The Republic of Moldova is a small, densely populated country, which gained its independence and became a sovereign state on 27 August 1991. It is situated in South Eastern Europe, north of the Balkan Peninsula. The total area is 33,843 square km. The distance between the North and the South extremities is 350 km, and from East to West is 150 km. Moldova shares borders with Romania and Ukraine.
Under the Constitution adopted in July 1994, Moldova is a democratic republic based on the rule of law. The Constitution separates the state powers into three branches – the legislative, the executive and the judicial branches.
The legislative power belongs to the Parliament of the Republic of Moldova, elected for four-year terms. The Parliament is unicameral. It consists of 101 deputies – representatives of parties and electoral blocks, as well as independent candidates.
The Government exercises the executive power. Its role is to carry out the domestic and foreign policy of the state, as well as to control the activity of public administration. The Government consists of a Prime Minister, deputy prime ministers, ministers and other members. The President of the Republic of Moldova designates a candidate for Prime Minister through consultation with parliamentary factions.
The President of the Republic of Moldova is legally distanced from all branches of power.
Nevertheless he / she is mostly allied to the executive branch. The People elect the President by direct, secret and freely expressed vote, for a four-year term.
The judicial branch encompasses the Supreme Court of Justice, Courts of Appeal and ordinary courts. The Supreme Court of Justice is the highest court and has the power to review decisions made by lower courts.
The Constitutional Court of Moldova is the sole authority of constitutional jurisdiction in the Republic of Moldova. The six justices are appointed for six-year terms. The Parliament, the Government and the Superior Counsel of Magistracy appoint two justices each.
The Constitution recognises the principle of local autonomy and states that all local issues be resolved and managed by local authorities, which operate independently pursuant to law.
Each level of public administration has its own and delegated functions. The basic functions of local government include the organization of social services, welfare services for the elderly, housing and utilities, water supply and sewerage, the provision of public services, physical planning, public transport, and the maintenance of local roads and streets.
Moldova is currently divided into 37 first-tier units, including 32 districts (in Romanian - “raioane”), three municipalities (Chişinău, Bălţi, Bender), one autonomous territorial unit (Gagauzia) and one territorial unit (Transnistria). The capital and largest city is Chisinau.
Moldova has 66 cities (towns) and 917 communes. Some other 699 villages are too small to have separate administration, so are administratively part of either cities (40 of them) or communes (659). This makes for a total of 1,681 localities in Moldova
The Republic of Moldova is a civil law country. Its legal framework is based mainly on statutory law. The leading legal acts are the Constitution, organic and ordinary laws approved by the Parliament, as well as other normative acts issued by the Government and other public authorities.
Under the Constitution, the Republic of Moldova undertakes to respect the treaties and conventions to which it is a party. In the event of any discrepancies between the national and international legislation applicable for the
Republic of Moldova, the latter prevails.
Foreign and domestic investors are treated equally under the Moldovan legislation and the legal framework is the same for foreign investments.
One of the primary tasks of the Government is to attract investments and create a favorable business climate for all investors, both foreign and local. Moldovan law generally allows investments in any field of entrepreneurial activity on the entire territory of the Republic of Moldova, provided that national security interests, anti-trust legislation, norms of environmental protection, people’s health and public order are respected.
Free economic zones, whose residents are provided with a range of tax and customs incentives and state guarantees, are attractive for industry investment projects.
Foreign investors’ guarantees and rights
According to the Moldovan Constitution, the state must ensure the inviolability of foreign investments. The Government is keen to establish coordinated policies and well-balanced legislation in order to stimulate both domestic and foreign investments.
The legal framework for the protection of foreign investments consists of the Law on investments in entrepreneurial activity and international bilateral treaties for the facilitation and mutual protection of investments.
The law prohibits discrimination against investments based on citizenship, domicile, residence, place of registration, place of activity, state of origin or any other grounds.
The law provides for equitable and level-field conditions for all investors. It rules out discriminatory measures hindering the management, operation, maintenance, utilization, acquisition, extension or disposal of investments. At the same time, certain restrictions are provided for residents of zones that do not implement the international standards of transparency (e.g. prohibition to hold shares in banks, insurance companies) and for the acquisition of agricultural and forested land.
Public authorities intending to develop a new investment policy are required to organize public consultations before implementing such policies.
Investments cannot be subject to expropriation or to any other similar measures which can directly or indirectly deprive investors of their property right or the right to control investments, unless the following conditions are met:
The measure is undertaken for the general public good;
The measure is not discriminatory;
Preliminary and equivalent compensation of damages is given.
Investors have the right to sue public authorities for damages caused due to illegal actions and decisions. Compensation is paid in the currency of the investment.
The practice of recent years has shown that implementing economic projects in Moldova with a long payback period is extremely difficult. A range of problems investors face can explain the situation at the stage of business launching. Mainly, they relate to obtaining of permits, various information, and methodological support from public authorities with regard to entrepreneurship.
Moreover, there are cases of conflict between state structures and investors, including the interpretation of legislation. Consequently, these aspects lead to delays in implementing the investment project, therefore, its imminent financial losses and increasing investment risks. This adversely affects both the country’s investment climate and Moldova’s image on the international arena.
Considering the above, it was proposed to create the Council for promoting investment projects of national importance. The Council members are chairpersons of main state institutions responsible for the regulation and conducting investment activity. This will allow solving problems encountered by investors, having a unique position concerning the interpretation of normative acts, monitoring the compliance with legislation, eliminating business barriers.
At the same time, the Council will provide linkage between public and private sectors, protect interests of investors (their rights) and will solve specific problems regarding not only investors, but also other entrepreneurs.
Easiness of doing business
As per the WB report Ease of Doing Business, in 2016 Republic of Moldova was ranked 52 out of 189.