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Table of Contents:

I. Introduction.........................................................................................................................................2

A. AboutATIC............................................................................................................................................2

B. ComparativeAnalysisoftheWhiteBook2008-2012..........................................................................3

C.LogicsoftheWhiteBook……….………...………………….……………………………………………….7

D. GoalandObjectivesoftheWhiteBook................................................................................................7

II. Executive Summary............................................................................................................................8

III. Moldova ICT Development in Regional and Global Comparison....................................................9

A. NetworkReadinessIndex......................................................................................................................9

B. BusinessUsage...................................................................................................................................10

C. IndividualUsage..................................................................................................................................10

D. GovernmentUsage.............................................................................................................................13

E. Affordability..........................................................................................................................................13

IV. ICT Industry Competitiveness..........................................................................................................17

A. IndustryStructure................................................................................................................................17

B. ContributiontoGDP............................................................................................................................19

C. ForeignTradeofICT...........................................................................................................................21

D. ContributiontotheStateBudgetandtheSocialInsuranceBudget....................................................22

E. ImpactontheOtherSectorsoftheNationalEconomy........................................................................25

V. Potential for Growth..........................................................................................................................27

A. GlobalTrends......................................................................................................................................27

B. Changesonthelocalmarket...............................................................................................................27

VI. Competitiveness Factors..................................................................................................................28

A. HumanCapital-aCriticalFactorintheICTSectorDevelopment......................................................28

B. BusinessEnvironment.........................................................................................................................30

C. EntrepreneurialSkillsandInnovations................................................................................................34

VII. Recommendations for Short, Medium and Long Term Policies...................................................35

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This White Book presents an analysis of the ICT industry and industry’s recommendations on short, medium and long term policies. The White Book was developed by the Moldovan Association of Private ICT Companies (ATIC), with the support of the Competitiveness Enhancement and Enterprise Development Project II (CEED II), funded by the United States Agency for International Development (USAID).

A. About ATIC

ATICisanumbrellaassociationoftheprivatecompaniesoperatingintheinformationtechnologyandcom-municationssector,setupin2008withthepurposeoffacilitatingthedialoguebetweenICTcompaniesandtheGovernmentofMoldova.

ATIC’smissionistofosterthedevelopmentoftheMoldovanICTindustrythroughviablepartnershipsbetweenprivatecompanies,similarorganizations,governmentbodiesandinternationalorganizations,tocontributetoincreasingindustrycompetitivenessandcompanies’capacities.Atthesametime,ATICaimsatexpandingthemarket,attractinginvestmentsinthesectorandparticipatingindecision-makingatnationalandinternationallevels.ATICcooperatescloselywith thegovernmentandeducational institutions topromote ITeducation,enhancelaborforceandsupporttheICTindustry.

Attheendof2012,ATIChad38membercompanies,whichemployedatotalof8000peopleandaccountedfor50%oftheoverallICTvolume.ThemajorgoalofATICistomaintainabusinessenvironmentfavorableforICTcompanies.

The main activities of ATIC are the following:

• improvetheimageofICTdomesticallyandabroad,

• cooperatewithgovernmentandeducationalinstitutionstoimprovethequalityofITeducation,

• supporttheestablishmentofpartnershipsinICT,

• getinvolvedinimprovingthebusinessenvironmentintheICTindustry,

• cooperatewiththegovernmentbodiesinidentifyingsolutionstoenhancethequalityandquantityofICTgraduatesandprofessionals,

• sustain thedialoguebetween the ICT industryand thegovernmentbodies to improve thebusinessenvironment,attractinvestmentsandsupporttheindustry.

I. Introduction

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Actions Expected results Success Indicators Status

Establishclearprioritiesforpublic-privatepartnershipsandafocalpointforcommunicationwiththeGovernment(ICTAssociation)

Constructivedialogue ICTsectorhaswelldefinedpriorities Achieved

Strongprivatesectorcommitmenttoinformationsocietydevelopment

ICTsectorhasasinglepointforcommunicationwiththeGovernment

AchievedbyestablishmentofATIC

Aggregatethecurrenteducationalneedsandongoingprivateinitiativesinacomprehensivebusinesssectorprogramforpartnershipwiththeeducationalsystem.

Fasttrackforeducationmodernization

Majorprivateinitiativesintheeducationfieldarecoordinatedincommonprogramwithcleargoals

PartlyachievedthroughadditionalcoursesinitiativeNotachievedintermsofcurriculum.

DevelopanICTsectorprofilethatdemonstratesthecapacityandattractivenessoftheICTsector

IncreasedawarenessabouttheICTimportance.ImprovedICTsectorvisibilityandtopicality

AsoundICTsectorprofiledevelopedandusedbytheGovernmentandprivatesector

AchievedbyUSAIDCEEDII

Investinworldrecognizedtechnologies,qualitymodelsandstandards

Improvedinternationalcompetitiveness

Numberofcompaniescertified Unmonitored

Numberofpeoplecertifiedperrecognizedtechnology

Partlyachieved

ProvidepromptfeedbackanddataabouttheimpactofstrategicdecisionsintheICTsector

Strategicdecisionmakingprocessbasedondetailedimpactanalysis

PrivatesectorprovidesconstructivefeedbackaboutICTplansandactions

Ongoing

B. Comparative Analysis of the White Book 2008-2012

In2008,thefirstPolicyWhiteBookwasdevelopedbyATIC,withsupportfromUSAIDCEEDProject.ThegoalofthatpublicationwastoclearlydefinethenationalICTsectorasoneofthemostproductivesectorsoftheeconomy,toidentifyitsdevelopmentopportunitiesforthefollowing3years,andtomakestrategicrecommen-dationsforimprovingthebusinessenvironmentinthesector.

List of actions:

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Actions Expected results Success Indicators Status

EstablishmentofrealisticgoalsandprioritiesforICTdevelopmentandinformationsocietybasedonalreadydevelopedstrategiesandtheactualneedsofthesocietyandbusiness

Stronggovernmentsectorcommitmenttotheinformationsocietystrategydevelopment

RealisticstrategicprioritiesfortheICTsectorestablishedandused

Achieved

InitiationofeffectivepublicprivatedialogueforICTsectordevelopment

Sustainableandefficientstrategyimplementation

Numberofmeetings.Numberofissuesdiscussed.Numberofissuessolved

Achieved

Prepareanactionplantoprotectintellectualpropertyrights,withinapublic-privatepartnership

Designasystematicapproachtosolvingtheissuesrelatedtointellectualpropertypiracy

Theplanadoptedin12months Unachieved

Modernizationofeducation: Fasttrackforeducationmodernization

• updatetheregisterofprofessions

UpdatedregisterofICTprofessionsusedbytheeducationalsectorwithin12months

Ongoing.Discussionstartedin2012

• formaworkinggrouptoaidincooperationbetweentheICTsectoranduniversities

SpecificactionsfromtheICTsectorincludedintheeducationalprocess

Ongoing

• identifyandaddressimmediateproblemsforinefficienteducationinput/output

Input/outputproblemsanalyzedandaddressed

Ongoing

• modernizetheICTcurriculum

CurriculumforICTuniversitiesmodernized

OngoingStartedin2012

ICT Sector Priorities for Government Intervention

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EliminatebarriersforICTsectorgrowth:

Properfiscalandadministrativeenvironment

GrowthoftheICTsector

• effectivegrowthdrivenregulationaimingatreducinginterconnectfeesonthecommunicationmarket,toensurerapidmarketgrowth

Interconnectionfeestrend Achieved

• improveandeliminatebureaucraticproceduresthatregulatethebuildingofICTinfrastructure,i.e.theprohibitiononplacingICTinfrastructurewithin10kmofnationalborders

TimeandeffortstoobtainedapprovalforbuildingICTinfrastructure

Unachieved

• introduceaqualitybasedcriteriainstateICTprocurements

%ofstateprocurementsintheICTbasedonqualitycriteria

Unachieved

• eliminatethepossibilityforcrosssubsidiesofthestateownedenterprisesandtheirtransformationtobudgetsponsoredinstitutesorprivateenterprises

%oftheICTstateprocurementexecutedbyprivatecompaniesorindependentmarketentities

Unachieved

• eliminatetheadditionaltaxburdentothemobilecompanies(2.5%paymenttotheRepublicFundforSocialProtection,VATrefundtime,amortizationpolicyfortheSWandICTetc.)

Overalltaxburdenofthecommunicationsectorcomparedtotheaveragefortheindustry;timeandeffortsforVATrefundbytheICTcompaniescomparedtotheotherexportorientedsectors.AmortizationperiodforSWandICTalignedwiththeirlifecycle

Unachieved

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The first White Book proposed a series of recommendations most of which have unfortunately not been implemented so far. However, a number of proposals have been put into effect:

1. Since2009,theNationalRegulatoryAgencyforElectronicCommunicationsandInformationTechno-logy(ANRCETI)haspublishedfinancialreportsonitsincomesandexpenses.ThisallowsforahigherlevelofconfidenceintheuseoftaxespaidbytheelectroniccommunicationsproviderstotheAgency’sbudget.ThepublicationofexpensesincreasesthetransparencyoftheAgency’sactivityandeventuallyraisesitsefficiency.

2. From2010to2011,theexcisetaxesforvideoandwebcameraswerereducedandthentotallyelimi-nated.Thus,mostwebcamsarenowimportedbylegalmeansandthepricethereofhasreducedsig-nificantly.

3. From2009to2011,concreteactionswereundertakenintermsoftheinterconnection,includingaccesstothelocalloopandcolocation,whichhascontributedsignificantlytoreducingthebroadbandinternettariffs.

4. NumberportabilityiscurrentlyunderimplementationandstartingwithMay2013itwillbeamandatoryrequirement.

5. In 2010, the LawonPreventing andCombatingCybercrimewaspublishedand is currently imple-mented.

6. ANRCETIhasinitiatedtheregulatoryframeworkforissuanceoflicensestousetheradiofrequencysub-band3750–3800MHz(forserviceprovision inWiMaxstandard).However, it isassumedthatlicenseswillbeusesbasedoncompetition,notforfreeasthe2008WhiteBookwassuggesting.

7. Thegovernmenthasextendedtheapplicationoftaxincentivesonsoftwarecompanies.

Strategic interventions

• StrategicallianceswithworldrecognizedICTuniversitiesandinstitutions

Directaccesstomoderneducation

Easedpenetrationofbroadband Ongoing

• Creationofexcellencecentersincooperationwithinternationalorganizations

Directaccesstomoderntechnologies

Numberofstudentswithworldrecognizeddiplomas

Unachieved

• Businessandtechnologyincubators

GrowingnumberofICTcompaniesandICTemployees

Numberofcompaniesandnumberofexpertstrainedin/appliedcertaintechnologies;numberofnewICTcompanies,numberofnewemployees

Partlyachieved.Intermsoftechnologicincubators,thereisonlyoneundertheMoldovanAcademyofScience

• TechnologyParksExcellentbusinessenvironmentformaturedomesticandinternationalICTcompanies

VolumeofdirectinvestmentinICTcompanies.NumberofcompaniesinTechParks

Unachieved

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C. Logics of the White Book

This White Book has the following logics:

Chart 1 Logics of the White Book

D. Goal and Objectives of the White Book

ThisWhiteBookprovidesanoverviewoftheICTsectordevelopmentinMoldova.

ThedocumentisexpectedtostrengthenthedialoguebetweentheICTbusinessandtheGovernmentandtoallowsupportinggovernmentpoliciesbasedontherealneedsofMoldova’sICTindustry.

Thepaperintendstopresenttheexistingsituationinthesector,theachievementsandfailuresinimprovingthebusinessenvironmenttotransformitintoonewhichismoreattractiveforinvestments,andthebottleneckstosectordevelopment,aswellasrecommendationsintendedtocontributetoincreasingICT’sshareascom-paredtootherindustries.

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In2011,MoldovahadasignificantincreaseofitsNetworkReadinessIndex:fromthe97thtothe78thpositionamong the total number of 140 countries. This enhancement was due particularly to the development oftelecommunicationinfrastructureinthepasttwoyears,whereMoldova’sranked41st.Businessusagehasanalarminglevel(120thposition),causedbytheweakcapacityofcompaniestoabsorbnewtechnologiesandmodesteffortstotraintheirstaff.

Mobiletelephonypenetrationratedoubledfrom2007to2011,exceedingthelevelof100subscribersper100inhabitants.Thenumberofinternetusersalsodoubledinthesameperiod.Theshareofhouseholdshavingacomputerandinternetaccessincreased,positioningMoldovaaheadofsomeCentralEuropeancountriessuchasBulgaria,in2011.Broadbandinternetaccessincreasedinthepastfouryearsfrom1.4to9.9subscribersper100inhabitants.

From2008to2010,thecostoftelecommunicationservicesreducedsignificantly,placingMoldovaamongthetop10countriesasregardsthedynamicsofpricereductionforsuchservices.Thus,in2011Moldovasteppeduptothe8thpositionamongthe142countriesasregardstheaffordabilityofICTservices.Thereductionoftheconsumptionbasketfortelecommunicationserviceswascausedparticularlybythedecreaseofthebroadbandinternetprice.ThecostsforfixedtelephonyinMoldovaarerathersymbolic,whilemobiletelephonyremainsoneofthemostexpensiveintheCIScountries.

Ofthetotal829enterprisesoperatinginthesector,about55%areICTservice-providers(K72accordingtoCAEM2005)involvedinsoftwaredevelopmentandcomputermaintenance.Thenumberoftheseenterpriseshad themost dynamic increase in the sector: over 17% annually from 2005 to 2001.Telecommunicationcompaniesaccountedforthebiggestshareofemployees-41%oftheoverallnumberofover22thousand.OvertwothirdsofthelatterareemployedbyS.A.Moldtelecom.

In 2011, ICT had a contribution of approximately 6.8% to theGDP,which decreased compared to 2009.Telecommunicationsaccountedforthebiggestshare(about80%),beingalsothesubsectorthatgeneratedthereductionofthevalueaddedinthesector.Accordingtoofficialestimates,slightlyover0.8%oftheGDPor about 12% of the value added in the sector is generated by the software development and computermaintenancecompanies.Inreality,thisfigurecouldbetwicehigher.

Foreign trade by ICT companies increased significantly in the past years. The export of information andinformaticsserviceshadimpressivegrowthtrends,increasingover13timesfrom2005to2011.

ICTcompaniesaccountforover5%ofthecontributionstothesocialinsuranceandhealthinsurancebudgets.

Unlikethetrendsobservedinotherregionalcountries,therateofenrolmentintertiaryeducationreducedinthepastyears.Apparently,thenumberofstudentsissufficienttosatisfythedemandexistingontheinformationtechnologymarket.However,inreality,onlyasmallnumberofgraduatesarecapableofperformingthecurrenttasks,most of them requiring preliminary training before employment.Most software companies organizetrainingsfor theirnewlyhiredstaff, thusreducingthegapbetweentheskillsof thecurrentemployeesandthoseofthefreshlyemployedgraduates.

From2009to2011,Moldova’srankasregardsbusinessenvironmentfellfromthe94thtothe106thposition.Thesituationintermsoftheeffectivenessoflegalbodies(Parliament),thelawonICTsector,legalindependenceandintellectualpropertyprotectionworsenedascomparedtoothercountries.

III. Moldova ICT Development in Regional and Global ComparisonII. Executive Summary

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A. Network Readiness Index

TheeffortsundertakenintherecentyearstoboosttheICTsectorinfrastructurecontributedtoraisingMoldova’spositionininternationalrankings.

Followingaslowfallduring2007-2009,Moldovasteppedupto the78thposition in theNetworkReadinessIndex,gettingclosetoitsneighbors-RomaniaandUkraine,whicharemuchmoreeconomicallydeveloped.

Chart 2 Evolvement of countries ranking in the Network Readiness Index

Source: INSEAD, The Global Information Technology Report, 2012

Ananalysisof theIndexcomponentsrevealsthat thegrowthwasduetoasubstantial improvementof theICT infrastructure.Over threeyears,Moldovamoved69positionsup, ranking41st in termsof thenetworkreadinesscomponent.Thefalloftheenvironmental(political,regulatory,business,andinnovation)componentfromthe94thtothe106thpositionisalarming.

III. Moldova ICT Development in Regional and Global Comparison

NetworkReadinessIndex(NRI)measureseconomies’capacitytofullyuseICTforenhancingcountry’scompetitiveness.Since2002,NRIhasbeendevelopedbyWorldEconomicForum incooperationwithINSEAD and used by politicians and other stakeholders to identify the strengths andweaknesses tomonitortheeffectoftheundertakenactions.

NRIiscalculatedbasedontencriteriawhichincludefourareas:environment,capability,usageandimpact.Thestudypresentedin2012wasconductedin2011on142countries.

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Chart 3 Evolvementof Moldova’s ranking in terms of Network Readiness Index components

Source: INSEAD, The Global Information Technology Report, 2012

B. Business Usage

Accordingtothe2012INSEADresearch,theweakestpillarofnetworkreadinessisBusinessUsage.Forthiscomponent,Moldovaranks120thoutof142countriesor33positionslowerthanin2009,behindCIScountrieswithsimilardevelopmentlevelssuchasArmenia(104),Azerbaijan(72),Georgia(109),Tajikistan(111),anditsneighboringcountries-Romania(91),Bulgaria(101),andUkraine(76).

Two factors have contributed significantly to diminishing this index:

1. Firm-leveltechnologyabsorptioncapacityreducedfrom4.26to3.9from2009to2012.Moldovaranked126th,leavingbehindonlytwoCIScountries:theKyrgyzRepublicandtheRussianFederation.

2. Investmentbyenterprisesinstafftraininganddevelopmentisoneofthelowestintheworld–118thpositionbehindRomania(79),Georgia(106),Armenia(105),andUkraine(117).Themainreasonbeingthatmostcompaniesdonotperceivetrainingasbringinganyvalue.

Theothertwofactors–CapacityforinnovationandExtentofBusinessInternetUse–havemodestscores,rankingMoldovaonthe107thand109thpositionsrespectively.

C. Individual Usage

Intermsofindividualusage,Moldovahadaslightprogressfromthe80thtothe71stpositionfrom2008to2011,accordingtotheINSEADresearch.

Mobiletelephonypenetrationratedoubledduringthepastfouryears,bringingMoldovaclosetoitsneighbors–RomaniaandUkraine,andaheadoftwoCIScountrieswithsimilardevelopmentlevels-ArmeniaandGeorgia.

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Chart 4 Evolvement of mobile telephony penetration rate by countries

Source: International Telecommunication Union (http://www.itu.int/ITU-D/ict/statistics/)

Between2008and2011, theshareofMoldovanpopulationusing Internetalmostdoubled.Asimilar trendexistedintheneighboringcountries.Internetisusedbyapproximately38%ofthenationalpopulation.

Chart 5 Internet Users

Source: International Telecommunication Union (http://www.itu.int/ITU-D/ict/statistics/)

Remittancesfrommigrantscontributedtoincreasingtheshareofhouseholdhavingapersonalcomputer.This,alongwithfamilies’needtocommunicatecheaplywithmembersabroad,ledtoaconsiderableincreaseoftheshareofpeoplehavingaccesstoInternet.

Thus,from2007to2011,theshareofhouseholdshavingacomputerincreasedfrom23%to41.6%,andtheshareofthosethathaveaccesstointernet–from16%to41%.

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Chart 6 Share of households having a computer and internet access in 2010

Source: INSEAD, The Global Information Technology Report, 2012; ITU, Measuring the Informa-tion Society, 2012

Inthepastfouryears,thenumberofbroadbandInternetusersinMoldovaincreasedsignificantlyfrom1.4to9.9per100inhabitants.Thehighrateofhouseholdsusingcomputerswillpromptbroadbandinternetexpan-sioninthefuture.

Chart 7 Broadband Internet access

Source: International Telecommunication Union (http://www.itu.int/ITU-D/ict/statistics/)

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D. Government Usage

From2009to2012,Moldovamovedupfromthe103thtothe94thpositionintermsofusageofICTtechnologiesbythegovernment.TheimprovedratingwasdueprimarilytoanimpressivegrowthinthenumberofonlineservicesprovidedbytheGovernment–fromthe112thtothe82ndposition.However,Moldova’sperformanceintermsoftheimportancethattheGovernmentplacesontheICTsectorisweaker–108thposition.

IT-relatedexpendituresineducation,publichealthcareandpublicadministrationvariedinthepastfiveyearsbetween10%and18%ofthetotalexpensesoflegalentitiesinthecorrespondingareas.Thebreakdownofexpensesinthepublicsectordiffersfromtheoverallbreakdown.Therefore,legalentitiesotherthantheonesmentionedabovespent32%of the ITbudget forpurchasingcomputerequipmentand26%- forsoftware,whilepublicsectorentitiesspent48%oftheirtotalbudgetforequipmentandonly12%(orfortimesless)forsoftware.Only1%ofthepublicsector’sbudgetwasallottedforthedesignanddevelopmentofinformationsystems.

E. Affordability

From2008 to2010, thecostof telecommunicationservices reducedsignificantly.According toa researchbytheInternationalTelecommunicationUnion(ITU)conductedin2011,theICTPriceBasket(IPB)reducedbyapproximately50%,placingMoldovaonthe9thpositionamong165countries.ThepricereductionforthetelecommunicationserviceswasdueprimarilytoareductionofthepriceofbroadbandInternetby3.7times.

Accordingtothe2012INSEADresearch,Moldovaranks8thoutofthe142countriesintermsoftherateofincreaseofICTserviceaffordability.

Theabsolutecostoffixedtelephonyservicesislow–24%lowerthantheCISaverage.OftheCIScountries,onlyBelorussia,Kyrgyzstan,UzbekistanandTajikistanhavelowertariffsforthefixedtelephony.

Chart 8 Cost of fixed telephony basket

Source: ITU, Measuring the Information Society, 2011

InrelationtotheGrossNationalProduct(GNP),thiscostexceedsthecostaverageintheCIScountries,whilebeingmuchlowerthanthecostintheCentralEuropeancountries,eveninrelativeterms.

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However,access tofixed telephony, including the low tariffsappliedbyoperators,havea lower impactoninformationtechnologydevelopment.Moreover,atinternationallevel,thelowdemandforfixedtelephonyhasdeterminedadecreaseinthenumberofsubscriberssince2007¹.

Chart 9 Cost of fixed telephony basket in relation to GNP

Source: ITU, Measuring the Information Society, 2011

Comparedto2008,thefixedtelephonycostinrelationtoGNPpercapitawentdownfrom1.8to1.15%.Thiswasduetoboththedecreaseofthebasketinabsoluteterms,andtheGNPgrowthpercapita.

TariffsformobiletelephonyprovidedbyMoldovanoperatorsareconsiderablyhigherthaninmostCIScountries.Chart 10 Cost of mobile telephony basket

Source: ITU, Measuring the Information Society, 2011

InrelationtoGNP,thecostofmobiletelephonyishigh:about3.5timeshigherthantheaveragefortheCIScountriesandalmosttwiceasmuchasinmostcountriesofCentralEurope.¹ITU,MeasuringtheInformationSociety,2011

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Chart 11 Cost of mobile telephony basket in relation to GNP

Source: ITU, Measuring the Information Society, 2011

Comparedto2008,themobiletelephonycostinrelationtoGNPreducedbyonethird(from12%to7.64%),whichwasmainlycausedbyanincreaseintheGNPratherthanthereductionofabsolutecosts.

Absolute tariffs forbroadband internetare the lowest inCISand lower that inCentralEuropeancountriesexceptRomania.

Thecutoftariffsforbroadbandinternetledtoasignificantincreaseoftheshareofhouseholdshavingaccesstointernetfrom16%in2008to41%in2011.

Chart 12 Average monthly tariff for broadband Internet

Source: ITU, Measuring the Information Society, 2011

RelativetariffsforbroadbandInternet(inrelationtoGNP)arecomparabletotheonesinmanyCIScountriesandslightlyhigherthanthoseinCentralEurope.

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Chart 13 Average monthly tariff for broadband Internet, in relation to GNP

Source: ITU, Measuring the Information Society, 2011

InrelationtotheGNPpercapita,thecostofbroadbandinternetdecreasedsignificantlycomparedto2008–from18.5%to3.9%.

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A. Industry Structure

ThestructureoftheICTindustryisdiversified,comprisingthemanufactureofequipment,provisionofservices,wholesaleandtransport. Thus, intheClassificationofEconomicActivitiesofMoldova(CAEM)there isnoseparateICTsection.Thismakesitdifficulttoconductanalyses,evenatthelevelofsomegeneralindicatorssuchasthegrossvalueadded,theshareinGDPorthesales.

ThereisnocleardefinitionoftheICTindustry.Forpurposeofthisstudy,thefollowingsectorsofthenationaleconomy(accordingtotheCAEM2,2005)havebeenincludedinICT.

30000 Manufacturingofofficeequipmentandcomputers31300 Manufacturingofinsulatedwireandcable32000 Manufacturingofradio,televisionandcommunicationequipmentanddevices33200 Manufacturingofinstrumentsandappliancesformeasurement,verificationandcontrol33300 Manufacturingofindustrialprocesscontrolequipment51840 Wholesaleofcomputers,peripheralsandsoftware51850 Wholesaleofotherofficemachineryandequipment51860 Wholesaleofotherelectronicequipmentandcomponents64200 Telecommunications71330 Rentingofofficeequipmentandcomputers72000 Computerequipmentandrelatedactivities

Unlike the 2008White Book, this study does not include code 1543 – wholesale of electrical householdappliancesandradioandTVdevices.HavinganinsignificantshareintheoverallICTtrade,thissubsectorhasaweakinfluenceonthegeneraldata,whichallowsfordatacomparability.

Themainactivityofmostoftheindustrycompanies–829or55%–istheprovisionofICTservices,includingdevelopmentofsoftware,consultancy,andcomputermaintenance.From2005to2011,thenumberofsuchenterprisesincreasedbyapproximately17%annually.

Telecommunicationsispracticedbyabout460enterprises,withnochangecomparedto2007.ThenumberofenterpriseswholesaletradingICTproducts,particularlycomputers,peripheralsandsoftware,increasedbyapproximately10%annuallyfrom2007to2011.

ThenumberofenterprisesmanufacturingequipmentdesignedfortheICTindustrydecreasedin2011com-paredto2007,accountingforonly5%ofthetotalnumberofexistingICTcompanies.

IV. ICT Industry Competitiveness

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Table 1 Structure of the Moldova ICT sector, number of enterprises

Source: National Bureau of Statistics

About22.3thousandpeopleareemployedinICTcompanies,slightly(5%)morethanin2007.ThenumberofICTprofessionalsemployedintheITdepartmentsofcompaniesthatcarryoutvariousactivitiesotherthanICTshouldbealsotakenintoaccount.ThenumberofsuchemployeesiscomparabletothoseworkingintheICTcompanies–about10-15thousandpersons.

Table 2 Number of employees in the ICT industry

Source: National Bureau of Statistics

Over41%oftheICTindustryemployeesworkintelecommunications,ofwhichtwo-thirdsareemployedbyS.A.Moldtelecom,and34%workinICTservices(softwaredevelopment,computermaintenance,etc.)

CAEM Code Sector 2005 2007 2011

Manufacturing 75 89 7730000 Manufacturingofofficeequipmentandcomputers 9 9 7

31300 Manufacturingofinsulatedwireandcable 3 5 4

32000 Manufacturingofradio,televisionandcommunicationequipmentanddevices 30 37 21

33200 Manufacturingofinstrumentsandappliancesformeasurement,verificationandcontrol 30 33 36

33300 Manufacturingofindustrialprocesscontrolequipment 3 5 9Wholesale 86 118 15951840 Wholesaleofcomputers,peripheralsandsoftware 77 103 13551850 Wholesaleofotherofficemachineryandequipment 5 7 1051860 Wholesaleofotherelectronicequipmentandcomponents 4 8 14Telecommunications 358 466 460ICT services 376 519 829TOTAL 895 1192 1525

CAEM Code Sector No. of employees

Manufacturing 372630000 Manufacturingofofficeequipmentandcomputers 67

31300 Manufacturingofinsulatedwireandcable 1859

32000 Manufacturingofradio,televisionandcommunicationequipmentanddevices 184

33200 Manufacturingofinstrumentsandappliancesformeasurement,verificationandcontrol 1522

33300 Manufacturingofindustrialprocesscontrolequipment 94Wholesale 171251840 Wholesaleofcomputers,peripheralsandsoftware 104351850 Wholesaleofotherofficemachineryandequipment 64251860 Wholesaleofotherelectronicequipmentandcomponents 27Telecommunications 9 157ICT services 7 664TOTAL 22 259

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Chart 14 Breakdown of employees by sub-sectors

B. Contribution to GDP

TherearetworeasonswhyitisnotpossibletoestablishwithhighprecisiontheICTindustrycontributiontoGDP.Asmentionedabove,according toCAEM, the ICT in-dustry isbrokendownbysub-sectors:manufacturing,services, wholesale and communications. Therefore,thecalculationofthegrossvalueaddedatatwodigit-levelbytheNationalBureauofStatisticsistoosynthetictoallowestablishingtheICTindustry’scontribution.

Thesecondreasonisthehighshareofthe“grey”mar-ket,whichconsistsprimarilyoftheimportofequipmentwhichwasnotbeensubjecttocustomsclearanceandtheprovisionofundeclaredservices.

TheonlyICTsub-sectorthevalueaddedofwhichiscalculatedbytheNationalBureauofStatisticsisITserviceprovision(sectionK72ofCAEM2005),namelyconsultingoncomputerequipment,softwaredevelopment,computermaintenance,etc.Followingagrowthduring2008-2010,thesoftwaresectorsloweddownin2011.Althoughthevalueaddedinthisareaincreasedby3%in2011comparedto2010,intermsofcurrentprices,thisgrowthwaslowerthantheGDPgrowth.

Chart 15 Share of IT services in GDP

Source: Calculations based on the data from the National Bureau of Statistics

Telecommunicationservicesare included in thestatisticalcalculations togetherwith thepostalservices, insectionI64,accordingtoCAEM2005.However,knowingthattelecommunications(groupI642ofCAEM2005)accountforabout89-95%oftheICTservices²,wecancalculatewithahighprobabilitythegrossvalueaddedgeneratedbythissub-sector.

²The share of telecommunications reached its minimal value of 89.1% in 2009 and its maximal value of 94.6% in 2008

0,70%

0,60%

0,50%

0,40%

0,80%

0,90%

2008 2009 2010 2011

1,00%

0,81%0,86%

0,91%

0,82%

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Chart 16 Share of telecommunications to GDP

Source: Calculations based on the data from the National Bureau of Statistics

In2011, theaddedvaluegeneratedbyenterprisesmanufacturing ITequipmentaccounted forabout0.34-0.37%oftheGDP,whichwashigherthaninthepreviousyears.However,itshouldbenotedthataround95%oftherespectivevaluewasgeneratedbytheenterprisesmanufacturingwireandisolatedcables(groupD313)andthemanufacturersofmeasuringdevicesandtools(groupD332).Theother5%orlessthan0.02%oftheGDPresultedfromtheactivityofenterprisesproducingcomputerandofficeequipment,radio,televisionandcommunicationequipmentanddevices,andequipmentforcontrolofindustrialprocesses.

UsuallytheICT’wholesalesub-sectoristhemostdifficulttoassess.Ananalysisofthesalesinthissector,admittingthat12-15%ofthemarevalueadded,revealsamodestcontributionofabout0.22-0.27%totheGDP,ofwhichthesaleofperipherals,computersandsoftwareaccountsfor96%.Thisindustrysegmentisthemostaffectedbytheblackmarketactions.However,evenadmittingthathalfofthecomputerimportsareunregis-tered,thecontributionofthissegmenttotheGDPwouldnotexceed0.5%.

Chart 17 Contribution of ICT to the GDP, by areas, 2011

Therefore, the overall contribution to GDP of thefour ICT sub-sectors – services, manufacturing,telecommunicationsandwholesale– isabout6.8%.Thisfigurerepresentstheregisteredvalueoftheindustryanddoesnotincludetheundeclaredactivitiesofbusinesses.Nevertheless,evenapossible “adjustment”of thevalueaddedfortheITsectorwouldnotchangeitsshareintheGDPbecause:

1)telecommunication,whichisafullytransparentsegment,accountsforthebiggestshare(5.4%);

2) in order to ensure data comparability, the increaseof the absolute value added for the industry should beaccompaniedbyanincreaseintheabsolutevalueaddedfor theothersectorsof thenationaleconomy.Thus, thesharecouldevendecrease.

Source: Calculations based on the data from the National Bureau of Statistics

2008 2009 2010 2011

5,50%

5,00%

4,50%

4,00%

6,00%

6,50%

5,89%

6,12%

5,79%

5,37%

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C. Foreign Trade of ICT

Asshowninthetablebelow,theexportofICTservicesincreasedconsiderablyinthepastyears.Thebiggestsharebelongedtothecommunicationservices,whichalsoincludespostalservices.

Itshouldbementionedthattheinformaticsandinformationservicesincreasedover13timesfrom2005to2011;theirshareintheoverallexportofservicesincreasedfrom0.9%to5.4%duetothefactthatboththeactualvolumeandthedeclaredvaluedofexportsgrew.

Table 3 Foreign trade of IT and communication services, mln USD

Source: National Bank of Moldova

Importof ICTservicesalso increased, thoughlessthanexports.Thus, from2005to2011, foreigntradeofcommunicationservicesdoubledandthatofinformaticsandinformationservicesincreasedalmostninetimes.

Chart 18 Foreign trade of ICT services

Thefiguresaboveshowtheofficialexports.However,inthisindustry,theshareofundeclaredactivitiesissig-nificant.Usuallyinsuchcasesoutsourcingisdonethroughspecializedwebsiteslikewww.odesk.com,andthepaymentismadebywiringdirectlytotheprovider.Accordingtocertainsources,in2009,theIToutsourcingmarketvolumeinMoldovawasabout54mlnUSD³,twicehigherthattheofficialfigures.

³http://ceeoa.org/assets/Uploads/CEEITOReview2010.final.pdf

2005 2006 2007 2008 2009 2010 2011CommunicationservicesExport 59.37 71.19 85.67 114.56 105.21 126.05 133.96Import 27.28 29.00 37.55 47.37 39.15 38.13 42.46

InformaticsandinformationservicesExport 3.64 7.97 14.27 26.27 29.75 33.42 47.84Import 4.40 5.89 15.65 15.99 23.98 23.63 22.99

22

Becauseoftheissuesrelatedtothebookkeepingofforeigntradeofservices,alargeamountofserviceex-portsandimportsavoidbookkeepingandreportingtothegovernmentinstitutions.Inordertoregisterinthebookstheexpensesorrevenuesfromtheinternationaltradeofservices,companiesshouldsubmitsupportingdocumentsregardingthetransactionsmade,namelytoconcludeaStatementofdeliveryandacceptance.Usuallythisishardtoachieveandsometimesevenimpossible(i.e.forelectronictrade).Thus,itiseasierforbusinessestoregisteracompanyabroadtodeliversoftware,whiletheincomesaretransferredintothecoun-trybysemi-legalways,avoidingreportingtotheStateTaxService.

ItisalsodifficulttoassessthevalueoftheimportsandexportsofICTequipment.TheStandardInternationalTradeClassification(SITC)doesnothaveaseparatesectionforthissubsector.Ontheotherhand,thedatafromtheCustomsDepartmentarenotaccurate,giventhehighshareofunregistered imports.However, ispossibletofollowthetrendbyanalyzingthetwochaptersthatincludetheimportofICTequipment:75-Officemachinesandautomaticdata-processingmachinesand76Telecommunicationsandsound-recordingandreproducingapparatusandequipment.

Forbothchapters, imports,even ifpartly registered,exceedconsiderablyexports:44 times forchapter75and12timesforchapter76.Importsincreasedduringtheperiodof2003-2011butnotsignificantly,followingtheoverallimporttrendforthecountry.Theshareoftheabovementionedchaptersinthetotalimportsvariedbetween3.07%and3.74%duringthesaidperiod.

Accordingtosomeestimates,thehardwaremarketaccountsforabout100mlnUSD,inclusiveofVAT.Basedonthisdataonecanestimatethelevelofimports,whichsatisfiesthismarketvirtuallyentirely.

AnanalysisofthevalueaddedbythemanufacturingICTcompaniesandtheamountofVATtransferredtothebudget,wecanestimatethatatleast90%oftheindustryproductsareexported.Thebiggestshareofexportsbelongstotheenterprisesmanufacturinginsulatedwireandcablesandthemanufacturersofinstrumentsandappliancesformeasurement,verificationandcontrol.

D. Contribution to the State Budget and the Social Insurance Budget

ICTaccountsforabout5.4%oftheVATcollectedin2011totheStateBudgetorover577mlnlei.Thetele-communicationssub-sectorisresponsibleforthebiggestshareofthisamount–over55%.ThoughthevalueaddedintelecommunicationssuggestsabiggershareoftheVATpaid(about79%),theactualshareislower,giventhefactthatthevalueofexportsintelecommunicationsexceededbyfarthevalueofimports,theformerbeingVATexempted.

Trade,throughhavingamodestshareintheindustry’svalueadded,hasasignificantshareintheVATtrans-ferstothebudget,sincemostoftheproductssoldcomefromimports.

ManufacturingcompanieshavenotmadesignificantVATpayments,giventhehighshareofexports inthissubsector.

23

Chart 19 Share of ICT in the total VAT paid

Source: Calculations based on the data from the National Bureau of Statistics

TheshareofICTinthetotalVATpaidreducedsignificantlycomparedto2007–from9.7%to5.4%.Thiswasduetoboththereducedabsolutetransfersandtheincreasedtransfersmadebyotherindustries.

Chart 20 Evolvement of the level of VAT paid by the ICT sector

ThesituationoftheamountofsocialinsurancecontributionspaidbytheICTsectorissimilar:about5%ofthetotalforthecountry.Theshareofmanufacturingishighduetothebigshareofsalaryexpensesinthevalueaddedbythissub-sector.

In2011,theoverallamountofcontributionspaidbytheICTsectorwas330mlnMDL.

24

Chart 21 Social insurance contributions paid by the ICT sector

Source: Calculations based on the data from the National Bureau of Statistics

Thecontributionstothehealthinsurancebudgetin2011amountedto88mlnlei.ThesharethereofinthetotalhealthinsurancecontributionspaidinthecountryandthebreakdownbyICTsub-sectorsaresimilartotheonesexistingforthesocialinsurance.

Boththeamountofsocialinsuranceandhealthinsurancecontributionsincreasedbyapproximately74%com-paredto2007.

Chart 22 Evolvement of social insurance contributions and health insurance premiums paid by the ICT industry

Inadditiontotheabovementioned,theICTindustrypaidin2011about597mlnMDL.AbigpartofthesearepaymentstotheRepublicanfundandthelocalfundsforpopulationsupport.

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E. Impact on the Other Sectors of the National Economy

Until2009,theconsumptionofinformationtechnologiesinthenationaleconomysectorsincreasedcontinu-ously,particularlyduetothegrowthofconsumptionintransportsandcommunications.However,in2010ITconsumptionstartedtodeclinemainlyduethereductionofITconsumptionbyhalfintransportsandcommuni-cationsfrom2009to2011.Fortherestofsub-sectors,thelevelofconsumptionremainedvirtuallythesame.

Thegrowthofinvestmentsintelecommunicationsduring2008-2009andthedecreasethereofduring2010-2011maybeexplainedbythefactthatmobileoperatorsmadeinvestmentsinthe3Ginfrastructure.

Chart 23 Expenses by the national economy sectors for information technologies

Source: National Bureau of Statistics

1. Impact on Enterprises (at micro level)

TheapplicationsdevelopedbytheICTsectorhaveanimportantimpactonenterpriseproductivity.

Theeconomicandfinancialanalysesorthetechnicalandeconomicfeasibilitystudiesenableaccuratede-cision-making,which leadstomaximizationofsalesandminimizationofexpenses. Inarapidlydevelopingworld,notonlytheaccuracyofactionsisimportant,butalsothetimeframeinwhichsuchactionsaretaken.Thedevelopmentofmanagementinformationsystemsenablesdecision-makinginatimelymanner.Informa-tionsystemsallowsignalingwhenadecisionisnotmadeontimeorisincorrect.

ThecostsforpromotionthroughInternet(e-mail,websites,socialnetworks,twitter,etc.)areconsiderablylowerthanthoseforpromotionthroughhardcopies.Inaddition,thescopeofadvertisingismuchwider.

Informationtechnologiesenableautomatingnotonlydecision-making,butalsotheproductionprocess.Highproductivityallowsreducingdirectunitarycosts,andthusincreasingenterprisecompetitiveness.

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Informationtechnologieshavegeneratedastrongtrendofenterpriseactivitiesglobalization.Companiesarepermanentlylookingforinformationaboutvariousprovidersintheirsearchforcheaperandmorequalitativerawmaterials,betterlaborforce,cheaperfinancialsources,morepromisingmarkets,aswellasforinformationaboutthebestpracticesinthefield.Experience,asacriticalfactorforacompany’ssuccess,graduallyyieldsuptothecapacityofrapidlyfindingthenecessaryinformationandapplyingitadequately.

2. Impact on the Education System

TheuseofITmakesinformationmoreattractive,helpstheeducationprocessbecomemoreappealingandturnsitfromanobligationtoapleasure.Thus,studentsarethosewhorequestinformation,becomingactiveconsumersintheprocessofeducation.

Informationtechnologiesallowfindingthenecessaryinformationrapidly.Asaresult,theefficiencyoftheentireeducationprocessincreases.

Inthemodernworld,havingthecapacitytomemorizeinformationisnotasimportantashavingtheabilitytoeasilyfindinformation.Theuseofinformationtechnologiesincreasesconsiderablytheabilityofstudentstofindusefulinformationwhenneeded.

3. Impact on the Public Administration

Not less important is theuseof information technologies inpublicadministration.Thiseliminates theneedtosubmittovariousinstitutionspilesofdocumentsgeneratedbyotherentitiesorwhichhavealreadybeensubmittedtoothergovernmentbodies.Italsoallowsforamorerapidanalysisofdocuments(thereinnoneedforseveralagenciestoexaminethesamedocument)andsavesthetimeofbusinesses,whichwillnothavetogotodifferentgovernmentagenciestoaskforapprovalsandcoordination.Increasingtheefficiencyofcivilservantswillallowreducingthenumberthereofandincreasingthesalariesfortheremainingstaff.

Theuseofnewtechnologiesincreasessignificantlythecapacityofcitizensandofvariousentitiestogetin-volvedindecision-makingbythegovernmentbodies.

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A. Global Trends

According toGartner Inc., the ITmarket will grow by around 3.5% annually in the following three years,reaching4.4trillionUSDin2015.AlthoughcurrentlytheyhaveaninsignificantshareintheoverallITmarket,“cloud”serviceswillincreaseby20%,reachingin2015asalesvalueofabout180billionUSD,accordingtothereportpresentedbyGartnerInc.GiventhefactthatthereislittleknowledgeaboutMoldovancompaniesontheinternationalmarket,thesalesincloudcomputingcreatefavorableconditionsforexport.Themarketingef-fortrequiredforcloudsalesislowerthantheoneneededforindividualproductsales.Thesoftwaredevelopedmaybeplacedincloudasservices.

Anotherrelativelyopensegmentthatrequiressmallinvestmentsarethemobileapplications.AnIDCreportestimatedthismarketat35billionUSDin2014.Thishoweverrequiresahighmarketingeffort.Theriskofcreatingsoftwarethatisnotsuccessfulonthemarketisrelativelyhigh.AccordingtotheestimationsoftheCentralandEasternEuropeanOutsourcingAssociation(CEEOA),therehasbeenatrendofoutsourcingmar-ketgrowth.Thismarketincludessmallprojectsforsmallandmediumcompanies,representingapromisingopportunityforMoldova.

Theshareofsoftwaredesignedforthebanking,financialandinsurancesectorsiscontinuouslygrowing.Cos-tumersappreciatehighlycompaniesthathaveextensiveknowledgeandexperienceinspecificareas.UsuallysoftwarecompaniesinMoldovaareactivelyinvolvedindevelopingsoftwareforthefinancial-bankingsector,whichisanimportantcompetitiveadvantage.ComparedtotheAsiancountries,MoldovaisclosertoEuropebothgeographicallyandculturally.LaborforceinMoldovaisconsideredofhigh-qualitywhilerelativelycheap.ManyforeigncompaniesconsidermovingtheirofficesclosetotheEU.SoftwarecompaniesintheEUandNorthAmericaseeCentralandEasternEuropeasamoreconvenientoptionthanAsiaduetoamuchmorecooperativeandresult-orientedlaborforce.AnotheradvantagefortheEuropeancompaniesisthesmalltimezonedifference,whichmakescommunicationeasier.

Followinganincreaseby43%ofthesoftwareexportsin2011,in2012thegrowthpaceisexpectedtoslowdowntothelevelof2009-2010–about12-13%peryear.

B. Changes on the local market

InNovember2012,ANRCETIgrantedtwolicensesforthe4thgenerationofmobiletelephonytoMoldcellandrespectivelyOrangecompanies,whichprovidemobiletelephonyservicesontheMoldovanmarketandwhichwillmodernizetheirexistingnetworksbasedontheLTEtechnology.Accordingtothetermsofthelicense,byDecember31,2015,thelicenseholderswillhavetocoveranareainhabitedbyatleast25%ofthepopulation.Therefore,inthefollowingtwo-threeyears,agrowthofinvestmentsintelecommunicationsisplanned.

Thenewgenerationoftechnologieswillenhancesignificantlythequalityofmobileinternetaccess,willfacili-tatetheinteractivityandthecapacityofdatatransfer,theorganizationofvideoconferencesonmobilephonesanduseothermodernmobileapplications.Recently,ANRCETIannounceditsintenttomakeavailabletothetelecommunicationproviderstheradiofrequencysub-band3750-3800MHzinordersecurepublicnetworksandservicesforelectroniccommunicationsviaterrestrialmobilenetworksforbroadbandradioaccess.Ac-cordingtotheproposalofANRCETI,companiesthatcurrentlyprovidemobilecommunicationserviceswillbeboundtosecurecoveragebyBWAservicesonatleast30%oftheterritoryofMoldova,within18monthsaftertheygettheBWAlicense.TheothercompanieswillbeboundtosecurecoveragebyBWAservicesforatleast30%oftheterritoryofMoldovawithin36monthsaftertheygettheBWAlicense.ANRCETIconsidersthattheissuanceofsuchlicensewillcontributetoattractinginvestmentsinthedevelopmentofnewInternetaccesstechnologies,which,intheirturnwillstimulatecompetitiononthemarketofpublicbroadbandInternetservices,particularlythoseprovidedintheruralareas.

V. Potential for Growth

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A. Human Capital - a Critical Factor in the ICT Sector Development

TheICTindustry,particularlytheserviceprovisionsub-sector(softwaredevelopment,computerservice,etc.)involvesalotofhumancapital.AkeyfactorforthesectordevelopmentistheskillsandknowledgeoftheITengineersandprofessionals.

Traditionally,theenrolmentrateinthetertiarylevelofeducationinMoldovaisquitehigh.Inthepastfiveyears,following the establishment of limits for student intake in the tertiary education, the enrolment rates haveloweredcomparedtotheCentralEuropeandCIScountries.

Chart 24 Rate of enrolment in tertiary education

Source: INSEAD, The Global Information Technology Report

Similarly tootherspecialties, theenrolmentof studentsat ICT facultiesdecreased,while theshareof thelatterinthetotalenrolmentremainedvirtuallyconstant–11%.In2007,2623placeswereprovided,whilein2012thenumberofplacesdecreasedto2367.However,thenumberofplacesfundedfromthestatebudgetincreasedfrom618to762.

Thesefiguresincludethefollowingspecialties:electronics,optoelectronicsystems,tele-radio-communications,microelectronics and nanotechnologies, computers, information technologies, automatics and informatics,informationsecurity, informatics,cyberneticsandeconomicinformatics,appliedinformatics,andbiomedicalsystemsengineering.

However,eventheplacesavailablearenottotallyfilled.Thus,in2012,outofthe2367placesprovided,only1930havebeenfilled.

VI. Competitiveness Factors

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VI. Competitiveness Factors Chart 25 Number of places approved for the ICT specialties

Source: Government Decisions on approval of the Education Enrolment Plan

Apparently, the number of graduates is sufficient to ensure the demand on the ITmarket. However, theteachingmethodsandthecurriculumareobsolete.Onlyasmallnumberofgraduatesareabletoperformthejob-relatedtasks,mostofthestudentsrequiringadditionaltrainingbeforeemployment.ThestrictrequirementsimposedbytheMinistryofEducation,thepoorfinancingandthelowflexibilityofteachersmaintainthisstatusquo,increasingthegapbetweenthedemandbycompaniesandthesupplybyeducationalinstitutions.ThecooperationbetweentheprivateICTsectorandtheteachingstaffisverypoor.

Chart 26 Evolvement of the share of places provided for ICT specialties

Mostsoftwarecompaniesorganizetrainingprogramsfortheirnewstaff,thusreducingthedividebetweentheexistingandthenewcomingemployee,intermsofknowledge.

Thereareveryfewspecializedtrainingcenters,butgraduatesareunawareevenofthese.

Alotoftheprogrammerschoosetoprovidesubcontractservicestoforeigncompanies.Unfortunately,mostoftenthoseprogrammersarenotfreshgraduates,butformeremployeesofsoftwarecompanies.Thisaffectsevenmoretheavailabilityofskilledhumancapitalforthelocalcompanies.

Accordingtosomesources,thenumberofMoldovanprofessionalsprovidingoutsourcedITservicesisabout1600.TheaveragerateperhourforprogrammersinMoldovaislowerthantheoneforthesameprofessionalsintheCentralEuropecountries.ThemostreasonableexplanationforthatisthelowawarenessaboutMoldova.

http://ceeoa.org/assets/Uploads/CEEITOReview2010.final.pdf

4

4

30

Chart 27 Average rate per hour for Moldovan programmers

Source: CEEOA, Central and Eastern Europe IT Outsourcing Review, 2010

B. Business Environment

As shown in the study presented by INSEAD, in the recent years Moldova’s rank in terms of “businessenvironment”fellfromthe94thtothe106thpositionfrom2009to2011.

Table 4 Moldova’s position by business environment components, as part of the Network Readiness Index

Source: INSEAD, The Global Information Technology Report, 2012

Thesituationintermsoftheeffectivenessofthelaw-makingbody(theParliament),thelawsrelatingtoICT,thejudicialindependenceandtheintellectualpropertyprotectionhasworsened.

1. Government Regulation

The continuous movement of the ICT sector to the grey economy, as well as the awareness about theopportunities thatmightarise if thissector issupportedhavepromptedtheGovernment tostart reforms in2005toreducesignificantlythefiscalburdenforsoftwaredevelopers.Theresultsdidnottakelongtoappear:investmentsinthesectorhaveincreasedandmostsoftwarecompanieshavestoppedhidingthesalariestheypaytoprogrammers.Asaresult,from2005to2011,theregisteredexportsofsoftwareservicesincreased13times.

Mostof the interviewedcompanieshavementioned thereductionof thefiscalburden.On theotherhand,the fiscal regulations are not stable, which creates problems for the tax administration and reduces theabovementionedadvantage.

INSEAD,TheGlobalInformationTechnologyReport,2012

5

5

Component Position in the 2009 Report

Position in the 2012 Report

Effectivenessoflaw-makingbodies 76 99LawsrelatingtoICT 91 101Judicialindependence 111 132Intellectualpropertyprotection 70 110No.ofprocedurestoenforceacontract 27 18No.ofdaystoenforceacontract 25 20

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Telecommunicationcompaniespay2.5%fortheirrevenuesfrommobiletelephonyservicestotheMinistryofLabor,asthesearestillconsideredluxuryservices.

Ingeneral,thelegislationonelectroniccommunicationsisalignedtotheEUregulationframeworkof2003.Currently, theEU2009regulation framework is inprocessofadoption.Themaindocumentregulating thisareaistheLawonElectronicCommunicationsNo.241-XVIof15/11/2007.Basedonthislaw,ANRCETIwasestablishedasanindependentregulatingauthorityonthemarketofelectroniccommunicationandinformationtechnologyservices.

According to therespective law, theprovisionofelectronicnetworksandservicesmaybe initiatedwithoutanypriorapproval,justuponthenotificationofANRCETI.Withinsevendays,ANRCETIinformsthesupplierwhetherornotitmeetstherequirements.

ByLawNo.241,theUniversalServicewasdefined,aswellastherequirementsandthewayinwhichsuchserviceissecured.Theservicesincludedintheminimalsetoftheuniversalservicearethefollowing:

• accesstopublicelectroniccommunicationnetworksatafixedlocation;• informationonthesubscribersandavailabilityofsubscriberregisters;• accesstopaidpublictelephones,includingfreeaccesstoemergencyservices.

The Decision of theANRCETIAdministration Council No. 12 of 31/01/2009 sets forth the principles andproceduresregulatinginterconnection,includingaccesstothelocalloopandcolocation.FromMay2013,thenumberportabilitywillbecomearequirement.

CurrentlytheMoldovanlawprovidesfortwotypesoflicenses:

1. LicensegrantedbytheLicensingChamberforimport,export,design,manufacturingandsaleofcryp-tographicandtechnicalmeansforinformationsecurity,ofspecialtechnicalmeansforsecretobtainingofinformation,provisionofservicesinthefieldofcryptographicandtechnicalsecurityofinformation.

2. LicensegrantedbyANRCETIforservicesofdevelopment,implementationandsecuringoperationofnationallyimportantautomatedinformationsystems,includingsoftware.

Followingthereformsundertakeninthepasttwoyears,theproceduresattheLicensingChamberhavebeenorganizedaccordingtotheone-stop-shopprinciple.AsreportedbymostenterprisesholdingalicenseinICT,theproceduresexistingatthisagencyarefluidizedanddonotcreateanyproblems.

However, enterprises face difficulties when obtaining the license from ANRCETI. On the one hand, thenationallyimportantactivitiesarenotwellestablished,andontheotherhand,theproceduresareburdensome,a lot of additional documents certifying the capacity of the enterprise to perform the licensed activity arerequested.TheDecisionof theANRCETIAdministrationCouncilNo. 33of 04.11.2010 sets forth only therequirementswhichthelicenseholdershouldmeet,withoutindicatingspecificallythelistofdocumentstobesubmittedinordertogetthelicense,andtheactivitiesconsideredasnationallyimportant.Theambiguityindefiningtherespectiveactivitieshasledtothefactthatlicensesarerequiredfortheparticipationinanytenderorganizedbypublicinstitutions.Accordingtotheinterviewees,contrarytotheprovisionsofthelegislationinforce,theproceduresusedbyANRCETIdonotfollowtheone-stop-shopprinciple.

Theservice-provisionorretail/wholesaletradeactivitiesmaybeperformedonlybyenterprisesholdingspecificlicenses.Contrarytothelegislationinforce,theprocedureforobtainingpermitsfromlocalpublicauthoritiesisnotorganizedaccordingtotheone-stop-shopprinciple.Beforesubmittingtheirdocumentstothemayor’soffice,enterpriseshavetoobtainsignaturesandapprovalsfromdifferentbodies, includingfromthedistrictmayor’soffice.Anotherproblemfacedbyenterprisessellinghardwareistherequirementtoholdbothatradeauthorizationandamaintenanceauthorization.Thisisnonsensebecausebothactivitiesarecarriedoutwithinthesamespace,whiletheenterprisehastoobtainapprovalsfromtheNationalPublicHealthCentre,theCivilProtectionandEmergencySituationsService,aswellasfromothergovernmentbodiestwotimes.

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2. Infrastructure

Ninetypercent (90%)of the internetand transport servicesareensuredby threeoperators:Moldtelecom,StarnetandOrange.Thehighcompetitionhasdeterminedaconsiderablereductionofpricesinrecentyears.ICTcompaniesaregenerallysatisfiedbothbytheavailabilityofnetworksandtheratesperceived.

Therehavebeennocomplaintsaboutthepowersupply;however,onlyinveryfewcasesfacilitieshavebackuppowersources.Formanyoftheinvestorsthisconditionisunacceptable.

The high supply of spaces for rent determines low rental rates. It is relatively easy, particularly for smallcompanies,tofindspacesforrentequippedwiththenecessaryinfrastructure.However,somecompaniesfinditusefultocreateanITparkthatwouldsecureaccesstohigh-speedInternetandotherservicesusefulfortheICTcompanies.

3. Access to Finance

Theexistingfundingsourcesarebank loansandowner’s investments.Generally, it isrelativelydifficult forcompaniestoaccessloansbecauseofthelackofcollateraltosecurerepaymentoftheloan.Thisisevenmorecomplicatedforsoftwaredevelopingcompanies,whichinvestmoneyintheformofwagesanddonotowncurrentorfixedassetstobepledgedascollateral.Evenforthehardwarecompanies,thepurchasedgoodsmaybepledgedascollateralatjust40%oftheirmarketvalue.

TherearenogovernmentprogramsorfundstosupportfinancingoftheICTbusinessbythebanks.

4. International Bodies

OfalldonorsoperatinginMoldova,onlytheWorldBank;USAID,throughitsCEEDIIProject;andtheEBRD-haveshowninterestinsupportingtheICTsector.

Theobjectiveof theCompetitivenessEnhancementandEnterpriseDevelopment II (CEEDII)Project is tosupportMoldova’s efforts of creating a strong, diversified and export-oriented economy by increasing thecompetitivenessandefficiencyofthekeyindustries.CEEDIItargetssixindustries:apparelandtextile,fashionaccessories,homefurnishings,informationtechnology,wineandtourism.SomeoftheprojectactivitiesaimatimprovingthedialoguebetweentheabovementionedprivatesectorsandtheGovernmentofMoldovaandsupportingtheassociationsandunionscreatedwithintherespectiveindustries.Thefollowingactionshavebeenestablishedas important for increasingcompetitiveness: improvebusinessprocesses,useadvancedtechnologies,improveproductandservicequality,develophumanresourcesandpromoteproducts.

ThegoaloftheWorldBank(WB)istoreducepoverty.OneofWorldBank’sprojectsfocusedone-governance,havingtwocomponents:

• e-leadershipcapacityandenablingenvironment,thatprovidessupporttotheE-governmentCentre,whichwasrecentlyestablished,and

• e-servicesdevelopment,thatprovidessupportfor1)establishingandimplementingtheM-Cloudand2)developingaselectednumberofe-governmentservicesandsharedapplicationstobedeliveredthroughmultiplechannels,includinggovernmentportalsandmobilephones.

Itisexpectedthatmostapplicationsusedfortheabove-listedpurposeswouldbedevelopedbylocalcompanies.

Intherecentyears,theEuropeanBankforReconstructionandDevelopmenthasbecomethebiggestinvestorintheCentralandEasternEurope,supportingeconomiesbybearingtheinvestmentriskwhenitistoohigh,inordertomakecertainsectorsattractive.

33

EBRDhasactivelysupportedANRCETI.TheBASprogram fundedpartlybyEBRDsupportedprojects forimplementationofmanagementinformationsystems(about46%ofthetotalnumberofprojects).

5. Market Changes

The globalization of the programming services’ market has considerably changed companies’operation. The developing markets such as Apple App Store, Android market, Amazon Marketplace,oDesk.com, freelancer.com and others provide new export opportunities for local companies. “Cloud”sale has become a common practice in Moldova, used both for selling and purchasing products.

6. Public Procurement

ICTcompaniesconsiderthatpublicprocurementslacktransparency.MostofthemarketplayersbelievethattheTechnicalSpecificationsarepreparedinsuchwayastofavoraspecificbidder.AnotherissueisthefactthatthePublicProcurementsAgencytendstoselectthelowestpricedbideventothedetrimentofquality.InthiswaytheAgencymakessureitwouldnothaveanytroubleslatteron,aftertheauditbytheCourtofAccounts.

There is no database with the ICT projects implemented by the government institutions. This engenderssituationswhenTechnicalSpecificationsare implemented form thescratch,withoutbenefiting fromsimilardevelopmentsperformedearlierintherespectivearea.

Nopost-saleauditsareperformed;thereforeitisnotensuredthattherequirementsaremet.Itisoftendifficultevenforthebeneficiariestoestablishwhethertheprovidedprogrammingservicemeetsthetechnicalrequire-ments.

7. Intellectual property protection

As shown in the study presented by INSEAD, Moldova’s rank fell from the 70th to the 110th position intermsof “Intellectualpropertyprotection”.Thesurveyfindings revealasoftwarepiracy rateofabout90%.ThisvirtuallydoesnotdifferfromthepiracyratesintheCIScountries,exceptRussia.ThechartbelowshowsahugedifferencebetweenthepiracyratesinMoldovaandintheCentralEuropeancountries.

Chart 28 Software piracy rate in the CIS and Central European countries

INSEAD,TheGlobalInformationTechnologyReport,2012

6

6

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TheNationalAssociation of Private ICTCompanies has already proposed a draft Law on amendment ofcertainlegalacts,particularlytheLawNo.139of02.07.2010onCopyrightandRelatedRights.ThedrafthasbeendevelopedwiththeparticipationofthetwinningprojectexpertsoftheNationalCopyrightsAssociationandotherprivatesectorrepresentatives.

Theinitiativeisnowunderdiscussions;itsmainprovisionsareasfollows:

• excludetheminimalratesestablishedbytheGovernmentforthequantumofremuneration• changetheprocedurefordeterminingthequantumofremunerationforthereproductionofworkson

personalinterest• excludethemandatoryconditionof indicatingthedistributor’s identitywhenreleasingequipmenton

themarket• exclude theneed topresentanevidence regarding thepaymentofcompensatory remunerationby

importers• excludetheprovisionregarding“theuseofsoftwarebypublicauthoritiesbasedonunique licenses

negotiatedbytheGovernmentwiththeholdersofsoftwareatareasonableprice,withoutprejudicetotheinterestsoftheintellectualrightsholder”

• changethewayofprotectionofcopyrightsandrelatedrightsthroughcomputernetworks,namely,holdthewebpageownerandthehostingserviceprovideraccountableandeliminatetheaccountabilityofcompanieswhichonlyprovidedatatransferservices(Article66).

C. Entrepreneurial Skills and Innovations

Oneoftheissueshinderingtheintegrationofcompaniesintheglobalflowisthepoorentrepreneurialskills.Onlyasmallnumberofenterprisesare ledbypersonswith international relationsexperience.Mostof thesmall companiesdonothavesufficiententrepreneurial skills; this leads to investments insoftware for theinternationalmarket,whichdonotgeneratesufficientsalesforareturnoninvestments.

Nocasesareknownwhenlocalcompaniesconductresearchanddevelopmentactivities.Usuallycompaniesusesolutionsexistingontheinternationalmarket,byintegratingthemintheirownproducts.

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No Recommendations Issue Institution Term Outcome

Strategic

1.

CreatepremisesforICTsectordevelopmentaccordingtothefollowingindicators:

• Numberofindustryprofessionals

• Export• Investment• Programsaimed

atkeepingprofessionalsinthecountry.

Sofar,theICTsectorhasdevelopedbyitself,withasupportinsomenarrowareas,withouthavingaclearnationalstrategicvisiontoencourageinformationtechnologiesandcommunicationsinitscontinuousdevelopmentinMoldovaandwithoutimplementingprogramsthatwouldcontributetoenhancingthequalityandnumberofindustryprofessionals,ortoincreasingindustry’ssharedomesticallyandintermsofexports.

MinistryofInformationTechnologyandCommunications,MinistryofEconomy

Medium

•IncreasethenumberofITspecialiststwotimesin5years.

•Increaseexportsupto200mlnUSDin5years.

•Createaninvestmentfundofminimum10millionin5years.

•Increasetheindustryvolume4timesin5years.

Education

2.

CreateaworkinggroupofrepresentativesfromeducationalinstitutionsandtheICTsectorthatwillexamineandapprovethecurriculafortheICTspecialties.

Theindustryenterprisesaredissatisfiedwiththeknowledge,skillsandcapacitiesoftheMoldovanICTgraduates.Ontheonehand,graduates’knowledgeispoorandontheotherhandthecurriculuminthehighereducationalinstitutionsisoutdated.

MinistryofEducation Medium

•Curriculabroughtinlinewiththetechnologiesonthemarket.

•Lowercostsfortrainingofnewemployees.

3.

Includeinthecurriculaforprogrammerssubjects,which,thoughnotrelatedtothetechnicalfield,arerequiredforbusinessdevelopment,suchasprojectmanagement,marketing,andcommunication.

ICTgraduateshavepoorknowledgeinbusinessdevelopmentorprojectmanagement.ICTisaveryspecificindustryandrequiresdeepknowledge;thereforegraduatesofotherfaculties(i.e.economy)areunlikelytostartbusinessinthisarea.Thesmallnumberofprofessionalshavingbothgoodhardandsoftskillshindersentrepreneurshipdevelopmentintheindustry.

MinistryofEducation Medium

•Increasednumberofenterprisesintheindustry

•Increasedefficiencyofindustryenterprises.

4.Createmechanismstostimulateinternshiptrainingofstudents.

Managersarenotinterestedtotrainstudentswhodointernshipattheircompany,mainlybecausetheyhavenoguaranteesthatthosestudentswouldgetemployedwiththeircompanylater.Evenifcompaniesacceptstudentsforinternship,on-jobtrainingisratheraformality.

MinistryofEducation,MinistryofFinance

Medium

•Graduateswillbecomemorefamiliarwiththeactivitieswithinenterprises

•Graduateswillhavebetterknowledge.

VII. Recommendations for Short, Medium and Long Term Policies

36

5.

Createfiscalandnon-fiscalmechanismstostimulateICTenterpriseswhichco-fundstudenteducationatICTspecialties.

Thechangeofcurriculawillhaveaminoreffectaslongasteachers’salariesarelow;therefore,theteachingmethodwillremainunchanged.Mostteachersarenotstimulatedtoapplyproperteachingmethodsorevenlackthenecessaryskills.

Enterpriseshavenosayintheselectionofstudentsforenrolment,andeducationinstitutionsarenotparticularlyinterestedinselectingthosewhoreallyhavetheskillsandinterestforIT.

MinistryofEducation Medium

Increasedrateofgraduates’“acceptability”.

6.

CreatepremisestoencourageprivatesectorICTprofessionalstoteachITsubjectsatuniversities

Currently,themotivationofprivatesectorprofessionalstoparticipateintheeducationoffuturespecialistsisincomparabletotheirmotivationfortheworktheyperformattheircompanies.

However,inordertoensureaccesstothemostrecenttrends,itisnecessarytofindawaytoencourageprofessionalstoparticipateintheeducationoffuturespecialists.

MinistryofEducation,MinistryofInformationTechnologyandCommunications

Medium

Numberofprofessionalsfromtheprivatesectorinvolvedinteachingatuniversity.

Taxes and Fees

7.

RedirecttotheICTSupportFundthe2.5%taxcurrentlypaidtotheRepublicanandlocalfundsforsocialsupportofpopulationbycompaniesprovidingmobiletelephonyservices.

LawNo.827wasapprovedatthebeginningof2000,whenmobilephoneswerealuxury,beingusedbylessthan3%ofMoldova’spopulation.Therefore,thecreationofaFundformaterialsupporttothesociallyvulnerablepopulation,towhichthemobiletelephonyuserscontributedaswellwasjustifiedbothfromsocialandeconomicviewpoint.

In2012,whenthemobiletelephonypenetrationrateexceeds100%andmostofthevulnerablepopulationusesmobilephones,thistaxisnotrelevantanymore.Currentlymobilephonesarenotaluxurybutratheratoolwhichhelpssavingtimeindecision-makingoraccessinginformation.

MinistryofFinance Medium

Themobiletelephonyserviceswillbeevenmoreaffordable.TheFundforsocialsupportofpopulationwillbefilledfromthesaleofluxurygoodsthatdonotcontributedirectlytoeconomicdevelopment.

37

8.

ProvideincentivestotheBPOcompanies,similartothoseexistingforthesoftwarecompanies.Namely,calculatethedeductionsrelatedtostaffremunerationbasedonantheaveragemonthlysalary.

ItiswellknownthattheBPOsubsectorismostexposedtothetemptationof“hiding”apartorevenitsentireactivity.Thereasonsarethefollowing:

•CostumersofthissectorareforeigncompanieswhichhavenorelationtothefiscalsystemofMoldova.

•VirtuallytheentireamountofsalesrepresentsthevalueaddedbytheBPOcompanies;therefore,BPO’seconomicrelationswithotherlocalcompaniesareminimal.

•Insignificantassetsareneededfortheactivities;thereforeitisdifficulttoidentifythem.Suchcompaniesoftenrentapartmentsfromindividualsandaredifficulttotrack.

•Employeesofsuchcompaniesareyoungpeople,upto40years,whicharenotmuchconcernedabouttheirfutureretirementpensions.

MinistryofFinance Long

•Increasedrevenuestothebudget,duetocompanieswhichwillgiveupservicesprovidedbyoffshorecompaniesandwilllegalizetheiractivity

•Increasedexports,giventhefactthatcompaniesoperatingoffshoreandhavingaspace“hidden”frompeopleareunlikelytobesubcontracted,thuslosingalotofcontracts.

9.

EliminateVATonsoftwaredesignedtoincreaseenterprises’efficiency,improvetheeducationprocessortheresearchanddevelopmentactivities.

Thehighcostofsoftwareisoneofthereasonswhytheseareoftennotused,althoughtheycouldincreasecompanies’efficiencyandbringreturnoninvestments.Thepiracyrateis90%.

MinistryofFinance,MinistryofInformationTechnologyandCommunications

Long

•Increasedenterpriseefficiency,improvedprocessofeducationandofresearch-developmentactivities

•Reducedpiracyrate.

10.MaintainafiscalenvironmentfavorableforITcompanies.

MoldovawouldbecomeuncompetitiveinrelationtootherregionalcountriesiffiscalincentivesenforcedfortheITcompaniesarecancelled.Tomaintain,stimulateandgrowthesectoritisnecessarytodevelopandmaintainanattractivefiscalpackageforICT.

MinistryofFinance,MinistryofEconomyMinistryofInformationTechnologyandCommunications

LongAttractivefiscalpackageforICTcompanies.

38

Regulatory framework

11.

NotifytheMunicipalCouncilofChisinauabouttheinconsistencybetweentheDecisionoftheMunicipalCouncilNo.13/4of27.12.2007andthelegislationinforce,particularlytheLawNo.231of23/09/2010.Inaddition,MITCwillrequirethatthenewregulationstipulatesexpresslythatonlyoneauthorizationmayberequestedbothfortradeandforservices.

a.Themayor’sofficeobligescompaniestoattachtotheapplicationforauthorizationapprovalsfromthedistrictmayor’soffice,theNationalPublicHealthCentre,theCivilProtectionandEmergencySituationsService,etc.

b.Mostcompaniessellinghardwareprovidemaintenanceservicesduringthewarrantyandpost-warrantyperiodonthesameaddress.Itispointlessthatanenterpriseappliestwiceforthesameauthorization/approvalfromtheresponsiblebodies.

MinistryofInformationTechnologyandCommunications

Short

Fluidizationandtransparencyoftheauthorizationobtainingprocess,whichwillleadto:

•savingmanagers’timeinfavorofotheractivitiesaimedatcompanydevelopment

•reduceunofficialpaymentsbycompaniestosimplifytheproceduresforobtainingauthorizations.

12.

Makeitpossibleforthesoftwareexporttoberegisteredbasedonsupplier’sdeclaration,withoutrequestingStatementsofdeliveryandacceptance.

TheTaxStateServicerequirescompaniestohaveStatementsofdeliveryandacceptanceforservicesprovided,includingabroad.ItisunreasonableandusuallynotevenpossiblefortheproviderstoaskcostumerstosignStatementsofdeliveryandacceptanceinthecaseofsoftwaresale.Consequently,manyenterprisessetupcompaniesabroad,whichsellsoftwareandreceivethemoney,thusavoidingthebureaucraticprocedures.

MinistryofFinance,MinistryofInformationTechnologyandCommunications

Medium

Apartoftheserviceexportconductedthroughe-commercewouldbecome“official”iftheywererecordedinthecompany’sbookkeeping,andwouldpayalltheduetaxes.

13.

Eliminatelicensesforservicesofdevelopment,implementationandsecuringoperationofnationallyimportantautomatedinformationsystems,includingsoftware.

ANRCETIhastheauthoritytoissuelicensesfordevelopmentofnationallyimportantinformationsystems.However,thereisnoregulationdefiningthetermnationally important information system.Therefore,thelicenseisrequiredforvirtuallyanytenderforprocurementofsoftware,regardlessofwhetherthelattermay“damagepeople’srightsandhealth,theenvironmentorthestatesecurity”.

Initiative–MinistryofInformationTechnologyandCommunicationsMinistry,MinistryofEconomy

Short

ReducedbureaucracyandtimespentbyICTcompaniestoparticipateintendersorganizedbypublicadministrationauthorities.CompanieswhichwillprovidetherespectiveserviceswillnotifyANRCETIinwriting.

One of the criteria to determine the types of activities subject to licensing, Art. 4, Law No. 451 of July 30, 20017

7

39

14.

Allowforthecustomsclearanceofelectronicproductsimportedbyairlineattheairport’sCustomsOffice.

Theairportcustomsofficeisnotauthorizedtoclearelectroniccomponents.Whentheyimportcomponentsbyairline,companieshavetorentavehiclewithtrailerthatcanbesealed,topreparethetransitdocumentsontheterritoryofMoldovaandtopayforboththeAirportterminalandtheCricovaterminal.

CustomsDepartment Short

Theneedforatransitdeclarationwillbeeliminatedandthetimeandresourcesofimportersofelectronicproductswillbesaved.

15.RevisetheNationalOccupationsRegister(CORM).

IThasdevelopedandadvancedrapidlyinthepastdecade,creatingnewoccupations/positionswhichimplydifferenttasksthanthoseapprovedtenyearsagoinCORM,whosedescriptionoftherightsandobligationsofemployeesareoutdated.

TheformalapprovalofthenamesofIToccupationsisalsonecessaryinordertoconsistentlyusepositionnamesinIT,thestandardizationaccordingtothewidely-acceptedITnorms,theoccupationsontheITlabormarket,andtosecurepermanentprofessionaldevelopmentofthecorrespondingspecialists.

MinistryofLabor Medium

CORMwillbeadjustedtoincludeoccupationscurrentlyexistinginthesectorwhichhavenotbeenincludedintheregister.Asaresult,HRmanagementinICTcompanieswillbesimplified.

16.

ApprovethemechanismforrevisionoftheTechnicalSpecificationsbythecivilsocietyandthelineorganizations.

ThePublicProcurementAgency(PPA)doesnothavesufficientabilitiestoassesICTbids.MostICTcompanieshavecomplainedaboutalowtransparencyinPPA’sactivity.

MinistryofInformationTechnologyandCommunications

Short

•TechnicalSpecificationscomplyingtorequirements

•Moneysavingstothebudget.

Public Procurement

17.

CreateandmaintainacentralizedelectronicregisterwithinformationontheITprojectsimplementedforgovernmentinstitutions.

Variousgovernmentinstitutionsrequestsoftwarefortheircurrentactivity.Theissuesfacedbythoseinstitutionsareoftensimilar.Thus,somesoftwarecouldbecreatedbysimplyadjustingtheexistingones.

MinistryofInformationTechnologyandCommunications

Short

Reducedeffortsincaseofsimilarprojects;smallerbudgetresourcesnecessary.

40

18.

SelectagroupofexpertswhowillbecontractedbyPPAwhentechnicalexpertiseisrequired.

PPAhasnosufficientskillstoassessbidswhenitcomestoICTproducts,particularlyprogramming.Ontheotherhand,anymistakeinselectingthesuccessfulbidmaybeconsideredbytheCourtofAccountsanattempttoprotectcertaincompetitors.Asaresult,usuallythelowestbidsareselected.

MinistryofInformationTechnologyandCommunicationswithsupportfromATIC

Short

Thebidswiththebestprice/qualityratiowillbeselectedwithintenders.Corruptioncaseswithinpublicprocurementswillbediminished.Experts’advicewillbeaconsultativeone.Itisrecommendedthatexpertsareselectedrandomly,observingtheconfidentiality(i.e.thebeneficiaryandthesoftwarecompaniesshouldnotknowtheexpert(s)).

19.

ApproveaGovernmentDecisionsimilartoGDNo.834of13.09.2010“OnApprovaloftheRegulationonPublicProcurementofWorks”,whichwouldincludesoftwareprocurementrulessimilartothoseforprocurementofconstructionworks,includingtheguaranteeforsecuringcontractexecution,monitoringofprojectsbyPPAuntilthesignatureoftheStatementofdeliveryandreceipt.

PPAdoesnotmonitorsuchprojectsafterimplementation.TheimplementedprojectsoftendifferfromtheTechnicalSpecificationsattachedtotheContract.Sometimesthebeneficiarymayfindsuchinconsistenciesandsometimesonlytheproviderisawareofthem.

Initiative–MinistryofInformationTechnologyandCommunications

Short

NumberofprojectsthedeliverablesofwhichareinconsistentwiththeTechnicalSpecificationsshalldiminishsignificantly.

Foster Sector Development

20.

CreateaframeworkfavorableforICTcompanies’participationinresearchanddevelopmentactivities.

Moldovansoftwarecompanieshavenosufficientresourcestolaunchsuchactivitiesbecauseoftheirlimitedhumanandfinancialcapacitiesandthehighrisks.

ITtechnologydevelopmentisduetodailyhardworkoftalentedpractitionersratherthantoamazingdiscoveriesbyresearchers.Onlypersonswhoreallyfeelthemarketandhaveextraordinaryabilitiestofindvarioussolutionsmaybetheengineofresearchanddevelopmentactivities.Thecurrentapproachusedinthestate-fundedscientificresearch,whichiscoordinatedprimarilybytheAcademyofScience,deterstheparticipationofcompaniesthatdonothaveonstaffpeoplewithscientificdegrees,eventhoughtheymighthavetalentedprogrammers.

MinistryofInformationTechnologyandCommunications

Long

Theresearchanddevelopmentactivitiescouldbringhugebenefitstothecountryaswecouldexportintellectualpropertywithconsiderablevalueadded,ratherthanjustlaborforce,evenifhighlyqualified.

41

21.

CreateanITincubatorforstartups.InformationabouttheincubatoranditsbenefitswillbewidelydisseminatedamongfreshgraduatesofITfaculties.Theincubatorcouldbeco-fundedbyforeignfundersandthestate.

Usuallystartupshaveneitherfinancialresourcesnorexpertiseorskillstogetinvolvedininternationalsoftwaretrade,thereforetheystarttocrowdonthelocalmarketinanattempttowinabiggershareortrytowinprojectsontheEuropeanmarket.Inbothcases,companiesarenotgrownenoughtobeabletoimplementdevelopmentactivities.

MinistryofInformationTechnologyandCommunications

Medium

TheincubatorwillprovideinformationabouttheWesternmarketswhicharecurrentlythemostpromisingones,includingaboutthemarkettrends,informationonthemostdemandedproducts,thewaycostumersoperate,etc.theincubatormemberswillhavethepossibilitytogainadvancedskillsofmarketing,entrepreneurship,fiscaladministration,etc.

Inaddition,theywillhavebetteraccesstothebestpracticesintheindustry.Theywillbeabletodeveloptheirbusinessideasandgetfeedbackfromindustryexperts,includingfromabroad.

22.Searchandproposeviablefinancialproductstofinancetheindustry.

ItisdifficultfortheICTcompaniestocontractbankloansbecauseofthelackofcollateraltosecuretheloan.Thisisevenmoreseriousaproblemforthesoftwarecompanies,whichinvestmoney(assalaries)todevelopsoftware,buthavenofixedorworkingcapitaltopledgeassecurity.

ThereisnogovernmentfundorprogramtosupportfinancingofICTbusinessesbythebanks.

ATIC,NationalBankofMoldova,MinistryofInformationTechnologyandCommunications

Long

Additionalfinancialresourcescouldallowcompaniestonotonlygroworbestableonthemarket,butalsoinvestinprojectsfordevelopmentofbothproductsandprocessesingeneral.

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NOTES

43

NOTES

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