Overseas business risk for Moldova

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Information on key security and political risks which UK businesses may face when operating in Moldova.

1.Political

The Republic of Moldova became an independent state following the collapse of the Soviet Union in 1991. It is a parliamentary republic with a multi-party system. The incumbent President is Maia Sandu, who was elected on a platform of fighting corruption and building closer ties with the West. Prime Minister Dorin Recean leads the government.

According to the Constitution, executive power is exercised by the government led by the Prime Minister. The President promulgates laws, countersigns the appointment of judges, and has the right of legislative initiative. The President serves as the Head of State and holds certain powers in foreign policy and national security.

In the 2021 Parliamentary elections, the Party of Action and Solidarity (PAS) won 63 seats giving it a parliamentary majority. PAS was the first party to win an absolute majority of seats on its own since April 2009, and the first to win an absolute majority of votes since 2001.

Moldova is second most affected country by the war in Ukraine and a hybrid front in it. In December 2023, the European Union decided Moldova could open accession negotiations to join the EU.

1.1 Elections

Since August 2019, Parliamentary elections use a proportional representation system. The next parliamentary elections are scheduled to take place in 2025. Local elections occurred in the autumn of 2023. 2024 will see both Presidential elections and a referendum on joining the EU.

The first round of Moldova’s local elections in 2023 were dominated by excessive Russian interference, through illicit finance and propaganda, funded by exiled oligarchs. Two days before the elections, Moldova barred candidates of the Chance (formerly Sor) Party from taking part. This came a few days after Moldova had suspended media outlets for spreading disinformation.

1.2 Reform

Moldova’s reform agenda is largely based on accession arrangements with the European Union.

On 8 November 2023, the European Commission recommended Moldova open EU accession negotiations, which the European Council agreed in December. The Commission cited Moldova’s progress on six of its nine conditions: protecting human rights, reforming public administration and finance, fighting organised crime and civil society representation. It noted still unmet requirements, including no significant progress on high-profile corruption cases. By March 2024, the Commission has asked Moldova to ensure: a functional judicial and prosecutorial appointments process; that anti-corruption institutions work more effectively together; and progress on implementation of its deoligarchisation plan.

The United Kingdom is an active supporter of the Moldova Support Platform (MSP), which brings together governments, IFIs, and International Organisations to coordinate and enhance their support for Moldova. There are 5 pillars of activity: economic, refugee response, energy, border security and anti-corruption. The UK and Romania have led the anti-corruption pillar, working together with the Moldovan government.

1.3 UK-Moldova Strategic Partnership, Trade and Cooperation Agreement

On 24 December 2020 the UK and the Republic of Moldova signed the Strategic Partnership, Trade and Cooperation Agreement (SPTCA). The agreement establishes a political and economic partnership between the UK and Moldova, including a comprehensive free trade area. It maintains the effects of the EU-Moldova Association Agreement (AA). The SPTCA covers:

• trade in goods - including provisions on preferential tariffs, tariff rate quotas and rules of origin
• sanitary and phytosanitary measures
• trade in services
• intellectual property, including geographical indications
• government procurement

The agreement strengthens UK cooperation in political, security and foreign matters with Moldova and replicates wider elements of the Association Agreement, such as provisions on political dialogue and other forms of cooperation.

In light of the impacts of the war in Ukraine on Moldova, the United Kingdom liberalised for an initial period of 12 months, until 31 July 2024, all tariffs to zero on the remaining seven agriproducts originating from Moldova and signed the Amending Agreement on 25 May 2023 to deliver this. Previously, tomatoes, garlic, grapes, apples, cherries, plums, and grape juice were subject to tariff rate quotas.

1.4 Media

In its 2023 World Press Freedom Report, Reporters Without Borders ranked Moldova 28th on the Global Press Freedom Index - a significant rise from 68th in 2022. The report characterises Moldova’s media as diverse but extremely polarised, with the editorial lines of the leading media outlets correlating closely to the political and business interests of their owners. The 2023 Freedom House report on freedom of media assessed Moldova as “partially free.”

In December 2022, six television channels linked to fugitive Illan Shor had their broadcasting licences suspended for broadcasting “Russian disinformation” particularly about the war in Ukraine. In October 2023, Moldova blocked 31 Russian-language media sites ahead of the local elections, accusing them of spreading false information.

Challenges to media freedom in Moldova include restrictive laws, punitive legal measures, physical violence and threats, online harassment, financial challenges, arbitrary and/or unlawful surveillance of journalists, and mis- and dis-information.

Membership of international organisations

Moldova is a member of:

• The United Nations
• The Organization for Security and Cooperation in Europe
• The North Atlantic Cooperation Council
• The International Monetary Fund
• The World Bank
• The World Trade Organization
• The GUAM Organization for Democracy and Economic Development
• The North Atlantic Treaty Organization’s Partnership for Peace program among others

Transnistria

The UK is committed to supporting a comprehensive, peaceful settlement of the Transnistria unresolved conflict based on the sovereignty and territorial integrity of the Republic of Moldova with a special status for Transnistria.

The UK supports the settlement process negotiations in the “5+2” format as well as meetings in the 1+1 format and in the Working Groups. We fully support the contribution of the mediators and observers, and express our gratitude to the OSCE Mission to Moldova for their constructive work.

The UK recognises that the Russian contingent to the tripartite peace keeping force operates on the basis of the Moldova-Russia Ceasefire Agreement of 21 July 1992.

The presence of the Operational Group of Russian Forces on the territory of the Republic of Moldova is not based on any legal framework nor with the consent of the host country. The stationing of these troops and munitions is a violation of the sovereignty of the Republic of Moldova and runs counter to the constitutional neutrality of the Republic of Moldova.

The UK is mindful that at the 1999 OSCE Istanbul Summit the Russian Federation committed itself to withdraw its troops and equipment from the Republic of Moldova by 31 December 2002. However, it is the case that the process of the withdrawal of troops and equipment and the destruction of munitions ceased in 2003 and remains incomplete.

2.Economic

Russia’s invasion of Ukraine has impacted negatively the Moldovan economy. In 2022, Moldova’s macroeconomic position weakened significantly. GDP contracted by 5.9 percent and inflation reached an average of 28.7 percent.

Moldova continues to request international support and provide assistance to over 113,000 Ukrainian refugees - more per capita than any other country. The number of these registered for Temporary Protection is rising steadily.

From 18 July 2022, Moldova has benefited from EU micro-financial aid. The European Bank for Reconstruction and Development invested €525 million in 2022.

In April 2023, the International Monetary Fund’s Executive Board concluded the Extended Fund Facility arrangements and the immediate disbursement of US$96 million for budget support. The IMF projected a modest economic recovery in 2023, with elevated short-term risks that may relate to further escalation of the war in Ukraine, additional energy shocks, and pressure on public finance. The medium-term impact of the war is estimated to be significant.

Moldova ranks 48 in the World Bank’s Doing Business 2020 Report (PDF, 1.8MB), which notes, among other things, that the cost of starting a business in Moldova has risen due to the increased cost of company registration and enforcement of contracts is easier due to Moldova’s adoption of a new mediation law.

Thethe last published Global Competitiveness Index 2020 (PDF, 3.7MB)ranks Moldova in 86th place, improving by 14 positions on the 2019 index. The World Economic Forum survey identifies the biggest problems to be corruption, policy instability, government instability, access to financing, government bureaucracy and an inadequate supply of infrastructure.

In 2021, the EU furthered its status as Moldova’s main trading partner (PDF, 536KB). EU-Moldova trade reached a record level of EUR 4.52 billion, which is 23% higher than in 2020. The EU share of Moldovan exports has been increasing steadily since the Association Agreement/Deep and Comprehensive Free Trade Area entered into force and accounts for around 50% of Moldova’s total trade.

3.Bribery and corruption

Corruption in the Republic of Moldova has been a longstanding issue that has significantly impacted the country’s development and governance. Moldova has struggled with corruption in various sectors. Those most affected are justice and prosecution, customs, public procurement, police, education and public health.

One of the main factors contributing to corruption in Moldova is the weak rule of law and a lack of transparency. This has allowed corrupt practices to thrive, undermining the country’s democratic institutions and impeding economic progress. Several high-profile corruption scandals involving politicians (president, prime minister, MPs, etc.) and government officials have highlighted the depth of the problem.

Political corruption has been particularly prevalent in Moldova, with allegations of bribery, embezzlement, and abuse of power. Political parties have been accused of engaging in vote-buying and illicit financing during elections. These corrupt practices have eroded public trust in the political system and hindered the country’s democratic development.

The justice system in Moldova has also faced significant challenges of corruption. Allegations of judicial bribery, undue influence, and a lack of impartiality have raised concerns about the fairness and integrity of the legal process. This has further undermined citizens’ trust in the judiciary and hindered access to justice.

Corruption has also affected Moldova’s economy and public services. Bribes and illicit payments have become common practice in business transactions, hindering fair competition and deterring foreign investment. Additionally, corruption has undermined the delivery of essential public services, such as healthcare and education, as funds intended for these sectors are often misappropriated.

Efforts to combat corruption in Moldova have been ongoing, but progress has been slow and obstructed by systemic challenges, including vested interests. The country has implemented various anti-corruption laws and established institutions such as the National Anti-Corruption Centre (NAC) and Anti-Corruption Prosecutor’s Office (APO) to investigate and prosecute corruption cases. However, there have been concerns about the effectiveness and independence of these institutions.

International organizations and partners have provided support to Moldova in its anti-corruption efforts. The European Union, for instance, has conditioned financial assistance on the country’s progress in tackling corruption and implementing necessary reforms. However, sustained and comprehensive measures, including strengthening institutions, promoting transparency, and fostering a culture of accountability, are needed to address corruption effectively in Moldova and restore public trust in the system.

After the parliamentary elections in 2021, the newly appointed Government made the justice sector reform and anti-corruption its main priorities. Since then, high-profile corruption cases have been sent to court and are currently being examined by the judges.

4.Human rights

Moldova has a legal and institutional framework in place covering the respect for human rights. However, implementation across the country is inconsistent, mainly because of the financial dependence of the key human rights state institutions and limited capability to ensure their functionality.

According to2022 Amnesty International human rights report, no visible progress was made in reducing instances of torture and other ill-treatment in detention. Impunity continued for past human rights violations by law enforcement agencies. New “temporary” restrictions on public assemblies were introduced. The rights of LGBTI people were not fully realized, leading to cases of harassment, discrimination and violence. Some refugee reception centres turned away religious and ethnic minority refugees. In the breakaway Transnistria region, prosecution and imprisonment for peaceful dissent continued.

5.Terrorism threat and protective security advice

Although there’s no recent history of terrorism in Moldova, attacks cannot be ruled out.

5.1 Crime

Crime levels are low overall in most cities. However, you should be alert to the risk of street crime and petty theft, particularly in Chisinau, and for pickpockets and bag snatchers in crowded areas. Take usual precautions when using ATMs: there have been instances of credit card and ATM fraud. Visitors are encouraged to keep their valuables and passport in hotel safes and carry a copy of their passport.

5.2 Intellectual property

Moldova’s agency for the protection of copyrights is the State Agency on Intellectual Property (AGEPI), which works on improving the legal framework and harmonisation with the EU acquis, increasing public awareness, and building capacity in law enforcement. In addition, Moldova has a National Commission for Intellectual Property that serves as an advisory body of the government.

The country is party to 39 multinational and bilateral conventions, arrangements, treaties and agreements on Intellectual Property Rights (IPR) including the WTO/TRIPs and 23 WIPO agreements.

Following Moldova’s adoption of the AA/DCFTA with the EU in June 2014, AGEPI participated in implementation of the IPR chapter of the agreement with the objective of ensuring a level of protection for intellectual property rights in Moldova similar to that in the EU, including effective enforcement.

Significant progress was achieved in implementing a number of IPR regulations in line with the EU agreements. On 13 December 2022, the Administrative Council of the European Patent Organization adopted the decision to invite Moldova to join the organization. This will lead to further integration into the European patent area.

Online registration of intellectual property with AGEPI is not difficult. The time required to obtain IPR protection varies depending upon the type of protection sought:

• for copyright it takes 15-30 days
• patents for plants 1.5-3 years
• short-term patents for invention 7-8 months
• patents for invention 17-18 months
• geographical indications, appellations of origin, or traditional specialties guaranteed 10-12 months
• industrial designs 10-12 months
• trademarks 10-12 months

For more information, you should contact the Republic of Moldova’s State Agency on Intellectual Property:

6.Organised crime

Organised crime in the Republic of Moldova has been a significant issue for several decades, posing serious challenges to the country’s security and stability. Moldova, situated between Romania and Ukraine, serves as a crucial transit point for various illicit activities, including drug trafficking, human trafficking, arms trafficking, smuggling and money laundering.

Some of the most prominent criminal organisations operating in Moldova are the so-called Soviet-style ‘Prison Gangs’. These criminal organisations have a hierarchical structure and engage in a wide range of illegal activities. They often exploit political connections, corruption, and weak law enforcement.

Drug trafficking is a major source of income for organised crime groups in Moldova. The country’s strategic location on the drug trafficking routes between Asia and Europe makes it an attractive transit point. Moldova is primarily used for the smuggling of drugs such as heroin, cocaine, and synthetic drugs, with criminal networks employing various methods to transport and distribute narcotics.

Human trafficking is another significant concern in Moldova, with criminal organisations exploiting vulnerable individuals, especially women and children, for forced labour and sexual exploitation. Moldova has been identified as a source, transit, and destination country for human trafficking, and efforts to combat this issue have been ongoing but challenging.

Money laundering is a critical component of organised crime operations, allowing criminals to legitimise their illicit proceeds. Moldova’s immature financial system and sometimes weak regulations or enforcement mechanisms have made it an attractive destination for money laundering activities. Criminal networks exploit loopholes in the financial system to launder their illicit funds.

Efforts to combat organised crime in Moldova have faced numerous challenges, including widespread corruption, limited resources, and inadequate legislation. However, the Moldovan government, with support from international organisations, has taken steps to address these issues. Measures have been implemented to strengthen law enforcement agencies, enhance border security, and improve cooperation with international partners in fighting organised crime.

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