Institute of Management and Rural Development

1. Institute of Management and Rural Development INTAS Research Project on Agri-food Industry Restructuring in Ukraine and Moldova (AFIRUM)

2. GDP per capita has decreased in comparison with 1993 • Moldova is an agricultural economy. • Agriculture represents 22,3% of GDP. • The most part of industrial base is in Transnistria region. • Incomplete structural transformation of enterprises is one of the biggest obstacles to economic growth. • The present situation in agriculture was determined by authority's unwillingness to restructure collective and state farms. Institute of Management and Rural Development

3. Value Added by sector; % (1993 – 1999) Source: Department of Statistical and Sociological Analysis Institute of Management and Rural Development

4. Structure of agricultural land in Moldova at the beginning of 1999 • The total area of the Republic of Moldova is 3384,4 thousands hectares. • The weight of agricultural land in total land area is 75,5 % . • Arable land occupy the area of 2556,6 thousands hectares or 71 % of the total of agricultural land. Institute of Management and Rural Development

5. Process of formal land privatisation is not finished yet • Not state land owners still does not mean individual property. • Only about 20 % of agricultural land is owned by real individual farmers • The most part of the land is owned by divers forms of collective farms • Mostly all new collective farms keeps the old mentality Institute of Management and Rural Development

6. Food processing leads the industry • Agriculture and food processing account for two thirds of national income and employ about 42% of the labour force. • Moldova’s national economy is based mostly on local resources • Only agricultural sector employs about 700 thousand people. Institute of Management and Rural Development

7. Structure of Production by Industrial Category; Constant Prices, Lei Million Source: Department of Statistical and Sociological Analysis Institute of Management and Rural Development

8. Structure of Food Processing Production; Constant Prices, Lei Million Source: Department of Statistical and Sociological Analysis Institute of Management and Rural Development

9. In 1999 agri-food industry continued the trend of previous years • The overall industrial output in 1999 was Moldovan lei (MDL) 8.055 billion in current prices. • Real output decreased by 9 per cent compared to 1998. • Agricultural production in 1999 in current prices was MDL 5.370 billion. • Agricultural output was 8 per cent lower than in the same period in 1998. Institute of Management and Rural Development

10. Main problems of processing industry • Equipment • 82% of all equipment is old • Power consume of this equipment is 1,5-3,0 times more than of similar modern equipment. • This equipment can not assure the quality is acquired by foreign customers. • Row material • Quantities of delivered row material are decreasing steadily during last years. • Processing industry capacities are used only for 15%. Institute of Management and Rural Development

11. Common problems for agri-food sector • Marketing • “Product” orientation instead of “customer” oriented production • Lack of branded products • Insufficient knowledge about customer’s demands • Pricing policies do not respond to real situation • Lack of reliable trade partners Institute of Management and Rural Development

12. Types and forms of Business Activities • Individual owners; • Partnership; • Corporations or joint stock companies; • Companies limited by shares; • Co-operative producers; • Lease-hold enterprises; • Collective enterprises; • Municipal enterprises; • State owned enterprises. Institute of Management and Rural Development

13. Structure of export • Moldova's foreign trade is still oriented towards CIS countries. • 53% of exports is going to Russia. • Other 12,8 % of exports are going to Ukraine and Belarus • Roumania is one of the main trade partners from CEE region. Institute of Management and Rural Development

14. The average wage do not cover the minimal consumer budget The average level of salaries in 1999 was 303 lei per country and 166 lei in agriculture. The average monthly pension is Lei 83.5, the same as one year ago. Wage arrears reached Lei 527.3 million. Over the first three months of 2000 the arrears to pensioners declined from Lei 300.2 million to Lei 265.7 million. The minimal consumer budget in February 2000 equalled to Lei 973. Institute of Management and Rural Development

15. FDI into Moldova have a steadily rising trend • Major investors are companies from France -34% and USA - 30% of total direct investment • 34% of FDI was made in manufacturing, 33% in energy and utilities and 15 % in trade • There are about 1807 enterprises with foreign capital in Moldova • Voxtel (France) is Moldova’s largest foreign investor to date. • Sudzuker AG (Germany) bought 36 per cent stakes in four Moldovan sugar plants (Drochia, Donduseni, Alexandreni and Glodeni) • Lafarge (France) - 52 per cent stake in Ciment • Europharm, Inc. (USA) - 85 per cent of Farmaco • Esastampa (Italy) - 60 per cent in Piele. • Steillmann Gruppe (Germany) 65 per cent of Balteanca Institute of Management and Rural Development