Investment Compact For South East Europe

OECD Investment Compact 1

OECD

Investment Compact for South East EuropeWork Program with Moldova

‘FDI Vision and Strategy 2006 – 2010’

OECD Investment Compact and cooperation with the Republic of Moldova

Project Team Meeting Paris, November 10th, 2006


Background information:

The FDI Strategy below is part of the first phase of the OECD Investment Compact programme with Moldova

The OECD Investment Compact Strategy has been elaborated between March and May 2006

The OECD Investment Compact had two meetings with the Minister of Economy and Commerce in order to coordinate with the Ministry the work on the FDI Strategy:

April 2006 – in order to present the outline of the FDI Strategy June 2006 – to present the OECD Investment Compact FDI and

Export Promotion Strategy for 2006 – 2010

Until July 2007, the OECD Investment Compact will develop the implementation phase of the project


1.Share and endorse Strategy/Vision/Style

2.Align structure/systems/skills

3.Remove priority barriers to trade/investment

4.Establish/reinforce competitive advantages in priority sectors

5.Assess/improve skills required to compete in priority sectors

6.Implement linkage and integration programs

7.Market/sell Moldova

8.Evaluate/monitor progress in attracting FDI and promoting Exports

The New ‘FDI & Exports Vision/Strategy 2006 – 2010’ Provides a Route Map for Change/Progress with 3 Building Blocks

A Strategic Vision, 4 Foundation Platforms (Where)/8 Main Modules of Action (How to Compete)

A. Strategic Vision

‘Moldova today is building a competitive and vibrant market economy that will compete on international markets for investment and trade.

To attain that national objective Moldova will maximise the scale and scope of private investment, both international and domestic, and its integration into the economy.

Moldova will use its natural resources and human talents to compete in world markets…’

B. Where to Compete ? C. How to Compete ?

1. Improveoverall business

environment

2. Focus on 6 priority sectors

3. Build all types of FDI/exports

(greenfield, privatizations, M&A,

expansion)

4. Focus on priority countries

Geography

Sector

Customer

Environment


2. Sector Focus: Follow a Two-Pronged ApproachMoldova Should Invest in Priority Sectors while Remaining Open to Opportunities in all Sectors

Why Priority Sectors?Priority Sectors for Moldova

3 Sectors Currently Being Promoted and 2 New Sectors

Two-pronged approach Open to international investments for all

sectors by creating an attractive investment environment and promotion of Moldova as a whole

Focus limited resources on selected sectors and clusters where growth prospects/jobs are good and Moldova has a competitive advantage

Selecting priority sectors does not exclude other sectors

Strategy and sector focus should be flexible to adapt to changing market conditions

Selecting sectors allows to deepen promotion efforts to targeted companies and build competitive advantage with closer company relationships

Moldova brand/sales messages can be deepened by adapting to sector requirements

The most successful IEPA in the world define priority sectors

Sustainable Energies

Remote Business/Technical Services

Organic Food

Wine

ICT software

E-business

Textile and Apparel

Open to FDI from all Sectors

New sectors of focus Traditional sectors of focus


Investor Segment

M&A, JV’s investors

Existing investors/exporters

Privatization investors

Greenfield investors

Key Requirements per Segment

Quality of existing partnerFairness in evaluationProtection of liabilitiesSpeed in execution

Improved infrastructureBetter returns on investmentGovernment support

Increased incentives Tax benefits

Assistance to venture into newer areasFinancial and technical support

No/limited preferred national treatmentStability of governmentAlignment of regulations and guidelinesCommitment of regulatory agencies

Easy to set-up proceduresSpeed in executionConvenient operations maintenanceCo-development support

Key Benefits to Be Expected

M&As are worldwide one of the biggest source of FDI and driven by company business strategies. Joint ventures can emerge from M&As or independently promoted by individual companies and investment promotion agencies

Most EU and OECD countries obtain more than 50% of their new investment each year from existing investors, hence importance of working with existing investors

New investment can come from expansion of existing plants, other group or sister companies, supplier companies (e.g. common in auto sector)

Existing investors can be a powerful lead to other companies, to their home countries, and to helping in policy and promotion

Typically transition countries have a first wave of FDI driven by privatisation and Moldova has similarly followed this pattern. Continuation of this policy is important for structural and market economy reform.

Significant visibility for potential investors

Attracting higher levels of mobile greenfield is crucial for Moldova

New greenfield investment will bring new sectors and new companies

3. Moldova Will Build all Types of FDI/Exports SegmentsEach Segment Having Specific Benefits and Requirements to be Considered


Main mandates To undertake an audit of existing skill needed by investors To determine the current output (e.g. number of computer scientists, financial accountants,

pharmacists, toolmakers, electricians or animators graduating each year) and To seek to project future demand and needs

The Task Force should ideally be jointly led by the Ministry of Education and Ministry of Economy So that education and training can be coordinated better with investment policies and strategies and It should consist of industry representatives from all the priority sectors for Moldova

Existing work by groups such as the Swiss Agency for Development and Cooperation on job profiles should be considered by this Task Force to gain from coordination and expert inputs

The audit should provide the basis for planning future skills development and supply

In conjunction with the audit referred to above, existing companies, both international and domestic should provide feedback on existing training (national schemes or in-house training) so that a picture of how adequate present programs are and what new initiatives may be desirable

Existing recruitment agencies (as well as international recruitment agencies) should be encouraged to build databases of Moldovan people both in Moldova and outside

This may also assist in attracting back skilled Moldovan people now resident outside Moldova Some OECD countries have successfully used such data to attract back skilled emigrants and to assist

in their FDI & Exports promotion

The Ministry of Economy Should Launch a Task Force on People Development and Skills

Assess/improve skills required to compete in priority sectorsAssess/improve skills required to compete in priority sectors


1. Flesh out the Linkage strategy

3. Launch dialogue with international companies

The Investment & Exports Promotion Strategy within its corporate plan, should set out its strategy and action plan to promote better integration of FDI & exports and linkage between international investors and domestic companies/institutions

International companies in Moldova have signalled their interest in increased linkage This willingness should be pursued by the IEPA in order to maximise the benefits of investment for both

investors and Moldova A first step should be to establish a series of databases on

(a) existing purchases and potential for increased domestic supply (b) existing suppliers or potential suppliers and their capability to meet, for example, quality and logistical

standards demanded by international companies

Get International investors to have a key role in organising workshops or seminars on their procurement policies and procedures, on introducing companies to group procurement personnel

Form Technical/Business training seminars on specific issues such as manufacturing methods or linking into IT systems of major international companies

Ensure the IEPA undertake a regular dialogue with international companies to explore the prospect of expanding existing operations by introducing new business functions

by encouraging links with universities or research institutions and by seeking to build dialogue on the expansion of domestic-based operations into regional export operations

Such work may also form part of the promotion and selling work of the IEPA, for example meeting group senior executives to present the Moldovan case for enhanced development in Moldova

Encourage Universities and research institutions to seek greater contact and linkage with existing international companies in providing technical evaluation, testing or research support

Link into the linkage policy the Programs to enhance domestic company development so as to ensure good knowledge of international company requirements and standards applied to suppliers

This subject should also form part of the sectoral strategies being pursued by the IEPA

Main Actions Required

4. Develop domestic companies and monitor results

Actions to Implement a Linkage Program between FDI and Local Enterprises

2. Create training program to strengthen SMEs with high potential

Implement an integration and linkage programImplement an integration and linkage program


Moldova Will Undertake a New Proactive Marketing/Selling Approach to International Investors

Based Upon the New Branding Strategy For Moldova

Market: The IEPA Needs to Set out Comprehensive Marketing Actions

Press and media visits - IEPA should seek to encourage 4-5 representatives

of the international media to visit Moldova each month and highlight successful investment and trade case experiences

- Such visits need to be carefully planned, organised and handled efficiently

- The should regularly inform international and domestic media of investments and maintain a media file of news reports

Promotional events- A list of all promotional events, both in Moldova and

outside should be published and circulated monthly to key players (all FDI companies in Moldova, key target companies, embassies, etc.) to invite interest

PR and press releases on all new investments (inc. expansions) in Moldova should issue from the Minister of Economy (or other senior government representative)

Advertising and publicity material- A full range of general, sectoral and website

instruments (brochures, newsletters, investment guides, presentations), reflecting the new Moldova ‘brand’ should evolve

Investor award schemes reflecting practice in many OECD countries - IEPA should work with industry sponsors to promote

annual awards to investors (biggest investment, best employment creator, biggest exporter, etc.) in order to highlight the benefits of new investment and new trade developed

Sell: Moldova Should Adopt a Proactive Approach to Seeking Investment and Trade

The work of MEPO to date has undertaken such approaches but needs to move to new and more continuous high levels of activity

‘Selling’ involves identifying target companies and presenting the ‘unique selling proposition’ of Moldova to that company. It involves - Building relationships with a company, sometimes

over years- Encouraging them to include Moldova in their

investment location assessments, and - Seeking exploratory visits to Moldova (‘site visits’)

The most successful investment & export promotion agencies worldwide have developed successful practices and techniques- Special and individual company/industry

presentations (taking into account the determinants of FDI decisions)

- Understanding strategic business pressures in certain sectors and offering solutions to these in their sales proposition or message to companies

- Building the cluster image of Moldova having competitive advantages in certain sectors

- Working with company management (e.g. those based in Moldova) to ensure Moldova is presented to key decision makers at corporate H.Q. or associated companies

Market/sell Moldova Market/sell Moldova


Next Steps

A strategy implementation plan needs to be completed after the endorsement of the vision and strategy

The Ministry of Economy and MIEPO will take the lead role in this process

The OECD Investment Compact will closely work with the Ministry of Economy and Commerce in the implementation phase of the project

The main goals of the OECD Investment Compact for the upcoming nine months are:Build and FDI Database

Launch five foreign investors events:- Three outward missions in: Great Britain, France Switzerland- Two inward missions in: Germany, Sweden

Define and establish a SME Linkage Programme

Conduct a skill gap assessment

Investment Compact For South East Europe

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