UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION COUNTRY PROGRAMMING FRAMEWORK FOR INCLUSIVE AND SUSTAINABLE INDUSTRIAL DEVELOPMENT REPUBLIC OF MOLDOVA 2019 - 2023 This Country Programming Framework (CPF) is designed to enhance UNIDO's support to the Government of Republic of Moldova to implement a road-map towards Inclusive and Sustainable Industrial Development (ISID) as stated in the Lima Declaration adopted on the 2 December 2013 during the 15th session of General Conference of UNIDO. In doing this, UNIDO has aligned with the priorities set out in the National Development Strategy Moldova 2020, building on the achievements of past projects and programmes. As industrialization is a long-term endeavour involving many stakeholders, efforts will be made to strengthen synergies and minimize duplication by collaborating with development cooperation partners, state and non-state actors, including the private sector in the country. As a framework based on established national priorities, it will be a useful guide for UNIDO's interventions in the Republic of Moldova over the next years. The fund mobilization to implement the CPF is the shared responsibility of the Government and UNIDO. On behalf of Government of Moldova His Excellency Mr. Victor Osipov Signature Date Ambassador Extraordinary and Plenipotentiary Permanent Representative On behalf of UNIDO Mr. U Yon g Signature Date Director General
Transcript
UNITED NATIONSINDUSTRIAL DEVELOPMENT ORGANIZATION
COUNTRY PROGRAMMING FRAMEWORK
FOR INCLUSIVE AND SUSTAINABLE INDUSTRIAL DEVELOPMENT
REPUBLIC OF MOLDOVA
2019 - 2023
This Country Programming Framework (CPF) is designed to enhance UNIDO's support to the Government of Republic of Moldova to implement a road-map towards Inclusive and Sustainable Industrial Development (ISID) as stated in the Lima Declaration adopted on the 2 December 2013 during the 15th session of General Conference of UNIDO. In doing this, UNIDO has aligned with the priorities set out in the National Development Strategy Moldova 2020, building on the achievements of past projects and programmes. As industrialization is a long-term endeavour involving many stakeholders, efforts will be made to strengthen synergies and minimize duplication by collaborating with development cooperation partners, state and non-state actors, including the private sector in the country. As a framework based on established national priorities, it will be a useful guide for UNIDO's interventions in the Republic of Moldova over the next years.
The fund mobilization to implement the CPF is the shared responsibility of the Government and UNIDO.
On behalf of Government of Moldova
His Excellency Mr. Victor Osipov Signature Date
Ambassador Extraordinary and Plenipotentiary
Permanent Representative
On behalf of UNIDO
Mr. U Yon g Signature Date
Director General
List of Abbreviations
AA Association Agreement GHG Greenhouse Gas
BAT Best Available Techniques Gil Gender Inequality Index
BEP Best Environmental Practices GUAM Organization for Democracy and Economic Development
BSEC Black Sea Economic CooperationGWh Gigawatt hours
BPO Business Process OutsourcingHa Hectare
C02 Carbon dioxideHACCP Hazard Analysis and Critical Control
CEE Central and Eastern Europe Points
CEFTA Central European Free Trade Agreement HDI Human Development Index
CIS Commonwealth of Independent States H.E. His/Her Excellency
CISFTA Commonwealth of Independent States ISID Inclusive and Sustainable IndustrialFree Trade Agreement Development
CP Country Programme ISO International Organization for
CPF Country Programming Framework Standardization
DaO Delivering as One IT Information Technology
DBA Development Bank of Austria JSC Joint Stock Company
DCFTA Deep and Comprehensive Free Trade ktoe Kilotonne of Oil Equivalent
Agreement M&E Monitoring and Evaluation
DFI Development Finance Institutions MIA Moldova Investment Agency
EaP Eastern Partnership MoSEFF Moldovan Sustainable Energy Financing
EBRD European Bank for Reconstruction and Facility
Development MSMEs Micro, Small & Medium Enterprises
EC European Commission MVA Manufacturing Value Added
ECA Europe and Central Asia MW Megawatt
EIB European Investment Bank NCPP National Cleaner Production Programme
EU European Union NBS National Bureau of Statistics
EUR Euro NDS National Development Strategy
FDI Foreign Direct Investment NGOs Non-Governmental Organizations
FEZ Free Economic Zone OECD Organization for Economic Cooperation
GDP Gross Domestic Product and Development
GEF Global Environment Facility ODA Official Development Aid
PCB Polychlorinated Biphenyl
POP Persistent Organic Pollutants
ppp Purchasing Power Parity
R&D Research and Development
RECP Resource Efficient and Cleaner Production
RES Renewable Energy Sources
SDGs Sustainable Development Goals
SECI Southeast European Cooperative Initiative
SMEs Small and Medium-sized Enterprises
TFEC Total Final Energy Consumption
TPES Total Primary Energy Supply
UN United Nations
UNDP United Nations Development Programme
UNECE United Nations Economic Commission for Europe
UNEP United Nations Environment Programme
UNIDO United Nations Industry Development Organization
UNPSD United Nations Partnership for Sustainable Development
USAID United States Agency for International Development
1. Country Situation Analysis ............................................................................................................................................................................. 9
1.1. The national context........................................................................................................................................................................................ 10
1.1.8. Private sector development and SM Es................................................................................... 29
1.1.9. National development policies.................................................................................................31
1.1.10. Youth and women empowerment.......................................................................................... 35
1.2. Challenges to be addressed ...................................................................................................................................................................... 37
2. UN Coordination Framework...................................................................................................................................................................... 41
3. Past Cooperation and Lessons Learned ..............................................................................................................................................42
4. Country Programme Components...........................................................................................................................................................44
4.1. COM PONENT 1: Enhanced industrial competitiveness, market access, innovation and investment promotion 47
4.2. COM PONENT 2: Productive employment for rural communities and entrepreneurship development..............49
4.3. COM PONENT 3: Sustainable energy and environmental management...........................................................................50
5.3. Monitoring and Evaluation.......................................................................................................................................................................... 53
5.4. Risks and mitigation measures................................................................................................................................................................ 55
5.5. The legal context............................................................................................................................................................................................. 55
6. Indicative budget and Fund Mobilization Strategy.......................................................................................................................... 55
6.2. Fund mobilization strategy.........................................................................................................................................................................56
Executive summaryThis Country Programming Framework (CPF) sets up the programmatic vision and strategy for engagement and partnership for inclusive and sustainable industrial development (ISID) between the Government of the Republic of Moldova1 and UNIDO. It has been prepared as a result of extensive consultations with the Government and key national stakeholders.
By means of an official letter from H.E. Mr Valeriu Lazar, former Deputy Prime Minister and Minister of Economy of Moldova, dated 14 February 2014, the Government formally stated its readiness to engage with UNIDO in strengthening cooperation and facilitating the promotion of the industrial and entrepreneurial development of the country. An intensive consultation phase followed through dedicated meetings with national and international stakeholders, prospective donors and partners. As a result of the intensified dialogue and the findings of the UNIDO programming and fact-finding mission to Chisinau in March 2017, the CPF was formulated taking into account the identified industrial development needs of Moldova and cross-matching these with UNIDO's expertise.
The CPF is based on the Sustainable Development Goals (SDGs) and will contribute to their achievement in Moldova. The country is determined to drive the industrial development of the national economy and adopt a comprehensive and integrative approach for the accomplishment of national targets. Moldova has undertaken the good-faith effort of mainstreaming the SDGs into the country's strategic documents and objectives through the nationalization of the SDGs, including SDG 9: Build resilient infrastructure, promote inclusive and sustainable industrialization and foster innovation and all other inter-linked goals, of 2030 Agenda for Sustainable Development. The CPF is aligned with the country's main development policy frameworks, including the National Development Strategy (NDS) otherwise referred to as "Moldova 2020", the Strategy of Attraction of Investments and Promotion of Exports 2016 - 2020, the Strategy of Innovation for the period 2013 - 2020 "Innovation for competitiveness", the National Strategy for Agricultural and Rural Development 2014 - 2020, the Strategy for the Development of Tourism, the Energy Strategy of the Republic of Moldova until 2030, the National Renewable Energy Action Plan of the Republic of Moldova for 2013-2020, the Environmental Strategy of the Republic of Moldova 2014 - 2023, the Waste Management Strategy of the Republic of Moldova 2013-2027 and the Economic Development Priority Measures 2017-2019. The CPF draws upon the United Nations Partnership for Sustainable Development (UNPSD) 2018-2022.
The document provides an important opportunity for a strengthened partnership between UNIDO, the Government of Moldova and other key stakeholders leading to results that are of strategic priority, specific and measurable and promote ISID. Emphasis will be put on the development and strengthening of value chains, export capacity building, competitiveness and innovations, entrepreneurship development, as well as on measures to support energy efficiency, the uptake of renewable energy and the promotion of sound environmental management.
1 "Republic of Moldova" and "Moldova" are used interchangeably throughout the document Page | 6
Moldova lost large parts of its significant manufacturing sector as a result of the institutional changes following the collapse of the Soviet Union. Despite recent years having witnessed improved economic growth rates, the country's limed natural resource endowments, high vulnerability to climate change, significant rates of external migration and a growing socio-economic gap between rural and urban regions all hamper attempts to eliminate poverty and embark on a path towards socio-economic progress and shared prosperity. Economic development is volatile and hampered by low levels of productivity and value-added with domestic demand being increasingly covered by importing more sophisticated consumer goods, undiversified export basket with limited export destination, making the economy highly dependent on trade regimes and external factors. For the supply of energy, Moldova relies almost exclusively on foreign imports, mainly on natural gas provided via Russia, Ukraine and Romania. At the same time, the potential for elevating energy efficiency, especially in the industrial sector, as well as increasing the uptake of local renewable energy sources in order to reduce energy poverty and increase energy security remain largely untapped. Employment opportunities are inconsistent with the educational framework, forcing young people to leave the country and exacerbating overall socio-economic conditions particularly outside the urban areas.
The Government of the Republic of Moldova has undertaken measures to improve the overall competitiveness of the economy, increasing industrial productivity, stimulating entrepreneurship, encouraging knowledge and innovation through capacity development and adoption of international standards and use of best practices within the overarching goal of full integration into EU markets and into global value chains. Traditional and emerging donors in the region of Europe and Central Asia will continue supporting development projects in the country due to its strategic location, as well as close economic and political ties with the European Union. UNIDO will join hands with the Government on mobilizing funds from and building partnerships with the main bilateral and multilateral donors, as well as international development finance institutions active on the ground.
With an overall estimated budget of EUR 28,980,000 the CPF has been developed to contribute to the achievement of the inclusive and sustainable industrial development agenda of Moldova through dedicated development activities in three components:
Component 2: Productive employment for rural communities and entrepreneurship development; and
Component 3: Sustainable energy and environmental management.
The underlying theme for this CPF will be the strong focus on creating a lasting contribution to the ongoing and planned efforts of the Government of the Republic of Moldova for a sustainable economic transformation, industrial diversification and creation of inclusive jobs through private sector and entrepreneurship development, rural development for overcoming rural-urban disparities, restructuring and modernization of priority sectors, value addition and market access, promotion of innovations and Page | 7
research and development, increased resource efficiency and renewable energy uptake and the introduction of sound and sustainable environmental practices.
This CPF is not a rigid portfolio of projects, but rather constitutes a flexible framework allowing new projects and initiatives be included at any stage in line with the country's priorities and needs.
Origin of GDP (%) in 20166: Trade - 14.1%, Industry-14.1%, Agriculture, forestry and fishing- 12.2%, ITC - 5,9%, Public administration and education - 9.7%, Construction - 3.3%, Financial and insurance - 5.37%, Real estate, renting and business activities - 5.1%, Transport and logistics - 5.12%, Other sectors - 25.8%
Manufacturing value added (MVA) % of GDP7
13.89%, 2016
Doing business rank8 44 (out of 190)
Main natural resources9 10 lignite, phosphorites, gypsum, limestone, arable land
Main production70 Agriculture: Oil seeds and oleaginous fruits; miscellaneous grains, seeds and fruits, cereals, edible fruit and nuts
Industry: Electrical machinery and equipment and parts, beverages, spirits and vinegar, articles of apparel and clothing accessories,
2 National Bureau of Statistic3 https://data.worldbank.org/indicator/NY.G DP.PCAP.CD?locations=MD4 https://datahelpdesk.worldbank.org/knowledgebase/articles/906519-world-bank-country-and-lending-groups5 http://statistica.md6 idem7 https://data.worldbank.org/indicator/NV.IND.MANF.ZS?locations=MD8 http://www.doingbusiness.Org/~/media/WBG/DoingBusiness/Documents/Annual-Reports/English/DB17-Report.pdf9 https://www.cia.gov/library/publications/the-world-factbook/geos/gg.html10 http://www.geostat.ge/index.php?action=page&p_id=119&lang=eng Page I 9
Services: 49.2%; agriculture: 33.7%; industry and construction: 17.1%15 16
1.1. The national contextMoldova shares borders with Romania and Ukraine and has a total area of 29,683 km2 with a current population of 2,998,200, excluding the breakaway territory of Transnistria.15 The country's transition from a centrally planned system to a market economy had an adverse impact on the population's welfare. After losing large parts of its previous manufacturing sector as a result of the institutional changes, social and income inequalities have generated societal differences that continue to persist.17 Despite rapid economic growth in the past decade, leading to notable gains in poverty alleviation (the national poverty rate fell from 26% in 2007 to 11.4% in 2014), Moldova remains one of the poorest countries in Europe, which poses significant challenges to sustaining economic progress and providing shared prosperity.18
As a country with a small economy and limited natural resource endowments, Moldova has historically pursued a trade-led development strategy. A member of the World Trade Organization (WTO) since 2001, Moldova has signed 14 regional trade agreements with about 45 partners ensuring free access of its goods to a total market of over 800 million consumers. Moldova is also a signatory to the Central European Free Trade Area (CEFTA), which consolidates a free trade area between South Eastern Europe and the EU15 as well as the Commonwealth of Independent States Free Trade Area (CISFTA)19 according to which it enjoys duty and quota-free access to Commonwealth of Independent States (CIS) markets. Moreover, the country is also a member of the Organization of the Black Sea Economic Cooperation (BSEC), Organization for Democracy and Economic Development (GUAM), Southeast European Cooperative Initiative (SECI) and other regional economic initiatives. The negotiations between Moldova and the European Union (EU) on an Association Agreement (AA) and a Deep and Comprehensive Free Trade Agreement (DCFTA) were concluded on 27 June 2014, with the signing of both documents. Since then, EU integration and respective reforms are prioritised by policy makers committing to bring governmental, regulatory and business practices in line with EU standards.
Moldova's National Development Strategy (Moldova 2020), which was approved in 2012, calls for a transition towards an economic model based on the following eight priorities: (1) aligning education with labour markets; (2) increasing public investment in roads; (3) promoting financial sector competition; (4) improving the business climate; (5) raising energy efficiency, including the use of renewable sources; (6) ensuring fiscal sustainability of the pension system; (7) enhancing the efficiency and quality of justice, including combatting corruption; and (8) fostering the competitiveness of agrifood products and sustainable rural development.
The relatively high average economic growth rate of 4% per year registered between 2011 and 2017 did not result in substantial job creation. While there has been an increase in wages in the non-agricultural sector, the overall employment rate during this time fell from 58% to about 41%. Lack of employment continues to affect the poor and bottom 40% of the population, with an increasing number of people having been forced to turn to subsistence agriculture, in particular in rural areas. Overall, Moldova's economy has expanded since 2000; however, the uptake in national consumption has largely been driven by the high share of remittances, which is among the highest in the world.20 Around one million Moldovans work in Europe, Russia and other CIS countries. Continuous dependence on financial flows from citizens working abroad is making the economy extremely vulnerable to external fluctuations and shocks. The reliance on remittances, which made up about 1.465 billion USD in 201621, thus around 21.7% of the country's Gross Domestic Product (GDP), is unsustainable and underlines the need for a
Assessment-2016.pdf19 The CISFTA is a free trade area between the Russian Federation, Ukraine, Belarus, Uzbekistan, Moldova, Armenia, Kyrgyzstan and Kazakhstan. The Agreement, which was signed by the said countries on 18 October 2011, replaced existing bilateral and multilateral free trade agreements between the countries. The agreement was ratified by the Moldovan parliament on 27 September 2012 and entered into force in 2013. It was subsequently signed and ratified by Uzbekistan (2013) and Kyrgyzstan.20 http://documents.worldbank.org/curated/en/168451467995808859/pdf/105722-WP-P151472-PUBLIC-Moldova-Poverty- Assessment-2016.pdf21 https://data.worldbank.org/indicator/BX.TRF.PWKR.CD. DT?locations=MD Page | 11
more balanced economic model. This includes the creation of more and better jobs and access to improved education.22
Another significant risk to the economy is Moldova's undiversified export basket and the limited export destinations for Moldovan exports. Ukraine, Russia and Belarus take up over one-third of all exports leaving the country. Another growing factor of socio-economic influence is the impact of climate change on the agricultural sector, having greatly affected production output and the country's overall GDP and household consumption following severe droughts in 2012 and 2015. Moldova ranks as the most climate vulnerable country in Europe and has currently very limited adaption capacities.23 Furthermore, the latest European Commission (EC) Progress Report on Moldova notes that local and regional instability led to a deterioration of the Republic's economic climate. There has been a reduction of the production volume of both goods and services. In addition, a decrease of foreign currency inflows due to shrinking exports and remittances resulted in increased inflation. Taking into account the present day challenges, building up domestic capacities, pursuing shared prosperity and strengthening economic competitiveness and resilience become key priorities in achieving long-term economic and political stability in the country.24
1.1.1. Overall m acroeconom ic profile
Moldova is ranked as a lower middle-income economy with a nominal GDP per capita of USD 1,90025. Between 2011 and 2017, the country's economy grew on average by 4% per year, whereby development was mainly driven by domestic consumption and maintained by remittances. Significant economic shocks in recent years were experienced due to the ban on agricultural products in Russia, the global financial crisis, severe climate conditions, in particular affecting the harvests of 2012 and 2015, as well a fraud cases in three large banks, which deprived the country of one-eighth of its GDP. The latter was particularly damaging for the business confidence and the authority's agenda has since focussed on restoring investors' confidence in Moldova's economic governance.26
The national economy of Moldova has undergone profound structural changes over the past ten years, with the share of the service sector increasing by 27% and the share of both agriculture and industry in total economic activity decreasing by 16% and 11% respectively. Today, Moldova's main economic sectors by share in total output are: services (58%), including telecommunications, culture, tourism, construction and transportation; agriculture (12%), including oil seeds, oleaginous fruits, miscellaneous grains, seeds and fruits, cereals, edible fruit and nuts vegetables, and; industries (14%), including electrical machinery and equipment and parts, beverages, spirits and vinegar, apparel and clothing accessories, furniture, bedding and mattresses as well as other economic activities making up the remainder (15%). The service sectors employ close to half of the working population (49%), with
22 The World Bank, Country Partnership Framework for the Republic of Moldova for the Period of FY18-2123 The World Bank, Country Partnership Framework for the Republic of Moldova for the Period of FY18-2124http://www.mfa.gov.md/img/docs/Progress_Report_on_EU_Moldova_Association_Agenda_March_2016.pdf25 https://data.worldbank.org/country/moldova26 The World Bank, Country Partnership Framework for the Republic of Moldova for the Period of FY18-21 Page | 12
agriculture being the second largest employing sector (34%), while industry employs the remaining workforce (17%). Despite the growing share of the service sector, agriculture remains the main pillar of the national economy and the main source of livelihood in rural areas, engaging about a third of the active population of the country compared to only 12% occupied in industry.27 Besides low productivity, under-developed rural infrastructure and poor access to markets, the sector is highly vulnerable to natural factors. Climate change-related weather events, in particular droughts, have had severe effects in recent years: the country has experienced five severe droughts since 2000 (2000, 2003, 2007, 2012 and 2015) which have shown to have a direct negative impact on the GDP in the respective years.
Moldova's economy managed to recover from the recent recessions and grew by 3.5% in 2017, supported by a strong recovery in agriculture and robust private consumption, in turn, led by higher remittances and higher private and public wages. At the same time, the contribution of net exports remains negative as a result of the continuous and growing dependency on imports. The contribution of net trade to GDP growth is likely to remain negative, despite favourable export developments. As consumption and imports strengthen, the current account deficit is expected to gradually increase, but to remain below its historical average thanks to the revitalization of foreign inflows.28 The reliance on remittances received from abroad, strengthened pensions, in addition to increased consumption, were the main drivers of Moldova's growth during all of the 2000s. Remittances are still 2-3 times higher than development aid and nine times higher than FDI inflows. As these drivers of growth are not sustainable in the long-run, and in order for Moldova to experience guaranteed future growth and poverty reduction, the country will have to strongly focus on private sector-led job creation.29 In terms of ensuring economic sustainability and long-term prosperity, and in addition to creating new jobs, increasing labour productivity is the main way to provide a more stable economic framework. Low labour productivity and shortcomings in education are fundamental reasons for the low level of income per capita in Moldova. Despite repeated economic slowdowns, the level of unemployment is comparably low at about 4%. However, the employment rate in Moldova is low compared to other European countries, standing at about 41% compared to 53% in the EL). This, among other reasons, is the result of an increased share of the informal economy, which employs an estimated 30% of the country's total workforce and heavy outward migration of Moldovan nationals.30 Youth unemployment is much higher than total unemployment measuring at about 13%. Moldova's education and training system shows many deficiencies, primarily there are significant mismatches between the education on offer and available employment opportunities in the country. Moreover, there is a weak strategic framework, poor service delivery and ineffective oversight evident in the country's technical and vocational training.31 This has led to an unbalanced labour market, with higher demand for workers with vocational training than for young people with university degrees, which urgently calls for a reform in
27 Statistical yearbook, 2016, http://www.statistica.md/pageview.php?l=ro&id=2193&idc=26328 http://pubdocs.worldbank.org/en/503241506936993065/Moldova-Economic-Update-2017-October-2-ENG-FINAL.pdf29 The World Bank, Country Partnership Framework for the Republic of Moldova for the Period of FY18-2130 http://www.oecd.org/eurasia/competitiveness-programme/eastern- partners/Peer_Review_Note_Monitoring_SME_reforms_Moldova.pdf31 Ibid.
vocational education and training (VET) and a review of the university curricula aimed at increasing the employability of young graduates.
The situation is explained by the fact that most of the economically active population lives in rural areas, where educational attainment is lower and economic activities are less profitable with lower wages. Furthermore, according to data from the National Employment Agency, 64% of the unemployed are located in rural areas. This deepens social and geographical disparities and calls for action to increase employment opportunities in rural areas, especially for youth and women.
On the policy level, Moldova offers attractive conditions for investors due to its geo-economical position and an attractive tax regime as well as low labour costs. The corporate tax rate in Moldova is at a highly competitive rate of 12%. Adding to this, the country adopted a Law on Industrial Parks in 2010, which along with Free Economic Zones (FEZ), offers substantial tax and operational benefits. Such initiatives have created a more favourable environment for investors in the development of the industrial sector of the economy. Foreign Direct Investments (FDI) is seen as a real driver for job creation, increased maturity of domestic firms and industrial development. However, institutional capacity to attract investments is lagging behind and is further impeded by political instability. Thus, the high FDI inflow reached in 2007-2008 remains exceptional compared to more recent years.
It is expected that, in the long-run, a weak convergence of Moldova to the level of the Central and Eastern Europe (CEE) countries will be observed32. Despite economic growth, the average income in Moldova is still very low in contrast to the GDP per capita in CEE countries, which is above all a consequence of the very low comparative productivity. The analysis of Moldova compared to reference countries points to structural deficiencies in the Moldovan economy, which partly explain this gap. Particularly, tradable sectors are underdeveloped, with industry currently having relatively low capacities to increase its share in GDP. Agriculture is a substantial but an uncompetitive sector. In conclusion, the economy of Moldova remains focussed on imports, while current export capacities remain low and their potentials untapped. Adding to this the private sector's investment activity is continuously declining. In fact, the national economy is steadily losing its potential to grow, which could lead to further increases in the gaps in productivity and real incomes compared with neighbouring CEE countries, thus putting at risk reaching long-term economic competitiveness and resilience. This could ultimately endanger the much-needed success in further eradicating poverty in the country.
1.1.2. Socioeconom ic profile
The last census in 2014 put the population number of Moldova at 2,998,200, indicating a reduction of 11.4% over the previous ten-year period. The urban population makes up 38.2% of this total, with 61.8% of all people living in rural areas. Out of the entire population, 51.8% are women and 48.2% men. The 0- 14 age group has seen the most significant decrease of all demographic sections, shrinking by 2%, while the over the age of 60 group increased by 3%. Although the number of economically active citizens
32 Expert Grup (2017) "State of the country report Republic of Moldova", http://www.expert-grup.org/en/biblioteca/item/1482-raport-de-stare-a-tarii-2017&category=7
decreased overall, it still remained the biggest group representing 65.4% of the total population, creating an opportunity for economic growth in the medium term. Until 2050, the demographic structure of Moldova is expected to see a further overall decline in the total population, increased ageing and a slightly growing share of the population residing in urban areas. The stagnation of total fertility and an unchallenged emphasis on external migration, both of which are interlinked, can be seen as the main driving factors of this development.33
Large parts of Moldova's society remain dependent on remittances sent back home by labour migrants. Despite having an overall positive impact on the standard of living, this made local market dependent on the economic state of other countries in the region. In 2014, 68.8% of the stream of labour migrants went to seek employment in the Russian Federation. Over the course of the last 15 years, the total amount of remittances peaked in 2013 when it reached USD 2 billion. Prior to 2009, most of the remittances originated from Western European countries. However, since 2009 this trend reversed with the Russian Federation now being the main source of income.34 Moldova's macro-financial system is therefore dependent on the state of the Russian economy, and others, which ultimately affects the wellbeing of Moldovans residing within their own country. Considering that the share of remittances accounts for an average of 18% of the entire population's income, a decrease by one-fourth of this source of income leads to a decrease of 4.75% in Moldova's GDP. The deriving shock is mainly felt within the social strata with a low income and in rural areas, the latter accounting for 70% of all migrants leaving the country to work abroad.
In 2016, the number of those employed within the country's borders increased by 1.3% year-on-year, reaching 1,219,500 people, which constitutes an employment rate of 40.8%. A similar employment rate was recorded last time during the crisis year of 2009 when the employment rate reached the 40% threshold. Thus, it took the national economy about seven years to recover the employment rate reached in the period of the global crisis, yet it still falls short of the rate attained prior to the crisis. The unemployment rate in 2016 was 4.2%, decreasing by 0.7 percentage points (p.p.) after an increase in the previous year. While employment increased in both absolute and relative terms, this increase was accompanied by a decrease in the number of formal jobs and an increase in informal employment, which negatively affects productivity and wage growth rates.35
Moldova is ranked 107th (out of 188) in the United Nations Development Programme (UNDP) Human Development Index (HDI) of 2016, putting the country in the top of medium human development category. At the regional level, countries which are close to Moldova are Turkmenistan and Uzbekistan, which have HDIs ranked 111 and 105 respectively.36 The country made significant progress in reducing poverty and promoting inclusive growth since the early 2000s. Considering the low level of the Gini
33 UNDESA Population Division https://esa.un.org/unpd/wpp/Graphs/DemographicProfiles/34 Expert Grup (2015) "Republic of Moldova 2015 State of the country report", p.22 http://www.expert- grup.org/ro/biblioteca/item/download/1382_f24bl51f9281855ee740b7alca5b780035 MEGA, 2nd Quarter, 2017, #1636 http://www.md.undp.org/content/dam/moldova/docs/Publications/HDR16%20Report.pdf Page | 15
index of 27%, Moldova has also been successful to some extent in avoiding the occurrence of unequal distribution of income within its society. Despite a sharp decline in poverty (from 68% to 17.5% between 2000 and 2011) and a continued downward trend to 11.4% in 2014, achievements in economic development and reduction in poverty have stagnated since 2010.37With 16.3% of the population living below the regional poverty line of USD 5 per day in 2015, which dropped 2% from 2014, Moldova remains one of the poorest countries in Europe. Moreover, a large share of the population (44.6%) is concentrated among the vulnerable (USD 5 - 1 0 -a-day consumption), meaning that they are at risk of falling back into poverty.38
The rural poverty rate is about 19% while it stands at 5% in urban areas. According to World Bank calculations, the employment rate in rural areas decreases faster than in urban which leads to a higher poverty rate among the rural population.39 The rural population relies on agricultural income and remittances, which are more volatile compared with other income sources, increasing the vulnerability to poverty. Most of the smallholders have limited opportunities and potential to commercialize and increase the size of their farms. Over the past years, the share of people in self-employment in agriculture for own consumption who work less than 20 hours a week (currently excluded from official employment numbers) increased from 15% of those working in agriculture in 2007 to 24% in 2014. This suggests that a larger share of people, mainly older people and the less educated, were rapidly transitioning to unpaid, low-intensity agricultural jobs and semi-subsistence farming.40 A recent increase in informal employment supports this phenomenon. Thus, the rural population is more affected by shocks impacting agricultural outputs as was seen in 2007 and 2009.
Poverty also varies among regions. The lowest poverty rate remains in the capital city, Chisinau, while central and southern regions register the highest poverty rates. Causes for poverty in Moldova are manifold, aside from structural challenges of the economy in the form of dependency on remittances and the associated risks, an aging population, a lack of economic opportunities and skills mismatches, informal payments and informal occupations, there exist also disparities in welfare and access to services across urban and rural areas and among ethnic minorities. The lack of road infrastructure and transport services plays a vital role in preventing people from connecting to employment and economic opportunities, markets, health care, and education. While a greater share of the population is living in rural areas, the rural population receives only a quarter of the amount of water supplied to the urban population.41 * Ultimately the country's low wage level (Moldova was ranked the second lowest wage
37 https://data.worldbank.org/indicator/SI.POV.DDAY?locations=MD38 The World Bank Systematic Country Diagnostic, 201639 World Bank, Moldova Poverty Assessment 2016, Poverty and Shared Prosperity in Moldova: Progress and Prospects: http://documents.worldbank.org/curated/en/168451467995808859/pdf/105722-WP-P151472-PUBLIC-Moldova-Poverty- Assessment-2016.pdf40 World Bank, Moldova Poverty Assessment 2016, Jobs diagnostics for Moldova41 World Bank, Moldova Poverty Assessment 2016. Poverty and Shared Prosperity in Moldova: Progress and ProspectsPage | 16
country after Ukraine with an average salary paid in hand of 216 EUR) is exacerbating the challenge of addressing the long-term elimination of poverty.42
As the role of remittances and pensions moderates, future growth and poverty reduction will need to be generated by quicker private sector job creation and increased productivity, as well as by renewing the stock of market-relevant human capital while shielding the population from shocks. Moreover, strengthening employment in the non-farm sectors is critical for sustaining progress towards expanding shared prosperity and for addressing the problems associated with an ageing population in a fiscally responsible manner. Finally, the vulnerability to climate shocks is expected to increase, affecting more heavily those households located in the rural areas and dependent on agricultural. Mitigation and measures to help affected households adapt to the impacts of climate change are therefore indispensable.43
1.1.3. Industrial sector
The structure of the Moldovan economy has undergone some changes over the past 25 years. Back in 1989, the Moldovan economy was relatively balanced with a share of 39% of industrial production, 37% agricultural production, and 24 % services. Nowadays, the economy is service-driven with shrinking shares of industrial and agricultural output. In 2016, services accounted for 73.7% (including other sectors), industry - 14.1 %, and agriculture - 12.2%.
In 1991, industry in Moldova accounted for about 40% of GDP and provided employment to 20% of the population. Consumer goods accounted for about 22% of industrial output, divided almost in half by food processing and clothing manufacturing. Traditional industrial products were: electrical equipment, pumps for industrial and agriculture use, agricultural equipment, chemical and construction industries.
For more than 20 years, Moldovan industry has gone through a difficult transition process owing to the need to re-engineer its production capacities and find new markets. The de-industrialisation was accompanied by a heavy brain drain, a lost capacity and relevance of engineering education, and a declining industrial culture.
During recent years, Moldova slightly improved its ranking in the Competitive Industrial Performance Index to the level of 2006, reaching position 111 out of 146 countries in 2014, though still far from its 84th place in 1990. At present, Moldovan industry is surely but slowly growing and regaining its importance for the country.
Currently, the industrial sector contributes to about 14% of the national GDP. Manufacturing produces about 85% of the total value of industrial production. Food production accounts for about a quarter of the total industrial production, with beverages making up about 11%. Other industries which contribute more than 5% include the manufacturing of other non-metallic mineral products, textiles and apparel as well as electrical equipment.
Moldovan industry is still characterised by low productivity and weak competitiveness. Traditional sectors continue to drive industrial development and are supported by the recent foreign investments in electrical cables and industrial textiles for the automotive sector, which are leading the integration of Moldovan industry into global value chains. Thus, in 2016 the industry grew modestly by 2.8% and underwent significant structural changes. The production of textiles, clothing, leather goods and footwear was not significantly affected by the crisis, and during 2016, these sectors recorded a two-digit production volume growth together contributing 10% to the total industrial production. Furniture production also increased and contributed about 3% to the total industrial production in 2016. These two sectors played an important role in the 2016 gross value growth. The structure of Moldova's exported industrial products is also changing. Thus, in 2005 the main exported product categories were beverages, including alcoholic drinks and vinegar, which were mostly replaced by electrical equipment and appliances in 2016, products which were not included in the top-10 exports in 2005. This was mainly due to exports of electrical cables cars made by several companies with the help of foreign investments. Investments have a vital role in the enhancement of the industrial production capacity and export supply. Additional new product categories in 2014, which were not included in 2005's top 10, include oilseeds and oleaginous fruits, pharmaceuticals, furniture, bedding, mattresses and pillows.
The absolute number of items exported by Moldova during the period 2011-2014 showed a continuous downward trend. Based on the analysis of the number of exported products and probabilities of their survival in the ECA region, experts concluded that insufficient marketing efforts and quality management were partly to blame, and that the probability of survival of Moldovan exports is much higher for products manufactured within the new industries compared to the traditional ones, especially for those coming from agriculture and food and beverage industries.44
Industrial production is characterised by a high concentration in the capital, which limits opportunities for better jobs in other regions and rural areas. Thus, 55% of industrial goods are produced in the capital city and 22% in the northern region. Industrial development is primarily dependant on the recent growth of foreign investments in FEZs offering attractive conditions. Overall, tax and incentives regimes are one of the most favourable in the region and the government is keen to further support and develop the country's attractiveness for investments. However, efforts to enhance the spillover effect and increase the capacity of domestic companies to serve investors should be the priority. These efforts will contribute to raising the maturity of local producers, increasing their competitiveness and capability to be integrated into international value chains.
The recently adopted National Strategy for Investment Attraction and Export Promotion 2016-2020 underlines the importance of job creation and export enhancement for sustainable economic development of the country. It emphasises the capacity of new technologies to enhance the competitiveness of local products. Thus, the strategy is focused on the seven sectors prioritised, based on their potential to attract investment, create jobs and contribute to the rise of exports for the next 4-5 years. These sectors have been identified based on the regional trends, domestic capacity, and competitive advantage. There are seven sectors identified as priorities for policies on investment attraction and export promotion: (1) agriculture and food industry; (2) automotive industry; (3) business services especially Business Process Outsourcing (BPO); (4) clothing and footwear industry; (5) electronics industry; (6) Information and Communication Technologies; and (7) production of machinery and parts. Almost all of these sectors exhibited significant and similar development during the last five years, partially owing to systemic support from USAID funded projects which aim at enhancing the competitiveness of local enterprises and increasing maturity of the sectors and their supporting institutions. The issues faced by these sectors are similar which made any efforts to develop them much more efficient. Among the most important issues are the following: lack of skilled workforce at all levels from shop floor workers to management, design and engineering; lack of capacity to produce homogeneous products; lack of investment or expensive financing available; lack of integration along the value chain and insufficient business linkages. These challenges, along with the weak institutional capacity to attract investments and promote exports, are causes of lost opportunities and hence targeted by the above-mentioned policy.
1.1.4. Agricultural sector
The agricultural sector plays a major role in Moldova's economy, having a share of 12.2% in GDP in 2016. However, the sector's contribution to the national economy has vastly decreased compared to only a decade ago, where it accounted for over 30%. This change can be contributed to the rapid emergence of the services sector which makes up about two-thirds of the country's GDP.45 46 Although agriculture presently employs about a third of the workforce, employment numbers are on the historic decline, having accounted for half of all jobs twenty years ago. Workers exiting the agricultural pool found employment in the emerging service sector or were forced to migrate as a part of the structural process.45 Although there is a high domestic demand for agro-products largely due to remittance inflows from abroad, the market has not been able to adjust to the higher demand. Additionally, domestic demand tends to be in search for more sophisticated, diversified and higher value-added products. Within this context, popular imported products are tobacco, off-season fresh fruits and vegetables together with alcoholic beverages. However, domestic supply has not been able to respond to these changes in demand due to reasons ranging from scarce processing capacities, climate-vulnerable basic production and fragmented value changes. Today, the main agricultural products produced by the Republic of Moldova are wheat, sunflower, fruits, berries, grapes and nuts. Overall, agriculture remains
45 National strategy on agriculture and rural development for the period 2014-202046 Ibid.
an important sector of Moldova's economy, which needs to become more competitive in order to be able to service domestic demand and compete in the global market.
The Republic of Moldova, unlike most of the ECA countries, generates almost half of its export earnings with the help of the agricultural sector. However, the agri-food balance is in decline due to the fast increase of imports of processed food. Agri-food exports, which primarily consist of low-value products and unprocessed raw materials, have increased threefold from 2000 to 2012, while agri-food imports, dominantly processed products, have grown sevenfold, resulting in a deterioration of the agri-food trade balance and affecting trade conditions. In value terms, five sectors dominate Moldovan agricultural and processed food exports: oilseeds and oleaginous fruits (HS12), beverages and spirits (HS22), fruits and nuts (HS8), cereals (HS10) and preparations of vegetables, fruits and nuts (HS20).47 In three out of these five product groups, the share of Moldovan exports to the EU is higher than the share of exports to the world. This, in particular, applies to cereals. In addition to the EU, the CIS region is one of Moldova's main trading partners in agri-food. In 2011, Russia, Belarus, Ukraine, Romania and Germany accounted for 60% of total agri-food exports. In the same year, Moldova's primary import countries for agri-food were Ukraine, Russia, Romania, Turkey and Germany which accounted for 60% of total agri-food imports.48
For the past 20 years, agriculture has shown slower and unstable growth patterns compared to the rest of the economy. The biggest factor contributing to weak growth were the impacts of climate change and the persistence of severe droughts in 2003, 2007, 2009 and 2012 which had a negative impact on the country's crop yields. Moreover, the high volatility of agricultural output is a reflection of underdeveloped weather-related risk mitigation instruments, including sufficient access to irrigation, low rate of adoption of modern agricultural technologies (such as drought-resistant varieties, anti-hail protection tools) and a lack of innovative insurance schemes for agriculture, such as the index-based weather insurance program. Evidently, this formulates the urgent need to adapt agricultural production to climate change under conditions where, even without climate change, increases in non-agricultural demand for water are expected to cause shortages in the next several decades.49 Further reasons associated with Moldova's slowing of agricultural production include the impacts of economic crises, which have raised input prices (e.g. fertiliser, fuel, and machinery).50
According to data provided by the National Bureau of Statistics (NBS), after a drastic decrease in 2015 (by 13.8% year-on-year), agricultural production recovered due to more favourable climate conditions.51 It became a flagman of economic growth in 2016, with a contribution of 2.2 p.p. to the overall growth of 4.1%. The entire sector grew by 18.6% while crop production experienced a growth of 26%. Growth in livestock production was more modest, with 3.1%, being traditionally less volatile. Crop yields in wheat
47 HS stands for Harmonized System and is a multipurpose international product nomenclature developed by the World Customs Organization (WCO).48 National strategy on agriculture and rural development for the period 2014-2020.49 Ibid.50 Ibid.51 http://www. statistica. md/newsview.php?l=ro&idc=168&id=5511.
(+40%), sunflower (+39%), fruits and berries (+19%), vegetables (+12%) and grapes (+3%) saw significant increases compared with 2015. The livestock sub-sector grew insignificantly (+3%), however, the smaller increase in livestock production is offset by a stronger stability compared to crop production. The unusually strong growth in egg production (+7%) occurred prevailingly due to the increase in the number of laying hens. Milk production slightly decreased compared to the 2015 level (-0.8%) with one of the causes being the decrease (-10.1%) of active livestock in dairy enterprises.
Land usage in Moldova favours crop production. However, there is an overall low profitability of the agricultural sector as a result of soil degradation, as well as the dominant position of low-value crops in agricultural production at the expense of high-value crops. Over 80% of the area cultivated in the Republic of Moldova is covered by low-value crops (such as cereals, oilseeds, sugar beet and fodder crops), while fruit and vegetables occupy less than 20%. Cereals, including wheat, corn and barley occupy more than half of the sown areas. Moldova's focus on cereal production is due to large-scale mechanization, relatively low capital requirements, limited labour intensity, reliable markets and stable profit opportunities, as well as the limited need for irrigation. The lack of high value-added product production is primarily due to high investment requirements, low irrigation potential and availability as well as stringent food safety requirements.52
The lack of horizontal and vertical integration of value chains is another cause of the low competitiveness of the agricultural sector. The reasons for current low prices for agricultural production include underdeveloped wholesale markets, reduced bargaining power, uneven product quality, as well as a lack of distribution channels, precarious infrastructure and limited access to external markets. The absence of a modern post-harvesting infrastructure was identified as one of the weakest links in the supply chain for fruits and vegetables. Furthermore, the slow development of the processing industry also contributes to the lower competitiveness of the sector.
Producing households from rural areas have dominant shares in the market for animal products (milk: 96%; cattle and poultry: 63% and; egg production: 63%). Similarly, most of the animal stock is concentrated in rural areas, including 92.1% of all cattle, 95.5% of cows, 61.5% of pigs and 96.9% of sheep and goats. This situation presents a number of challenges for the sector along its way to enter the EU market. EU market requirements have prevented the export of Moldovan meat and live animals so that there are currently no exports to the EU. Government officials have announced their aim for the country to become authorised to export dairy products to the EU by 2019.53 At this point, Moldovan companies can trade on the EU market in only three animal products: honey, caviar and egg powder.The biggest obstacle is to fulfil the requirements and commitments of complying with the established rules to produce and commercialize livestock production, namely the implementation of the
52 National strategy on agriculture and rural development for the period 2014-202053 Statements made by Mr. Octavian Calmic, Minister of Economy of the Republic of Moldova and Mr. Gheorghe Gaberi, chief of the National Food Safety Agency of the Republic of Moldova, as reported by Realitatea TV on 3rd of May 2017, http://www.realitatea.md/piata-ue-ramane-neexplorata-moldova-are-voie-sa-exporte-doar-anumite-produse-de-origine- animaliera—video 55885.html.
international food safety standards (Hazard Analysis and Critical Control Points (HACCP)-based management system). A recent study54 on the dairy industry concluded that in order to fully benefit from the opportunities offered by the DCFTA in the dairy sector, a set of actions are expected from each stakeholder group: the government, dairy producers, associations, and individual farmers. General recommendations set out include measures to organize farmer-controlled marketing and production cooperatives, with the aim to increase their negotiating power with their suppliers, and to secure the provision of high-quality feed and other key inputs; improving cattle feeding in the cold winter, as this is indispensable for improving the animals' health and productivity; diversification away from primary production and start-up small processing plants targeting local markets; and others .
According to the Agricultural Census from 2011, Moldova had 2,243,540 hectares of arable land and 902,214 agricultural holdings. About two-thirds of the farms own more than 50 hectares each.Moldovan arable land is largely fragmented into small parcels of land belonging to different owners. Up to 90% of cultivated crops are cereals such as maize and sunflower and fodder crop. This produces a negative impact on soil quality, which has degraded significantly. The situation could be improved through the diversification of cultures and crop rotation, including through the introduction of more herbs.
Apples are traditional horticulture products, and modern technologies already exist and are implemented along the apple value chain. However, it is difficult to enhance market diversification and Moldovan fresh apple exports are almost entirely directed towards the CIS region and fail to penetrate the EU market. Other cultures such as prunes and pears have the potential to produce better profits, but similarly, other fresh fruits (grapes, plums, cherries and peaches) make up a very small fraction of the EU's imports. The primary reason for the lack of success for Moldova's fresh fruits to enter the EU market is primarily due to the EU's already highly-sophisticated fruit market. The EU relies on complex logistics and imposes specific requirements on product packaging, as well as a minimum entry system. In particular, Moldova has found the latter to pose as a significant market barrier.55
There are 65,000 ha of orchards in the country which have a high production potential that is not fully exploited due to limited post-harvest facilities and unreasonable loan schemes. Horticulture is a traditional branch in Moldova which gives good returns when products are exported. Vineyards in Moldova account for 137,000 ha, from which table grapes account for around 20,000 ha. Only a quarter of vineyards have productivity levels above 8 tons/ha, while another 35% have an output of 3-5 tons/ha and the remaining 40% less than 3 tons/ha.56 Organic agriculture is another underdeveloped sector in Moldova and exports are not fully exploited. Areas cultivated with organic agriculture could be increased to 100,000 ha. The market for organic produce is characterized by poor organization among
54 Moldovan dairy: the difficult way towards the EU market, Expert Group55 National strategy on agriculture and rural development for the period 2014-202056http://country.eiu.com/article.aspx?articleid=1674655951&Country=Moldova&topic=Economy&subtopic=Forecast&subsubtopic=Economic+outlook
farmers and there are no concerted efforts to promote their products on domestic and international markets. Other key problems of this sector stem from pest control, decreasing livestock and lack of skills for manure management.570ver the years, agriculture has maintained its position as a priority sector for donor organizations and has received financing in the form of grants, preferential credits, and various forms of technical support. In 2016 the agriculture sector was a leading receiver of external aid, absorbing about 29.6 million EUR, according to data published by the State Chancellery in its annual report on Official Development Aid (ODA). The same report indicates that the focus of support was in the area of increasing competitiveness through market integration and modernization, in addition to modernization of the agri-food chain to comply with EU requirements on quality and food security.
The EU provides significant support to the development of Moldova's agricultural sector. According to the European Neighbourhood Instrument for 2014-2020, 30% of the EU's allocations have been projected for the agricultural and rural development of Moldova (indicative allocation for the 2014-2020 period is 610-746 million EUR; the indicative bilateral allocation for the programming period 2014-2017 is 335-410 million EUR).58 This support is intended to:
• increase the competitiveness of the agri-food sector through modernization, market integration and alignment with international standards;
• support the diversification of economic activity in rural areas giving due attention to the creation of green and decent jobs, observing in particular agro-biodiversity conservation and the protection of valuable areas; and
• ensure the sustainable utilization of natural resources in rural areas and in the agri-food sector etc.
Moldova has excellent opportunities to modernize its agricultural sector and steer it towards a flexible and competitive direction.59 Producers have to be encouraged to move towards the production of high value-added products, rather than focusing on the export of raw products and bulk. Packaging sophistication and diversification can help in adding value and entering new markets. The agricultural productivity of Moldova is low due to the high number of small family farms and the lack of cooperative/clusters development, the low degree of technology in post-harvest infrastructure, the low level of entrepreneurship and the limited educational opportunities as well as the low use of agricultural inputs for further processing. Therefore, modernising agriculture, upgrading production processes and technologies, improving special education at the VET and higher level and establishing EU-compliant food safety standards are vital factors for the social, economic and political progress of the sector and the national economy. Especially against the background of the expected impact of climate change,
57 Idem, p. 2158 http://ec.europa.eu/enlargement/neighbourhood/pdf/key- documents/moldova_2014_2017_programming_document_en.pdf59 Trade Sector Impact Briefs, EU Neighbourhood Page | 23
effective irrigation with high water-use efficiency will be another key to sustainable agricultural development.60
1.1.5. Tourism
According to data from the NBS, the share of income derived from tourism in GDP accounts for only around 1%. In 2016, travel and tourism directly supported 10,000 jobs (0.9% of total employment) in Moldova and this figure is expected to rise by 1.4% per year to 12,000 jobs (1.0% of total employment) in 2027. This includes employment by hotels, travel agents, airlines and other passenger transportation services (excluding commuter services), as well as the activities of restaurant and leisure industries directly supported by tourists.61 Compared to other countries in the region (5% in Romania; 8% in Bulgaria; 9% in Hungary; 10% in Croatia and 25% in Greece), the tourism sector has a significantly lower share in GDP.62
According to the Strategy for Development of Tourism for the years 2014 - 2020, Moldova has a competitive advantage relative to neighbouring countries in niches such as vineyards and wine tourism, gastronomic tourism and cultural tourism.63 In addition to this, there was an attempt in 2016 to design a national program for ecotourism development. Expansion in these niches requires sufficient housing in rural areas. In 2016, only 26 tourist pensions were available with the total capacity to host 955 visitors daily.64 During the same year, 21,343 tourists were hosted by tourist pensions, equal to about 7% of the total capacity, while at the same time this represented an increase of almost 2.5 times compared to the previous year. Tourists visiting Moldova find accommodations mostly in Chisinau (90%), and only by an extent of 10% in rural areas.
In spite of prioritisation of the sector and recent efforts to develop it, Moldova remains an unknown tourist destination visited only by about 15,600 foreign tourists yearly. As the Strategy for the Development of Tourism acknowledges, Moldova could fit into the niche of so-called "adventurous tourism" as an attractive destination for individuals looking for new and unexplored places. However, degradation of natural capital has had a significant negative effect on the development of community nature-based and ecological tourism, which have been identified by the Tourism Development Strategy "Tourism 2020" as important drivers for the country's economic development. These forms of tourism could include and combine wine tourism, rural tourism and cultural tourism bringing mutual advantages to the adjacent sectors and enhancing employment opportunities in rural areas.
1.1.6. Energy
Moldova has minor reserves of coal, petroleum, natural gas and a moderate hydroelectric potential. As a result, the country highly depends on energy imports, mainly from Russia, Ukraine and Romania. More
60 National Strategy for agricultural and rural development for 2014-2020, http://lex.justice.md/md/353310/61 World Travel & Tourism Council; Travel & Tourism Economic Impact 2017, Moldova https://www.wttc.org/- /media/files/reports/economic-impact-research/countries-2017/moldova2017.pdf62 World travel and tourism council, Economic Impact Analysis63 Strategy for the development of tourism 2014 - 2020, p. 2964 National Bureau of Statistics
than 74% of the country's energy needs are covered by imports of coal, oil products and natural gas, making it vulnerable in terms of energy security. The country's significant dependency on energy imports has led to increases in domestic energy prices and external debts.65 66
In the share of total final energy consumption (TFEC), the industrial sector (8%) was the fourth largest consumer in 2016, the first one being residential sector (49,8%) followed by transports (28.4%), public sector with services (10.6%) and agriculture (3,17 %). The industry is the third biggest consumer of natural gas in the country, 61 kilotonnes of oil equivalent (ktoe) and electricity after the residential sector and services. With almost all of the country's electricity generated from the combustion of natural gas (5,755 GWh out of 6,091 GWh), while hydropower, solar photovoltaic (PV) and wind supply 308 GWh and a combined 4 GWh respectively, the role of renewable energy in the industrial sector is largely underrepresented and industrial activity relies almost exclusively on natural gas imports. However, domestic production of biofuels and waste is the biggest source of energy in the residential sector. Agriculture is only a minor consumer of total energy, most of it results from demands for petroleum products.65
In terms of the transport of energy, a 43-kilometre long pipeline between Moldova and Romania provides for the transport of natural gas. Additionally, Moldova initiated to build a pipeline connecting Ungheni to Chisinau, to allow gas to reach Moldovan population centres.67 Moldova's energy mix is less C02 emissions intensive in regional comparison, given that the country uses virtually no coal for energy generation. At the same time, energy intensity in Moldova is still comparatively high (over 3 times higher than the EU average), though it has significantly decreased since 2005. Numerous factors, including ageing technology, equipment and networks, and the fact that the system runs at much lower than the designed load, contribute to higher energy losses.68 69 Thus, the main risks that will have to be addressed by the country are associated with the high dependence on single import sources, in particular natural gas, and low efficiency, both at the level of supply and demand. Additional problems include low penetration of the energy system with renewable energy sources, despite the efforts of the Government and development partners to promote the uptake of biomass in an effort to raise national capacity in the bioenergy sector. As an agricultural country, biomass is one of the most accessible alternative energy sources in Moldova and currently is supplying 26% of the total annual energy consumption. Although there are certain risks associated with fluctuations in agricultural production output as a result of the predicted impacts of climate change.59 In the absence of increased uptake of energy efficiency and renewable energy, the supply of reliable and affordable electricity, as well as
65 https://www.unece.org/fileadmin/DAM/env/epr/epr_studies/ECE_CEP_171_En.pdf66 https://www.iea.org/statistics/statisticssearch/report/?year=2015&country=Moldova&product=Balances67 https://www.cia.gov/library/publications/the-world-factbook/geos/md.html68 Energy Charter Secretariat (2015) "In-Depth Review of the Energy Efficiency Policy of MOLDOVA", p. 10 http://www.energycharter.org/fileadmin/DocumentsMedia/IDEER/IDEER-Moldova_2015_en.pdf69 https://www.unece.org/fileadmin/DAM/env/epr/epr_studies/ECE_CEP_171_En.pdf Page | 25
heating; will likely remain an issue of major concern for business, policy-makers and citizens and consequently negatively influence investments and the country's socio-economic framework70.
The last Implementation Report of the Energy Community issued in September 2016 indicates almost a halving of the energy intensity in the country from 0,92 TPES/GDP (total primary energy supply/GDP) in 2011 to 0,48 TPES/GDP in 2014.71 The main sources of this reduction are the measures for increased energy efficiency and the reduction of overall energy consumption in the industrial sector, which decreased more than twofold over the same period. The Government had set energy saving targets of 167 ktoe and a 9.5% reduction by 2020 in line with the European Directive 2006/32/EC on energy end- use efficiency and energy services. As of 2016, the Moldova Energy Efficiency Action Plan 2016 - 2018 reported savings of 52,5 ktoe and a reduction of 3.0%, indicating a substantial gap compared to the agreed targets72 73.
The European Bank for Reconstruction and Development (EBRD) supports the modernization and renovation of the industrial sector through the Moldovan Sustainable Energy Financing Facility (MoSEFF) III credit line, for which EUR 20 million is expected to be allocated. UNIDO is expected to provide assistance in the area of energy management and associated best industrial practices in the context of both the National Cleaner Production Programme and through follow-up activities of the Industrial Energy Efficiency project that was implemented in Moldova recently. Access to finance will remain central to the achievement of these programs. However, this may represent a constraint for the industrial sector for two main reasons. Firstly, companies and the private sector will not be able to access finance and grants from public funds. Public funds will be unavailable for the time period indicated in the Action Plan. As a result, the Energy Efficiency Fund and other state-owned funds are likely to have reduced resources available for investments in infrastructure. Secondly, it is not clear to what extent the credit line of MoSEFF III will continue to be attractive for industry and Small and Medium-sized Enterprises (SMEs). The industrial and SMEs sector seem to have exhausted their potential for energy savings through measures that require significant financial support. Under these circumstances, the internalization of low or zero cost energy saving measures appears to be a more feasible solution for the manufacturing sector and for the country's small businesses.
In the area of renewable energy, the most significant increase in the share of the renewables energy mix has been achieved in biomass consumption where a 26% of the energy used in Moldova has biological origin. Data from the Moldovan Energy Regulatory Agency and Energy Efficiency Agency indicates an increase in installed capacity of renewable energy in the past two years, from 21.2 megawatts (MW) in 2015 to 26,7 MW in 2016.
70 http://blogs.worldbank.org/europeandcentralasia/moldova-road-energy-sector-viability71 Energy Community Annual Implementation Report 2015/2016, p. I l l https://www.energy- community.org/portal/page/portal/ENC_HOME/DOCS/4332394/3 D790302C9FD5024E053C92FA8C0D492.pdf72 Idem, p. I l l73 Energy Community Annual Implementation Report 2015/2016, p. 110 Page | 26
The Action Plan for Energy Efficiency for 2016 - 2018 also mentions renewable energy but refers merely to biomass. Particular focus on developing the capacity of local green tech industries should be encouraged as it would be in line with Government priorities to re-industrialize the country and help to decrease the country's considerable energy dependency. In fact, installed renewable electricity capacity significantly falls short of the identified technical potential. This is especially the case for solar PV, wind and biomass, with a technical potential of 4.647 MW, 20.868 MW and 753 MW respectively, and installed capacity is currently a little over 2 MW for each of these sources. Recent experience has shown that the promotion of renewable energy investment opportunities has increased the number of solid biomass fuel producers fivefold since 2011, indicating both the effectiveness and the need to further promote investments and build capacities for the uptake of renewable energy, in this case biomass, in order to capitalize on the sector's potential.73
In accordance with the Renewable Energy Action Plan for the period 2013 - 2020, by 2015,150 MW of intermittent renewable power should have been installed73 74. Similar to its goals on energy efficiency, it can be observed that the country is largely running behind schedule. Nevertheless, taking into account that a massive integration of intermittent renewables in the Moldovan energy system might cause system security problems, imbalances, as well as financial impact, in order to address those key issues, the Government is revising its vision on development of the renewable energy sector. Thus, through the new Law on the promotion of the use of energy from renewable sources and other items of secondary legislation, including the revised version of the NREAP 2013-2020, the Government aims at installing a cumulative capacity up to 180 MW by 2020, instead of 400 MW set by the Action Plan.75 76 77. To be noticed that 80% of the Moldovan population is considered to live in energy poverty, with major influencing factors being raising energy prices, the low-income level and high and inefficient consumption of energy.76 77 Small-scale decentralized renewable energy systems should therefore be considered to provide a solution for the energy deprived rural areas, while the focus in urban and industrialized areas should be put on stepping up the promotion of energy efficiency, in addition to integrating renewable sources, which becomes highly relevant in an effort to reduce production costs, promote economic competitiveness and reduce energy imports.
1.1.7. Environm ent
The country is struggling with low environmental practices and the overall environmental situation in Moldova requires a significant improvement to address the deterioration in the past decade. Moldova is highly vulnerable to climate change and disasters with an average annual economic loss of 2.13% of its total economic output. Moreover, the country's unique biodiversity is treated by warming
73 IRENA:Cost-competitive renewable power generation: Potential across South East Europe74 Idem75 http://lex.justice.md/index.php?action=view&view=doc&lang=l&id=36388676 The World Bank measures energy poverty indicators as outputs (e.g. lack of electricity connections)77 http://documents.worldbank.org/curated/en/101211468060253519/pdf/Moldova-Tariff-and-Afordability-Study-2015-10- 26-FINAL.pdf
temperatures, habitat fragmentation and over-exploitation. However, the country's enforcement of environmental legislation lags behind, which is likely to result in further environmental degradation, pollution and the unsustainable use of natural resources.78 79 Soil erosion and other degradation processes in the country are mainly the result of poor agriculture practices. In addition, Moldova's vulnerability to climate change is expected to increase, which inter alia, puts at significant risk the country's agriculture, which continues to be the main source of income for a large share of the Moldovan population.
The 3rd United Nations Economic Commission for Europe (UNECE) Environmental Performance Review showed that total emissions of C02 more than doubled from 2005 to 2011, reaching about 12.8Mt of C02 in 2013. Moreover, although the total volume of air pollutants emitted from stationary sources decreased by 24% between 2005 and 2010, the positive development was not due to industry becoming cleaner, but rather due to a reduction of the total volume of industrial production.78 79 80 Similarly, between 2005 and 2010, Greenhouse gas (GHG) emissions from the energy industry and transportation increased 29.6% and 15 % respectively.
Moldova is a country with scarce water resources. The country uses groundwater for household purposes, industrial and agricultural sectors. Around 70% of the population uses groundwater as drinking water; however, only 15% of this resource represents abstracted water.81 Due to limited water resources, low water use efficiency and water losses overall water scarcity is intensifying. While the amount of wastewater doubled from 2005 to 2009, total wastewater discharges decreased by 7.3% between the years 2005 to 2011.82 During the same period, nitrate discharges diminished by 38.8% and sulphates by 20.8%, while chloride discharges increased by 12.3%.83
Industrial use of water in Moldova registered a slight decline in 2014. Nevertheless, this sector continues to be the largest user of water, accounting for 74.5% of total water use in the country. Around 45% of the water is used by the beverage and food industry, followed by electricity, gas and water industries at 15%. The 2014 UNECE Environmental Performance Review for Moldova concludes that water pollution in Moldova as a result of industrial activities is significant, according to official figures only 89% of sewage water requiring treatment is normatively treated. The general picture presented by the NBS indicates that in 2015, the collected wastewater accounted for 67.6 million cubic meters, whereby 55% of this volume was coming from the general population, thus suggesting that the remaining was generated by economic activities. The most common practice of discharging industrial wastewater is
78 http://www.md.undp.org/content/moldova/en/home/climate-change-environment-energy.html79 http://documents.worldbank.org/curated/en/101211468060253519/pdf/Moldova-Tariff-and-Afordability-Study-2015-10- 26-FINAL.pdf80UNECE (2014) "Republic of Moldova. Environmental Performance Reviews. Third Review" https://www.unece.org/fileadmin/DAM/env/epr/epr_studies/ECE_CEP_171_En.pdf81 UNECE (2014) "Republic of Moldova. Environmental Performance Reviews. Third Review", p. 91, http://www.unece.org/fileadmin/DAM/env/epr/epr_studies/ECE_CEP_171_En.pdf82 Waste management strategy 2013-2027, http://lex.justice.md/index.php?action=view&view=doc&lang=l&id=34734183 UNECE (2014) "Republic of Moldova. Environmental Performance Reviews. Third Review", p. 91, http://www.unece.org/fileadmin/DAM/env/epr/epr_studies/ECE_CEP_171_En.pdf
into municipal wastewater treatment plants (WWTPs).84 A lot of industrial WWTPs are obsolete. In 2010, only 17 (9%) of 198 WWTPs were in a satisfactory state, 112 (56%) require repair and 69 (35%) required full refurbishment. Significant quantities of untreated industrial wastewater go into rivers. Major issues are caused by the filtration beds of sugar factories, wineries and electronic enterprises.85 Most WWTPs operate de facto with mechanical treatment only. As a result, discharges from WWTPs into water bodies contain organic substances, ammonium and nitrates.86
Moldova still holds insufficiently secured deposits of Persistent Organic Pollutants (POPs). The Waste Management Strategy of Moldova till 2027 suggests that POPs make up 20-30% of the total stock of obsolete and inhabited pesticides in Moldova. From 2007 onwards, some actions were taken with the destruction of 2,766 tons of POPs.87 The remaining amount of POPs is estimated at about 700 tons and studies conducted in the close vicinity of deposits show that the soil and surface water are contaminated with these substances.
1.1.8. Private sector developm ent and S M E s
Public sector development policies in Moldova systemically focus on the improvement of the entrepreneurship environment and the increase of competitiveness. Regulatory reforms have helped Moldova to steadily advance in the World Bank's Doing Business rankings, from 83rd out of 185 countries in 2013 to 52nd out of 189 countries in 2016. However, Moldova still faces significant challenges when it comes to increasing competitiveness and attracting new investment.
Over the last few years, certain progress could be observed in trade facilitation, especially after the DCFTA signing. The overall trading conditions of Moldovan goods are well positioned, with free trade access to a cumulated market of over 880 million customers. However, trade and transportation logistics lag behind in realising the offered market potential. Other areas in need of further development include the strengthening of institutions, business sophistication and innovation, business linkages and enterprise financing issues as well as addressing the mismatch between available skilled workforce and labour market requirements
As in other lower-middle income countries, economic activity in Moldova is characterised by a high number of Micro, Small and Medium-sized Enterprises (MSMEs). In 2016, Moldova had 46,000 registered businesses, 33,300 (72.4%) of them were active, out of which 85% were micro-, 11% small- and 2.5% medium- and only 1.3% large-sized.88 Moldova's SMEs contribution to GDP is close to 40% and the employment rate is 60% out of total jobs, while SMEs account for 98.7% of all enterprises. Most of
84 National Bureau of Statistics (2016) "Activitatea sistemelor de alimentare cu apă şi de canalizare în anul 2015", 31 May 2016, http://www.statistica.md/newsview.php?l=ro&id=5223&idc=16885 Republic of Moldova. Environmental Performance Reviews. Third Review, p.9486 Idem, p.487 87 Ministry of Environment (2013) "Waste Management Strategy of the Republic of Moldova for 2013-2027", p. 6, http://www.serviciilocale.md/public/files/deseuri/2013_01_24_NATIONAL_WASTE_MANAGEMENT_STRATEGY_2013- 27_ENG.pdf88 http://www.statistica.md/newsview.php?l=ro&idc=168&id=5685 Page | 29
the SMEs in Moldova operate primarily in low added-value sectors such as retail, trade and agriculture followed by manufacturing and construction, which weakly contribute to the national value-added. The growth of the SME sector is inhibited by low levels of innovation and absorption of Research and Development (R&D), low levels of SME internationalization due to regulatory barriers, limited export support measures, access to finance below regional levels (e.g. high collateral, low number of firms with loans), excessive reliance on government/donor support, incomplete regulatory frameworks and, lastly, a weak legal system and regulatory enforcement capacity.
The main reason for their underperformance is that SMEs operate in isolation and are unable to realize economies of scale. While growth opportunities emerge through access to export markets, SMEs in Moldova have only limited export options due to the extent of the above-mentioned factors. Export consortia development activities should be undertaken within cluster programmes in order to increase integration into global value chains. UNIDO has developed an approach to cluster development that helps seize growth opportunities and overcome obstacles to development and has a distinctive advantage and long-term experience in fostering export consortia.
To overcome the barriers facing the private sector, the Government has prioritized the promotion of industrial parks to support local economic development. The adoption of the new Law on Industrial Parks (No. 182 of July 15, 2010) created new conditions for attracting investments in the development of the industrial sector of the economy. Within one year after adoption, 13 feasibility studies were developed on the creation and development of industrial parks, based on various types of property in different regions of the country. When creating and developing the activity of industrial parks, investors are provided with state support both in the process of obtaining authorizations to operate (the principle of "single window") and in the process of park functioning: granting of special benefits for use and redemption of assets, optimization of government inspections of the residents' activity as well as support for investment projects of national significance. Currently, approximately 60 industrial companies operate in 10 industrial parks in the country, employing over 2,500 people. However, to reach the full potential of industrial parks for the economic development of Moldova, and as a factor in creating an enabling shared prosperity through job creation, further investments are needed. To attract more investments, services such as quality certification and export promotion could be expanded through the use of co-financing initiatives targeted to specific segments of the SME sector, especially to those with high growth prospects. Further attention should be paid to increasing the quality and availability of business development services, including non-governmental organizations (NGOs), consultancies and business associations. This could help to broaden the range of services and foster the diversification of sources and types of external financial assistance.89
Moldova is a member of various regional and international organisations. The country declares integration into the European Union as its main development priority. The structure of external economic relations is changing due to the political decisions taken in joining the EU's Eastern
Partnership (EaP) in 2009. Decisions are further influenced by the signing of the AA between the European Union and the Republic of Moldova, which fully came into force on 1 July 2016 and the introduction of the DCFTA. Over the last few years, the EU has remained as the main market for both Moldovan exports and imports and has overturned the share of the CIS region, which Moldova also maintains a free trade area with. Exports to EU countries in 2016 totalled 1.332 million USD (9.4% increase as of 2015), while CIS countries received 20.3% of all exports, corresponding to a 15.9% decrease in total exported value. The export analysis shows a three-fold increase in new destinations in Asia (Iraq, Lebanon and Malaysia), which is partially explained by the availability of maritime transportation due to the development of the Giurgiulesti seaport, which enables access to the Black Sea. Another reason is the need to explore new markets after a decrease of exports to the Russian Federation and barriers limiting exports into the EU. The overall increase of trade with other countries shows the efforts of Moldovan producers to diversify export destinations and to ensure greater sustainability and avoid economic risks as a result of geopolitical tensions and existing market barriers.
1.1.9. National developm ent policies
Moldova aims to achieve a paradigm shift away from the existing economic model of reliance on remittances and consumption towards an export-oriented model built on investments, innovation and competitiveness. The current reform agenda is expressed within the National Development Strategy (NDS) otherwise referred to as "Moldova 2020", which was adopted in July 2012. The NDS includes a total of seven priorities and, in the context of economic development, focuses on the following objectives:
• Aligning the education system with labour market needs in order to enhance labour productivity and increase employment in the economy;
• Increasing public investment in the national and local road infrastructure, in order to reduce transportation costs and increase the speed of access;
• Reducing financing costs by increasing competition in the financial sector and developing risk management tools;
• Improving the business climate, promoting competition policies, streamlining the regulatory framework and applying information technologies in public services for businesses and citizens;
• Reducing energy consumption by increasing energy efficiency and using renewable energy sources.
Emphasis is put on private sector development, particularly on SMEs, the development of quality infrastructure capacity facilitating exports, the transfer of advanced technologies (including in agriculture), the application of environmental best practices within the private sector and regulations aiming to stimulate and eliminate the barriers preventing business development.90
90 "Moldova 2020. National Development Strategy: 7 solutions for economic growth and poverty reduction", p.8, approved by Law nr. 166 of July 11th, 2012), http://particip.gov.md/public/files/Moldova_2020_ENGl.pdf Page | 31
Up until 2015, Moldova's industrial policy was focused on strengthening and encouraging factors determining the creation of a technologically advanced, science-intensive, efficient and competitive industrial sector connected to European standards.91 The main document of strategic planning prepared by the Ministry of Economy and Infrastructure in this respect was the Strategy of Industrial Development for the period until 2015 approved in 2006. The document set out the principles, objectives, and priorities for development of industrial branches and main mechanisms and instruments for its implementation, aiming at improving the legal environment, industrial management capacity, enhancing competitiveness of industrial enterprises, supporting industrial enterprises to innovate and access new markets as well as strengthening of scientific potential and growth of professional skills of workers from the industrial sector. The Strategy focuses on the period until 2015; however, its objectives remain relevant and will be inherited by the new industrial strategy which is currently in the making.
The most recent and comprehensive economic policy document is the National Strategy for Investment Attraction and Export Promotion 2016-2020, adopted by Government in March 2016.92 The Strategy aims to enhance the value and the diversification of Moldovan exports. Investments, particularly FDI, are seen as the main instrument to harness the country's economic potential. The Strategy identified seven priority sectors for the attraction of investments and export-oriented policies: (1) information and communication; (2) manufacturing of machines and equipment; (3) administrative services and activities to support services; (4) machinery and parts of machines; (5) cloth, textile, and footwear manufacturing; (6) electrical equipment; and (7) agricultural and food industry. As a result of this Strategy, it is expected that by the end of 2020 the annual inflow of investments would rise to 380 million USD, create a minimum of 10,000 new jobs, increase the volume of exports of goods up to 3.002 billion USD, with services up to 1.275 billion USD, reduce trade deficit in GDP up to 4% and decrease the unemployment rate to 1.4%.
The Government's Strategy of Innovation for the period 2013 - 2020 "Innovation for competitiveness" aims to provide a comprehensive framework for horizontal policies expected to enhance the competitiveness of Moldovan products and services on international markets, the building of a knowledge-based economy, development of human resources and the absorption of innovations.93 The strategy acknowledges that Moldova has the capacity to assimilate, reproduce, re-engineer and optimize existing innovations; however, the country has little capacity to generate innovation at a global scale. The Strategy recognizes that the innovative capacity of the country derives primarily from the capabilities of local companies, the level of sophistication and education consumers and the way in which the Government, universities, research institutes and other stakeholders interact to set up a system that is able to absorb and diffuse innovations. Implementation of this Strategy should accelerate the development of the innovation system of Moldova, improve the perception and acceptance of
91 http://www.mec.gov.md/en/content/industry92 Strategy of Attraction of Investments and Promotion of Exports 2016 - 2020, March 3, 2016, http://www.gov.md/sites/default/files/document/attachments/intr42_5.pdf93 National Innovation Strategy of Republic of Moldova for 2013 - 2020 "Innovation and Competitiveness" http://mec.gov.md/sites/default/files/document/probal6.pdf
innovations within society, facilitate the results of research into innovative products and services thus bringing a new quality of economic growth, develop innovation culture and ultimately help to improve the quality of life of Moldovan citizens.94 95
In 2014, the Government also approved the National Strategy for Agricultural and Rural Development for 2014 - 2020.95 The scope of the Strategy is to raise the competitiveness of the agri-food sector through comprehensive restructuring and modernization and to improve conditions for living and working in rural areas. The Strategy also aims to achieve synergies between agri-food activities and protection of the natural environment. Specific objectives of the strategy include (1) modernization of the agri-food chain in order to meet EU requirements on food safety and quality; (2) facilitation of access to capital, inputs and output markets for farmers; (3) reform education, scientific research and rural extension services in the agri-food sector and create an integrated agriculture information system; (4) support sustainable agricultural land and water management practices; (5) support environmentally friendly production technologies, organic production and products ensuring biodiversity; (6) support the adaptation and mitigation of climate change effects on agricultural production; (7) enhance investment in physical infrastructure and rural services.; (8) increase employment and income opportunities in rural areas in the non-agri-food sector; and, finally, (9) stimulate local community involvement in rural development.
Further on, these policy documents were complemented by several Sectorial strategies, as listed below:
The Strategy for the Development of Tourism adopted in May 2014 is meant to implement the provision of the Law Nr. 352-XVI from 24 November 2006 on organisation and realisation of touristic activities in Moldova and defines tourism as a priority sector for the national economy.
The Strategy for the Growth of Competitiveness of IT Industry for 2015 - 2020 was approved by the Government in May 2015. Through this document, it is hoped that the information technology (IT) sector may become a catalyst for growth, efficiency and innovation for the traditional economic sectors of Moldova and for society as a whole. Software exports from Moldova increased from 14.27 million to 62.52 million USD between 2007 and 2013. In addition, and despite the fact that in 2013 the domestic market was still dominated by the purchase of hardware components accounting for 67% of the market, that year also registered a 30% increase of software acquisitions relative to 2010. There are, however, still shortcomings that this Strategy seeks to address. Existing gaps mainly relate to the deficit of human capital, a faulty business environment and the lack of a strong image for Moldova as a destination for outsourcing IT. Areas of intervention for this Strategy include: (1) IT education; (2) business environment; and (3) international partnerships.
The Energy Strategy of the Republic of Moldova until 2030 provides concrete guidelines for Moldova's energy sector development, with the main goal to provide the required basis for economic growth and
94 Idem, p. 4,18, 26. The cost of the Strategy is estimated at 1,6 billion Lei.95 Government Decision Nr. 409 from 4.06.2014 on the "National Strategy on Agricultural and Rural development for 2014 - 2020" http://maia.gov.md/sites/default/files/article/1662048_md_ard_strategy_e.pdf
improved social welfare. The key objective is to create more efficient energy use, assure energy security of the country, modernize energy infrastructure and integrate it into the European energy market. In terms of energy efficiency, the strategy envisages a reduction of energy use by 20% until 2020. Another set target is to achieve 20% renewable energy sources (wind and solar) in the energy mix.
In the Notional Renewable Energy Action Plan of the Republic of Moldova for 2013-2020, the overall target for renewable energy consumption in 2020 has been set by the Energy Strategy up to 2030, thus harmonising the provisions of the in-force legislation in the Republic. The sectoral targets are set at 10% RES in electricity (RES-E), 10% RES in transport (RES-T) and 27% RES in heating and cooling (RES-H&C). The overall RES target of 17% and the RES-T target of 10% represent obligations resulting from the membership as a contracting party being set by Decision D/2012/04/MC-EnC of the Ministerial Council of the Energy Community. The draft law on the promotion of the use of energy from renewable sources consolidates the objective of the Republic of Moldova to act towards implementation of Decision D/2012/04/MC-EnC. According to this plan, the electricity from renewable energy will be generated mostly from wind power starting from 2016. Wind power generation will be partially complemented by the electricity produced from biogas starting from 2015, as well as by the existing small-scale hydropower production (which contributed about 2% of renewable energy to the generation mix in 2009). Due to an increase in the equipment's competitiveness, solar PV technology will also contribute to the generation of power by the end of this decade.
The Environmental Strategy of the Republic of Moldova for the period 2014 - 2023 aims to address the environmental challenges from the industrial sector by (l)introducing a system of integrated control of emissions and pollutants; (2) internalizing best available technologies; (3) Improving the systems of quality management; (4) measuring the reduction of environmental risks in the area of industrial units; (5) cleaning of polluted industrial lands; (6) upgrading of wastewater treatment installations; (7) minimization of the production of industrial waste and increasing the safety of waste storage spaces; (8) application of Resource Efficient and Cleaner Production (RECP) concept within organizations and enterprises; and (9) promoting eco-innovation that diminish the environmental impact activities or manufactured products while giving a boost to new business opportunities.96
In 2013, the Moldovan Government approved the Waste Management Strategy for 2013-2027.97 The document was developed according to EU Directives and sets waste management goals in line with EU principles. It outlines clear objectives and implementation measures for each waste stream and estimates the costs of these measures at 375 million to 470 million EUR for the period. Based on this Strategy, the Government of Moldova undertakes the development of a new legal and institutional framework on waste management regulation in line with EU legislation, which would be economically efficient and would improve human health and environment. By complying with the National Strategy, it is foreseen to create an integrated waste management system based on a regional approach, the territorial division of the country in eight waste management regions, regional infrastructure
96 Environmental Strategy of Republic of Moldova for 2014 - 202397 http://serviciilocale.md/public/files/deseuri/2013_01_24_NATIONAL_WASTE_MANAGEMENT_STRATEGY_2013-27_ENG.pdf Page | 34
development for solid household waste deposit and transfer stations, the development of collection systems and the treatment of specific waste flows (packaging, tires, batteries) by promoting and implementing the principle of "producer responsibility" including hazardous waste (medical waste, waste oils, etc.) and one collection point at every regional level. Support for the implementation of this Strategy is expected to be provided by the European Investment Bank (EIB) that proposed a loan of 100 million EUR and will be focused mainly on the development of environmental infrastructure in the sector of solid waste disposal98.
The most recent and relevant document on economic development is called Economic Development Priority Measures (2017-2019) led by the Ministry of Economy and Infrastructure and adopted by the Government in July 2017. This paper outlines feasible interventions that will spur economic development in Moldova, taking into account the limits of assistance budgets and implementing capacities.99 It is an analytical document that guides the development programming in Moldova and serves as a reference to all donors and development partners to avoid overlapping activities. The overall objective of the proposed measures is to increase the creation of more and better jobs in companies situated in all regions of Moldova. Implementation of the interventions is expected to produce results defined for additional 80.000 jobs created, an increase in GDP by 400 million EUR and increases in exports by 200 million EUR per year.
1.1.10. Youth and women empowerment
Moldova's overall national legislative framework for promoting gender equality is in line with international commitments. However, implementation lags behind due to the persistent cultural perceptions of the role of women in society. Women still face discrimination and inequality in social, economic and political life, lacking effective opportunities for participation in decision-making in public and private spheres. Only 20.79% of the Members of Parliament are women, 20.6% of mayors, 30.04% of local councillors, and 18.55% of district councillors, which is far below international standards and the country's commitments under nationally and internationally agreed goals. The share of women entrepreneurs is 27.5% in urban and 14.9% in rural areas.100 101 102 Furthermore, women who wish to start their own business face many barriers, including access to bank loans, as well as state-funded business and entrepreneurship development programmes.101102 It is vital for the country to create an enabling environment for women entrepreneurs in order to facilitate their economic contribution.
Moldova's overall Gender Inequality Index (Gil) positions the country at 50 out of 155 countries, with a value of 0.248.103 Data from the NBS indicates that, as of January 2015, the share of employed men and women has almost reached the same level, with 49.6% of women and 50.4% men.104 At the same time,
98 http://www.eib.org/projects/pipeline/2014/20140483.htm99 Economic Development Priority Measures (2017-2019)100 http://eca.unwomen.org/en/where-we-are/moldova/economic-empowerment101 http://www.md.undp.org/content/moldova/en/home/gender-equality.html102 http://eca.unwomen.org/en/where-we-are/moldova103 http://hdr.undp.org/sites/all/themes/hdr_theme/country-notes/MDA.pdf104 National Bureau of Statistics "Portretul statistic al femeilor şi bărbaţilor din Republica Moldova", 4 March 2016, Page | 35
unemployment affects men to a greater degree at 60% of those unemployed, while 40% of all unemployed are women. In terms of employment discrepancies between men and women in industry, the number of women employed in this sector is 12.3% compared to 23% of all men able to work.105
While Moldovan women aged 25-64 years have a higher degree of training, especially with university degrees (women with a university diploma account for 22.3% while men account for 17.1%), they earn on average 12.4% less than men. The largest gender income disparities disadvantaging women were registered in information and communication (23% less), industry (18.3% less), art and recreation activities (15.1% less), health and social activities (10.9% less) and public administration and defence (10.8% less). Visible discrepancies are also registered in leading positions at all levels, with men accounting for 57% and only 43% of the managerial positions occupied by women.106 This clearly illustrates the existence of forms of economic discrimination against women in Moldova.
The economic empowerment of women should be analysed in comparison with other countries from the region. Research conducted by the World Bank in the past years within 360 Moldovan companies revealed that 47.5% of enterprises were co-owned by women and 25.7% were managed by women.107 Half of all the SMEs in the country are created with the participation of women. Data from the World Bank indicates that this exceeds the rates in Eastern Europe and Central Asia by 30.9 % and 18.7% respectively and approximately every third SME is owned by a woman (28.5%) as compared to the average rate from the region (12.2%).108 Nevertheless, women in Moldova continue to be less represented in the private sector than men (2.6 times more men than women in businesses) and tend to have smaller micro-enterprises, hire fewer employees, earn less revenue and are less likely to engage in export markets.
In Moldova, the legislative framework of the national youth policy is constituted through the Notional Youth Low adopted in 1999, the Notional Youth Strategy 2009-2013 and the National Youth Action Plan 2009-2013. The National Youth Law marks the responsibility of the State to guarantee youth participation and youth development, including the right to social protection, the right to participate in public life, the right to personal development and the right to study and access to job opportunities. The Law highlights the need to "create socio-economic, legal, political, cultural and organizational conditions under which young people may realize their personal potential and thereby benefit their society ". The National Youth Strategy 2009-2013 determines four priorities of action: (1) to improve the access to information and services; (2) to enhance participation in public life and active citizenship; (3) to create employment opportunities; and (4) to develop human and institutional capacities.
http://www. statistica. md/libview.php?l=ro&id=5106&idc=168105 http://data.worldbank.org/indicator/SLIND.EMPL.MA.ZS?locations=MD106 Idem107 Dodon, C. (2015) "Women Economic Empowerment in Republic of Moldova", Academy of Economic Sciences, p.7, http://www.ase.md/files/proiecte/unwomen/colocviu/2.4_C. Dodon_EN.pdf108 Idem and World Bank Enterprise Survey 2013,http://www.enterprisesurveys.Org/data/exploreeconomies/2013/moldova#gender Page | 36
In Moldova, 20.6% of young people (21.6% of male and 19.7% of female youth) participate in the labour market. More than one-third of the economically active youth works in the informal sector and are largely engaged in agriculture, wholesale and retail trade, as well as in hotels and restaurants. Young people face a clear labour market disadvantage in Moldova. Although the rate of unemployment among them (15.8% for male and 14.9% for female youth) is comparable to the average of countries in the EU, the risk of being unemployed is twice as high for young people as for adults.109 The share of unemployed youth (16 -29 years) was around 35% of the total officially registered unemployed in Moldova.However, the figure of young people without jobs almost halved in this period, from nearly 30,000 individuals in 2010 to slightly more than 16,000 in 2015. Yet, this diminishing unemployment rate is not the merit of a higher absorption ratio by the domestic labour market. The lack of decent employment opportunities is a major push-factor for migration, particularly for youth from rural areas, where youth unemployment is higher than in urban areas. Recent studies show that the decrease in the unemployment rate of youth in Moldova is due to a number of reasons: high level of non-official employment, a high migration flow of young people seeking work abroad and poor statistical evidence of the real population number of the Republic of Moldova.110
The extensive migration of youth is a particular problem for the country and especially affects rural regions. It is estimated that in urban areas, young people account for 31.3% of the number of migrants leaving the country, while in rural regions, the number is significantly higher at 44.5% of the total number of external migrants.111 This could be explained by the higher level of unemployment of youth from rural areas. The Government's objective by 2020, relative to 2013, is to increase by a minimum of 30% the number of economically empowered youth. The expected result is an increase of 10% in the number of young entrepreneurs and the creation of 300 sustainable businesses through the programs for economic empowerment.112 At the same time, it aims to decrease unemployment by 2020, from 12.1% to 8% for youth aged 15-24 years old and from 8.7% to 5% for youth aged 15-29 years old.113
1.2. Challenges to be addressedThe main long-term development goal of Moldova is to accelerate economic growth in a sustainable and more inclusive manner, strengthening the economy to overcome its severe vulnerabilities and achieving a transformation to a more balanced, structurally sound and diversified development model. The main challenges on the road to sustainable development continue to be shaped by the vital need to stimulate a structural transformation of the economy towards increased concentration in high value-added and labour-intensive production activities building better lives for Moldovan
109 http://www.oecd.org/dev/inclusivesocietiesanddevelopment/youth-issues-in-moIdova.htm110 Buciuceanu-Vrabie, M. & Pahomii, I. (2015) "Demographic barometer. Situation of youth in Republic of Moldova: from goals to opportunities", National Institute for Economic Research, p. 2,http://moldova.unfpa.org/sites/default/files/pubpdf/Demographic%20Barometer%203_Situation%20of%20Youth%20in%20RM_2015.pdf111 "National Strategy for Youth Development Sector till 2020", Annex Nr 1, p. 4, Government Decision Nr. 1006 from 10 December 2014, http://lex.justice.md/index.php?action=view&view=doc&lang=l&id=356215112 "National Strategy for Youth Development Sector till 2020", Annex Nr 1, p. 28-29113 Idem Page I 37
citizens. The UNIDO Country Programme Framework (CPF) programming and fact-finding mission to Chisinau in March 2017 concluded that inclusive and sustainable industrialisation will be crucial for Moldova in its strives to change the existing development paradigm and achieve sustainable and resilient economic growth by creating jobs, providing equal opportunities and increasing living standards, while safeguarding the environment
In view of the national priorities, based on the previous cooperation and lessons learned, the CPF is aiming at addressing the following challenges:
Persistent unemployment, migration, skills mismatch and inequality
Today, Moldova remains the poorest country in Europe despite high annual economic growth registered between the years 2011 and 2016, which did not result in job creation, but on the contrary, the rate of employment of the population dropped from 58% to 41%. Figures for youth unemployment indicate rates comparable to the average of EU countries (15.8% for male and 14.9% for female youth), however, the risk of being unemployed is twice as high for young people as for adults. Low labour productivity is the fundamental reason for the low level of income per capita in Moldova. This, among other reasons, is the result of an increased share of the informal economy (employing an estimated 30% of the country's entire workforce) and significant external migration. Large-scale migration, along with reduced fertility rates has significantly reduced Moldova's population and limits the country's long-term competitiveness. Moreover, the labour market is heavily dependent on external migration due to the inflow of remittances, which along with consumption, is the country's major source of growth. The receipt of remittances from Moldovans working abroad (USD1.465 billion in 2016 or 21.7% of GDP) makes the country extremely vulnerable to external fluctuations and shocks. The main country of destination for Moldovan migrants in the last decade was the Russian Federation, which links Moldova's macro-financial system to Russia's economy. The country's unemployment rates can also be blamed on the existing skills gap. Although Moldova has a highly-educated labour force, there is a lack of basic practical skills needed by the private sector and education. This has led to an unbalanced labour market, where there is a higher demand for workers with vocational training than for the supply of youth with university degrees. There is a strong need for developing skills through practical and vocational training in order to increase the levels of meaningful and stable employment and entrepreneurship in the country.
Low competitiveness, investment in R&D and innovations
The share of Moldovan SMEs in the country's GDP is close to 40% and contributes towards 60% of employment out of total jobs. However, while SMEs in Moldova account for 98.7% of total enterprises in the country, they have limited opportunities, skills, and resources to innovate, either in terms of products, internal business processes or markets. Furthermore, most SMEs in Moldova operate primarily in low added-value sectors such as retail, trade and agriculture, followed by manufacturing and construction, which weakly contribute to the national value added. These factors make Moldovan SMEs rather uncompetitive, hindering their integration in regional and global value chains.
For more than 25 years, Moldovan industry has gone through a difficult transition process owing to the need to re-engineer its production capacities and find new markets. The deindustrialization was accompanied by a heavy brain drain, lost capacity and relevance of engineering education and a declining industrial culture. Despite favourable business conditions in the country today, with a corporate tax rate of 12%, there is poor business sophistication, innovation and competitiveness. The technological gap represents a significant structural weakness, as a result of a lack of investment in R&D, which undermines the competitiveness of exports. In 1996, public investments in R&D in Moldova accounted for 0.4% of GPD. In 2015, overall research and development expenses in the country accounted for approximately^.37 percent of GDP (2015), positioning Moldova at 135th of 138 countries in the global ranking in terms of the number of scientific publications.114 Although Moldova adopted a new Law on Industrial Parks in 2010 to attract investments, which, along with FEZs, offer substantial tax and operational benefits, the industrial parks have not yet achieved their full potential as contributors to economic development and job creation due to lacking investments.
Insufficient productivity, quality and capacity to compete in agriculture
Agriculture is a key sector for achieving prosperity in Moldova. It is one of the main pillars of the country's national economy and the main source of livelihood in rural areas. One-third of the active population of the country works in agriculture, compared to 12% in industry. However, Moldova's agriculture sector faces substantial challenges, including low productivity, underdeveloped rural infrastructure, poor access to markets and the impacts of climate change. In addition, Moldova faces challenges in making its agro-products more competitive on high-value markets. Much investment is needed to increase the country's horticultural production processes, including in harvest, post-harvest and processing infrastructure. Moldova's agricultural and rural development is confined by small-scale farms that produce limited yields, owing to insufficient knowledge, outdated technologies and weak supply chains. As a result, agricultural producers in Moldova face difficulties to invest in equipment and new technologies and hence produce agricultural output that can respond to the increasing demand.
Moldova's farmers and exporters will need to adhere to the high product quality standards and traceability required in EU and other strategic markets. To successfully explore the opportunities of the available trade regimes and increase the competitiveness Moldovan agriculture producers need to improve productivity and quality, increase the capacity to compete and improve the quality of packaging. To make agricultural commercialization more attractive and effective for poverty reduction, the segment of commercially oriented smallholder farms should be enabled to grow and modernize. Furthermore, there is a need to increase employment opportunities in horticultural, which can be achieved through supporting involved SMEs and family farm owners through the facilitation of knowledge-transfer and the setting up of clusters. Due to the country's fall in agricultural production as
114 World Bank (2016), "Research and development expenditure (% of GDP)", http://wdi.worldbank.Org/table/5.13; WEF (2016), "The Global Competitiveness Report 2016-2017", http://www3.weforum.org/docs/GCR2016- 2017/05FullReport/TheGlobalCompetitivenessReport2016-2017_FINAL.pdf Page | 39
a result of numerous droughts, Moldova will also have to better adapt to climate change and introduce measures to strengthen the resilience of the agriculture sector.
High energy inefficiency, high energy intensities and missed opportunities in renewable energy sources.
Moldova is one of the world's most vulnerable countries in terms of energy security, due to its high dependence on energy imports from Russia, Ukraine and Romania, which make up 74 % of the country' energy needs. The high dependence on energy imports is due to Moldova's minor supplies of coal, petroleum and its moderate hydroelectric potential. The reliance on energy imports has led to an increase in domestic energy prices as well as external debts. In view of Moldova's energy dependence, 80% of the population is considered to live in energy poverty.115116
In contrast to the region, Moldova does not use coal for electricity generation, heat production or industrial processes, making it relatively less C02-emissions intensive. However, energy intensity continues to be high in Moldova and is caused by factors which include ageing technology and equipment, networks and the fact that the system runs at a much lower than designed load, which contributes to higher energy losses with up to 75% of the productive capital in the energy sector being physically outdated.115 116 117 Although there have been notable improvements in energy intensity since 1994, energy intensity measured per GDP PPP in 2014 continued to be more than 1.5 times higher than on average in the ECA region.118
With energy consumption expected to grow, one solution for the country's dependence on single energy import sources, mainly natural gas, would be to utilise the country's renewable energy sources. UNIDO has previously implemented a project to enhance the local manufacturing capacity of solar thermal energy systems in Moldova and the country has also previously directed efforts towards the bioenergy sector since biomass is one of Moldova's most accessible alternative energy sources. Recent history has shown that the promotion of investment opportunities for renewable energy sources has significantly increased the number of biomass producers in the country. This shows the readiness of market actors to capitalise on the existing potential, strongly supporting the idea to further promote investments and build capacities in the renewable energy sector. Both energy efficiency and renewable energy should be considered priorities for Moldova, supported by respective policies and regulations based on detailed analysis of the economic potentials and applicability in all sectors of the economy, including industry.
Low environmental practices
115 The World Bank measures energy poverty indicators as outputs (e.g. lack of electricity connections)116 http://documents.worldbank.org/curated/en/101211468060253519/pdf/IVIoldova-Tariff-and-Afordability-Study-2015-10- 26-FINAL.pdf117 http://www.md.undp.org/content/moldova/en/home/sustainable-development-goals/goal-7-affordable-and-clean- energy.html118 https://data.worldbank.org/indicator/EG.EGY.PRIM.PP.KD?locations=MD-Z7-7E
Although the total industrial use of water in Moldova declined in 2014, the industry continues to be the largest user of water in Moldova, accounting for 74.5% of total water use in the country. The beverage and food industry uses up the most water, around 45%, followed by electricity, gas and water industries with 15%. Total wastewater discharges decreased by 7.3% between the years 2005 to 2011. During the same period, nitrate discharges diminished by 38.8% and sulphates by 20.8%, while chloride discharges increased by 12.3%.119 The polluting effects of agricultural fertilizers, pesticides and land-use seem to be less pronounced in Moldova, while household sanitation systems, poorly or non-treated municipal wastewater discharges, as well as inadequate solid waste management sites and discharges from power and industrial plants, play a significant role in water contamination.120 121The impact of industrial activities on water pollution is significant, with about 89% of sewage water requiring treatment being normatively treated. While the most common practice of discharging industrial wastewater is the transfer to municipal WWTPs, a lot of industrial WWTPs are obsolete. This poses grave environmental concerns as significant quantities of untreated industrial wastewater end up in rivers. The quality of water can be improved through minimization of the water pollution from industrial processes, increasing the efficiency of water use, recycling and safe reuse and enhancement of the protection and restoring of water-related ecosystems (forests, wetlands, rivers, aquifers and lakes). Introducing principles of sustainable production and consumption must be addressed by the Government. Overcoming the current lack of integrated waste and chemicals management systems, in accordance with international requirements, should be prioritized on a strategic level and applied to both rural and urban areas. This means continuously pursuing efforts to comply with the Stockholm Convention on POPs, amongst others, and the national strategic framework. Furthermore, businesses should be encouraged to adopt RECP practices and to share responsibility for the disposal of toxic waste and pollutants.m
2. UN Coordination FrameworkThe United Nations Partnership for Sustainable Development (UNPSD) 2018-2022 summarizes the Government of the Republic of Moldova and UN Partnership for the priority policy and programme areas for a 4-year period. Building on the results achieved under the UN-Republic of Moldova Partnership Framework (UNPF) 2013-2017 and continuing the Delivering as One (DaO) approach, the Government of the Republic of Moldova and the UN system will pursue the achievement of national development priorities, as well as the country's international human rights commitments and the reform agenda linked to the EU association process. The results focus on four strategic priorities that respond to the Republic of Moldova's development and human rights challenges and make use of the UN comparative advantage.
119 UNECE (2014) "Republic of Moldova. Environmental Performance Reviews. Third Review", p. 91, http://www.unece.org/fileadmin/DAM/env/epr/epr_studies/ECE_CEP_171_En.pdf120 http://www.serviciilocale.md/public/files/2nd_Draft_WSS_Strategy_October_final_Eng.pdf121 http://www.md.undp.org/content/moldova/en/home/sustainable-development-goals/goal-12-responsible-consumption- and-production.html
The four focus areas identified by the Government of Republic of Moldova and the UN country team for the UNPSD 2018-2022 include:
Governance, human rights, and gender equality
• Outcome 1: the people of Moldova, in particular the most vulnerable, demand and benefit from democratic, transparent and accountable governance, gender-sensitive, human rights and evidence-based public policies, equitable services and efficient, effective and responsive public institutions.
Sustainable, inclusive and equitable economic growth
• Outcome 2: the most vulnerable people in Moldova will have access to enhanced livelihood opportunities, decent work and productive employment generated by sustainable, inclusive and equitable economic growth.
Environment, sustainability and resilience
• Outcome 3: the people of Moldova, in particular the most vulnerable, benefit from enhanced environmental governance, energy security, sustainable management of natural resources and climate and disaster resilient development.
Inclusive and equitable social development
• Outcome 4: The people of Moldova, in particular the most vulnerable, demand and benefit from a gender-sensitive and human rights-based inclusive, effective and equitable quality education, health and social policies and services.
The implementation of the UNPSD will require an estimated total of USD 156,700,000. This includes USD 9,770,000 from regular or core resources of the UN agencies and USD 33,754,000 from non-core or extra-budgetary resources from bilateral, multilateral and private sources. The total estimated funding gap is USD 113,176,000. This will need to be mobilized overthe period of the UNPSD.
UNIDO provided support for the formulation of the UNPSD and made a commitment to contribute to Outcome 2: enhanced livelihood opportunities, decent work and productive employment generated by sustainable, inclusive and equitable economic growth and Outcome 3: enhanced environmental governance, energy security, sustainable management of natural resources, and climate and disaster resilient development, of the above-mentioned framework.
3. Past Cooperation and Lessons LearnedIn the Republic of Moldova, UNIDO has been operational since 1993 and has completed in total 16 stand-alone projects with a budget of USD 859,662 in the following areas:
• Policy support to SMEs (advisory services) in 1994-1995;• Assistance to industrial sectors (wine sector, fruit and vegetable canning plants and fumigation
sector) in 1996 and in 2005;• Formulation of industrial strategy in cooperation with the Government in 1996, assistance in
formulating the national industrial development strategy and drafting laws on innovation and technological transfer, technological and industrial parks;
• Support to the Government on industrial transformation process in 1995-1996;• Support in establishing an investment promotion agency in 1996;• Formulation of energy efficiency strategy in 2000 and identification of energy efficiency needs in
2007;• Resource efficient and cleaner production since 2009• Reduction of greenhouse gas emissions through improved energy efficiency since 2010 (an
ongoing country project);• Trade capacity-building through support to quality infrastructure development (a completed
preparatory assistance project in 2012 on upgrading the wine-tasting laboratory);• Industrial statistics;• Reducing Greenhouse Gas Emissions through Improved Energy Efficiency in the Industrial Sector
in Moldova in 2011-2017.
Recently, UNIDO has completed a few important projects in Moldova. The National Cleaner Production Programme (NCPP) aimed at improving the resource productivity and environmental performance of enterprises and other organizations through the application of resource efficient and cleaner production (RECP) methods, techniques and policies. The first phase of the NCPP was completed in 2011 with the Czech Republic's financial support of USD 129,635; the second phase of the NCPP was funded by the Government of Austria with USD 561,150 and was finalized in 2015. With Polish funding, the JSC Raut factory, one of the biggest factories for metal processing and manufacturing of military equipment during the Soviet era, was modernized and local engineers were trained in the production of solar panels. In addition, UNIDO implemented a GEF-funded project which led to improved energy efficiency in the industrial sector of Moldova. The country was also part of the Regional RECP Demonstration Programme for the European Union's Eastern Partnership region.
Regarding investment promotion, UNIDO launched the preparatory assistance for the development of a project on strengthening the investment promotion capacities of the Moldovan Investment Agency (MIA). The main objective of the pipeline project is to mobilise investments for Inclusive and Sustainable Industrial Development (ISID) and partnerships for industrial parks. The preparatory assistance phase has resulted in the preparation of a project document, which has been validated by MIA, the Ministry of Economy and Infrastructure and Industrial Park authorities in Moldova.
At present, UNIDO is preparing the GEF - funded regional project "Introduction of POPs Best Available Techniques (BAT) and Best Environmental Practice (ВЕР) in the metallurgical industry in Central and Eastern Europe, the Caucasus and Central Asia".
UNIDO works in Moldova as a non-resident agency, which impedes the prospects for intensive and systematic cooperation as well as limits the agency's visibility in the country in the absence of a strategic framework, offered by the CPF. The technical assistance was hence provided with limited engagement into strategic planning with the Government and other partners. Therefore, the scoping and programming during the CPF preparation were organised in a more inclusive consultative manner, involving a wide range of stakeholders including government and public agencies, the donors' community and UN agencies, as well as other potential partners.
4. Country Programme ComponentsAiming at enhancing sustainable industrialisation and ensuring shared prosperity, the Government of Moldova has called upon the expansion of UNIDO's technical assistance to the country on a number of occasions. Throughout the years, Moldovan decision makers expressed interest in cooperation with UNIDO in various areas, such as agri-business development; industrial parks and investment promotion; youth entrepreneurship with a special focus on rural regions; SMEs and clusters development; quality infrastructure/trade capacity building; and others. The development of a comprehensive Country Programme to assist Moldova in the accomplishment of targeted results was requested by H.E. Mr Valeriu Lazar, former Minister of Economy and Deputy Prime Minister of the Republic of Moldova with an official letter, dated 24 February 2014. In June 2014, the Permanent Mission of the Republic of Moldova to the International Organizations in Vienna informed UNIDO on the designation of two national focal points at the former Ministry of Economy to facilitate the exchange of information with UNIDO.
In 2015, Mr Vitalie lurcu, Deputy Ministry of Economy and Infrastructure of the Republic of Moldova called for UNIDO to step up its support for Moldova by a comprehensive programme putting emphasis on ISID and corresponding policies on industrial parks and free enterprise zones (export processing zones). The Deputy Minister requested the inclusion of an industrial development component to the main phase of the intended project "Strengthening the promotion capabilities of the Republic of Moldova in mobilizing ISID investments and partnerships to the industrial parks" that would help put in place adequate policies. Within the CP, the Ministry recommended developing policies in line with ISID principles with clear emphasis on industrial zone planning and development based on the local factor endowment and potential to integrate into global value chains.
In close cooperation with the Ministry of Economy and Infrastructure, UNIDO fielded a programming and fact-finding mission to Chisinau in March 2017, during which a series of meetings with representatives of the Government, other UN agencies, donors and private sector support institutions were held to gather first-hand data, identify the country priorities and industrial development needs, scope the possible UNIDO interventions under the CPF and define potential partners for its implementation. The findings of the mission were summarised in the Needs Assessment of Moldova, which takes into account the Government vision and strategic planning for industrial development and
cross-matches these with the priorities of the donors active on the ground.122 On the basis of this thorough assessment, the areas of UNIDO's engagement in Moldova were identified and the findings served as an analytical framework for the development of this Country Programme.
The overall objective of the Country Programme is to provide support to the Government in achieving its economic development objectives and strategic goals set up in the national development plans and policies, move towards the realisation of the SDGs as well as advance the integration process with the EU. The strategic priorities and outcomes formulated in the UNPSD 2018-2022 are also taken into account. It is recognised that the industrial sector's contribution to GDP and job creation has been stagnant, reflecting weak technological capabilities, rendering it incapable of capitalizing on the preferential market access conditions offered by the different trade agreements.123 Agriculture remains one of the main economic sectors, employing 32% of the labour-force in 2015,124 while about 50% of exports were agri-food products.125 Besides low productivity, the sector is highly dependent on natural factors (floods, hail, and droughts). The main obstacles in increasing the productivity levels in agriculture are a lack of knowledge and capacities of farmers, in particular of small owners, in using modern technologies for the production and protection of crops. Limited access to business support services and marketplaces as well as persistent challenges across the whole value chains add to the hurdles confronted by the sector. The services sector, which constitutes the main engine of growth, is largely driven by public administration along with health, education and social work. The move away from agriculture has been supported by declining productivity. Lack of R&D and innovations, labour skills gap and small domestic markets are main factors constraining economic competitiveness.
In this regard, UNIDO will assist the Government of Moldova to achieve higher competitiveness in priority industrial sectors, diversify and upgrade its industrial base, as well as add value to products and services creating opportunities for women and youth in rural areas. Additional measures need to be undertaken to support knowledge-intensive, innovative and green industries with higher value addition, foster entrepreneurship and job creation as well as enhance skills and create conditions for the up- scaling of competitive and environmentally sound practices in SMEs. A particular focus will be placed on MSMEs section of the economy, which forms an important backbone of Moldova's private sector landscape.
Taking the above into account, the Government of Moldova and UNIDO have agreed to structure the CPF activities into three broad thematic areas:
122 Needs assessment for CPF is available in a separate document.123 This is reflected in the country's narrow export mix, which continues to be dominated by agricultural and miscellaneous manufactured products. The miscellaneous manufactured products also comprise a narrow range, with clothes and furniture accounting for 54% and 23% of total exports, respectively.124 NBS (2016), "Labour force in the Republic of Moldova: employment and unemployment in 2015", http://www. statistica. md/newsview.php?l=en&idc=168&id=5147125 NBS (2016), "Export activities of the Republic of Moldova, January-October 2016", http://www.statistica.md/newsview.php?l=ro&idc=168&id=5441
Component 2: Productive employment for rural communities and entrepreneurship development
Component 3: Sustainable energy and environmental management
Under each component, selected project examples and concrete proposals were outlined and presented to serve as a reference. It has been agreed in principle that those three components are pertinent and fit well both the ISID related priorities and needs of the country. The CPF's components will be implemented in partnership with the Ministry of Economy and Infrastructure as a leading national partner, and with the participation of other relevant ministries such as Ministry of Agriculture, Regional Development and Environment and the Ministry of Foreign Affairs and European Integration.
Table 1: Alignment of the CPF
CPF components
CPF WILL BE ALIGNED WITH:
Relevant national sector priorities
UNPSD 2018- 2022
Focus area
Othernational/regional/int ernational frameworks and commitments
Strategy of Attraction of Investments and Promotion of Exports 2016 - 2020, Strategy of Innovation for the period 2013 -2020, Strategy for the growth of competitiveness of IT industry for 2015 - 2020, Economic Development Priority Measures (2017-2019)
Sustainable, Inclusive and Equitable Economic Growth:
Outcome 2
SDG 5, SDG 8, SDG 9, SDG 12, SDG 16
AdvancingEconomicCompetitiveness
Productive employment for ruralcommunitiesandentrepreneurshi p development
National Strategy for Agricultural and Rural development for 2014-2020, Strategy for the Development of Tourism
Sustainable, Inclusive and Equitable Economic Growth:
The Energy Strategy of the Republic of Moldova until 2030, National renewable energy action plan of the Republic of Moldova for 2013- 2020, The Environmental Strategy of Republic of Moldova for the period 2014 - 2023, WasteManagement Strategy for 2013- 2027
Improving the competitiveness of the Moldovan economy is crucial in terms of making full use of the opportunities offered by the DCFTA as well as by more than 45 other free trade regimes. These facilitate an extension of the rather small domestic market and bring about vast opportunities to the Moldovan private sector. However, Moldovan industry is still characterised by low productivity and competitiveness. Traditional sectors remain the drivers of the industrial development, supported by the recent foreign investments in electrical cables and industrial textiles for the automotive sector, which are leading the integration of the Moldovan industry into global value chains. Other industrial outputs remain left aside due to insufficient sophistication, quality and overall preparedness to enter foreign markets. In addition, export survival rates are declining. Yet, the integration into global value chains is an important component of export promotion especially for MSMEs that possess limited financial and Page | 47
technical capacities but dominate Moldova's enterprise landscape. Currently, MSMEs often operate in isolation and their development and export potential remains untapped. Another challenge is the limited attention granted to sustainable and clean production practices and a major lack of R&D and innovation.
Moldova is transitioning from a factor-driven to an efficiency-driven economy in its efforts to favour local enterprises progress up the value chain and adopt more sophisticated production processes and business models, based on efficiency, knowledge and innovation to improve the productivity and quality of products and services. To this end, investments play a major role in the expansion of the country's production capacity and also export supply. In 2001-2014, every 1 USD invested annually in the productive capital of exporting economic activities generated an average of USD 0.49 in exports in the following year126, with some sectors (technical equipment and precision and optical medical devices) generating USD 14.5 in exports. Foreign investments have also played an essential role in increasing the level of sophistication of Moldovan exports. Among the key investment attraction instruments are industrial parks and free economic zones, which have strong spill-over effects over the national economy. Under the adopted Strategy of Attraction of Investments and Promotion of Exports 2016- 2020, the Government acknowledges the need to enhance the value and the diversification of Moldovan exports. In this context, a continuous focus on attracting investments, particularly FDI, is seen as the main instrument to harness the country's economic potential.
With the implementation of the Strategy of Innovation for the period 2013 - 2020 "Innovation for competitiveness" the Government aims to accelerate the development of the innovation system of Moldova by improving the perception and acceptance of innovations within society and by facilitating the results of research into innovative products and services, improving the quality of life of Moldovan citizens. The Strategy strongly interlinks with the targets set under the Strategy of Attraction of Investments and Promotion of Exports 2016-2020 since currently, the country has little capacity to generate innovation at a global scale and therefore lacks the ability to improve the conditions for increased economic competitiveness and to realise its exports potential.
In view of the above, four projects could be implemented under this component (additional projects could be added in the course of the implementation of the CPF to accommodate the evolving development priorities of Moldova) (details are provided in ANNEX 1):
i. Strengthening the promotion capabilities of Moldova in mobilizing ISID investments and partnerships to industrial parks;
ii. Industrial upgrading and modernization of a priority manufacturing sub-sector (e.g. protective equipment: shoes, masks, attire; metal components; precise engineering or furniture; others if deemed appropriate by the Government);
iii. Enhancing the competitiveness of local SMEs in a priority manufacturing/agro-processing sector in Moldova through cluster development;
iv. Strengthening linkages between research and industry in Moldova;v. Implementation of a Subcontracting and Partnership Exchange Centre for developing Moldovan
supplier SMEs and linking them to multinational companies (MNC)-inward investors in the automotive sector.
4.2. COMPONENT 2: Productive employment for rural communities and entrepreneurship development
High youth unemployment, low level of general employment and increasing informal employment are among the main risk factors for future economic growth and prosperity in Moldova. Creating more opportunities for productive employment in rural communities is one of the main priorities to overcome the staggering rate of external migration, which is affecting mostly but not only the country's younger generation.
The agricultural sector and the food industry have the potential to become a major source of employment and a feasible source of improving the living standards in rural areas. In 2016, 33.7% of the employed population worked in agriculture. The vast majority of these people (93.5%) were from rural areas. The average monthly wage was only 65.3% of the national minimum wage. At the same time, over 80% of people with an income under the national poverty line live in rural areas. The favourable yet also vulnerable climate and fertile soil provide excellent conditions; however, scarce processing capacities and fragmented value chains impede the competitiveness of the sector and reaching its full potential for poverty alleviation and inclusive growth. Another strong limitation is the small sizes of the farms that are not organized in clusters, the low technological preparedness and lack of post-harvest infrastructure, as well as missing market integration and limited to no adaptation capacities to the impacts of climate change on agricultural output.
At the same time, Moldova has an underdeveloped organic agricultural niche with unexploited export potential. Areas cultivated with organic agriculture could be increased to 100,000 ha. Presently, organic products are neither prominent on the local market nor substantively used for exports. The market is characterized by poor organization among farmers and there are no concerted efforts to promote their products on domestic and international markets. Other key problems of this sector stem from deficits in pest control, decreasing livestock and lack of skills for manure management.127 Importantly, Moldova has good potential in agriculture but producers need to be encouraged to move towards the production of high value-added products, rather than focusing on the export of raw products and bulk, which offer stable but comparably lower profit rates. Packaging sophistication, developing processing industry and diversification of products can help in adding value and entering new markets. For the existing
127 Idem, p. 21 Page | 49
agricultural capacities the focus should be set on the horizontal and vertical integration of value chains, developing wholesale markets, increasing bargaining power, align product quality, as well as extend distribution channels. Additionally, infrastructure improvements would help to overcome weak supply chain links.
Rural communities could also gain from the promotion of the tourism sector, which currently remains underutilized for both national and international tourists. As the Government's Strategy for the Development of Tourism "Tourism 2020" acknowledges, the country could become a destination for "adventurous tourism". In this respect, particular attention has to be paid not only to establishing and maintaining relevant infrastructure and engage in comprehensive advocacy but also on safeguarding the pristine natural environment. This is a key factor for the uptake of community nature-based and ecological tourism, which in turn could become a new and important driver for the country's economic development. Such forms of tourism could be combined with wine tourism, rural tourism and cultural tourism, bringing mutual advantages to other sectors, especially agriculture, while enhancing employment opportunities in rural areas across the entire demographic spectrum.
The economic empowerment of Moldova's younger generation should be considered as one of the main factors in balancing the significant outward migration, in particular in rural areas where close to half of all people seeking job opportunities abroad are young people. Encouraging and promoting the creation of enterprises founded by young people, taking into account the above-mentioned areas of potential intervention, could foster the creation of sustainable businesses, bringing employment to rural areas.
Considering the needs and challenges to be addressed under this component, the following three projects can be implemented (details are provided in Annex 1):
i. Empowering Moldova's youth through entrepreneurship;ii. Livestock-sector development programme - revival of the milk and meat production in
Moldova;iii. Linking agricultural producers and handicrafts makers with the tourism sector in Moldova.
4.3. COMPONENT 3: Sustainable energy and environmental managementMoldova is considered to be one of the most vulnerable countries to climate change and natural disasters in the entire ECA region. The impact of climate change on the national economy has been significant leading to an average annual economic loss of 2.13% of the GDP due to the high dependency of a large share of the population on incomes generated from agricultural activities. Environmental degradation, pollution and unsustainable use of natural resources are among the additional significant concerns for Moldova's sustainable development agenda.
Moldova is one of the most carbon- and energy-intensive economies in the region, with energy consumption twice as high as the EU average. Moldovan industry is characterised by high energy inefficiency, lack of renewable energy usage and a dependence on imported energy (74% of the
country's energy needs) from Russia, Ukraine and Romania, namely in the form of natural gas for electricity and heat generation. Outdated technology and equipment, insufficient practices and networks can be partly to blame for the country's lack of energy efficiency, as can the fact that the system runs at a much lower than designated load.
For solar PV, wind and small hydropower installed renewable electricity capacity significantly fall short of the identified technical potential. This is also the case for biomass, which forms the most accessible source of alternative energy in the country and where the technical potential that could be realised is estimated at 800 MW. The promotion of renewable energy investment opportunities has recently led to substantial increase in the number of solid biomass fuel producers. This indicates both the effectiveness and the need to further promote investments and build capacities for the uptake of biomass. Consequently, increased and better access to finance will remain central to the achievement of scaling up renewable energy in the country. Under the given circumstances, the internalization of low- or zero- cost energy saving measures forms another feasible solution, in particular for the manufacturing sector and for the country's MSMEs.
Given that 80% of the Moldovan population is considered to live in energy poverty, small-scale decentralized renewable energy systems could be considered to provide a solution for the energy deprived rural areas. At the same time, the focus in urban and industrialized areas should be put on stepping up the promotion energy efficiency, in addition to integrating renewable sources, which becomes highly relevant in an effort to reduce production costs, promote economic competitiveness and reduce energy imports in the process.
Moreover, Moldova faces serious environmental challenges and struggles with low environmental practices. Although Moldova's total volume of air pollutants decreased by 24% from 2005-2010, this was not due to improved environmental practices but rather a reduction of the total volume of industrial production. Similarly, between 2005 and 2010, GHG emissions from the energy industry and transportation increased 29.6% and 15% respectively.
The Restructuring of the manufacturing, industrial, quarrying and agricultural sectors resulted in reduced pressures from waste management on the environment. This development reduced generated amounts of waste and in some sectors also decreased the amount of waste previously accumulated. However, the existing waste management infrastructure does not comply with international standards and has to be significantly improved to ensure safe and reliable recovery and disposal of waste. The amount of industrial waste undergoing disposal or final treatment on the territory of Chisinau Municipality is more than double the amount of waste generated there. This indicates that significant amounts of waste are transported to Chisinau for processing.
The poor quality of water resources is the result of the lack of sustainable water management to protect the resources from pollution from untreated or insufficiently treated wastewater, and industrial and agricultural activities. Future economic development relies, among other things, on the sustainable management and protection of water resources. A huge amount of untreated industrial wastewater is
currently discharged into rivers. The major problems are caused by the filtration beds of sugar factories, wineries and electronic enterprises.
Under this component, it is envisioned that the following six projects could be implemented (details are provided in Annex 1):
i. UNIDO clean-tech innovation programme for Moldova;ii. Promoting small-scale renewable energy applications in agriculture (hydropower, solar, wind,
biomass and biogas);iii. Wastewater management programme for Moldova;iv. Industrial energy efficiency 4.0;v. Industrial insulation for climate protection and market development in Moldova;
vi. PCB management programme for Moldova.
5. Management framework
5.1. Programme managementThe implementation of CPF will be guided by the National Development Strategy "Moldova 2020" and other sectoral documents including the Strategy for Attraction of Investments and Promotion of Exports 2016 - 2020, the Strategy for Innovation 2013 - 2020, the National Strategy for Agricultural and Rural Development 2014 - 2020, the Strategy for the Development of Tourism, the Energy Strategy 2030 as well as National Renewable Energy Action Plan 2013-2020 and the Environmental Strategy 2014 - 2023. Other relevant strategies and policies which are currently under development will be taken into account after their formal adoption. The CPF will be also closely aligned to the UNPFSD 2018-2022.
The Government leadership and ownership is a critical feature of the CPF. Therefore, within the overall aim of strengthening national capacities for managing the development process in the country, the Country Programme will seek to build the necessary institutional and human competencies to ensure the sustainability of the Programme results beyond its completion.
The Ministry of Economy and Infrastructure of Moldova will be the main government counterpart for the implementation of the CPF. It will facilitate and provide strategic guidance to the implementation of the Country Programme. Other key Ministries, such as the Ministry of Agriculture, Regional Development and Environment, and the State Chancellery will be involved in facilitating the Programme's implementation. Further stakeholders that will play a central role are the private sector and its support institutions in the country.
Due to the lack of UNIDO representation in Moldova, the Regional Division for Europe and Central Asia at UNIDO will enact the dual role of a focal point for the Country Programme both at the field- and at the HQs-level. The Regional Division will lead the overall coordination, provide oversight in the management and act as an interface between the technical departments for the overall Country Programme implementation, monitoring and reporting, and will provide support to the Government in fund-raising. Close interaction with the Permanent Mission of Moldova to UNIDO will be sustained to Page | 52
ensure and maintain a conducive environment for the execution of the Programme and provide the necessary assistance to Project Managers on the ground. To meet the requirements for and facilitate the CPF implementation and ensure ongoing coordination, monitoring and reporting both at HQ- and at the field level, a Programme Management Unit needs to be established. This requires a budgetary allocation of approximately EUR 30,000 per year for the duration of the CPF, subject to the approval of UNIDO Executive Board.
5.2. CoordinationA Country Programme Steering Committee (CPSC) will be set up in the first six months of the launch of the Country Programme. The CPSC will be comprised of Government representatives, implementing national counterparts and UNIDO and will be chaired by the Ministry of Economy and Infrastructure. CPSCs responsibility will be to exercise overall programme oversight, provide guidance to the implementation and ensure an ongoing national ownership of the CPF. The delivery of the Country Programme outputs will be coordinated within the broader context of the UNPFSD 2018-2022.
For each project, a separate steering- or advisory committee will be established to monitor and guide the implementation of the respective project. Main implementing counterparts, the lead Ministries as per the specific area of intervention, as well as UNIDO project coordinators, will participate in the project steering or advisory committees. Implementation and monitoring of individual projects carried out within the framework of the Country Programme will be executed as described in the individual project documents.
5.3. Monitoring and EvaluationThe CPF shall be subject to UNIDO evaluation policy and guidelines, in conformity with UNEG/DAC norms and standards and latest Director General's Administrative Instructions (e.g. DGAI 18 Rev.l). The monitoring and evaluation (M&E) strategy will comprise inputs of individual projects under the umbrella of the Country Programme, field visits, regular reports, and data collection on a biannual basis. Biannual progress reports will be issued on the status of resource utilization. The focus will be placed on the achievements of the indicators listed in the Results Framework. The biannual progress reports will be shared with all relevant stakeholders involved in the implementation of the Country Programme to communicate achievements and challenges encountered. At the beginning of each project, a baseline data survey will be collected in order to develop SMART indicators. Regional Division for Europe and Central Asia will ensure the two levels of M&E requirements, from the HQs and the UNPFSD level are properly coordinated and do not lead to duplication efforts.
In the third year of the Country Programme implementation, a mid-term review will be carried out together with the national counterparts. Findings from the review will enable appropriate strategic, programmatic and operational adjustments.
The terminal in-depth independent evaluation will be conducted in close cooperation with the Independent Evaluation Division at UNIDO HQ, the Regional Division for Europe and Central Asia and the
national partners at the end of the fourth year. The evaluation will examine performance against outcomes, assess and document the overall impact of UNIDO interventions against planned outputs, outline lessons learnt, and define the scope of and make recommendations on the way forward.
A detailed indicative M&E work plan for the Country Programme is shown in Table 2.
Table 2: Indicative M&E work plan for the Country Programme for Moldova
M&E activity description Parties involved M eeting frequencyCountry Program m e Steering Com m ittee (CPSC)
Regional Division for Europe and Central Asia, m ain G overnm ent Counterparts (the M inistry of Econom y and Infrastructure, the M inistry of A griculture, Regional D evelopm ent and Environm ent, the M in istry of Foreign Affairs) and other im plem enting national counterparts
Every six m onths If required, CPSC should m eet m ore fre que ntly on the request of any party involved
C ollection of baseline survey data
Project m anagers, Project coord inators At the start of the project
Annual Progress Reports (APRs) on ind ividual projects under the fram ew ork of the Country Program m e
Regional Division for Europe and Central Asia to validate and sign off on consolidated report prepared by PM s for subm ission to CPSC
A nnually
Annual Country Program m e Review to assess progress and perform ance
Regional Division for Europe and Central Asia and CPSCto review the CPF perform ance and m ake a corrective decision (based on the APR)
Annually, prior to the finalization of APR and to the definition of the annual w ork plans of the CPF
Project/s steering com m ittee m eetings
Regional Division fo r Europe and Central Asia, project steering com m ittee m em bers
6 m onths, m ore frequently if required
M id-term Country program m e review
Regional Division for Europe and CentralAsia, external consultants, andCPSC
Mid of Country Program m e (during the third year)
M onitoring visits field sites and regular m onitoring reports
Regional Division for Europe and Central Asia
A nnually
C onduct end of program m e surveys (for assessm ent of behavioural changes and im pactim plem ented)
Regional Division for Europe and Central Asia; external evaluators
Evaluation at the end of the fourth year of the CPF
Term inal Country Program m e Evaluation/ ind ep end en t evaluation report
Regional Division for Europe and Central Asia, CPSC, JSC, independent external evaluators; Program m e O fficer at FIQ
Evaluation at the end of the fourth year of the CPF
5.4. Risks and mitigation measuresThe implementation of the CPF could be affected by both external influences as well as internal events. Some of the potential risks and mitigation actions considered are the following:
A ccess to fu n d s and national absorption capacities: While Moldova is a lower-middle-income country receiving relatively strong donors' support, some development partners operating on the ground are facing constraints with the implementation of development interventions owing to limited national capacities for the uptake of large-scale technical assistance. UNIDO is not a resident agency in Moldova, which calls for a carefully designed fund-raising and partnership strategy to be designed together with the Government, building on the merits of UNIDO's unique position in the UN system to support the Government's efforts for ISID, cross-matching the related needs of Moldova with the actual and upcoming donors support. A graded approach will be sought for the implementation of the technical assistance portfolio, tailored according to the national absorption and implementation capacities.
Governance, institutional and legislative fram ew orks: The country has experienced in the recent past certain governance challenges and political instabilities. In the event of reoccurrence, these might influence negatively the implementation of the CPF. The country's institutional and legal frameworks are rapidly changing, mostly due to the ample administration and inspections reform, implementation of the EU-Moldova Association Agreement, and legislative alignment with the EU acquis. Ministerial structures are adjusting as well. These changes, if not considered timely, may affect the individual projects to be implemented within the framework of the CPF. Therefore, in order to ensure the effectiveness of the Country Programme, the governance and institutional framework developments will be monitored closely, and, through appropriate CPF- and individual projects steering committees' decisions, changes and necessary adjustments are to be taken into account.
N atural disasters: Due to its climate characteristics, Moldova ranks as the most climate vulnerable country in Europe. The scale and the frequency of natural disasters such as floods, late spring freeze, droughts, landslides, and others, have increased in the recent years due to the global climate change, as well as human activities, affecting almost all sectors of the economy, especially agriculture and tourism. To offset possible negative impacts, close cooperation will be sought with UN sister organizations in the area of building climate change resilience and adaptation, as well as disaster management.
5.5. The legal contextThe Government of Moldova agrees to apply to the present programme, mutatis mutandis, the provisions of the Standard Basic Assistance Agreement between the United Nations Development Programme and the Government of Moldova, signed and entered into force on 2 October 1992.
6. Indicative budget and Fund Mobilization Strategy
6.1. Indicative budgetThe table below outlines the indicative planning figures for the implementation of the CPF. The total estimated budget is EUR 28,980,000 and includes funds for the monitoring and evaluation of the components as well as for the programme coordination (incl. fundraising, steering committee meetings and communication).
Component 2: Productive employment for rural communities and entrepreneurship development
7,250,000 0 7,250,000
Component 3: Sustainable energy and environmental management
15,800,000 0 15,800,000
CPF Management Unit '150,000 0 150,000
M &E 30,000 0 30,000
Total CP 28,980,000 0 28,980,000
6.2. Fund mobilization strategyFund mobilization for the CPF will be carried out through joint activities by UNIDO and the Government of the Republic of Moldova. Cooperation and partnership with international development finance institutions (DFIs), multilateral and bilateral donors, international organizations, civil society and the private sector will be central to facilitate the CPF's contribution to the national development efforts of Moldova, specifically to those related to ISID. The CPF objectives as agreed with the Government of Moldova can be achieved only if sufficient funding is leveraged for the implementation of the technical assistance projects, which constitute the heart of the CPF. The set-out CPF budget is only indicative; however, the major funding gap calls for a duly planned and strategized Funds Mobilization Strategy to be devised and implemented jointly by UNIDO and the Government.Page | 56
The principal means of the CPF's funds mobilization will be leveraging viable partnerships with various stakeholders to achieve an impact of scale for the benefit of Moldova and its people. The mobilization and pooling of a multitude of resources, networks, the knowledge and ingenuity of various partners could bring about the necessary transformative change of the Moldovan economy and strengthen the results of UNIDO's technical assistance. In this endeavour, UNIDO and Moldova commit to work side-by- side for building partnerships for the implementation of this CPF. To keep the donor community informed on the ongoing process and to leverage the needed partnerships, a partners' roundtable will be organized in Chisinau alongside the CPF First Steering Committee meeting. The event will build on the existing donor coordination platform.
The fund mobilization strategy is not exhaustive and will be updated once the project components would have been finalized and will also be strengthened based on conclusions and outputs emanating from the partners' roundtable.
The donor coordination platform in Moldova is being restructured in line with the ongoing central administration reform to increase its effectiveness and enhance the compliance with the national development priorities. The new framework will foster communication with development partners and coordination among donor community and implementing agencies, as well as enhance the strategic dialogue with and coordinated action among development partners.
The fundraising and partnership building for the CPF will align with the existing donor coordination platform which currently consists of donor coordination meetings usually held once a month and General State Secretaries meetings and on an as needed basis upon request.
The European Union, the World Bank group, the European Bank for Reconstruction and Development (EBRD), USA, Romania, Germany, and Sweden are the largest development partners based on the total volume of ongoing aid.
Official Development Assistance in Moldova
Moldova has been supported by the international donor community since its independence and in the last ten years has received EUR 3.5 billion from external development partners. The total amount of aid in 2016 was EUR 440.3mln, registering an increase of 32.8% in comparison to the previous year. The share of loans is 77.9 %, which mainly represent a reimbursable aid for big investment projects in road infrastructure, transportation, agriculture, energy, water and sanitation, and others, while the share of grants is 22.1%.
According to the volume of disbursement, the strongest development partners of Moldova in the last years are the EU, the World Bank, UN agencies, Romania, and the U.S. Together they contribute about 76% of the total external aid in Moldova. European institutions are the main sources of the support offered to Moldova in its development pathway, disbursing EUR 94.9mln in 2016, followed by the World Bank with EUR 85.2mln. Romania is the biggest bilateral partner with EUR 84.9mln in 2016 for development projects in Moldova.
Along the years, governance, transport and logistics, together with agriculture and health were the leading sectors attracting external financial aid. According to the ODA report published by the State Chancellery, in 2016 agriculture was the leading sector receiving financial support. Private sector development and quality infrastructure are as well among the leading directions for support and were financed from external sources by EUR 8.8mln in 2016.
Taking into account the scale and areas of support provided to Moldova, the EU together with its financing institutions such as the EBRD and EIB and the development agencies of its Member States, including the Swedish International Development Cooperation Agency (SIDA), Gesellschaft fur Internationale Zusammenarbeit (GIZ), the Austrian Development Agency (ADA) and the Swiss Agency for Development and Cooperation (SDC), as well as the World Bank and some emerging donors such as Romania, Poland and others are considered the main potential partners for the implementation of the CPF as their development assistance strategies harmonise with UNIDO's thematic areas and planned activities in Moldova to support ISID. A preliminary donor mapping is included in Annex 2.
i. Strengthening the promotion capabilities of Moldova in mobilizing ISID investments and partnerships to industrial parks
Objective:
The objective of the project is to attract partners and investment to the industrial parks of the Republic of Moldova and the establishment of partnerships for investment promotion and finance networks.
Expected Outcomes:
• Outcome 1: Transferred best practices for facilitating the better governance, management and participatory monitoring of Industrial Parks;
• Outcome 2: Improved institutional capacities of relevant stakeholders;
• Outcome 3: Availability of financial instruments to cater to the development needs of industrial enterprises.
Key Outputs:
• Increased institutional capacity for master planning, monitoring and promotion of good governance in Industrial Parks;
• Improved, extended and diversified service portfolio for relevant stakeholders and selected Industrial Parks in the field of investment and partnership promotion;
• Identified incentive strategies to attract potential industrial tenants/residents, local and international, for Moldovan industrial parks;
• Increased coordination with international/development finance institutions for joint investment initiatives.
Duration: 3 years
Indicative Budget: EUR 1,200,000
ii. Industrial upgrading and modernization of a priority manufacturing sub-sector (e.g. protective equipm ent: shoes, m asks, attire; m etal com ponents; precise engineering or fu rn iture; others i f deem ed appropriate by the Governm ent)
Objective:
To strengthen the industrial capacities of SMEs in the priority industrial sectors with the aim of increasing their productivity and market share on the national and regional markets through, inter alia support to pilot manufacturing SMEs in upgrading of their technical and managerial capacities, while facilitating upgrading-related local skills development
Expected Outcomes:
National enterprises operating in the priority selected sub-sectors enhance value-addition and industrial efficiency, expand production, improve quality and gain access to regional and international markets with the support of the reinforced national technical expertise.
Key Outputs:
• Based on the market intelligence, a strategic gap analysis identifying regional and international export opportunities for the priority manufacturing sub-sectors focusing on product and geographical diversification in the mid- to long-term.
• Improved competitiveness and market access for pilot enterprises though industrial upgrading and modernization and building SME networks for achieving collective efficiency.
• Human and technical capacities of national expertise and counterpart institutions strengthened in providing value-added, enterprise diagnosis and modernization, competitiveness building and marketing, export promotion approaches, inter-institutional networking and business partnerships and other tailor-made industry-specific services.
Duration: 3 years
Indicative Budget: EUR 2,000,000
iii. Enhancing the competitiveness of local SMEs in a priority manufacturing sector/agro- processing sector in Moldova through cluster development
Objective:
Selected clusters in Moldova have enhanced access to markets/buyers and increased sales.
Expected Outcomes:
Targeted clusters have a professional marketing and branding strategy as well as required qualitystandards in place, which are required to tap new markets/buyers within Moldova and abroad.
Key Outputs:
• Potential target clusters mapped, diagnosed and final selection of beneficiary clusters undertaken;
• At least two clusters with good performing potential assisted in the formulation, implementation and monitoring of cluster action plans;
• Upgrading plans for companies in selected target clusters with regard to productivity, quality, product safety and relevant related standards/labels developed;
• Cluster branding and marketing concepts developed and linkages with the other industry sectors intensified;
• Cluster diversification and innovation processes (including new product development) instilled;• Technical assistance to municipalities, other government entities and business support
institutions on clusters as a tool to enhance competitiveness.
Duration: 3 yearsIndicative Budget: EUR 750,000
iv. Strengthening linkages between research and industry in Moldova
Objective:
To contribute to the strengthening of national human and technical capacities of national expertise on the improvement of knowledge and technology transfer between science and research institutions and industrial sector, thereby enhancing the commercialization of innovative technological applications developed by the science and research sector.
Expected Outcomes:
• Definition of innovative target areas/products
• Enhanced national capacities of the science and research institutions in terms of establishment of improved linkages between science and industrial sectors;
• Commercialization of technology and innovative solutions in the industrial sector;
• Enhanced linkages between science and research institutions with industry, in particular, SMEs and Government as a provider of the required innovation and business environment.
Key Outputs:
• Technical assessment of the commercialization pathways of the selected technologies is conducted
o Undertake market intelligence study to match (accessible/promising) markets with available / intended technologies/products with identification of the most potentially competitive target areas/products/technologies responding to market opportunities in accordance to the selected industry focus;
o Identify the best international practices for development of selected technologies/products;
o Conduct technical research to assess the commercialization pathways of the selected technologies;
o Review of selected technologies market development worldwide focused on selected best practices and lessons learned (includes study tours);
o Development of a technology roadmap focused on selected technologies, by modelling for customer usage cost and return on investment;
o Validation of the technologies roadmap;o Development of the selected technologies commercialization report, addressing market
readiness, economic analysis, and business case analysis for the technologies selected in the roadmap;
o Validation of the commercialization pathways for the selected technologies report.• National capacities strengthened in the knowledge and technology transfer and
commercialization of innovative solutionso Technical training on selected technologies innovation with national technical experts,
private sector enterprises, research institutions and other experts;o Conduct study tour for national experts of the pilot beneficiary institutions/enterprises to
identified countries/destinations (such as Canada, the Netherlands, and Sweden) to learn first-hand about the experiences and lessons learned for development of linkages between research and industry, with the focus on commercialization of research and innovative practices;
o Workshop for notional expertise based on the best available know-how and R&D on selected technologies development and innovation, business model innovation and policy enablers;
o Capacity building for national expertise on selected technologies commercialization roadmap;
o Hands-on training on selected technologies demonstration and implementation; o Coaching of national experts on the development of market-oriented innovative
approaches/tools science/innovation/technology zones. o Consider extended national, regional and international cooperation as a basis for
sustainability and enhancement of future competitive positioning, including facilitation of national cooperation appropriate to the selected targets between all domestic resources (centres of excellence, institutes, industry, Government).
Duration: 2 years
Indicative Budget: EUR 500,000
v. Im plem entation o f a Subcontracting and Partnersh ip Exchange Centre fo r develop ing M o ld ovan supplier SM Es and linking them to m ultinational com panies (M N C )- in w a rd investors in the autom otive sector
Objective:Improve the competitiveness of Moldovan SMEs to the level requited to enter global value chains, by promoting linkages between MNC inward investors in the automotive sector and local SMEs.Expected Outcomes:
• Upgraded reliability and quality of local suppliers - stronger managerial/technological knowledge and know-how (business planning; finance, accounting, marketing, human resource management, as well as management and organization, design, technology and production processes), leading to better business performance in terms of Moldovan companies' ability to conclude contracts with local subsidiaries of MNCs and other foreign investors in Moldova;
• More diversified and sustainable business relations with foreign companies/MNCs (in particular EU-based prospective business partners), sustained by a more compatible business language and culture, as well as technological readiness and standards among Moldovan SMEs-potential suppliers;
• Additional contracts of local SMEs with foreign companies/MNCs as direct result of the project Key Outputs:
• Subcontracting and Partnership Exchange Centre established as permanent supplier-buyer matchmaking platform for Moldova
• At least 200 local companies out of which minimum 20% receive a competitiveness assessment report based on a benchmarking analysis to guide adjustments to make in order to become MNC suppliers.
• Increased overall standard of domestic suppliers and at least 20 companies engaged in commercial and collaborative relationships with MNC subsidiaries;
MNC buyers engaged on permanent basis to generate requests for information (RFI), requests for proposals (RFP) and requests for quotation (RFQ) from Moldovan subcontractors.
Duration: 3 yearsIndicative Budget: EUR 1/800,000
COMPONENT 2: Productive employment for rural communities and entrepreneurship development
i. Empowering Moldova's youth through entrepreneurship
Objective:
The project seeks to empower youth by promoting job creation through entrepreneurship, particularly through youth-led social entrepreneurship in the strategic industrial sectors. This will be achieved by creating an enabling environment for youth entrepreneurship, including social entrepreneurship, which in return will foster local development, can generate local innovation, and contributes to private sector dynamism and continuous job creation (directly and indirectly) by youth for youth. This will consequently allow young women and men to engage in and benefit from Moldova's inclusive and sustainable industrial development.
Expected Outcomes:
Social and economic participation of youth, including from disadvantaged and vulnerable groups of society, will be improved by strengthening the entrepreneurial environment, particularly with a view to fostering youth-led social entrepreneurship.
Key Outputs:• An enabling policy framework, promoting youth-led entrepreneurship, particularly social
entrepreneurship, will be established, and capacities of the relevant Ministry is improved particularly in the field of Monitoring and Evaluation and impact assessment
• Youth entrepreneurs, including from vulnerable groups, benefit from an improved support system of non-financial business support service providers as well as of skills development institutions and TVETs through UNIDO's Entrepreneurship Toolkit, "Start and Grow";
• Access to adequate financing mechanisms, including to innovative financial tools, of youth entrepreneurs is improved;
• Youth-led enterprise creation and development, particularly of youth-led social enterprises, is supported in selected regions and value chains.
Duration: 3.5 years
Indicative Budget: EUR 2,000,000
ii. Livestock-sector development programme - revival of the milk and meat production in Moldova
Objective:
To expand the technical assistance to the development of the livestock sector by addressing the four income earners: milk, meat, leather and wool - putting the livestock at the centre of the development intervention for increased food security and safety, leading to increased income and poverty reduction.
Phase 1: Development of a livestock sector strategy (including milk meat, hides and skins as well as wool) including international exposure to best practices.
Expected duration: 0.5 year
Phase 2: Piloting the implementation of the livestock sector strategy through focused technical assistance along the whole value chain in a selected part of the country, addressing the following:
• upgrading of the VET education including aiming at continuous professional education for farmers and processors;
• good farming practices for dairy and meat cattle/sheep leading to increased yield, quality and income at the farm side and exportability (targeting EU market) of the final products;
• strengthening the milk collection system allowing the production of high-quality milk products in a broader range of diversification;
• increasing milk and meat-products supply by encouraging males breeding and the introduction of mixed breeds;
• upgrading of slaughterhouses;• improving sub-products' treatment and utilisation in order to create better prices and
availability of high-quality products for other sectors as additional income earners;• attracting private investments;• improving farmers and processors capacity to access finance.
Total duration: 4.5 years
Tentative overall budget: EUR 4,500,000
iii. Linking agricultural producers and handicrafts makers with the tourism sector in Moldova
Objective:
At least two territories with touristic potential based on flagship products developed to enhance territorial competitiveness.
Expected Outcomes:
Producers of origin-linked products have enhanced access to buyers through improved production and product quality, strong linkages with tourism and territorial branding.
Key Outputs:
• Mapping of typical/origin-linked products in the agricultural and handicraft sectors in the country and selection of target territories/clusters
• A public-private governance structure is operational in each of selected territories to pilot, coordinate and boost local socio-economic and cultural activities
• The tourism services in each of the territories have increased competitive advantage by highlighting the flagship products and other local sites/products/activities of touristic interest.
• Value chain performance around selected agri-food and handicraft flagship products in each of the territories has been strengthened in relation to market access, production capacity, quality, job creation, innovation and value addition.
Duration: 3 years
Indicative Budget: EUR 750,000
COMPONENT 3: Sustainable energy and environmental managementi. UNIDO cleantech innovation programme for Moldova
Objective:
To promote and support clean energy technology innovations in Moldova through piloting of a Clean Energy Technology (Cleantech) Innovation Competition and Entrepreneurship Accelerator Programme, leading to entrepreneurship development, job creation and positive environmental impact.
Expected Outcomes:
• Strengthened policy and legal framework to promote and support Cleantech innovations in SMEs, including start-ups, and support the creation of a local technology innovation ecosystem;
• A coordinating mechanism/platform established for clean energy technology innovators;
• Enhanced national institutional capacity to operate technology innovation incubators as result competition and accelerator programme;
• Connection of local technology innovators with international investors and corporates.
Key Outputs:
• Necessary policies and regulation for creating a Cleantech ecosystem identified and roadmap developed;
• Three National Cleantech Competitions organized;
• Three associated Accelerator Programme organized;
• Competition winners participate in regional and/or global networking activities with investors and corporates;
• Strengthened capacity of relevant national institutions to support local SMEs and start-ups in technology innovation;
• Clean Energy Technology Development Platform developed.
Duration: 4 years
Indicative budget: EUR 1,500,000
ii. Promoting small-scale renewable energy applications in agriculture (hydropower, solar, wind, biomass and biogas)
Objective:
The project aims to promote and support accelerated deployment of small-scale renewable energy applications in the agriculture sector through i) support to the preparation of models and policy
strengthening for promoting community based-small-scale power plants; ii) technical and institutional capacity building on selected renewable technologies; iii) demonstration of technical and financial viability of small-scale renewable applications.
Expected Outcomes:
• Strengthened local capacity for accelerated deployment of small-scale renewable energy applications;
• Policy and regulatory frameworks conducive to development and implementation of small-scale renewable energy applications.
Key Outputs:
• 2-3 small-scale renewable energy demonstration projects;
• Information and learning centre for small-scale renewable energy applications;
• Built capacity of local supply chain and service market for demonstrated renewable energy technologies (project developers, installers, operation and maintenance (O&M) service providers, etc.);
• Training materials developed for different market players, including communities and agribusinesses;
• Development of participatory process for the promotion, development and implementation small-scale renewable energy applications.;
• Draft policies and regulations to support selected small-scale renewable energy technologies.
Duration: 4 years
Indicative Budget: EUR 1,500,000
iii. Wastewater management programme for Moldova
Objective:
Protect water resources in Moldova by applying RECP and BAT in key industrial sectors.
Expected Outcomes:
• Strengthen the regulatory framework on water resource and wastewater management;
• Apply principles of RECP to reduce water use and wastewater generation in key industrial sectors;
• Introduce BAT to treat wastewater generated by key industrial sectors.
Key Outputs:
• Assessment of the existing regulatory framework on water use and wastewater treatment;
• Formulation of recommendations for improvement and enhanced enforcement of relevant regulations;
• RECP practices and technologies are applied and adopted in key sectors of high water use
o development of the Regulations for the use of use of sludge from sewage treatment plants;
• Installation and/or upgrade of industrial wastewater treatment plants to demonstrate the use of BAT in key sectors
o Piloting the construction of the sewage treatment plants in Soroca and Straseni or two other feasible locations, with the integration of biogas production facilities and CHP units, if economic feasibility is proven.
Duration: 4 years
Indicative Budget: EUR 1,800,000
iv. Industrial energy efficiency 4.0.
Objective:
To support promotion and accelerated upgrade of metering infrastructure and automatic control capabilities in Moldovan industry and utilities for increased energy efficiency and productivity, and reduced climate and environmental impact.
The project would also catalyse the creation of a thriving local market for hardware and ITC services for energy monitoring and management automation, with significant employment additional benefits.
Expected outcomes:
• Moldovan industry and utilities have better energy efficiency and productivity performance with integrated features of industry 4.0.
Key Outputs:
• Demonstration of state-of-the-art solutions for automated energy monitoring and management in industry;
• Capacity enhancement of the local market;
• Financing scheme for energy efficiency and energy management automation
Duration: 3 years
Indicative Budget: EUR 5,000,000
v. Industrial insulation for climate protection and market development in Moldova
Objective:
To support a revision of Moldova's technical regulation for hot and cold insulation levels in industry and other large energy consumers based on the principles of energy and cost efficiency, in addition to safety.
The project would support an upgrade of the local market/supply chain for insulation materials and services to industry and establish a financing/fiscal scheme to incentivize/subsidize accelerated industry and economy sector-wide adoption of the new regulation.
Expected outcomes:Page | 68
• Moldova's technical regulation for hot and cold insulation levels in industry takes into account the principles of energy and cost efficiency along with safety;
• The local market for insulation materials is functional and industry adopts and implements the regulation.
Key Outputs:
• Review and revision of Moldova technical regulation and market for industrial insulation;
• Demonstration of cost-effective and energy-efficient hot and cold insulation applications;
• Capacity enhancement of the local market
Duration: 3 years
Indicative Budget: EUR 2,000,000
vi. PCB management programme for Moldova
Objective:
To protect human health and the environment in Moldova from PCBs
Expected outcomes:
• Strengthen the regulatory framework on PCB management;
• Apply BEP to PCB management in key industrial sectors;
• Introduce BAT to treat PCBs generated by key industrial sectors.
Key Outputs:
• Assessment of the existing regulatory framework on treatment;
• Formulation of recommendations for improvement and enhanced enforcement of relevant regulations;
• Demonstrate the use of BAT in key sectors.
Duration: 4 years
Indicative Budget: EUR 4,000,000
ANNEX 2: DONORS MAPPINGB ila te ra l d o n o rs
According to the 2016 ODA report, among bilateral donors, Romania holds the leadership position followed by USA, Switzerland, Sweden, and Germany.
A brief description of the potential bilateral donors for the implementation of the CPF is provided below.
Austria: Moldova has been listed as a priority country for the Austrian Development Cooperation (ADC) since 2004. Poverty reduction has been an important factor for ADC in its selection of priority sectors and areas in Moldova. ADC in Moldova focuses on (i) water/wastewater management (60%) and (ii) labour-market oriented vocational training (30%) primarily in rural areas. Other important supplementary areas of intervention are (iii) governance (10%), and (iv) gender equality and environment.
In accordance with the Country Strategy 2016-2020, in the next years, Austria's development assistance will focus on capacity development and transfer of knowledge in three areas of thematic priority as follows:
1. Equal opportunity in education, focusing on labour market-oriented socially inclusive vocational education and training (VET)
2. Water, environment and climate change
3. Governance, rule of law and peacebuilding
Cross-cutting issues:
1. Social inclusion/promotion of social protection
2. Gender equality
Czech Republic: Moldova has remained one of the Czech foreign policy priorities. The development cooperation between the Czech Republic and Moldova is based on the results of previous development cooperation as well as current priorities.128 Development cooperation by the Czech Republic in the period 2018-2023 through the Czech Development Agency focuses on the following areas of cooperation:
• sustainable management of natural resources;• inclusive social development;
• good democratic governance;• agriculture and rural development;
The Czech development cooperation in Moldova consists of bilateral and trilateral projects managed by the Czech Development Agency, local small-scale projects under the Embassy of the Czech Republic in Chisinau, Aid for Trade projects under the Ministry of Industry and Trade of the Czech Republic and scholarships provided by the Czech government.129
Denmark: Denmark through its development assistance agency Danish International Development Assistance (DANIDA) has allocated DKK 1 billion (EUR 133 million) for the Neighbourhood Programme 2013-17 covering Eastern and South-Eastern Europe. Moldova and Georgia according to DANIDA have been prioritized. Primary areas of assistance in the region will cover:
• Human rights and democracy, including good governance, conflict resolution and peacebuilding, gender equality, minority rights, indigenous peoples7 rights, as well as strengthening of civil society and independent media
• Sustainable and inclusive economic development, including private sector development aiming at promoting sustainable growth, skills development, job creation, energy efficiency and green technology130.
Estonia: For the period 2016 - 2018 there is a Country Strategy for Estonian-Moldovan Development Cooperation in place. The document contains three main areas of intervention such as good governance, healthcare sector and support to the development of rural areas (including businesses and start-ups).131
The estimated budget for these interventions accounts for EUR 2.85 million.
Germany: German assistance to Moldova is administered by GIZ. German international cooperation with Moldova focuses on promoting modernisation in the agricultural sector and the food processing industries, improving vocational training and municipal services and improvement of skills of managers from Moldovan enterprises covering different economic sectors.
The three prioritized areas include:
• social development• governance and democracy
129http://www. mzv.cz/jnp/en/foreign_relations/development_cooperation_and_humanitarian/bilateral_development_coope ration/programme_countries/moldova_l/index.html130 Strategy for the Danish Neighbourhood Programme 2013-2017, http://um.dk/da/~/media/UM/Danish- site/Documents/Poiitik-ogdiplomati/Nyheder_udenrigspolitik/2013/StrategiUK_web.pdf131 Estonia Country Strategy for Estonian-Moldovan Development Cooperation, http://www.vm.ee/sites/default/files/content- editors/development-cooperation/moldova_maastrateegia_2016_2018_eng.pdf
• economic development and employmentJapan: Japan examines the possibility to prepare a Country Assistance Strategy Paper for Moldova. Priority areas for assistance are healthcare, agriculture, cultural support, and private sector development/support to SMEs
The total amount of Japanese assistance to the Republic of Moldova in 1992-2013 amounted to USD 71.31 million in grants and USD 59.26 million in terms of loan aid132. Japan opened an Embassy in Moldova in 2016, indicating that the cooperation and assistance offered to Moldova may increase.
Poland: Moldova has been on the list of priority recipients of Polish development aid since 2004. In 2015, 21 projects were undertaken in Moldova forthe total amount of PLN 4.4 million (EUR 1.02 million), and 7 projects in the framework of the Small Grants System for the amount of EUR 227,459.65.133
In 2015 areas targeted by the Polish Aid Agency in Moldova include:
• Regional development and decentralisation (6 projects)• Development of rural areas (9 projects)• Public Security and border management (1 project)
Romania: The Republic of Moldova is the main geographic priority for RoAid (Romanian's Development Cooperation Programme). Since 2010, the priority is given to support Moldova's European integration through the contribution to the capacity building of central and local public institutions and the support for democratic reforms and for civil society. There is no Romanian assistance strategy for the Republic of Moldova. The general framework is set by the National Strategy on National Policy for International Development Cooperation (2006). It is being defined a new strategic framework for ODA of Romania.
The overall objective of Romania's development cooperation policy is to support the partner countries' efforts to implement their own national development strategies. In this context, the MFA aims to promote Romania's international donor profile through financial, human and technical involvement in assisting partner countries to implement political, economic and social reforms. Main areas of cooperation are good governance, democracy and the rule of law, economic development, education and vocational training, health, development of infrastructure, and protection of the environment.
Romania provides assistance to Moldova in various cooperation frameworks, namely:
1. Commitment on providing a grant of € 100 million (Agreement between Romania and the Republic of Moldova on the basis of a non-refundable financial aid worth 100 million Euro granted provided to Moldova by Romania, April 27, 2010).
2. Education. Romania carries out a series of cooperative projects at all levels, e.g. scholarships for students from the Republic of Moldova (5,000 scholarships in 2010, 5,500 in 2013) with a value of about € 8 million in 2010,12 million in 2012 and 13 million EUR in 2012.
4. Numerous programs and training cooperation are held annually on a bilateral basis.
Sweden: The Results Strategy for Reform Cooperation with Eastern Europe, Western Balkans, and Turkey 2014-2020 sets out the following areas of development cooperation for Moldova:134
• EU market integration. Enhanced economic integration with the EU and development of market economy
• Democratic institutions. Strengthened democracy, greater respect for human rights and a better state under the rule of law.
• Environment and climate change. A better environment, reduced climate change and enhanced resilience to environmental impact and climate change a set of expected results within all results areas.
Moldova is a priority country for Sweden, and Swedish support will amount to EUR 14 million annually.
Switzerland: The new Swiss Cooperation Strategy with Moldova (2018-2021) presented in April 2018 includes following domains and budget allocation, in % from the total of 50.9mln CHF:
• Local Governance - 38%;• Economic development and employment -26%;• Health-33% ;• Other interventions - 3%.
Turkey: Turkish International Co-operation Administration (TIKA) administers the technical assistance funds of Turkey. There is no Turkish Assistance Strategy for the Republic of Moldova, however, the broad areas of assistance are:
• Project/programme assistance, particularly construction/renovation of buildings, infrastructure development
• Capacity-building• Socio-cultural activities and education• Agriculture, particularly capacity-building and provision of equipment135
134 Embassy of Sweden, Moldova." Development cooperation with the Republic of Moldova"http://www.swedenabroad.com/en-GB/Embassies/Chisinau/Development-Cooperation/Developmen-cooperation-with-the-Republic-of-Moldova-sys/135 http://www.tika.gov.tr/en/fields-of-activity/2 Page | 73
USA: The United States is assisting Moldova to consolidate democratic institutions, rebuild a struggling economy, improve the business environment, strengthen the rule of law, and address the frozen conflict in Transnistria. USAID partners with Moldova to improve government effectiveness and accountability and promote decentralization of the government and strengthen linkages between local governments and citizens to increase citizen engagement in the governance process. USAID is also helping Moldova address regulatory and policy-level challenges to sustain and accelerate economic growth. To increase Moldova's ability to compete regionally, USAID targets assistance at the country's most promising economic sectors to help create economic opportunities that will raise incomes, promote job growth, and improve living standards. There are six economic development projects currently active:
Development Credit Authority (DCA)Financial Institutions-Partners: Prime Capital, Comertbank, Rural Finance Corporation Timeframe: 09/2011 -04/2028
ICT Excellence Center (ICTEC) ProjectImplementer: Information Technology and Communications Association (ATIC)Project Period: 08/2015 -08/2018
Western NIS Enterprise Fund (WNISEFj/Florizon Capital Project Period: 09/1994 -12/2023
Development of a National Wine and Vine Registry for Moldova Implementer: The National Agency for Rural Development (ACSA)Project Period: 01/2015 - 01/2017
Export-led Development of Organic Agriculture in Moldova Implementer: People in Need (PIN)Project Period: 09/2016 - 09/2018
M u lt ila te ra l d o n o rs
World Bank: The World Bank Group's Country Partnership Strategy for Moldova for 2018-2021 aims to help reduce poverty and boost shared prosperity, and focuses on three areas of assistance:
ECONOMIC GOVERNANCE - strengthening the rule of law and accountability in economic institutions
SERVICE GOVERNANCE - improving efficiency, quality and inclusive access to public services.
SKILLS DEVELOPMENT - enhancing the quality and relevance of education and training to enable the acquisition of job-related skills
CLIMATE CROSS-CUTTING THEME: Greater adaptation, resilience and response to climate change
The agreement, signed on 17 December 2016 in Chisinau, envisage providing the Republic of Moldova with a budget support of about US$ 45 million, in the form of a loan of 13 million special drawing rights (about $ 17.4 million) from IDA and A loan of US $ 27.2 million from the IBRD.
European Union: The EU cooperates with Moldova in the framework of the European Neighbourhood Policy and the Eastern Partnership, aiming to bring Moldova closer to the EU. The programming of the EU assistance is part of the Single Assistance Framework for Moldova 2017-2020, with a budget up to EUR 348 million in the following priority sectors of intervention:
Sector 1: Economic development and market opportunities, including sustainable and inclusive economic growth (indicative 35% of total budget)
Sector 2: Strengthening institutions and good governance, including the Rule of Law and Security (indicative 15% of total budget)
Sector 3: Connectivity, energy efficiency, environment and climate change (indicative 25% of total budget)
Sector 4: Mobility and people-to-people contacts, including support to the continuous fulfilment of the Visa Liberalisation Action Plan benchmarks and to education, training and research (indicative 10% of total budget).
Cross-cutting issues, notably environmental protection and climate change, promoting the digital economy and society, gender and human rights will be mainstreamed in the priority sectors, together with the key Principles of Public Administration.
In addition, Moldova may benefit from supplementary allocations provided under the umbrella programmes. Such supplementary allocations will be granted on the basis of progress towards deep and sustainable democracy and implementation of agreed reform objectives contributing to the attainment of that goal.
Moldova is also eligible for financial support under a number of other EU instruments, such as the Instrument contributing to Stability and Peace (IcSP), Humanitarian Aid, the Partnership Instrument, the European Instrument for Democracy and Human Rights, the Instrument for Nuclear Safety Cooperation, Macro-Financial Assistance, the Mobility Partnership Facility (MPF), Development Cooperation Instrument (DCI) thematic programmes, and external actions under EU internal programmes for e.g. research and innovation, energy, transport, education and youth (Erasmus+) and culture (Creative Europe).
EBRD: The 2017-22 EBRD Strategy sets out the following priorities to guide the bank's investments and policy work in Moldova in the next five years:
• Restructuring the banking sector: The EBRD, together with International Monetary Fund, European Union and other key partners, will continue efforts aimed at rehabilitation of the banking sector. It will continue lending to its partner banks in Moldova to make finance available for Moldovan businesses. The EBRD will also work with strong strategic investors to restore transparency and corporate governance in the sector.
• Enhancing energy security: The EBRD will finance projects that promote greater domestic and cross-border interconnectivity in the energy sector. It will support the development of infrastructure for a wholesale electricity market and will fund opportunities in the renewables sector. The Bank will also conduct a comprehensive policy dialogue on reforms in the energy sector.
• Supporting private firms: The EBRD will continue lending to Moldovan companies, including under its Deep and Comprehensive Free Trade Area facility, to help them compete in the EU market. It will directly finance companies with viable business models, including export-driven foreign investors operating in free economic zones. The EBRD will help Moldova's best small and medium-sized enterprises to grow and explore new markets. It will continue working with the government to improve Moldova's business climate, including through its support to the Secretariat of the Economic Council of the Prime Minister.
• Promoting commercialization of public utilities and better infrastructure: The EBRD will continue supporting the development of infrastructure, including the modernisation of roads and railways. It will work with the authorities on tariff reform, procurement, sustainable practices, transparency, governance, and public-private schemes. The EBRD will promote energy efficiency in the public and residential sectors through direct investment and via partner financial institutions.
The EBRD is the leading investor in Moldova. To date, the Bank has invested over €1 billion in various sectors: infrastructure, energy, banking, industry, commerce and agriculture.
IMF: Moldova's quota in the IMF amounts to SDR 172.5 million (about US$241 million) or 0.04 % of total quota. Total Fund credit and loans outstanding at the end of June 2016 amounted to SDR 312.2 million (about US$ 437 million).
Priority areas of cooperation are Poverty reduction, SDGs, ensure macroeconomic stability, strengthening capacities of public administration.
ANNEX 3: LOGICAL FRAMEWORKImportant Note: None of the projects under the CPF is yet initiated and merely project concepts were developed for the consideration of the national counterparts and the perspective donors. Therefore, no project-specific information could be gathered, which impeded the refinement of project-specific assumptions and the specification of indicators, their baselines and targets. With the initiation of the projects under the CPF, project-related data will be gathered, which will be reflected in the CPF results framework. It will be accordingly streamlined and refined to enable sound reporting on results.
Intervention Item Indicators Means o f verification Risks & AssumptionsIm p ac t:
R ep ub lic o f M oldova achieves a productive transition o f its economy tow ards econom ically,environm entally and socially sustainable in du stria lization
• Increasing share of industry in GDP, baseline:14.1 %; target: 20% (by 2021 )• Volume of exports of manufactured products• Volume of SME production• Reduction of trade deficit in GDP by 4% by 2020• Increased employment rate, baseline 40.8% in 2016136 137
• Annual economic reports prepared by the National Bureau of Statistics of Moldova (NBS) and the Government• Annual Progress Reports on CP;• Mid-term Country Programme review;• Monitoring visits to field sites and regular monitoring report
• Full and continuous commitment by the Government• Sustained commitment of stakeholders• Political climate, changing policy and legislative frameworks• Global and/or regional economic stagnation with resulting deterioration of trade opportunities• Lacking national absorption and implementation capacities
C o m p o n e n t 1 E n h a n c e d in d u s t r ia l c o m p e t i t iv e n e s s , m a r k e t a c c e s s , in n o v a t io n a n d in v e s t m e n t p r o m o t io n
O utcom e Com ponent 1:
Priority industry subsectors are better integrated into global value chains and are able to produce competitive products
• Increased manufacturing value added, baseline 2281 ̂ 7per capita in 2014 '
• Increased share of medium and high-tech activities in total manufacturing value added, baseline 27% in 2014138
• Mid-term review and independent final evaluation of
• External and internal political, economic and social factors remain stable.
• Investments can be attracted• Sustained commitment by
136 National Bureau of Statistics of Moldova137 Competitive Industrial Performance Repor138 Idem Page | 77
2016, UNIDO, 2017
• Increased FDI stock per capita, baseline 741 USD in2015139
the CPF;• Monitoring visits to field sites
and regular monitoring reports.
the stakeholders
Output 1.1.Strengthening the promotion capabilities of Moldova in mobilizing ISID investments and partnerships to industrial parks
• amount of investment leveraged by project interventions
• # of jobs created• # of partnerships established within or through
project interventions
• Project progress reports;• Statistical data on investments to
industrial parks and employment generated by the industrial parks;
• Surveys
• The priorities of Government strategies and policies remain constant or at least conducive to industrial parks development
• External political, economic and social factors remain stable.
• Investments can be attracted for industrial parks and -zones development
Output 1.2.Industrial upgrading and modernization of a priority manufacturing sub-sector
• Enterprise performance indicators e.g. reduced factor costs, increased turnover, value added, % exported
• # of enterprise employees trained (female and male)
• # partner institutions and national experts trained (female and male)
• Increase in quality and quantity of goods and services produced by the selected beneficiary enterprises
• Post-upgrading performance and satisfaction degree of the beneficiary companies
• Market positioning vision for identified products of high potential and marketing implementation strategy developed
• # of partnerships facilitated• # and quality of export activities and export
promotion activities organized and participated
• Project progress reports• Beneficiary companies surveys• National statistical data
• Absorption capacity/ knowledge gaps
• Business climate for targeted subsectors remains stable and favorable
• Strong support by the Government remains in place for the targeted sub-sectors
139 The economic impact of FDI in Moldova - Results from an empirical analysis, GET, https://www.get-moldau.de/wordpress/wp-content/uploads/2018/01/PS_01_2017_en.pdf
Output 1.3.Enhancing the competitiveness of local SMEs in a priority manufacturing sector/agro- processing sector in Moldova through cluster development
• # of clusters assisted in the formulation, implementation and monitoring of cluster action plans
• # of upgrading plans developed for companies in selected target clusters with regard to productivity, quality, safety and relevant related standards/labels
• # of clusters branding and marketing concepts developed and linkages with other industries intensified
• # of new products developed• # of women and men from municipalities,
government entities and business support institutions who received awareness- and capacity building trainings in supporting clusters
• Project reports• Industry and government
publications• Government statistics and other
national and international sources
• Willingness of clusters participants to cooperate
• Trained people and enterprises apply their knowledge
• Business climate remains stable and favorable
Output 1.4.Strengthening linkages between research and industry in Moldova
• # of national experts (men and women) participating in capacity building activities and study tours
• # of partnerships established at the national, regional and international levels for facilitating commercialization pathways of the selected technologies
• Technology roadmap developed focused on selected technologies, by modelling for customer usage cost and return of investment
• Project reports• Regular field visits reports
• Absorption capacity/ knowledge gaps
• Sustaining commitment of stakeholders
• Trained people apply their knowledge
Output 1.5.Implementation of a Subcontracting and Partnership Exchange Centre for developing Moldovan supplier SMEs and linking them to multinational companies (MNC)-inward investors in the automotive sector
• Subcontracting and Partnership Exchange Centre established and operational
• At least 200 local companies profiles prepared and published
• At least 40 local companies receive a competitiveness assessment report based on a benchmarking analysis
• # of local companies receive contracts with foreign companies/MNC
• Project reports• Statistics from the Moldovan
Chamber of Commerce and Industry
• Economic and trade reports by the Ministry of Economy and Infrastructure
• Business climate remains stable and favorable
• International trade regime remains unchanged
Com ponent 2 P r o d u c t iv e e m p lo y m e n t f o r r u r a l c o m m u n it ie s a n d e n t r e p r e n e u r s h ip d e v e lo p m e n t
Outcom e Com ponent 2:
Agro-food MSMEs produce high quality agricultural products and generate productive employment
• Average 5% annual increase in the turnover of MSMEs and agro-food clusters;• Number of locally produced and processed agrofood products• Number of jobs in the food processing industry• Employment rate at the local level• Increased average monthly wage in rural area, baseline 65.3% of the national minimum wage in 2016
• Mid-term review and independent final evaluation of the CPF;
• Monitoring visits to field sites and regular monitoring reports
• Stable climatic conditions and lack of extreme weather events (floods, draught)
• Low level of migration out of rural areas
• Sustained commitment by the stakeholders
Output 2.1.Empowering Moldova’s youth through entrepreneurship
• # of young people received entrepreneurship training and receive advisory services• 70% of assisted youth successfully establish enterprises (i.e. develop business plans and receive loans)• # of financial institutions capacitated to provide more qualitative financial services to youth entrepreneurs• Increase in number of new jobs created within the assisted youth-led companies
• Training reports• Business plans / loan agreements• Counsellors reports
• Trained youth engage in entrepreneurial activities
• Sufficient number of promising projects are identified
• Availability of trainers to conduct the trainings when needed
• Conducive business environment
Output 2.2.Livestock-sector development programme — revival of the milk and meat production in Moldova
• Livestock sector strategy developed and adopted by the Government• # of trained farmers and processors• Increase in meat and milk-products supply• Increase in sub-product utilization in other sectors• Amount of investment leveraged
• Project reports• Training reports• Annual reports by the Ministry
of Agriculture, Regional Development and Environment
• Government commitment and support remains in place and continues to prioritize the livestock sector
• Trained farmers and processors apply the new skills and practices
• Demand for meat and milk products, as well as sub products remains available
Output 2.3.Linking agricultural producers and handicrafts makers with the tourism sector in Moldova
• # of typical products mapped• Increase in sales of typical products• # of jobs created through the project interventions
• Project reports• Reports by the Ministry of the
Economy on new products and their impact on the local market
• The tourist inflow to Moldova remains unchanged
E n v ir o n m e n t a l m a n a g e m e n t a n d s u s t a in a b le e n e r g y
Outcom e Com ponent 3 • Absolute contribution made to different environmental agreements
• External and internal political, economic, social or environmental
Improved water- and industrial waste management practices and increased utilization of energy efficiency and renewable energy in industry.
• % of water, 002, energy and material reduction in companies• % increase in environmentally compliant companies
prepared by the NBS and the Government;
• Mid-term review and independent final evaluation of the CPF;
• Monitoring visits to field sites and regular monitoring reports
factors remain stable.• Sustained commitment by the stakeholders
Output 3.1.UNIDO Cleantech Innovation Programme for Moldova
• Roadmap for Cleantech Ecosystem developed and operationalized• 3 National Cleantech Competitions organized• 3 associated Accelerator Programme organized• Clean Energy Technology Development Platform developed.
• Project reports• Annual reports by the Ministry of Economy and Infrastructure
• Government commitment for the implementation of policies and regulations for cleantech• Technology innovation incubators remain active
Output 3.2.Promoting small-scale renewable energy applications in agriculture (hydropower, solar, wind, biomass and biogas)
• 3 small-scale renewable energy demonstration projects formulated and launched• Training materials developed for different market players, including communities and agri-businesses• # policies and regulations to support selected small- scale renewable energy technologies in place and operational
• Project reports• Training reports• Reports by the Ministry of Economy and Infrastructure
• Technical, economic and financial feasibility of technologies• Continuing support of the key stakeholders to meet the project objectives• Beneficiaries interested in developing small-scale renewable energy projects
Output 3.3.Wastewater management programme for Moldova
• # of RECP practices and technologies applied• # of BAT introduced and utilized
• Project reports• Regular site visits reports• Reports by the Ministry of Agriculture, Regional Development and Environment
Stakeholder’s willingness and continuous Government commitment to the utilization of environmental goods and services •
Output 3.4.Industrial energy efficiency 4.0
• # state of the art solutions for automated energy monitoring and management in industry demonstrated• % GHG reduction achieved• # jobs created
• Project reports• Regular site visits reports
• Energy efficiency and technologies and practices continuously and safely used by the industries
Output 3.5.Industrial insulation for climate protection and market development in Moldova
• # of technical regulation for industrial insulation reviewed and revised• # of cost-effective and energy-efficient hot and cold insulation applications demonstrated• % GHG reduction achieved
• Project reports• Regular site visits reports
• Large energy consumers readily utilize industrial insulation applications
Output 3.6. • The text of a new set of regulatory instruments • Official gazette • The Government is committed
PCB management programme for Moldova
In compliance with requirements of Stockholm Convention on PCBs (Annex A, part II) adopted• Inventory with # of analyses of PCBs carried out• # of enterprises engaged in PCB management
• Progress report and training reports, database entries• Selected technologies comply with BAT/BEP.
to meet the requirements of the Stockholm Convention • Stakeholders remain committed to managing PCBs in an environmentally sound manner
C P F M anagem ent and M & E
Outcome 4Strong mechanism to ensure the achievement of the strategic impact of the CPF, exercise oversight of its implementation, enact fund-raising, coordination, M&E and reporting.
• Coordination, M&E and reporting frameworks developed and enacted• # of meetings of Country Programme Steering Committee facilitated and held• Fund-raising continuously executed•
• Field visits;• Bi-annual progress reports/Steering Committee’s reports• Project Manager’s reports• Evaluation reports• Data collection
• Government commitment to the CPF, its implementation and fund-raising• Stakeholders’ and national partners’ willingness for cooperation under the framework of the CPF.
Output 4.1.Country Programme Management Unit created for CPF oversight, coordination, fund-raising, M&E and . reporting
• # of meetings of the Country Programme Management Unit held
• Project Manager’s reports Country Programme Management Unit’s reports
• Funding for TA a can be attracted for the implementation of the CPF.
Budget breakdown for Component 4: CPF Management and M&EComponent 4: CPF Management and M&E
BL Outcome: Strong mechanism to ensure the achievement of the strategic impact of the CPF, exercise oversight of its implementation, enact fund-raising, coordination, M&E and reporting.
2019(EUR)
2020(EUR)
TOTAL(EUR)
Output 4.1: Country Programme Management Unit created for CPF oversight, coordination, fund-raising, M&E and reporting
C o u n try Program m e M anagem ent U nit created for C P F oversight, coordination, fu n d -ra isin g , M & E and reporting.
Activity4.1.1
CPF Signing ceremony and launching event;
Responsible: UNIDO Project Manager
Activity4.1.2
Recruit CPF National Consultant to ensure proper coordination, find-raising, monitoring and reporting at the field level;
Responsible: UNIDO Project Manager
Activity4.1.3
Recruit CPF International Consultant to enact the overall coordination, provide oversight in the management and act as an interface between the technical departments for the overall CPF
O utputs/A ctiv ities
Activity4.1.4
Activity4.1.5
Activity4.1.6
D escription
implementation, fund-raising, monitoring and reporting at the HQs level;
Responsible: UNIDO ProjectManager____________________Liaise with the Government and the Permanent Mission in Vienna to update and adjust the preliminary Funds Mobilization Strategy as featured in the draft CPF and plan joint fund mobilization activities.
Responsible: UNIDO ProjectManager, InternationalConsultant, National ConsultantOrganize and conduct CPF Steering Committee Meeting
Responsible: UNIDO ProjectManager, InternationalConsultant, National Consultant
Collect data and produce the CPF inception report, also taking into account the EB’s recommendations (if any).
Responsible: UNIDO ProjectManager, InternationalConsultant, National Consultant
Plan and conduct monitoring visits if necessary to field sites and produce regular monitoring reportsResponsible: UNIDO Project Manager, International Consultant, National Consultant
. . 1. _ :
ANNEX 4: Gender ChecklistGENDER MAINSTREAMING CHECKLIST FOR PROJECTS
Date: 10 June 2018 Project Manager: Solomiya OmelyanSAP#: 150451 Project Name: Country Programme for Moldova 2019-2023
ProjectComponent Question Yes No Partially Comments*
Analysis/Justification
1. Does the project explicitly address a gender issue or issues?If so, please describe how and if not, please provide explanation.
X
2. Does the background/context analysis of the project examine:a) the different situations of women and menbj the impacts the project will have on different groups
X
Data & Statistics
3. Will the project collect and use sex disaggregated data and qualitative information to analyse and track the gender issues?
X Relevant data will be used to monitor and evaluate gender-related developments. Gender disaggregated data has been gathered from NBS.
ResultsFramework
4. Are outcomes, outputs and activities designed to meet the different needs and priorities of women and men? Has a gender marker been assigned at the output-level (‘central focus of output', ‘significant attention', ‘limited attention' or 'no attention to gender')? **
XThe main part of outputs of components and projects included gender issue and will address different needs of women.
5. Does the results framework include gender responsive indicators, targets and a baseline to monitor gender equality results?
XCPF level gender responsive targets cannot be included at this stage but projects deriving from the CP will be gender sensitive.
Budget 6. Have adequate financial resources been allocated for the proposed gender activities (vis-à-vis % of total budget)?
X
Stakeholders&
Participation
7. Are women/gender focused groups, associations or gender units in partner organizations consulted/included in the project?
XThe projects are not initiated yet, as the implementation will progress more women/gender focused groups, associations or gender units will be included.
8. Does the project ensure that both women and men can provide inputs, access and participate in project activities (target at least 40 % of whichever gender is underrepresented)?
X
GenderCapacities
9. Has a gender expert been recruited OR does the project staff have gender knowledge and have gender related tasks incorporated in their job descriptions? X
The project staff as well as the Project Manager have gender knowledge.
10. Will all project staff be sensitized to gender (e.g. staff will complete basic online course; 1 Know Gender Course on UN Women's eLearning Campus https://trainingcentre.unwomen.org)?
XProject
Implementation
11. Is there gender balanced recruitment of project personnel and gender balanced representation in project committees? X
Monitoring & Evaluation
12. Will the monitoring and evaluation of the project cover gender issues and monitor behavioural changes towards greater gender equality? X
*Comments ore mandator/ for each question answered "No" or "Partially".** A user guide on how to assign a gender marker within UNIDO's SAP PPM system is found on the Intranet and OpenText
