Moldova’s Legislative Reform Plants the Seeds of Competition

March 17, 2019

Most of Moldova’s economists don’t become apple farmers—but Valeriu Matcovschi wasn’t about to let that deter him from his dream of creating a high-tech orchard. Matcovschi, a 58-year-old Moldovan, put his background studies in economics to work planting a 26-hectare orchard that produces 10 different varieties of apples. A drip irrigation system protects the crop from hail or excessive sun, and the sorting and packaging process that he devised preserves the fruits’ quality.

Quality is important because Matcovschi wants to export his apples to the European Union and markets like the Middle East, India, and Nigeria. To do that, his orchard must be able to compete with others in the region. That’s a tall order to fill because cumbersome regulations have been limiting Moldovan exporters’ attempts to open new markets. Increasing exports and boosting investment would help the country—one of the poorest in Europe—achieve sustainable, long-term growth.

To support Matcovschi and other Moldovan farmers, IFC is helping the nation’s agribusiness sector attract more private investment via new legislation that opens up agricultural input markets for EU-registered seeds, seedlings, fertilizers, and pesticides. The legislation, which is now in effect, helps input suppliers cut costs significantly, improve farms’ and orchards’ productivity, enhance competitiveness, and promote market access so farmers can reach their export targets.

IFC’s efforts were undertaken as part of the World Bank Group’s Moldova Investment Climate Project, a three-year advisory project funded by the government of Sweden. Its goal is to increase Moldova's private sector market competitiveness and agriculture exports by improving its business-enabling environment and helping simplify regulations and procedures. So far, IFC has invested a total of $233 million to support over 20 projects that enhance job creation in small and medium enterprises (SMEs). By the end of 2022, the companies that have been assisted by the project’s work are expected to increase their exports by 15 percent, compared to current levels.

A Time to Plant

Moldova has a moderate climate and fertile farmland, and its economy relies heavily on the strength of its agriculture sector. Agribusiness accounts for about one-third of Moldova’s GDP and employs around one out of every three citizens. Higher production standards and lower input costs for fruits, vegetables, and wine are key elements that will help facilitate these products’ access to EU markets—and a healthy economy.

Before the IFC-supported legislation reform, seeds and other inputs for farms in Moldova had to be registered locally, which required a minimum of one year and up to five years of additional testing. In practice, that meant very few of the latest EU seeds and seedlings, fertilizers, and pesticides were available to entrepreneurs and agribusinesses. As a result, crop productivity in the country was among the lowest in the region.

The legislation is expected to change that by improving the volume and quality of Moldova’s home-grown foods, ultimately benefiting farmers and agribusinesses. Better access to drought-resilient varieties of seeds and seedlings will also reduce the Moldovan agricultural sector’s vulnerability to climate change—improving its capacity to adapt and the long-term food security of rural households.

Ripening Business Goals

In addition to a projected increase in exports, the Moldova Investment Climate Project is working on other areas to help improve the business environment. One particular initiative made it possible for the government to reduce the number of permits required to conduct business from 416 to 152 and helped streamline the procedure for the remaining requests. In the past three years, project initiatives like these have helped Moldovan businesses save nearly $12 million in compliance-cost savings.

The impact of the new legislation on individual farmers like Matcovschi is already changing the way he thinks about his apple orchard’s future. “These reforms directly impact our business goals,” he says. “Since our products are export-oriented, this will allow us to compete better with the rest of the world. As a result, we hope to improve our profits, which will also enable us to grow the business further.”

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Published in March 2019