FDI prezentare
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Transcript of FDI prezentare
Author: Iabanji EcaterinaScientific director:Ph.D. Bunu Mariana
GRADUATION PAPER Specialty 364.1 „Finance and Banking”
ANALYSIS OF FOREIGN DIRECT INVESTMENT FLOWS INTO
THE REPUBLIC OF MOLDOVA
Actuality of research In the present development stage, regardless of
the country’s economic development condition, progress cannot be seen without foreign direct investments.
Foreign direct investments are important for a number of reasons. Firstly, they constitute import of capital – a scarce resource in any country, but in particular in transition and developing countries.
Secondly, foreign direct investments allow knowledge transfer from the source country to the investment destination.
Furthermore, foreign direct investments enable access to foreign markets and business networks.
The purpose of the research Is studying the economic role of the foreign
direct investment flows in the national economy, and study of the amount and structure of the FDI into the Republic of Moldova, in order to determine the specific of the foreign investments in the process of the economic development. Making the analysis of the FDI flows enable to determine the efforts and measures of the government in the field of attracting foreign direct investment, and to make conclusions about the improvement of the process of attracting FDI into the economy of the Republic of Moldova.
New economic development paradigm based on investments
and export
Positive effects of
FDI
Negative effects of
FDI
environmental degradation
public protest
market dominance by MNC
damaging competition for local
firms
improvement of production process, technology transfer
Stimulation of export orientation
increases the competiveness of local industries
realization of externalities
FDI Inflows to Selected Countries, 2001-11
Balance of payments and international investment position,
Types of investment
2007 2008 2009 2010 2011
Direct investment in the national economy
541,26 711,46 145,33 197,41 274,0
equity capital 227,38 441,7 161,56 156,98 143,9
reinvested earnings 112,81 98,7 -11,56 14,55 94,42
other capital 201,07 171,06 -4,67 25,88 35,68
Foreign direct investment / GDP (%)
12,29 11,75 2,67 3,40 3,91
Major investors
0
500
1000
1500
2000
2500
140
812
267 381206 380
1256
61
918 897
65 62
669
2017
1685.1
944.4813.9
545.7475.5
392.4 378.3 315.9 256.6 209.8 192.3 189.3172.3
1296
number of enterprises foreign investments (mil. MLD)
Reason 1 to invest in RM
Fiscal incentivesIncentives when starting a business VAT refund for capital expenses on long-term investments, except for housing and vehicles (not applicable in Chisinau and Balti) VAT and customs tax exemption for assets to be included in the share capital of the company
B. Benefits when operating 12% Corporate Income Tax – since 2012, with
incentives for investors Double Taxation Avoidance Agreements (DTAA )
with 39 countries
Existence of Industrial Parks
The Law on Industrial Parks (№ 182 from 15 July 2010):
30-year term for the industrial park; Free change of land use; Free transfer of state land to the company administrator; Opportunity to lease state land with a 30% discount; State contribution to the infrastructural and
technological development; Limited by and controlled Government inspections; Assistance from local authorities and the Council to
promote investment projects of national significance;
Agribusiness
Wine producti
onEquipment and
technology
Organic farming
Livestock farms
Milk processing plants
New orchards
Alternative
energy
BiogasStraw-fired
heating
Energy efficien
cySolar
energy
Hydro Power
Wind power
Business
Software
Support
Mobile telepho
ny
FEZ
Successful Investors of the RM
State actionsIn 2012 was adopted the National
Development Strategy "Moldova 2020" aims at orientating the country towards a dynamic model based on local and foreign investments and development of export-oriented industries.
An Association Agreement with the European Union is currently under negotiation
Steady implementation of structural reforms has raised Moldova’s competitiveness
As a result, Moldova was ranked nr. 81 in 2012 by Doing Business Rank
The Most Problematic Factors for Doing Business in Moldova
Improvements needed to attract more foreign investment in the
economy of the Republic of Moldova
Regional trade integration
Privatization of public property
Development of Free Economic Zones and of industrial parks
Improving of labour and land regulation
Realigning obsolete pieces of legislation to reality
Conclusions• Competition for foreign direct investment (FDI) is tough as
many potential investment locations try to attract scarce and increasingly footloose foreign capital. The data on Moldova’s FDI inflows and stock suggest that the country has only been partly successful in attracting foreign investors.
• Trade integration with EU and CIS countries, improvements in the business climate, privatization, and healthy growth prospects are the factors that would further improve Moldova’s potential for attracting FDI.
• Potential new investors frequently point out to severe problems which clearly outweigh the positive factors such as good access to foreign markets, the well-educated population, language skills, low wages and good agricultural land
• Investors reveals that there are a number of issues that inflate the cost and/or increase the risk of investing in Moldova, such as volatility of the political environment, the uncertainty of the economic situation, the ambiguity of the legal system, and the high level of corruption.
Recomendations
• improve the investment climate and legislation• a strategy for higher FDI into agro-food industries
should be developed and implemented• improve the quality of labor force• to improve the existing problematic relationship
between government and business, which is a major barrier for FDI
• to improve the activity of MIEPO as the investment promotion agency according to best international practice