true attractions for development of border business (trade, public nourishment, services, etc.), as well as into points of enlargement of some production facilities for businessmen from Romanian and maybe from other European states, which will want to benefit of geographic aspect – as closer as possible to the E.U. – besides the use of the trump of lower costs. Thirdly, Chisinau should speed up the process of adjustment of local production and quality standards to European standards, so that to exclude the barrier of standards for supply of goods to the E.U. The government does not have much time for meditation and it should take action, unless its eastern neighbours (Ukraine and Russia) could become „much stronger magnets” for investments of Europeans and pull up too tasty pieces from „hands of Chisinau”. As regards the investments for 2006, experts forecast 300 million dollars, compared with 260.33 million dollars in 2005. That means a rise of about 15 percent, compared with 7.6 percent in 2005. Although a doubling of the rise pace of foreign investments is forecasted, a remarkable success compared with the precedent years, this is an insufficient indicator, if we take into account the investments failures of the past years, as well as the developments in Central and Eastern Europe. According to a report that Economics and Trade Minister Valeriu Lazar has recently presented in the parliament, Moldova attracted foreign direct investments in the amount of 114.9 million dollars in 2001, 166.8 million dollars in 2002, 102.9 million dollars in 2003, 241.8 million dollars in 2004, and 260.33 million dollars in 2005.