Institute of Management and Rural Development

INTAS Research Project on Agri-food Industry Restructuring in Ukraine and Moldova (AFIRUM)

AFIRUM Institute of Management and Rural Development 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.

348323

394

443

523

440

312

0

50

100

150

200

250

300

350

400

450

500

1993 1994 1995 1996 1997 1998 1999,prel.

US$

AFIRUM Institute of Management and Rural Development 3

Source: Department of Statistical and Sociological Analysis

Value Added by sector;

% (1993 – 1999)

AFIRUM Institute of Management and Rural Development 4

Arable land71%

Orchards7%

Vineyards7% Pastures

15%

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.

Structure of agricultural land in Moldova at the beginning of 1999

AFIRUM Institute of Management and Rural Development 5

Process of formal land privatisation is not finished yet

State land owners

18%

Private land

owners82%

• 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

AFIRUM 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. Glass industry

Wood procssing

Construction materials

Chemicals

Light industry

Other

Engineering

Electric energy

Food processing

0 10 20 30 40 50 60

%

AFIRUM Institute of Management and Rural Development 7

Source: Department of Statistical and Sociological Analysis

Structure of Production by Industrial Category; Constant Prices, Lei Million

AFIRUM Institute of Management and Rural Development 8

Source: Department of Statistical and Sociological Analysis

Structure of Food Processing Production; Constant Prices, Lei Million

AFIRUM Institute of Management and Rural Development 9

• 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.

Industry and agricultural production decleaning(per cent in comparison with 1998)

15,2

36,5

19,2

15,4

23,7

10,0

3,0

0 5 10 15 20 25 30 35 40

Wine

Sugar

Canned and processed Fruit&Veg

Diary products

Bread

Crop-growing sector

Animal production

In 1999 agri-food industry continued the trend of previous years

AFIRUM 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%.

AFIRUM 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

AFIRUM 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.

AFIRUM Institute of Management and Rural Development 13

Structure of export

13,3%

10,9%

6,3%

65,8%CIScountries

EUcountries

CEEcountries

Othercountries

•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.

AFIRUM 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.

129,9 138,3

166,7 171,8

337,9303,4

252218,5

0

50

100

150

200

250

300

350

400

1997 1998 1999 22.000

Lei

Agriculture In the Economy

AFIRUM Institute of Management and Rural Development 15

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)

351,4314,5

168

244

050

100150200250300350400450

1996 1997 1998 October1999

USD millions

Lafarge (France) - 52 per cent stake in Ciment Europharm, Inc. (USA) - 85 per cent of FarmacoEsastampa (Italy) - 60 per cent in Piele.Steillmann Gruppe (Germany) 65 per cent of Balteanca

FDI into Moldova have a steadily rising trend