Information technologies

IT sector has not been ” immune ” to the effects of the pandemic. It has been offering services to other sectors which once the state of emergency was established, considered investment in process automation not a priority and stopped or terminated contracts with information technology companies. This massive impact was consumed during the month of March, and between April and June a new direction of activity was outlined, also determined by the existence of traffic restrictions. It is about the e-commerce that has taken on an unprecedented significance under the quarantine conditions.

Respectively, in the early period of the pandemic there was a structural reorientation of the demand for information technologies to which the companies in the field responded with appropriate supply. Therefore, e-commerce, which “overnight” has become an important tool in maintaining sales and offering new export opportunities, has revealed a number of problems that are specific not so much for the ICT sector, as for this type of tool.

However, there are gaps and artificial obstacles for the widespread application of e-commerce. The most important of them are: 1. how to apply the digital signature; 2. compliance with the requirements of the legislation on the protection of personal data; 3. high bank charges related to online payments; and 4. poor regulation of labor relations during remote work.

Electronic communications

A concern for representatives of the ICT sector is keeping the “luxury tax” on mobile services, contrary to the previously announced budgetary-fiscal policy proposing its cancellation. Similarly, the sector is disappointed by keeping the excessive contributions, such as the payment for the operation of the centralized database for ensuring portability, the compensatory remuneration for private copy and the introduction of the portability fee in the amount of 50% from the payment for operation. It goes without saying that these charges directly lead to higher mobile telephony costs for consumers, but as the pandemic places an increasing emphasis on e-commerce, remote work, online services, these costs will become an additional and unjustified burden on mobile telephony consumers. The drastic reduction, in the midst of the pandemic of the mobile termination rate and keeping at the same time an excessive fixed termination rate of the state-owned incumbent operator also raises concern. Added to this are the extremely complex and inefficient procedures for authorizing civil works for the construction of broadband networks, especially in the regions.

These, as well as other proposals from the ICT sector, can be found in the roadmap for the digitization of the economy launched during May by the Ministry of Economy and Infrastructure.

Creative industry

Creative industry brings together about 2500 micro, small and medium enterprises, providing jobs for about 12-15 thousand people, including about 3000 freelancers. The pandemic has unevenly affected companies in this sector. With the introduction of the state of emergency, marketing and promotion budgets were slashed, which negatively affected the volume of orders at large and medium-sized production houses. At the same time, online commerce caused a sudden demand for web design services, which benefited small entrepreneurs and freelancers. Due to the limitations of social distancing, the event industry has ceased to function.

A major challenge for the sector is the informal nature of employment. The costs of hiring as a natural person are prohibitive for the clients (56% of the costs are taxes), while obtaining the status of a legal entity is complicated. Tax legislation offers the possibility of carrying out individual economic activities (IEA), but the tax/statistical reporting requirements and the need for bookkeeping discourage freelancers from adopting the status of a legal entity. An optimal solution for them would be the regime of an authorized natural person (ANP) according to the model applied in Romania. Automated taxation subject to the volume of the transaction would allow these freelancers to be introduced into the formal economy and turn them into tax payers.

The solution described above is optimal for individual entrepreneurs. When it comes to medium-sized production houses, they want to benefit from special tax regimes similar to those offered to the ICT sector. Indeed, the economic potential to produce added value and generate exports is comparable. In essence, this would allow the use of local talent without requiring people to opt for emigration.

A specific problem for the film and advertising industry is the state’s policy on cash rebates (financial support). Such a policy applies in Romania, Ukraine and Georgia and consists in the reimbursement to the producer of a share (10-15%) of the cost of filming. In the Republic of Moldova, the policy has been accepted in principle by the adoption of the Law on foreign investments in the production of film and other audio-visual works, which provides financial support in the amount of 25% plus a 5% bonus if the film is promoting the image of the country. Unfortunately, that law was to be implemented through a government regulation, which has not yet been approved.

And not least, a coherent state policy that would promote local content is required. Annually, we import significant volumes of content (movies, music, books) from abroad and do very little to export. Currently, content producers survive thanks to donor support for social advertising, which limits creativity. To sell local content and especially to export it, one should offer national awards in neglected areas such as design, media, advertising, video games, etc. Another option is to organize and participate in thematic festivals, but his option cannot be implemented because of the pandemic.

* This information is collected during the discussions conducted by the experts who elaborate the Impact Study of the COVID-19 pandemic on the sectors of the economy. The data can be taken from the website www.consecon.gov.md only with the obligatory mention of the source “Economic Council under the Prime Minister of the Republic of Moldova” and the specification that “The impact study of the COVID-19 pandemic on the economic sectors is carried out by The Economic Council jointly with the Ministry of Economy and Infrastructure, with the support of the European Bank for Reconstruction and Development and the United Kingdom Government Fund for Good Governance. ”

The Secretariat of the Economic Council to the Prime Minister is supported by the European Bank for Reconstruction and Development, funded by the UK Government’s Good Governance Fund, and the International Finance Corporation’s Investment Climate Reform Project funded by the Government of Sweden’s International Development Agency.

Given the dynamics of sales of construction materials, the impact of the pandemic would not be felt in the current year, given that the demand for building materials is shown at the final stage. However, the slowdown in construction, both for objective reasons (declining purchasing power) and subjective reasons (delays in the issuance of building permits), will produce a noticeable impact in the coming year. A beneficial solution in this regard would be to maintain the “First Home” project because one could see the trigger effect of this initiative on the construction sector in general, and on construction materials in particular.

Sanitary protocols are considered important, allowing both the isolation of individual cases of illness and the quarantine of persons in direct contact with them. Thus, the shutdown of activity and partial remuneration of employees who are furloughed are avoided.

Due to the stocks of raw material, production did not suffer. About 30-40 components are used in the production of finishing materials, most of which are imported. Only chalk and gypsum are supplied from quarries in the Republic of Moldova, but one can only talk about higher production volumes in the context of access to foreign markets. Currently, the free trade agreement with the CIS states applies standards that are incompatible with modern production, giving undeserved advantages to producers in Russia and Kazakhstan. Although the Romanian market is attractive (high transport costs do not allow a wider geography), the customs procedures applied to the entry of goods in Romania (3-5 days) undermine the reliability of investments in this direction.

Cement production is performing badly for reasons unrelated to pandemic. The share of cement production imported from Ukraine on the local market is increasing, reaching 10-20%, while cement exports from the Republic of Moldova have already been blocked by Ukrainian courts through anti-dumping actions. In line with them, Moldovan cement is subject to tariffs of 94.6% for a period of 5 years. The Republic of Moldova did not initiate equal measures and did not challenge the Ukrainian decision at the WTO, although the trade balance with Ukraine is in favor of the latter. According to experts, Ukrainian cement has a lower quality compared to the Moldovan one, and its use in construction can negatively affect the seismic stability of buildings.

* This information is collected during the discussions conducted by the experts who elaborate the Impact Study of the COVID-19 pandemic on the sectors of the economy. The data can be taken from the website www.consecon.gov.md only with the obligatory mention of the source “Economic Council under the Prime Minister of the Republic of Moldova” and the specification that “The impact study of the COVID-19 pandemic on the economic sectors is carried out by The Economic Council jointly with the Ministry of Economy and Infrastructure, with the support of the European Bank for Reconstruction and Development and the United Kingdom Government Fund for Good Governance. ”

The Secretariat of the Economic Council to the Prime Minister is supported by the European Bank for Reconstruction and Development, funded by the UK Government’s Good Governance Fund, and the International Finance Corporation’s Investment Climate Reform Project funded by the Government of Sweden’s International Development Agency.

Thus, the closure of some production units abroad (Mexico) led to an increase in the volume of orders (from China) to the plants in the Republic of Moldova. The relatively cheaper cost of labor in the Republic of Moldova, the tax regime, transportation costs, make us more competitive compared to the main regional competitors.

At the same time, there is a shortage of skilled labor. In particular, higher education studies in the category of computer-aided mechanics and technical management of production are required. The prospects of a strategic partnership with the most highly rated European University in this field (RWTH in Aachen) make these master’s degree programs valuable, but the curricula for those programs needs to be accredited as soon as possible.

When it comes to labor force, it is also worth mentioning that during the quarantine (April), 90% of the employees in heavy industry were furloughed, benefiting from partial wage subsidies offered by the state. Since may, 80% of employees have returned to work. At the same time, the closure of schools and kindergartens complicates the options of many employees who are forced to stay at home caring for children. Of the 11,400 workers from Balti FEZ, about 10,000 have returned to work, which indicates that companies work at 75-80% of capacity.

Another forward looking direction, which could become instrumental in the substitution of imports, refers to the implementation of the development program of local suppliers. In particular, this initiative is currently being implemented by Balti FEZ. According to the initiative, 100 local producers could apply to an evaluation program implemented by experts from Germany and the Czech Republic, as a result of which 50-60 will receive specific recommendations to qualify as suppliers (plastic components, rubber, etc.) for large companies in heavy industry. In relation to the latter, it would be beneficial for the state to implement an investment subsidy mechanism (according to the PARE 1+1 model) that maximizes local potential. It would be optimal for state-owned enterprises, which import raw materials from abroad (Termoelectrica, Glass Factory) to similarly encourage local producers.

Another problem facing the sector are the amendments to the Customs Code (articles 315 and 317) requiring the licensing for exports of production waste. As waste comes from imported raw material, these amendments will basically require waste to be sold on the local market at low prices, which will affect competitiveness.

* This information is collected during the discussions conducted by the experts who elaborate the Impact Study of the COVID-19 pandemic on the sectors of the economy. The data can be taken from the website www.consecon.gov.md only with the obligatory mention of the source “Economic Council under the Prime Minister of the Republic of Moldova” and the specification that “The impact study of the COVID-19 pandemic on the economic sectors is carried out by The Economic Council jointly with the Ministry of Economy and Infrastructure, with the support of the European Bank for Reconstruction and Development and the United Kingdom Government Fund for Good Governance. ”

The Secretariat of the Economic Council to the Prime Minister is supported by the European Bank for Reconstruction and Development, funded by the UK Government’s Good Governance Fund, and the International Finance Corporation’s Investment Climate Reform Project funded by the Government of Sweden’s International Development Agency.

Drought has uncovered an inherent problem of the agricultural sector, namely, the supply of water for irrigation. The agricultural development strategy provides for the rehabilitation of water supply systems, allowing the irrigation of 122 thousand hectares and the construction of new systems for an area of 116 thousand hectares. In relation to these goals, in practical terms, only 10 irrigation systems have been rehabilitated from the funds of the COMPACT program, covering an area of 115 thousand hectares. Connecting agricultural producers to water supply systems remains a major challenge. Limited access to water is the main constraint for investments in performance based agriculture. According to World Bank estimates, the monetary value of annual climate related losses in the Republic of Moldova are about 700 million USD.

Another critical aspect for the development of agriculture is access to financial resources. According to the representatives of the sector, the National Fund for Agriculture and Rural Area Development in the amount of 1 billion lei is insufficient, and it is necessary to increase it up to 3-5 billion lei, so that agricultural producers can compete on fairer terms with regional producers, who benefit from economies of scale and greater subsidies.

Not least, it is necessary to launch a program dedicated to small processing enterprises (in villages). At present, raw materials with low added value predominate in the structure of agricultural production exports. The creation of small processing enterprises would widen the range of buyers of agricultural raw materials on the local market and allow the development of semi-manufactured production for export with higher added value. In addition, processed production is not so perishable and reduces the vulnerability of farmers to price fluctuations.

* This information is collected during the discussions conducted by the experts who elaborate the Impact Study of the COVID-19 pandemic on the sectors of the economy. The data can be taken from the website www.consecon.gov.md only with the obligatory mention of the source “Economic Council under the Prime Minister of the Republic of Moldova” and the specification that “The impact study of the COVID-19 pandemic on the economic sectors is carried out by The Economic Council jointly with the Ministry of Economy and Infrastructure, with the support of the European Bank for Reconstruction and Development and the United Kingdom Government Fund for Good Governance. ”

The Secretariat of the Economic Council to the Prime Minister is supported by the European Bank for Reconstruction and Development, funded by the UK Government’s Good Governance Fund, and the International Finance Corporation’s Investment Climate Reform Project funded by the Government of Sweden’s International Development Agency.

Against expectations, Moldovan Railways (MR) are in a similar situation. Cargo transport by rail decreased on average by 45%, of which goods transported for export by 26%, those imported by 15%, those in transit by 71% and domestic transport by 3%. The main international passenger routes (St. Petersburg and Moscow) are suspended until the decision of the authorities of the Russian Federation is changed. Internal passenger transport is operational, but with social tariffs for this category of passengers the financial situation of the MR remains precarious.

The impact of the pandemic on the transport sector is multidimensional. Unfair competition from illicit passenger transport is added to the losses from reduced volume of sales. Regular passenger routes comply with travel restrictions in the Republic of Moldova and the countries of destination and operate under the conditions of the formal economy (applying VAT, paying excise taxes on the purchase of diesel), while illicit transport avoids both travel restrictions and a number of costs. More seriously, drivers who perform regular trips are paid according to the number of hours spent behind the wheel, or as the number of trips has decreased, their wages have decreased by 30-40%. There is a risk that in the medium and long term, we could have a shortage of drivers, as they are attracted by the prospect of higher wages for the same work to EU or Russia.

Financial difficulties faced by transport operators are enormous. Interest payments on loans were deferred during the state of emergency only until 29 June, without the implementation of a staggered repayment schedule over a longer period.

* This information is collected during the discussions conducted by the experts who elaborate the Impact Study of the COVID-19 pandemic on the sectors of the economy. The data can be taken from the website www.consecon.gov.md only with the obligatory mention of the source “Economic Council under the Prime Minister of the Republic of Moldova” and the specification that “The impact study of the COVID-19 pandemic on the economic sectors is carried out by The Economic Council jointly with the Ministry of Economy and Infrastructure, with the support of the European Bank for Reconstruction and Development and the United Kingdom Government Fund for Good Governance. ”

The Secretariat of the Economic Council to the Prime Minister is supported by the European Bank for Reconstruction and Development, funded by the UK Government’s Good Governance Fund, and the International Finance Corporation’s Investment Climate Reform Project funded by the Government of Sweden’s International Development Agency.

Factories in the food industry sector have been operating under a normal regime under the terms of the state of emergency, although the adjustment to new sanitary requirements had an impact on costs. In particular, additional costs were incurred for the implementation of hygiene rules, while wearing visors and protective gloves negatively affected labor productivity. On the other hand, the need to comply with sanitary norms is clear, because a small infection outbreak is able to stop production, and the revenue missed due to stoppage is much higher than compliance costs.

The structure of sales has also changed. In particular, sales through small shops and sales in the villages have decreased. The closure of catering establishments during the state of emergency, as well as the closure of schools and kindergartens, clearly contributed to the reduction in sales.

A common problem for all processors in the food industry are differentiated VAT rates. Agricultural producers can sell production at 8% VAT, while processors are obliged to pay 20% VAT. Respectively, the difference of 12% makes agricultural processors uncompetitive compared to intermediaries that offer a higher price and recover VAT when exporting. This distortion of the market generates losses for the national economy. Instead of encouraging exports of processed agricultural production, it stimulates exports of raw materials. A reduced VAT rate, undifferentiated for the entire value chain, would normalize the market and allow reaching the full export potential.

Fruits and vegetables

Consumer demand for canned fruits and vegetables has changed. As they are not considered primary necessities, their domestic sales decreased by about 20-25% and exported production decreased by about 15% in the first half of this year.

In the domestic consumption, about half of production of juices and canned fruits and vegetables is domestic, while the other half is imports. The competition conditions are not favorable for local producers because the “natural” component in the imported juices is lower and makes the prices of these product categories more competitive. Making full use of new export markets is limited to countries with which the Republic of Moldova has free trade agreements. There is a huge potential for trade on the markets of China, India, Israel, but tariff barriers of 20-50% prevent this.

Bakery products

As for the confectionery and bakery segment, in March-April there was a sales increase of 10-15% after which sales have stabilized. The closure of kindergartens, schools and catering establishments also had a negative impact on this segment of food industry. Export potential of confectionery and bakery products is largely untapped. Sporadic increases have been registered on the US and German markets (biscuits, sweet cakes), but the EU market is inaccessible for a wide range of products containing animal components (butter, milk, eggs). Accordingly, in order to access EU shelves, local producers are forced to import components which, although accessible on the local market, are not properly certified.

Sunflower oil production

Both production and sales of sunflower oil have not been affected by COVID. To the contrary, being a product of first need, its external consumption is increasing. In addition, fluctuations in sunflower oil production due to the temporary shutdown of the activity of some factories abroad revealed new niches for selling production (Ethiopia, Tanzania). The turnover of oil factories was estimated to have increased by 15% at the time of consultations.

The streamlining of customs clearance procedures is of the utmost importance. Every day, about 120 transport units enter and leave the plant, but the procedures for obtaining certificates of origin complicate the operational management.

The import component in the production of sunflower oil is negligible, the raw material being 97% sourced locally. However, fluctuations in agricultural sunflower production, have a negative influence on the export potential of sunflower oil. In a “good” year, when the production of sunflower is 900-950 thousand tons, the processing of 340 thousand tons of seeds into oil is not an issue. Conversely, if the harvest is low and agricultural producers sell their harvest for export, oil mills run out of raw material. Due to the April-May drought, producers expect a reduced harvest of only 500 thousand tons of sunflower, but when the entire crop is exported, processing capacities will remain under-used.

Dairy products

The dairy sector is currently facing a double crisis, with the pandemic having a secondary impact. Activity restrictions applied to restaurants, schools and kindergartens that have limited market access to some extent, but the consumption of milk and dairy products in stores has not been affected. Overall, turnover during the state of emergency decreased by 10-15%. On the other hand, the drought that occurred this year negatively affected the source of raw material, namely milk purchased from the population that owns cows, goats and sheep. For the latter, high feed prices served as an incentive to slaughter animals when the price of milk delivered to the producer remained at the same level.

The national particularity of milk industry is that 80% of raw material is purchased directly from the population through a network of collectors employed by dairy factories. Thus, at the moment, the number one priority for the dairy industry is support for small farmers that are supplying raw material in order to make sure that they have feed. A bureaucratic barrier for the implementation of this solution lies in the fact that subsidies offered by AIPA are aimed at agricultural producers in the formal sector, however the absolute majority of farmers, suppliers of milk as raw material, do not have a registered status.

Due to the fact that the term of consumption of milk and natural milk products is short, the local market is dominated by local production which constitutes about 70%, while import production (pasteurized milk and dairy products) constitutes about 30%. There is a potential to replace imports with local production only when raw material suppliers would be protected. In this regard, there are only isolated cases of vertical integration of the value chain. A few large cattle, sheep and goat farms have managed to set up small milk and dairy production facilities, but due to the informal and dispersed nature of milk suppliers, there are no cases when large factories would exercise control over them.

The export potential of milk and dairy products is untapped. The fundamental obstacle faced by milk and dairy producers (which in terms of prices could be competitive in Romania) lies in the implementation of European standards. To obtain export rights it is necessary to implement product traceability and the application of quality standards throughout the value chain “from farm to fork”. This does not happen due to the fact that suppliers of raw materials are small farmers, unregistered and respectively, unsupervised.

Meat and sausages

Overall, meat production decreased between March and June 2020, compared to that period of the previous year by around 10%. Activity restrictions applied to restaurants, schools and kindergartens, as well as the ban on “group activities”, which traditionally stimulated the demand for meat for skewers during the summer season, played a decisive role. At the same time, the costs of pandemic prevention measures, such as working in two shifts and large quantities of disinfectant material, have been absorbed by meat producers.

Meat produced in the Republic of Moldova cannot compete in the CIS countries due to small quantities and cannot be exported to the EU due to non-compliance with the system which is under continuous evaluation by EU experts. Currently, of the 7 indicators that qualify chicken exports only 4 are accredited. However, the export potential of meat production is undeniable – as soon as exports to the European Union are allowed, local producers are ready to deliver chicken to Romania and other countries. In order to advance negotiations with the EU, an important element is to solve the problem of animal by-products (waste) by creating a unit for their processing.

Internally, the sector is forced to work in an environment of unfair competition from unauthorized producers. According to estimates, they hold about 20-30% of the meat market, avoiding both tax obligations and compliance with sanitary-veterinary rules (meat is slaughtered in hygienic conditions). Unregistered farms are not targeted by ANSA, and the marketing of meat produced by such establishments is allowed on the local agricultural market by veterinarians.

* This information is collected during the discussions conducted by the experts who elaborate the Impact Study of the COVID-19 pandemic on the sectors of the economy. The data can be taken from the website www.consecon.gov.md only with the obligatory mention of the source “Economic Council under the Prime Minister of the Republic of Moldova” and the specification that “The impact study of the COVID-19 pandemic on the economic sectors is carried out by The Economic Council jointly with the Ministry of Economy and Infrastructure, with the support of the European Bank for Reconstruction and Development and the United Kingdom Government Fund for Good Governance. ”

The Secretariat of the Economic Council to the Prime Minister is supported by the European Bank for Reconstruction and Development, funded by the UK Government’s Good Governance Fund, and the International Finance Corporation’s Investment Climate Reform Project funded by the Government of Sweden’s International Development Agency.

The difficulties caused by the pandemic are also coupled by a number of older impediments that obstruct the activity of the sector. First of all, it is about the slow and complicated process of issuing building permits in Chisinau municipality. The need to update the urban plan has become an artificial obstacle since in the absence of it, local public authorities should be guided by the old plan. Another impediment is the postponement of the adoption in Parliament of the Urban Planning and Construction Code, which integrates a set of reforms expected by the sector. These reforms would propel the Republic of Moldova into the World Bank’s Doing Business ranking, according to which our position in the world ranking for 2020 in terms of construction permits is 156 out of 190 countries.

The access of developers and road builders to the public procurement system is limited. At the same time, the participation of Moldovan road builders in road infrastructure projects is conditioned by the large volumes of works that they can only support in consortia with foreign companies, the role of the local participant being a “secondary” one. Bidding for smaller lots would increase the participation of Moldovan companies. Tender (and payment) conditions are considered to be unfair compared to similar tenders organized by the World Bank or the United Nations. The emphasis is only on prices, which are as low as possible, while the technical offer only accounts for 20%, which practically prevents local companies from participating in public procurement. An adjustment of the tender terms to international standards is considered to be a necessary condition for stimulating investment in this area. Likewise, the payment for works in 2 to 4 weeks after the signing of the acceptance documents should be something normal, which is not the case in relation to works performed for the customers in the budget system.

At the same time, there is little potential for replacement of imports of construction materials. If the raw materials (cement, gravel, concrete, brick) is comparatively better, other building materials (terracotta, paints, technical glass) come exclusively from import.

* This information is collected during the discussions conducted by the experts who elaborate the Impact Study of the COVID-19 pandemic on the sectors of the economy. The data can be taken from the website www.consecon.gov.md only with the obligatory mention of the source “Economic Council under the Prime Minister of the Republic of Moldova” and the specification that “The impact study of the COVID-19 pandemic on the economic sectors is carried out by The Economic Council jointly with the Ministry of Economy and Infrastructure, with the support of the European Bank for Reconstruction and Development and the United Kingdom Government Fund for Good Governance. ”

The Secretariat of the Economic Council to the Prime Minister is supported by the European Bank for Reconstruction and Development, funded by the UK Government’s Good Governance Fund, and the International Finance Corporation’s Investment Climate Reform Project funded by the Government of Sweden’s International Development Agency.

Online sales have not proven to be a viable solution, given that buyers prefer to appreciate the goods directly in furniture show rooms because size, color, appearance are critical to making the purchase decision. Representatives of the sector noted that the law on e-commerce is designed to pay invoices online and does not meet the requirements.

Representatives of the sector are complying with sanitary protocols, but mention that the closure of furniture show rooms was not justified. The large areas on which the goods are exposed represent a lower risk than public transport.

Furniture production is strongly connected to foreign trade. Raw material imports component in the production of laminated, upholstered furniture and trimmings are practically 100%. Relationships with suppliers have changed during the pandemic. If previously orders were made 4 weeks before delivery, now a minimum of 8 weeks is required. At the same time, suppliers insist on immediate payments, as opposed to the pre-pandemic period. On the other hand, furniture produced in Moldova has a significant share on the Romanian market. This is explained by the speed of execution of orders, affordable prices for furniture produced from laminated material (furniture factories in Romania are oriented towards luxury production, made of wood) and consumer confidence (laminated furniture produced in Ukraine is not in demand).

Labour costs are on a rising trend. Skilled workers (including graduates of vocational schools) take as a reference the wages they could earn in Romania or the Czech Republic, which face a shortage of labor. In the medium term, the productivity of the sector depends on the technology, for example, the purchase of new turning machines would reduce labor costs.

Taking into account the above, it can be stated that the competitive advantage that Moldova currently has in furniture exports will erode with the increase in labor costs, if measures to increase productivity based on new technologies are not taken.

* This information is collected during the discussions conducted by the experts who elaborate the Impact Study of the COVID-19 pandemic on the sectors of the economy. The data can be taken from the website www.consecon.gov.md only with the obligatory mention of the source “Economic Council under the Prime Minister of the Republic of Moldova” and the specification that “The impact study of the COVID-19 pandemic on the economic sectors is carried out by The Economic Council jointly with the Ministry of Economy and Infrastructure, with the support of the European Bank for Reconstruction and Development and the United Kingdom Government Fund for Good Governance. ”

The Secretariat of the Economic Council to the Prime Minister is supported by the European Bank for Reconstruction and Development, funded by the UK Government’s Good Governance Fund, and the International Finance Corporation’s Investment Climate Reform Project funded by the Government of Sweden’s International Development Agency.

Turnover at that time became absolute zero (“zero is zero”) while inventories of products, raw materials, often perishable were still full. Rent, wages, interest on loans are a significant component of costs, which still remained at the same level. According to estimates, about 25-30% of the employees of restaurants that made home deliveries were made redundant, their share in the restaurants that did not make deliveries, was even higher (only the core of the company was retained: the administrator, the accountant, the chef). In individual cases, lessors lowered or even canceled rent payments for the months of March-April, but this act of charity is unlikely to turn into something sustainable. An alternative path for many businesses in this sector, who were not burdened with loans, was to permanently stop the activity by giving up future income but also current costs.

After the resumption of activity, it turned out that a return to normality is no longer possible. In June, sales of catering establishments made up only 30% of that figure in the previous year, while in July about 50%. Under current conditions, most businesses in this sector have counted the months to bankruptcy (about 6-9 months.) According to estimates, in the spring of next year no more than 1/3 of bars, cafes and restaurants that exist today will remain open.

On a social level, the most negative impact comes from the layoffs of staff directly and indirectly involved in the catering sector, which reaches about 50 thousand employees. Taking into account the number of suppliers (about 90 thousand) that supply this sector with raw material, a number of chain impacts are very likely. From the accounts of affected companies, the procedures for qualifying people made redundant as unemployed by the NEA are arduous and lead to no results. During the same period, public institutions operate according to a reduced work regime. The number of applications is large, and in order to avoid physical contact, scanned copies of the document are presented, which are manually entered into the database. Also, subsidizing payroll taxes did not have the expected effect, as employers had little to pay for furloughing and made employees redundant en masse.

A nuisance in the current work of restaurants comes from the unpredictable and uneven procedure of applying restrictions. It is logistically difficult to comply with the new rules, announced by the media at 9 PM and implement them at the opening of the premises the next morning. It would be more appropriate for the entry into force of the new rules to occur in 3-4 days, so that businesses in the catering sector can adjust their business model. Some rules are not well founded and implementable, such as demonstrating kinship or applying the distance of 1.5 meters between customers and not between tables, as is the practice in other countries. Likewise, it is not clear what happens to the older rules since new rules that partially replace them come into force. The activity of control and finding bodies, apart from ANSA, which has clear powers in this field, the police, the praetor and others are present during the control, which is in contradiction with the state’s promise to help. In addition, the fines imposed, are prohibitive.

* This information is collected during the discussions conducted by the experts who elaborate the Impact Study of the COVID-19 pandemic on the sectors of the economy. The data can be taken from the website www.consecon.gov.md only with the obligatory mention of the source “Economic Council under the Prime Minister of the Republic of Moldova” and the specification that “The impact study of the COVID-19 pandemic on the economic sectors is carried out by The Economic Council jointly with the Ministry of Economy and Infrastructure, with the support of the European Bank for Reconstruction and Development and the United Kingdom Government Fund for Good Governance. ”

The Secretariat of the Economic Council to the Prime Minister is supported by the European Bank for Reconstruction and Development, funded by the UK Government’s Good Governance Fund, and the International Finance Corporation’s Investment Climate Reform Project funded by the Government of Sweden’s International Development Agency.

At the same time, the pandemic reviled a systemic problem related to the export of bulk wines. Selling those on the EU and CIS markets erodes the image of Moldovan wines which are trying to position themselves as high quality wines. At the same time, in the Republic of Moldova there is a constant surplus of grape production, and low-quality bulk wines are the only option available to grape producers who want to market their production. Even so, wine stocks in a volume of about 24 million decalitres are putting pressure on the market and distort prices. Such a volume represents the equivalent of two years of harvest compared to an acceptable level of one year of harvest. Respectively, these excessive stocks threaten the harvest of 2020.

The medium-term solution is to create capacity for wine distillation and processing waste resulting from wine production. A public-private partnership based on industrial platforms could stimulate investment in this area. Distilling low-quality wine is a sustainable alternative for grape producers, who could market their product at prices of around 30 euro cents per liter of wine, thus helping to eliminate stocks and lessen pressure on the emerging sector of wine for export. At the same time, the distillation of wines and the processing of waste products resulting from wine production will allow the development of local production of medicinal alcohol, grape seed oil, natural dyes, fertilizers for farmers. All of these, are currently imported.

The level of indebtedness of the sector is quite high – the volume of attracted loans accounts for about 65% of assets, which limits the sector’s ability to make additional investments. Instead of attracting credits, the sector would like to benefit from additional shares issuance, the positive experience of Purcari winery is considered a success story. At the same time, export guarantees from the Guarantee Fund managed by ODIMM are required for the active promotion of production on new markets.

* This information is collected during the discussions conducted by the experts who elaborate the Impact Study of the COVID-19 pandemic on the sectors of the economy. The data can be taken from the website www.consecon.gov.md only with the obligatory mention of the source “Economic Council under the Prime Minister of the Republic of Moldova” and the specification that “The impact study of the COVID-19 pandemic on the economic sectors is carried out by The Economic Council jointly with the Ministry of Economy and Infrastructure, with the support of the European Bank for Reconstruction and Development and the United Kingdom Government Fund for Good Governance. ”

The Secretariat of the Economic Council to the Prime Minister is supported by the European Bank for Reconstruction and Development, funded by the UK Government’s Good Governance Fund, and the International Finance Corporation’s Investment Climate Reform Project funded by the Government of Sweden’s International Development Agency.