Moldova Trade Study : Note 4. The Performance of Free Economic Zones in Moldova
In 1995, Moldova introduced free economic zone (FEZ) legislation with the aim of accelerating socioeconomic development by attracting domestic and foreign investment, promoting exports, and creating employment. Since then, seven free economic zones...
| Main Author: | |
|---|---|
| Format: | Report |
| Language: | English en_US |
| Published: |
Washington, DC
2016
|
| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2016/03/26076092/performance-free-economic-zones-moldova http://hdl.handle.net/10986/24006 |
| Summary: | In 1995, Moldova introduced free
economic zone (FEZ) legislation with the aim of accelerating
socioeconomic development by attracting domestic and foreign
investment, promoting exports, and creating employment.
Since then, seven free economic zones offering tax and
customs benefits have been established. This note assesses
the static and dynamic economic benefits of the program in
Moldova. The free economic zones have been successful in
attracting investment from both domestic and foreign
sources. The economic zones have become true export
platforms, generating a five-fold increase in exported
industrial production from the zones between 2004 and 2014.
On average, employment in the economic zones had a robust
growth in the last seven years and almost doubled since
2008. Evidence suggests that the economic zones have
significantly contributed to the diversification of exports
and to the changing structure of the Moldovan economy. The
effect of the economic zones on domestic firms appears to be
modest, however, and unlikely to contribute to the
technological upgrading and sophistication of the Moldovan
economy. Free economic zones tend to attract industrial
activities requiring intensive use of human resources for
certain operations. The economic impact of Moldovan free
economic zones is ambiguous. Moldovan legislation provides
sound and transparent provisions, but the main issue is how
this legislation is implemented. The majority of
recommendations are focused on streamlining the
implementation process, making it easier for companies to
operate. Here are the main recommendations for improving the
zones : (i) the importance of fiscal incentives should be
downgraded by shifting to targeted services for businesses;
(ii) reduce corruption and increase accountability by
establishing one-stop-shop procedures and elements; (iii)
establish a proper mechanism for monitoring and reporting
with the zones residents and administrator; (iv) empower the
regulator with additional relevant institutional capacities
and capabilities; (v) the role of residents in appointing
the administrator should be determinant; and (vi) establish
a proper mechanism for compensating residents of the zones
for restrictive treatment of the real assets. |
|---|