Wine, cars, and..machine tools… Moldova seeks stepped up Czech cooperation to develop economy

Czechs are doing their bit to support economic and political development in the small and relatively poor Republic of Moldova, sandwiched between Romania and Ukraine. The Czech Republic is already among Moldova’s top 10 European Union trade partners and is supporting the country with development aid for targeted areas. But the Moldovans would like to deepen relations much further.

Bohuslav Sobotka, Pavel Filip, photo: CTK

The pro-European Moldovan prime minister Pavel Filip and Minister for Regional Development Vasile Bitca were in Prague Tuesday for a meeting with Czech prime minister Bohuslav Sobotka and Minister of Industry and Trade Jiří Havlíček. The flagship event was a Czech-Moldovan business forum with presentations and around 65 Czech companies expected to take up the invite to look at what the country of 3.5 million people has to offer. The Czech prime minister already visited Moldova around a year ago with a similar business agenda prepared.

Moldova is widely reckoned to be the poorest country in Europe. The former Soviet Republic currently has a pro-European government and a pro-Russian president with the former seeking to maximise ties with the European Union. The country is seeking to make a plus and not a negative of its location between east and west, especially as a series of deals with the EU, Russia, and latterly Turkey give it free trade relationships with markets totalling more than 800 million people.

Trade ties with the Czech Republic, as minister Jiří Havlíček admits, are currently heavily tipped in favour of Czech exporters but Prague would be happy to see that change. Jiří Havlíček:

Jiří Havlíček, photo: archive of Ministry of Industry and Trade

"At the moment and over recent years, Czech-Moldovan commercial relations have been stable. The overall trade turnover is not that high being valued at around an annual 2.0 billion crowns. It is dominated by Czech exports to Moldova with a much smaller level of Moldovan exports to the Czech Republic. We would like that to change and see the bilateral commercial trade and relations at a higher level. But for Czech companies to start operating on the Moldovan market they need to be certain that the Moldovan government will work on its internal business and investment environment. Companies need to know that if they invest there they will be looked after and be able to develop. As the Moldovan prime minister and minister for regional development said clearly today, one of the priorities is to develop a standard business environment in Moldova and we want to help them with that.ʺ

Moldova has been since 2010 one of the Czech Republic’s priority targets for development aid, mostly aimed at handing over Czech know-how in developing state institutions, social services, environmental care and the business and economic infrastructure. The Ministry of Industry and Trade is the provider of one stream of aid to help small and mid-sized businesses develop under its aid for trade banner.

We would like that to change and see the bilateral commercial trade and relations at a higher level.

But the main direction of the Moldovan mission this week was elsewhere, they would like to see increased Czech corporate investment from the relatively low levels so far. Iulia Petuhov is deputy director of the Moldova Investment and Promotion Organisation (MIEPO) and explained its broad goals in Prague:

ʺAt the moment in the Republic of Moldova we have more than 50 Czech companies present. Of course, they are mostly in the automotive and small machine building components sectors and as in the case of any economy they are mostly involved in bilateral trade. We want to increase our trade partnership with Czech companies with events such as this. We would like more Czech companies present on our market. And, of course, taking into account the great experience of Czech companies in the automotive and machine building sectors as well as electronic devices, we would like to attract most of the companies in this sector."

From the background material, there is little room to doubt that Moldova would like to court Czech auto and auto supply companies to set up subsidiaries there or outsource some of their production there. A pamphlet in English ‘Automotive Components and Industry Overview’ sets out why those arguments should be taken seriously, not least average Moldovan wages of around 235 euros a month, around a quarter of the wages in the Czech Republic.

Illustrative photo: archive of Czech Government

And it’s an auto sector which has almost doubled the volume of its turnover and number of employees, now totalling just over 9,000, in the last four years. Some Moldovan companies are already supplying components to Czech car producers, with one significant supplier the local subsidiary of the US-based company Lear Corporation supplying the TPCA joint venture Czech car plant near Kolin, east Bohemia. The general argument is that Moldova could supply the labour intensive work which Czech companies now have trouble carrying out due to higher costs or the lack of local labour.

There is a political dimension to the economic drive to integrate with Western Europe, now almost two-thirds of Moldovan trade is with the EU and that represents a big change from just a few years ago. The Moldova-EU Association Agreement has been in place since the middle of last year, but as the election of the pro-Russian president at the end of the year showed, the political argument where the country should be has not been fully settled. Iulia Petuhov says Moldovan companies still have to make the most of the free trade with the EU that the agreement brings.

At the moment in the Republic of Moldova we have more than 50 Czech companies present.

"If you compare with three years ago when the share of Moldovan exports to the EU and CIS were about equal, our government understood that it was very important to have more linkages with European Union markets. We seek to have current standards and having signed the comprehensive free trade agreement, now are share of exports to the EU are more than 65 percent. For us the European Union market is very important and we have planned a lot of events in that market, different trade fairs and exhibitions, and our companies understand that by increasing the quality of their products and competitiveness they will have more opportunities to be present on European markets.ʺ

One market where Moldova has an established reputation and healthy Czech market is wine. And the Czech Republic has been instrumental in helping local producers set up their own quality control systems so that there can be no doubts about what consumers are getting. The Czech Ministry of Finance a few years ago had its reserves about Moldovan wine complaining that it was being sold as the local stuff from barrels in retail outlets. But the Moldovans say this dispute is now history and they are toasting better times. French-speaking Gheorghe Arpentin is director of the Moldovan National Office for Vine and Wine.

Illustrative photo: Kelly, Creative Commons 2.0 Generic

ʺAround 200,000 people are involved in this industry and most of those are in the countryside. We, Moldova, are the sixth biggest wine producer in Europe. After 2006 with the Russian embargo, we began to diversify and develop our market and now Moldavia has four priorities on the market and one of those is the Czech Republic. The Czech Republic is, according to the statistics, the second market for Moldovan wine in terms of volume and the third most important market in terms of total value. I am the director of the national office for Vines and Wine and we have the mission to promote our wine outside, above all on export markets. We have a second goal to ensure the quality of wine and the third target is to ensure the transfer of know-how in the vines and wine sector."

Gheorghe Arpentin says their Czech mission is to find Czech partners to boost sales and also get to know new techniques, such as the fast growing market, for bio wine, where he says that Czech growers and producers have skills that they would appreciate sharing. Czech development help has already helped Moldovan wine get a foothold in many European markets.

The Czech Republic is, according to the statistics, the second market for Moldovan wine in terms of volume and the third most important market in terms of total value.

"We are also here to find partners to help us promote our wine on the Czech market. We are here not just to promote our wine but also to invest in the market and to get to know the consumer. They should know that Moldova is changing its face. Our wines complies to European standards. In this we have been helped by the Czech Development Agency with a project through which we developed our registry of vines and wines. This registry is fundamental in allowing us to trace the origins of grapes and wine in our system of quality control. The project will be completed in the year 2018, but it has already helped us a lot in meeting all the wine quality standards required in the European Community.ʺ