Moldova

Capital Chișinău
Population 3.44 million (2018) CIA
Prime Minister Pavel Filip

Introduction

Throughout modern history, Moldova has existed as an annex of several different empires and states. Sandwiched between Ukraine to its east and Romania to its west, it has been endured centuries of foreign invasion, and countervailing cultural, linguistic, and geopolitical forces. Romania and Russia have, and continue to be, key players in the battle for hearts and minds in Moldova. While some citizens see the country’s future lying in reunification with Romania and EU integration, others look eastward, maintaining a strong cultural affinity with Russia.

For centuries, Moldova territory— which has been referred to at different points in time as Moldavia or as Bessarabia— passed between different empires and states. After annexing the territory from the Ottomans in the early nineteenth century, the Russian empire turned Moldova into a governorate and began a policy of heavy Russification. Russian was the only language taught in schools, despite many citizens’ signal failure and willingness to speak the language. After the First World War, most of the country was reunited with modern-day Romania, although an Eastern strip—Transnistria, was under Soviet control.

In 1940, Moldova was annexed from Romania by the Soviet Union and became the Moldavian Soviet Socialist Republic (SSR). Russians and Ukrainians poured into the country for work, and Russian was adopted as a joint official language with Romanian. The country’s Soviet leadership also ordered the use of the Cyrillic alphabet instead of the Latin one when writing in Romanian.

As modern-day Moldova’s independence movement grewin the Soviet Union’s dying days, an ethnic and cultural tension within the country’s population came to the fore. Ethnic Russians and Ukrainians in the country’s eastern Transnistria region - where they were a majority - grew nervous at Moldovan political leaders’ desire to abandon Russian as a state language and reunite the country with Romania. A bloody war in Transnistria ensued between pro-Russian separatists and Moldovan government forces, with the pro-Russian separatists also backed by the Russian Army. After the loss of several hundred lives a ceasefire was declared, but the conflict has never been resolved. Since 1992, the Transnistria region has been an unrecognized breakaway state within Moldova, where Russian is the official language and its government is financially supported by Moscow.

Romania has been a close ally of (ex-Transnistrian) Moldova since the latter declared its independence from the Soviet Union, in 1991. Romania was the first state to recognize Moldova’s independence, and the two countries have strong trade and investment links. While reunification between the two nations has often been mooted on account of their shared language and history, both Moldovan politicians and civil society are divided on the issue.

Indeed, future geopolitical orientation is a fault-line running through Moldovan politics. While the ruling coalition of parties in parliament claim to be die-hard Europhiles who seek both European Union membership and close cooperation with NATO, the country’s (ceremonial) President is a ardent Russophile, who wants Moldova to join the Russia-led Customs Union and cease all interactions with NATO.

Moldova is also plagued by rampant corruption, and levels of national wealth that are very low by the standards of most European economies. None of the country’s leaders appear to have the political will to limit the power which vested interests hold on government. The pro-Western leadership has recently signed an EU Association Agreement that facilitates exports into the European market. However, the agreement is now under threat from a pro-Russian Socialist Party that is enjoying runaway success in the polls. In short, the country’s future is bleak.

Quick Facts

Basics
Capital City Chisinau
Country Population 3.55 million
Largest City (Population) Chisinau (644,000)
2nd Largest City (Population) Tiraspol (130,000)
3rd Largest City (Population) Balti (100,000)
4th Largest City (Population) Bender (91,000)
5th Largest City (Population) Ribnita (46,000)
President (Dates) Igor Dodon (2016-Present)
Prime Minister (Dates) Pavel Filip (2016-Present)
Currency Leu
Politics
President Igor Dodon
Prime Minister Pavel Filip
Freedom House Score (1=Free, 7=Not Free) 3
Ruling Party Party of Socialists
Past Presidents (Dates) Nicolae Timofti (2012-2016)
Marian Lupu (acting) (2010-2012)
Vlad Filat (acting) (2010)
Mihai Ghimpu (acting) (2009-2010)
Vladimir Voronin (2001-2009)
Petru Lucinschi (1997-2001)
Mircea Snegur (1991-1997)
Past Prime Ministers (Dates) Gheorghe Brega, 2015-2016;
Valeriu Strelet, 2015;
Natalia Gherman, 2015;
Chiril Gaburici, 2015;
Iurie Leanca (2013-2015)
Vlad Filat (2009-2013)
Vitalia Pirlog (2009)
Zinaida Greceanii (2008-2009)
Vasile Tarlev (2001-2008)
Dumitru Braghis (1999-2001)
Ion Sturza (1999)
Serafim Urechean (1999)
Ion Ciubuc (1997-1999)
Andrei Sangheli (1992-1997)
Valeriu Muravschi (1991-1992)
Mircea Druc (1990-1991)
How Central Banker is Appointed Appointed by Parliament
Average Voter Turnout in Last 5 Elections
(% of Total Population)
50
Trade and Commerce/Economics
10 Major Import Partners
(% of Total Imports)
Exports Major
Partners (10)
Major Industries
by GDP
Top Exports Sanctioned by
(and Start Date)
Sanctioning
(and Start Date)
1. Romania (15%)
2. China (9.7%)
3. Ukraine (9.5%)
4. Russia (8.6%)
5. Germany (8.3%)
6. Italy (7.1%)
7. Turkey (6.9%)
8. Poland (3.8%)
9. Belarus (2.9%)
10. Hungary (2.3%)
1. Romania (23%)
2. Russia (11%)
3. Italy (10%)
4. Germany (6.6%)
5. UK (4.9%)
6. Belarus (4.9%)
7. Turkey (3.6%)
8. Bulgaria (3.3%)
9. Poland (3.1%)
10. France (2.5%)
Food Processing (sugar, oil, etc.)
Agricultural Machinery
Foundry Equipment
Refrigerators and Freezers
Washing Machines
Foodstuffs
Textiles
Machinery
September 2010: EU;
August 2014: Russia;
August 2017: Russia
Finance
Largest Sources of FDI by Country 1. Russia
2. Netherlands
3. Other
4. Cyprus
5. France
Demographics
Largest Ethnic Groups
(% of Total Population)
Largest Religions
(% of Total of Population)
Population Living
Abroad
Moldovan (75%)
Romanian (7.0%)
Ukrainian (6.6%)
Eastern Orthodox (93%)
Protestant (2%)
Old-Rite Christians (0.15%)
1 million
Major International Organizations (and date of accession)
1 UN–1945
2 Council of Europe–1995
3 OSCE–1993
4 WTO–2001
5 CIS–1994
6 EBRD–1992
7 IMF–1992
8 GUAM–1997
9 BSEC–1992
10 EAPC–1997
11 World Bank–1992

Politics

When Moldova declared independence from the Soviet Union in 1991, its early nationalist leaders intended to unite with Romania, with which it shares a historical and cultural legacy. More moderate leaderships coming to power meant the idea had been shelved by the mid-1990s however, and ultimately the two countries have pursued different paths. While Romania’s economic and democratic prospects benefitted immensely from its accession the EU in the mid-2000s. Moldova’s position on the outer track of European integration has caused it to remain less democratic, poorer, and mired in corruption. Many political institutions are subordinate to insider interests, media ownership is dominated by oligarchs and a recent mayoral election in the country’s capital was annulled after it produced a bad result for the government.

At the same time, Moldovan civil society is robust and the country’s democratic opposition, while suffering distinct electoral disadvantages to ruling parties, is not repressed in the same way as in other East European nations - such as Russia or Belarus. Political protests are common, often have significant scale and few arrests. Moldova is an excellent example of a country whose body politic are ‘partly free.’ while the deck is stacked against them by the ruling coalition and its eminence grise—all-powerful Moldovan oligarch and politician Vlad Plahotniuc—there is also significant room for freedom of expression, which could one day be converted into opportunities for regime change and genuinely reformist leadership.

Executive

Moldova’s executive branch is split into two parts. The Prime Minister is the most powerful (official) office-holder in the land, whose party is elected in parliamentary elections that take place at five-year intervals. If no one party receives a majority in the general elections, parties often govern through by coalition. The ruling government coalition currently consists of politicians from two parties—the Democratic Party and the European People’s Party—both which are notionally pro-European. The current Moldovan Prime Minister is Pavel Filip, from the Democratic Party. In reality, the Democratic Party—and particularly its chairman and largest donor Vlad Plahotniuc—enjoys outsize influence over their coalition partners.

Moldovan presidential elections are also typically held every four years. Unlike the cabinet, presidents have little executive power, although they can veto law and dissolve parliament in certain situations. The current Moldovan President is Igor Dodon - from the pro-Russian Socialist Party.

Legislative

Moldova has a unicameral legislative branch, comprising of 101 MPs. Parliament is the sole legislative authority, and MPs, the speaker and the government can all present legislative proposals.

Judicial

Moldova’s judiciary is ostensibly independent of government, but in reality it is a tool of the executive branch. Judges are believed to cooperate closely with the ruling Democratic Party, and Moldova’s constitutional court caused widespread protest this year when it annulled the results of the Chisinau mayoral elections on a heavily-suspect technicality.

Media, NGOs, and Civil Society

Vladimir Plahotniuc dominates the media of Moldova, owning 4 of the 5 largest television channels in the country, and controls over 60% of the information being given to the public. This situation is not expected to change in the medium-term. Online is the only place to find diversity of opinion on issues pertaining to Moldova. Print, television and other classical forms of news have all been de-legitimized in one way or another by ruling interests.

Since the transition from communism Moldova has had the most vibrant civil society in the post-Soviet space, more developed and powerful than even Ukraine or Georgia. Recently, however, that fact has begun to shift. The ruling establishment in Moldova has divided trade unions and undermined the independent role of the church. There have also been serious discussions to pass laws that will further subvert the freedom of assembly within the country. At present, the outlook for civil society is weak.

Main Issues

Moldova politics is in many ways a smokescreen. While many parties practice strong virtue-signalling to the international community as being either pro-EU or pro-Russian in their outlook, often they are more pro-themselves than anything else.

To be sure, this is not true of all political movements. The pro-Russian Socialist Party - which is headed by Igor Dodon - is genuinely pro-Russian and anti-Western. It champions an eastward geopolitical pivot that would involve scrapping Moldova’s Association Agreement with the EU, and joining the Russia-led Customs Union. Dodon - who has visited Russia more times in 2018 than all other destinations put together - is at pains to stress is opposition to NATO, his affection for Putin, and his affinity for the ‘traditional conservative’ legislation - such as anti-LGBT laws - which the Kremlin also endorses. Dodon’s Socialists are also popular for their pledges to eradicate corruption and increase spending on public services. Armed with what experts believe will be funding from secret Kremlin-backed channels, they may do well enough to win a parliamentary majority at next year’s elections.

But the ruling pro-Europeans are not truly pro-European - at least, not in their core values. While the Democratic Party has made some virtue-signalling gestures to Brussels such as banning Russian ‘propaganda’ TV channels earlier this year, the beady-eyed commentator would have noted that the channels’ distribution rights in Moldova had long been owned by their largest backer and chairman - Vladimir Plahotniuc.

Plahotniuc is widely regarded as the key powerholder in Moldova. An oligarch with an obscure background who made his fortune as a confidante of former Communist President Vladimir Voronin, Plahotniuc later launched his own political movement, the Democratic Party. Despite staggeringly low parliamentary results - it has never held more than a fifth of the country’s seats - Plahotniuc’s tactic of having the Democratic Party govern in coalition has allowed it to play an outsize role in politics. Despite not even being an elected MP, all government ministers answer to him, rather than Prime Minister Pavel Filip.

As well as the Parliament, Plahotniuc controls the country’s constitutional court, the magistrate’s council and the national anticorruption center. He also owns most of the country’s media, and several of its largest banks. Consequently, he has become a locus of popular dissatisfaction at the country’s rampant state corruption, and both the pro-Russian Socialists and the anti-corruption liberal parties regularly stage protests against him.

Two recent examples encapsulate the brazen nature of corruption under the Plahotniuc regime. The first - widely referred to as the ‘Great Moldova Bank Fraud’ saw $1 billion - or 13% of the country’s GDP - lifted from banks overnight and siphoned into offshore accounts. While many experts have alleged that Plahotniuc was behind the scheme, the country’s politicized authorities ultimately blamed his coalition partners - the Prime Minister and Liberal Democratic Party leader Vlad Filat ultimately being jailed for having facilitated the transaction. In any event, this huge theft of national wealth that occurred under Plahotniuc’s watch caused outrage among the citizens of Europe’s poorest country.

The second example of corruption was the outcome of this year’s mayoral elections in Chisinau - Moldova’s capital. Pro-Russian candidate Ion Ceban faced off in the second round against a young anti-corruption campaigner called Andrei Nastase. Nastase’s lack of financial and administrative resources had seen him overlooked as a strong candidate, but his message of European integration combined with eradicating Moldova’s insider interests in government struck a chord with many voters.

Even more unexpectedly, Nastase went on to beat Ceban in the the second round, and should have become the city’s next mayor. But hopes of political reformism at City Hall were abruptly dashed when Moldova’s constitutional court ruled the election void on an obscure technicality, and announced the city’s pro-Plahotniuc mayor would remain in his place after all. Outraged, tens of thousands of pro-Russian and pro-EU Moldovans took to the streets of Chisinau, and protested the corruption of the incumbent regime.

Despite their hatred of (notionally) pro-EU parties like Plahotniuc’s and their support for the pro-Russian Socialists, Moldovans are - on the - whole - pro-EU integration. Support for joining the EU reached record highs earlier this year, with 60% of the country in favor. Support for joining NATO, remains low at around 16%. Moldova’s citizens understand their country’s geostrategic importance to both NATO and Russia, and appear uneager to antagonize either side.

This has not stopped the country’s ruling class from using NATO and the EU to their advantage. Members of Plahotniuc’s party regularly stress their support for NATO cooperation and EU cooperation in order to seek greater financial assistance from a skeptical Washington and Brussels, who regard them as systemically corrupt and uncommitted to reform. Other virtue-signalling tools to project the Moldovan leadership as a bulwark of Western values and not as a corrupt entity have included moves by lawmakers to scrap Russian as an official language, and a ban on Russian TV channels in the country.

Conclusion

Reformist liberal-democratic parties that are not pro-Russian do indeed exist in Moldova. Andrey Nastase’s Dignity and Truth Platform, and former Presidential candidate Maia Sandu’s Action and Solidarity Party enjoy growing popularity among a disgruntled populace. However, with the decks stacked against these parties, it is unclear whether they will be allowed anywhere near the levers of power. For now, Plahotniuc - and to a lesser extent his pro-Russian Socialist counterparts - remain in the political ascendant.

Geopolitics

Moldova is one of the smallest countries in Eastern Europe. Over the past several centuries it has been a battleground for competing kingdoms and empires. While the Ottomans controlled most of its territory until the nineteenth century, present-day Moldova became part of the Russian Empire after the Russo-Turkish War of 1806-1812. A century of attempted russification followed, the First World War and the Russian Revolution of 1917. The chaos of the moment gave the region’s leaders an opportunity to declare their independence from Russia and join the Kingdom of Romania, with which Moldova shares a common language and culture.

The Kingdom did not remain united for long. In June 1940, Stalin gave the order to annex Moldova (then-Bessarabia) from Romania, turning it into a constituent republic of the Soviet Union (Moldavian SSR). A second wave of russification continued until 1990, when - in the dying months of the Soviet Union - the nationalist Popular Front party gained power in Moldova and began calling for reunification with Romania.

Today, Moldovan politicians and civil society are divided on what the country’s geopolitical affiliations should be. The reunification of Moldova with Romania, membership of the EU, relations with Russia and cooperation with NATO are all hotly debated issues. To some extent, this reflects the complexity of its history and culture, and to some extent it reflects prevailing trends and opportunities. This profile will attempt to explore them in some depth.

Global

The European Union

Moldova’s government has repeatedly professed a strong desire for EU membership, but that may be some way off. The country has an Association Agreement (AA) with the EU, which provides some trade liberalization for Moldovan exporters, and a visa-free regime is in place for Moldovan citizens who wish to visit the EU and have a biometric passport. The EU now accounts for 55% of Moldova’s total trade, a figure which has been rising steadily since the AA was signed in 2014. Russian trade, by contrast, has dropped sharply.

However, the European Commission has recently poured cold water on Moldova’s membership ambitions. Concerns over state-sponsored corruption and the politicization of the justice system formed the basis of a harsh rebuke of Chisinau’s leadership in a report earlier this year. Moldova does have has opposition parties that are genuinely pro-EU and also strongly anti-corruption, such as the Dignity and Truth and Action and Solidarity parties.

However the incumbent leadership - notably the ‘Democratic Party’ and the European People’s Party - are known for their willingness to protect vested interest, and are unlikely to deliver the kind of reforms that could satisfy Brussels. Thus, in the event of their reelection next year, further European integration does not appear likely.

Regional

Romania

Reunification of Moldova with Romania seemed very much on the cards in the heady days of Soviet collapse. The Popular Front of Moldova gained mass support in 1990, and after an election in which its coalition won a landslide, Pro-Romanian nationalist Mircea Druc was elected as the country’s Prime Minister. When Moldova declared its independence from the Soviet Union in 1991, Romania was the first country to give it international recognition, and politicians on both sides expected a rapid reunification. In 1991 however, Druc was abruptly fired from office by Moldovan President Mircea Snegur, who began to take a more outspoken stance in favor of preserving Moldova’s independence.

This was not least because of the Transnistria question. Many Moldovans supported the Russian-speaking region remaining part of the country and reunification with Romania was seen as the catalyst which would give its separatist movement legitimacy. By 1994, when a referendum was held on Moldova ‘remaining as an independent nation’, pan-Romania had become a fringe political cause and a landslide voted for Moldova to retain its independence.

Today, the issue is again on the agenda. Moldova is the poorest country in Europe in US dollar-denominated GDP per capita terms, while Romania has enjoyed a surge since 2000 thanks to the economic benefits of EU accession and membership. Currently, GDP per capita in Romania is almost five times that of Moldova.

Moldova’s miserly economic prospects, as well as its cultural and linguistic affinity with Romania are two reasons why between one in four and one in five citizens now support for Romanian reunification. The benefits of the EU single market and budget transfers from Bucharest offer the prospect of jumpstarting Moldova’s economic fortunes. Some Moldovan voters also see Romania’s more robust democracy and lower levels of corruption as attractive.

Political party support for the movement is limited however. Most politicians from leading parties strongly favor Moldova’s continued independence, and the pro-reunification European Action Movement garnered just over 1% of the vote in 2010 parliamentary elections. Romanian reunification is an unlikely path for Moldova in the medium term.

Russia

Moldova-Russian relations—as we have seen—go back a long way. Roughly one-fifth of the country’s population is comprised of Russian-speaking minorities, which is a legacy from the Soviet era. This figure excludes the population of Transnistria, a Russia-backed breakaway region on the country’s Eastern flank. Many Moldovans are fluent in Russian and, until recently, many of the country’s TV channels were broadcast directly from Moscow. Religious orthodoxy, the social conservatism of their populations and Moldova’s huge Russian diaspora are further elements of the glue that binds the two countries together.

However, most Moldovans strongly favor EU membership, and only a small minority actively advocate joining the Russia-led customs union, as Moscow desires. The economic benefits are just too strongly weighted in one direction. Moreover, the current leadership has made a strong point of virtue-signalling its Europhilic ambitions to Brussels, while criticizing Moscow’s geopolitical ambitions and banning Russian TV programs to prevent “media propaganda.” NATO has recently set up a Moldova liaison office in Chisinau, and cooperates with Moldova on a number of issues, such as cyber-defense.

Conclusion

The current pro-European leadership is vastly unpopular owing to repeated accusations of state-sponsored corruption. These culminated in 2014, when $1 billion—13% of national GDP—was lifted from financial institutions overnight in a massive bank fraud. In the ascendant is the Moldovan Party of Socialists, a led by President Igor Dodon. The Socialists have capitalized on widespread disillusion with the political establishment, and lash out at the corruption of the ruling parties while promising to increase public services. A thinly-hidden disdain for sexual minorities and a fierce profession of religious orthodox values also help their stock in a socially conservative country.

But the Socialists’ most glaring political feature - at least for geopolitical observers - is their ardent Russophilia. As well as making Russian mandatory in schools and reinstating it as an official state language, Dodon has expressed a willingness to federalize the country, which could reintegrate the country’s restive Transnistria but would also significantly diminish executive power in Moldova. This would make it easier for Moscow to play divide and rule among the country’s regions.

But most importantly, Dodon advocates a dramatic geopolitical pivot from Brussels to Moscow. He backs scrapping the country’s EU Association Agreement to join a Customs Union with Russia, and strongly opposes EU membership for Moldova. Dodon strongly deplores any military cooperation with NATO. As (a largely ceremonial) President, he has made five official visits to Russia so far this year, more than all other countries put together.

It is clear that a victory for the Socialists in next year’s parliamentary elections would cause a radical realignment in East European geopolitics. Whether they will win is an open question. They are ahead in the polls, but will face an uphill battle against the incumbent pseudo-liberals - who enjoy distinct administrative advantages by being in power. Election-rigging is not out of the question.

Economics

Moldova is Europe’s poorest country, though it often competes with Ukraine for this dubious title. The country’s nominal GDP stood at roughly $8 billion in 2017, with the GDP per capita (US dollars) at $2,240. The country’s economy comprises mainly of agriculture and food exports, though it also has a small manufacturing sector. High levels of corruption reduce the government’s tax base and create disincentives for domestic and foreign investment. Bureaucratic obstacles stymie the ease of doing business in Moldova.

The country currently has an Association Agreement with the EU, which has helped to facilitate Moldova’s ability to export goods into the EU market. A visa-free regime enables Moldovans with a biometric passport to travel to the EU.

Like many post-Soviet states, Moldova faced substantial turbulence in the immediate post-independence period. The foundations of a market economy were established through reforms that began in 1992, including price liberalization and privatization. After an interim period which included high inflation, economic stability had been largely achieved by the late 1990s. While Moldova recorded barely a year positive GDP growth in the 1990s, it has grown much more solidly in subsequent years, with output typically rising between 7% a year. Output fell in 2009 - after the global financial crisis - and in 2015 - following the contraction of the Russian and Ukrainian economies and after $1 billion was stolen from Moldovan banks.

Moldova has a relatively low-value and agriculture-focused export market, few natural resources to speak of, and low levels of foreign investment. Remittances account for a huge share of the country’s national output, and were estimated at 20% of GDP for 2017. Remittances and the fact that one third of the country’s working-age population are farmers who borrow very little allowed Moldova to avoid a huge banking crisis in 2015. While the $1 billion bank fraud amounted to 13% of national GDP, low levels of private borrowing by farmers and the role of remittances in the economy meant that neither households nor companies lost money directly.

In the longer-term however, the country’s growth profile will be significantly constrained by corruption and high levels of bureaucracy, which hinder investment and growth. Resolving these problems would entail not only better economic performance but also goodwill from the EU, who would be prepared to give Moldova greater access to the EU single market. However, there is currently little appetite for genuinely reformist leadership that eradicates corruption or bureaucracy.

Moldova depends heavily on Russia for its oil and gas, but is increasing energy links with Romania to diversify its energy supply.

Structure of economy and key markets

Agriculture accounts for just under 20% of the market, although agriculture, particularly wine, and food processing together comprise 40% of the GDP. The services sector dominates the structure of the economy, making up nearly 65% of output. Industrial production and manufacturing makeup just over 20%.

Moldova has some of the world’s most arable land, which may present a future opportunity for investors should the regulatory and political climate improve. The country has seen some foreign investment in its industrial sector, owing to its cheap and skilled labor force and proximity to the EU.

Trade Snapshot

Moldova’s main export partners are the EU and Russia. 66% of its exports currently go to the EU, while 10% go to Russia. The strong trade weighting in favor of the EU has been facilitated by Moldova’s signing of an Deep and Comprehensive Free Trade Agreement (DCFTA) in 2014, which either reduced or eliminated tariffs on goods and provided an increased services market. The trade picture can be expected to change dramatically, however, if the pro-Russian Socialists win next year’s election. They favor scrapping the EU’s DCFTA and joining the Russia-led Customs Union.

Moldova has a trade deficit of $2.4 billion, which widened 22% in 2017. Moldova’s top exports are insulated wire, sunflowers seeds, wheat, wine, and seats for machinery and automobiles. Its top imports are refined petroleum, packaged medicaments, cars, insulated wire, and textiles.

Romania is Moldova’s top export partner by far, with trade worth $568 million in 2016. Of this sum, Moldova exported $230 million in machines and parts, $103 million of vegetable products, and $71.5 million in metals. Russia is in second place with trade totalling $256 million, of which.

$50.7 million was in chemical products, $48.8 million in vegetable products, and $33.9 million in machines and parts. Italy is Moldova’s third largest export partner, with goods exported totalling $254 million. Of this sum, $123 million was in textiles, $49.7 million in vegetable products, and $21 million in leather goods and animal hides. Exports to Germany totalled $159 million. They included $48.1 million in seats, $36.6 million in textiles, and $15.6 in vegetable products. Finally, the UK is Moldova’s fifth-largest export destination, with trade at $120 million. Of this, $63.9 million was in vegetable products, $50.6 million in textiles, and $2.71 million in foodstuffs.

Moldova leading import partner is Romania and imported $578 million worth of goods, with $274 million of mineral products, primarily refined petroleum, $58.3 million of machines and parts, and $48.7 million of chemical products in 2016. China is in second place with $348 million, composed of $141 million of machines, $53.2 million of textiles, and $32.4 million of metals. Ukraine is in third place, with $374 million, of which $111 million is of foodstuffs, $56.3 million of metals, and $31 million of wood products. Russia’s imports total $338 million, including $75.2 million of mineral products, $73.8 million of chemical products, and $40 million of foodstuffs. Finally, Germany is in fifth place with imports at $328 million, of which $80.7 million are in machines, $57.8 million in transportation, and $53.1 million in chemical products.

Moldova has had active relations within several international organizations. The IMF is currently providing it with emergency funding, while Moldova’s Association Agreement has strengthened ties with the EU. Moldova is also a member of the World Trade Organization.

Regional ties include membership of the CIS (Commonwealth of Independent States), which reinforces ties between post-Soviet states and lowering trade barriers between them.Moldova is also a part of the GUAM Organization for Democratic and Economic Development, and the Organization for Black Sea Economic Cooperation.

Foreign Money Flow

Poor domestic conditions for FDI repel many foreign investors. Corruption, an opaque judicial system and political instability all negatively affect FDI prospects. In 2016, the total FDI inflow was $143 million. While Moldova has sought to attract foreign investment opportunities with tax breaks for certain businesses, the risks outweigh the rewards for many investors.

Moldova had to seek emergency funding from the IMF after the bank fraud crisis of 2014. A $183 million loan was agreed in 2016, on condition of government reforms to strengthen the banking sector and improve regulatory frameworks.

Moldova only adopted it present currency, the Moldovan lei in 1993, after using the ruble for two years after declaring independence. While this aimed to liberalize and free the market, hyperinflation took hold and devalued the currency to the US Dollar. Since 1993, Moldova has had a difficult time truly growing the economy in tangible ways--living standards have remained the same. Moldova has relied on foreign aid to either stabilize the economy from certain shocks and events, such as the embezzlement, or in the case of trade bans from Russia which have severely hurt the Moldovan economy.

Most recently, in 2016, the IMF promised a loan of $179 million spread out over three years. This loan came in exchange for the Moldovan government’s willingness to implement reforms in the banking and fiscal spheres, especially due to the banking crisis. Moldova has since received two of the tranches, totaling over $42.5 million in 2017.

Tax Law

Moldova levies taxes at both national and local levels, with income tax set at 20%. The country has a low corporate tax rate of 12% and low location costs. It applies a progressive tax, with 7% levied on citizens earning less than 33,000 lei per annum ($2,000), and 18% on citizens earning more. Capital gains, property and land taxes are all levied at low rates.

Conclusion

While the agricultural sector and cheap and highly-skilled industrial labor may offer future opportunities in Ukraine, corruption and bureaucracy make the country a risky investment destination for many foreigners. Political will is needed to eradicate these problems, but does not exist at the moment.

Culture & Society

Moldova’s population is infused with elements of both Romanian and Russian influence. While four fifths of the country speak Romanian as their first language, one fifth are Russian-speakers, a legacy of the Soviet era. This statistic excludes Transnistria, a Russian-speaking breakaway state in the country’s east that fiercely trumpets its cultural difference from Moldova.

Transnistria held an unrecognized referendum in 2006 in which 97% of the country voted to reunify with Russia, though the Russian government declined to honor the result. Many Moldovans speak both Romanian and Russian fluently, and Russian was an official ‘language of interethnic communication’ until early 2018. The government caused uproar even among pro-EU citizens when it banned Russian TV channels this year, as many consider the quality of Russian programming to exceed that of domestic Moldovan channels.

Given the close cultural and linguistic ties between Romania and Moldova, as well as the economic benefits of EU membership, support for Moldovan reunification with Romania is not negligible. In the past decade, it has fluctuated between 20% and 25%. A majority of Moldovans support joining the EU, but only a minority favor their country becoming a member of NATO.

Religion plays an important role in Moldovan identity. A large majority of Moldovans are Christian Orthodox, and the Moldova Orthodox Church plays a powerful role in public life. In 2016, President Igor Dodon won the second round partly thanks to Orthodox bishops’ support, who publicly praised his socially conservative agenda and questioned whether his opponent Maia Sandu was a lesbian.

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