Republic of Moldova

Investment relations between transition and developing countries are expanding, the UNCTAD report concludes

Investment flows in South-Eastern Europe decreased in 2010, while the flows towards CIS countries have insignificantly increased

Chisinau, July 27, 2011 – The flow of foreign direct investments decreased in 2010 in South-East European economies in transition, while in the Commonwealth of Independent States the FDI flow has insignificantly increased, reveals the 2011 World Investment Report of the UN Conference on Trade and Development (UNCTAD), launched today in Chisinau by UNCTAD, Export Promotion Organization (MIEPO), Ministry of Economy and United Nations Development Programme (UNDP).

Entitled ”Non-equity modes of international production and development”,  the Report mentions that FDI inflow to the Russian Federation, the biggest economy of the region, increased by 13% making up 41 billion dollars, in Ukraine, due to the improvement of macroeconomic conditions, FDI increased by 35%, while in Kazakhstan it slightly decreased in 2010. These three countries continue to be the main host countries of foreign direct investments into the CIS.

In South-Eastern Europe, the FDI flow is decreasing for the third year in a row, in 2010 – by 47%, partially because of the decrease of investment volume from European Union countries, the traditional investment source for this region.  The decrease of investments involves a structural aspect as well, since investors rarely start export businesses in this region, which has been excluded form the transnational corporations network. While in Croatia and Serbia the investment flow suddenly decreased, Albania has attracted for the first time over a billion dollars worth investments in one year.

The report also shows an intensification of investment relations between transition and developing countries. The share of developing countries in greenfield investments from transition countries has increased to 60% within the last year, having doubled compared to 2004.

In Moldova, foreign investments inflows began recovering after a dramatic decrease in 2009, making up 199 million dollars in 2010. The FDI stock has increased 6 times compared to 2000 and over 29 times compared to 1995. Last year, the FDI stock increased to 2,837 billion dollars. However, Moldova lags far behind neighboring countries and main trade partners.  In Romania, the FDI stock exceeded 70 billion dollars last year, in Ukraine – 57 billion and in Russia – 423 billion dollars. In contrast to countries from the region, Moldova was less attractive for international acquisitions and mergers, the value of such transactions making up 15 million dollars in the last five years analyzed in the report, while Romania reached 4,489 billion dollars, Russia- 26, 2 billion dollars and Ukraine - 9, 2 billion dollars.

According to UNCTAD report, cross-border non-equity production modes have generated global sales of at least 2 thousand billion dollars in 2010. These modes rapidly expand, shaping investment trends, with important implications for development. The study explains the fact that international production is not exclusively based on FDI on one side and trade on the other side. Cross-border non-equity production modes involve contract based production modes, service outsourcing, contract based agricultural production, franchising, licensing and management contracts. These production modes cover an important share, especially in developing countries, and have become important for the Republic of Moldova as well, upon opening by multinational companies of automotive manufacturing facilities.

At the same time, UNCTAD report warns that developing countries must mitigate the risk of remaining blocked in low value added production processes and avoid high dependence on foreign technology and inputs.   

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More about the World Investment Report at http://www.unctad.org/wir