Moldova cleans up it act to attract foreign businesses

The Eastern European country of Moldova is continuing efforts to attract overseas firms, as it tries to move past political uncertainty.

“I went with a backpack, and set up a business,” says Dutch entrepreneur Luc Vocks, recalling how he moved to Moldova in 2007.

Mr Vocks had first visited the former Soviet republic three years earlier, and recalls experiencing “the cliché that one would have of Eastern Europe at that time”.

“Everything was dirt cheap, and if you were a foreigner you’d get attention,” he says.

Today, Mr Vocks is the owner of a Moldovan company called DevelopmentAid. Based in the capital Chisinau, it employs 180 people in the country, and runs a website that lists job vacancies in the international development community.

Mr Vocks is one of a growing number of foreign entrepreneurs in Moldova. The government wants to attract more like him and hopes that low business tax rates will help.

The country’s standard corporation tax rate – the amount that firms have to pay on their profits – is just 12%. This compares with 25% in the UK, and 25.8% in the Netherlands where Mr Vocks had initially launched his company before relocating it to Moldova.

There’s an even better deal for tech firms. In 2018 the Moldovan government launched an initiative to grow the country’s IT sector – the Moldova IT Park (MITP).

This isn’t a physical business park. Instead it is virtual scheme open to all IT firms in the country – and those that wish to move there from overseas. Firms that sign up only have to pay a corporation tax rate of 7%.

The MITP is part of a wider effort by the Moldovan government to modernise and expand its economy ahead of a bid to join the European Union in 2030.

This drive is being led by Moldova’s pro-EU President Maia Sandu, who this week was re-elected for a second term. And last month Moldovans voted “yes” on pro-EU constitutional changes.

However, the vote was extremely close, with Yes getting 50.46% and No receiving 49.54%. Although Russia denied interfering in the vote, Moldova’s authorities said attempts had been made to buy up to 300,000 votes in what Maia Sandu described as an “unprecedented assault on freedom and democracy”.

Moscow is opposed to Moldova joining the EU, and supports Moldova’s breakaway region of Transnistria economically, politically and militarily.