Moldova, the small Eastern European nation nestled between Romania and Ukraine, has embarked on a significant journey to attract foreign investment and bolster its economy. Following years of political turbulence and economic challenges, current efforts are focused on creating a business-friendly environment to invite overseas firms. The Moldovan government is implementing various measures to facilitate this transformation and is experiencing promising signs of success.
Among those who have recognized Moldova as a viable business location is Dutch entrepreneur Luc Vocks, who first set foot in the country in 2004. Looking back, Vocks recalls his initial impressions of the former Soviet republic, describing it as a place with incredibly low costs and a stark contrast to his native Netherlands. He founded his company, DevelopmentAid, in 2007 in the capital city of Chisinau, which has since grown to employ 180 people. This transition from a fledgling startup to a successful enterprise exemplifies Moldova’s potential for foreign entrepreneurs.
One governmental strategy to attract businesses involves implementing significantly lower tax rates. Moldova’s standard corporation tax is set at a mere 12%, a stark contrast to the higher rates of 25% in the United Kingdom and 25.8% in the Netherlands. In a bid to stimulate the tech sector, the government rolled out the Moldova IT Park (MITP) initiative in 2018. This unique program offers a virtual business park environment where IT firms can operate under an exceptionally low 7% corporation tax rate and benefit from waived employer social security contributions, making it an attractive economic proposition for foreign firms.
Behind the push toward modernization is President Maia Sandu, who was recently re-elected for her second term. Sandu’s administration is determined to lead Moldova toward European Union membership by 2030, signalling a massive shift towards pro-European policies and reforms. However, this vision faces challenges, including dispute with Russia, which opposes Moldova’s EU aspirations and continues to support the breakaway region of Transnistria.
Supporting this vision is Dumitru Alaiba, Moldova’s Deputy Prime Minister and Minister for Economic Development and Digitalization. Alaiba shares an unyielding optimism regarding Moldova’s reform trajectory, emphasizing the substantial reductions in corruption over the last decade. Where once Moldova was marred by systemic corruption—highlighted by the infamous loss of one billion dollars from the central bank— the nation has made noteworthy strides. The Corruption Perceptions Index recently ranked Moldova 76th out of 180 countries, up from 91st the previous year, showcasing ongoing progress.
The MITP initiative has also successfully attracted numerous foreign tech companies, with more than 2,000 firms already registered, including 300 from abroad. Major contributors to this influx include businesses from the U.S., UK, Germany, Netherlands, and Ukraine. In the first half of 2024, MITP-associated companies generated €365 million in revenue and employ around 22,000 people, significantly contributing to Moldova’s GDP.
However, rapid growth in the tech sector brings new challenges, particularly concerning salary inflation. Sven Wiese, a German entrepreneur running Trabia, a small IT services business in Moldova, noted his predicament as he faces competition from larger firms that offer salaries eclipsing €100,000 annually, forcing smaller entities to reassess their compensation structures. Despite high demand, many Moldovan IT professionals still seek opportunities abroad, even as the country gradually sheds its image of high corruption and economic instability.
Moreover, geopolitical tensions, particularly concerning Ukraine’s ongoing war, add more complexity to Moldova’s plans for attracting foreign businesses. Despite these concerns, officials maintain that Moldova presents a promising opportunity, positioned as a potential regional hub linking various Central Asian countries.
With dedicated reforms and adaptive measures, Moldova aims to break free from its past and solidify its reputation as a burgeoning business ecosystem in Eastern Europe. The move towards EU integration, a concerted effort to reduce bureaucratic hurdles, and the establishment of favorable tax environments are all parts of Moldova’s strategy to rebrand itself as an attractive destination for foreign entrepreneurs and investors alike.
