Assisting Moldova's Competitiveness

ASSISTING MOLDOVA'S COMPETITIVENESS CHAMPIONS: SELECTING TWO FURTHER INDUSTRIES Photo credit: Doina Nistor / Photo caption: Study visit of Technical University Moldova to the Excellence Center from Brasov Romania

The USAID Moldova Competitiveness Project 14, Nicolae Iorga str. USAID Moldova MD-2012, Chisinau, Moldova Tel.: (+373) 22 908 280 Competitiveness Fax: (+373) 22 908 290 [email protected] Project USAID MOLDOVA COMPETITIVENESS PROJECT

Kevin Murphy, Martin Webber and Karen Isahakyan J. E. Austin Associates, Inc.

With and for Chemonics and the USAID Moldova Competitiveness Project

July 26th, 2016

This publication was produced for review by the United States Agency for International Development. The author’s views expressed in this publication do not necessarily reflect the views of the United States Agency for International Development or the United States Government. ACKNOWLEDGEMENT

The authors would like to express our deepest appreciation to all those who collaborated in this report. We would like to acknowledge Doina Nistor, Sergiu Rabii, Diana Lazar and all USAID MCP project staff for their support and collaboration. We would like to express special thanks to representatives of the many Moldovan companies that took time from their busy schedules to meet with us and share their insights on the competitiveness of their industries and the suitability of project assistance. These included companies involved in creative services, precision engineering, furniture, metal manufacturing and automotive supply industries. We would also like to acknowledge with much appreciation the crucial role of the staff of MIEPO, who helped to identify and organize meetings with companies. We would also like to thank international experts whom we consulted including Ifor Ffocs-Williams who advises the creative services industry cluster in New Zealand on the suitability of focusing on an industry with such a diverse set of companies. We would like to thank Dr. Michael Porter of the Harvard Business School Institute for Strategy and Competitiveness whose competitiveness diamond we used among our analytical techniques. We would like to thank Graeme Harrison of Oxford Economics who helps compile the tourism projections for the World Travel and Tourism Council with whom we analyzed the methodologies and accuracy of current and projected economic impacts of tourism in Moldova. Last but not least, many thanks go to Dr. Sergiu Botezatu, USAID/Moldova, who provided his comments throughout the course of our work.

Photo credit: Racceeva Elena / Phoro caption: Identity of Makers of Moldova, Atelier 99

2 ACRONYMS

CAGR Compound Annual Growth Rate CEED Competitiveness Enhancement and Enterprise Development (USAID project) CG Computer Graphics CS/CSI Creative Services or Creative Services Industry DC-FTA Deep and Comprehensive Free Trade Agreement EU European Union FEZ Free Economic Zones GDP Gross Domestic Product GoM Government of Moldova ITC International Trade Center, UN World Trade Organization JAA J.E. Austin Associates, Inc. MCP Moldova Competitiveness Project MDL Moldovan Leu MIEPO Moldova Investment and Export Promotion Organization MoU Memorandum of Understanding NBS National Bureau of Statistics of the Republic of Moldova CIS Commonwealth of Independent States PE Precision Engineering TUM Technical University of Moldova USAID United States Agency for International Development USD US Dollars VAT Value Added Tax

3 CONTENTS

Acronyms 1 Executive Summary 5 I. Background for this report 9 Objectives and Methodology 9 II. Industry Selection: From Long List to Short List 11 Exhibit 1: Industries Ranked by Turnover in 2014, million lei 13 Exhibit 2: Growth in Sales Ranked by Industry 2010-2014 (CAGR) 14 Exhibit 3: Top exports of products from targeted sectors in 2015, thousand USD 15 Exhibit 4: Employees in Moldovan Industry Sectors 17 Exhibit 5: Top Growth in Employment (net new jobs) in targeted sectors, 2014 / 10 18 Exhibit 6: Top Productive jobs (Annual Sales/ Employee) of targeted sectors, thousand MDL 19 Exhibit 7: Top exports of services from targeted sectors in 2015, thousand USD 20 Exhibit 8: Annual export growth of services from targeted sectors 21 Summary Analysis and Selection of Short Listed Industries 21 Exhibit 9: Summary Table: Automotive-Related, Precision Engineering, Creative Industries, Soft Drinks and Furniture are shown to be important industries for being "short-listed" for further analysis 22 III. Further Competitiveness Analysis of the 5 Short-Listed Industries 23 Revealed Competitiveness Analysis (RCA) 23 IV. Qualitative Analysis of the Five Leading Industries 25 Automotive Parts 25 Beverages - Soft Drinks 25 Furniture 26 Precision Engineering 26 Creative Services Industries 27 Summary on Industry Selection 27 V. Creative Services Industry (CSI) in Details 28 Competitiveness Assessment for Moldovan Creative Industries Cluster 28 Definition and Description 28 Examples of Creative Industries in Moldova 28 Can "Creative Industries" Be Considered as a True Industry Cluster? 29 Importance of Creative Industries 29 Market Trend Analysis: Favorable Trends in the Global and Regional Economic Context 29 Current Situation 29 Survey of Creative industries 30 SWOT Analysis. Creative Industry 30 Porter Diamond. Creative Industries 31 VI. Precision engineering in details 34 Competitiveness Assessment for Moldovan Precision Engineering and Manufacturing Cluster 34 Definition and Description 34 Examples of Precision Engineering and Manufacturing Businesses 34 Importance of Precision Engineering and Manufacturing Businesses 34 Market and Competitiveness Trend Analysis: Favorable Trends in the Global and Regional Economic Context 35 Current Situation 35 SWOT Analysis. Precision Engineering 36 Porter Diamond. Precision Engineering 37 Can Precision Engineering Be Considered as an Industry or Cluster? 38 Conclusion 38 Annex A. Exhibits 39 Exhibit 10: Size of national supply and international demand for all Moldovan products at aggregated "2 digit" level (2015) 39 Exhibit 11: Size, market share and growth (blue) in market share of Moldovan electrical equipment exports in 2015 39 Exhibit 12: Size, market share and improvement in market share for furniture, lighting, signs, prefab buildings (2015) 40 Exhibit 13: Size, market share and growth (blue) in market share of Moldovan machinery export categories in 2015 40 Exhibit 14: Size, market share, attractiveness and growth in market share of Moldovan beverage-related exports 41 ANNEX B. Select Interview Notes and Summary Matrixes 42 created demand for certain precision engineering much value-added MCP could provide. While we products. Emerging demand from the EU and early don’t see a role for MCP to support this sector, we EXECUTIVE signs that investors are coming to Moldova is a do recommend that USAID, EU or other donors good sign of areas for Moldovan competitiveness. consider providing a workforce training fund SUMMARY available to future investors who are considering The team then conducted further analysis and investing in Moldova but may be worried about the conducted extensive interviews with firms from these lack of trained personnel. This would have the The objective of this report was to identify one and footwear), wine, and tourism. Agricultural five industries to determine the suitability of each for triple advantage of benefitting Moldovan workers, or two attractive Moldovan industries for sectors were also excluded as the focus of the project assistance. We used the "self-selection" ensuring that all training funds went to people support by the USAID funded MCP project project was on non – agricultural sectors. Information criteria which focused on how receptive industry guaranteed to have jobs and also influencing using rigorous analytics. The USAID-funded for the sector assessments was collected through potentially indecisive investors to invest in Moldova. Moldova Competitiveness Project (MCP), available reports, offline and online data, government leaders were to project assistance. We also examined implemented by Chemonics, is helping to build statistical information and more than 60 interviews. the needs or gaps and whether MCP was in a The soft drink industry has high turnover but is competitiveness in four Moldovan industries. MCP Some industries seemed attractive but were not position to do something useful to fill them. We similarly concentrated among a few large has been assisting wine and vine, light manufacturing included in the short list because they are not took into consideration the potential for contributing companies. It was not selected since it is highly (textiles, apparel and footwear), tourism and export-oriented. Construction, for example, had to the competitiveness of other industries, if concentrated and has not created new jobs. Sales information technology industries to build their very high turnover and accounts for over 30,000 relevant. Finally, special factors were taken into are growing and sales per employee look attractive. competitiveness. Per the MCP project plan, MCP jobs but it is not export-oriented. consideration such as impact on youth who might Exports also grew by 3.6% between 2011 and 2015. will now choose one or two additional industries. otherwise emigrate, impact on women and the However, the industry is characterized by a few large This report presents analysis for industries being impact on disadvantaged regions. companies and it is unclear what the project could MCP subcontractor J.E. Austin Associates (JAA) assisted as well as new potential industries. The actually do to help the industry that it is not already implemented this study by analyzing the best team consciously included industries currently being The automotive supply sector was highly doing for itself. Furthermore, the industry is fairly data available and spending six person-weeks assisted in the analysis to review their attractiveness competitive and very attractive and might well capital intensive and generates less than 1,000 jobs. interviewing industry representatives. JAA is the relative to new industries. The analysis generally be the most competitive emerging industry in And there has been almost no growth in jobs in US-based small business that introduced confirmed the wisdom of MCP industry choices to the manufacturing sector. The data presented in recent years. competitiveness initiatives to USAID in 1998 and date. Textile and apparel exports account for about this report show that this sector is perhaps the co-authored the World Bank guide called Clusters US$274M along with employment nearing 20,000 most dynamic and competitive, generating new The furniture industry generates over US$100M for Competitiveness which provided a series of with textiles alone contributing nearly 1,500 jobs in jobs, exports and employment. It is also creating in exports, has been growing modestly and the competitiveness assessment tools. recent years. Tourism-related industries generated jobs outside of Chisinau in some disadvantaged industry is open to project assistance which over US$209M in export revenues with wine regions. Firms that currently operate in Moldova could do useful things. With a larger number of The team made a very important clarification generating nearly another US$100M. Exports of supply global brands, such as BMW, Mercedes, smaller companies, the project could provide early on by defining an industry by its capabilities computer services are nearly US$60M and growing Volkswagen and even Japanese firms producing in industry experts, upgrade training, and foster instead of by its products. The former can be rapidly. German. From these criteria, the industry was industry-education linkages. Had we been able to used to produce multiple products. Therefore placed at the top of our list. recommend three industries we would probably precision engineering includes a variety of products The team applied eight quantitative criteria to have included furniture. Based on the need to but relies on similar skills. Likewise creative identify five attractive industries: furniture, soft However, Moldova's automotive supply industry select only one or two industries, we did not services cover a variety of export services such as drinks, automotive supplies, precision engineering is characterized by a relatively small number of include furniture because there are fewer than animation, design, advertising and others. and creative industries. Criteria included exports, foreign firms who need less of the kind of help 5,000 jobs in the industry, employment has actually export growth, employment, employment growth, the project can provide. They have their own been declining, and these are basically low-wage Service industries and service exports were also turnover, growth in turnover, and sales per market linkages already established. They understand jobs in an industry that has relatively low turnover included in our review. The team look not only at employee as a proxy for the ability to generate their manufacturing processes and standards. And per employee. Prospects for growth also seem product exports but also at service exports and relatively high-paying jobs. This analysis was largely production is concentrated among a relatively small modest in the context of the overall growth of trends in the service industry. The global economy quantitative and yielded a short list of five leading number of foreign companies. They have been able European housing and furniture market. and most national economies are having larger industries for further analysis: furniture, soft drinks, to address workforce training gaps to date. Based service industry components so this was an important automotive supplies, precision engineering and on interviews with this sector it was unclear how thing to keep in mind while doing this analysis. creative services. The report identifies the leading industries in each criteria area and then provides a PRECISION ENGINEERING measuring equipment, iron and steel reservoirs This study began by analyzing 50 product summary analysis. The consultants paid special metalworking involving heat transformation and a categories to identify a short list of five leading attention to regional trends such as the Deep and Precision engineering (PE) was found to be variety of other products. Moldova was an historical industries for further analysis. This list was Comprehensive Free Trade Area (DC-FTA) attractive, is open to MCP assistance and the exporter of precision engineering products for the developed on the basis of the MCP’s Scope of agreement which gives Moldova access to EU project could do useful things to boost its Soviet defense industry and many of the skills still Work, to exclude industries that were already markets. This has already begun to attract investors competitiveness during a time of transition. The exist. As the industry involves many products, it is under assistance, such as IT, light industry (apparel in the automotive supply value chain and has industry involves communications equipment, hard to get accurate estimates at times and the

legitimate industry cluster. Creative industries in The creative services industry is growing and is Moldova do self-identify. Those we met do think of one that could retain talented young people and themselves as being a part of creative industries. has been showing signs of promise. The creative They would like to work together. And there are services industry has potential for growth as some commonalities captured in the definition Europeans and Russians outsource these functions above. There is usually something unique. The to Moldovans already. Moldovans have linguistic work may involve a computer but computers skills and are bi-cultural understanding people and cannot do the work. Creative work is hard to cultures in the West as well as those from countries outsource to computers. of the former Soviet Union, making them capable of adapting creative products for both sides. Barriers The creative industries can also add value and to entry are relatively low. And most importantly, enhance competitiveness of all other Moldovan the industry leaders meeting with MCP were industries by contributing to the design of furniture enthusiastic about collaborating and identified and apparel, or the packaging, branding and advertising useful things MCP could do to assist. of Moldovan wine. This industry also helps Moldova's "brand" internationally. While no good statistics Moldova can capitalize on EU demand through exist, JAA estimated about 10,000 people using a projects such as “Creative Europe”3 and move Delphi process through industry experts. Export towards more service oriented, high value jobs. revenues may not show up in the statistics. Many of Globally, the proportion of GDP is shifting to the firms interviewed seem to be experiencing services. While agriculture and manufacturing challenge is to help firms in this industry reorient the last few years. Therefore the industry is very good growth. continue to grow in value, most countries as they themselves to higher value products and markets, a open to assistance as it seeks to expand markets, become more developed have over half the economy potential role for MCP. The industry tends to be to diversify products and to deploy the engineering in the service industry. This trend will likely continue. product focused rather than simply being used for skills for which Moldova is well known. The firms outsourcing. This will provide some resilience. interviewed seemed very open to the idea of coming together and working with the project to For many products, turnover per employee in reposition there industry in global markets. The the PE industry is healthy ranging from 444,000 team met several larger firms that are re-orienting to 524,000 MDL. This compares favorably to their processes and sales efforts to serve EU 292,000 MDL for non-precision engineering and markets. The industry is going through a transition 278,000MDL for furniture. The industry is period to redeploy its skills to new products and sufficiently attractive as to have motivated both markets where MCP assistance might be particularly foreign investors and entrepreneurial startups. helpful. Exports are US$58M and the industry employs 5,763 people. The team found that many precision engineering products are growing at 20%1. And most importantly, The PE industry has gone through a mild these companies are growing because of exports. downturn and is open to engaging with MCP Given the prominence of precision engineering and and can use help. It lost 754 jobs in the last few related products in export growth its employment years, although those jobs remaining seem more ranked 8th among selected industries with 5,763 productive. Exports have gone down by 3.1% over jobs2.

CREATIVE SERVICES including commercials, advertising, cultural events, "App" design, creation and invention, website The industry may also help retain Moldovan Next steps will include fielding competitiveness INDUSTRY (CSI) design, social media, event managers, visual artists, youth in Moldova as many are attracted to experts and industry experts to engage the industries, Creative services can be defined as those trainers, speakers, computer graphics (CG), fashion work in the creative services industries. do the "cluster mustering," and with them apply design, entertainment, music composing, arranging diagnostics and identify the most promising initiatives producing tangible economic value-added We therefore recommend engaging PE and CSI through conceptual, logical, communication and and performance and many other specialties. to build the competitiveness of these industries and industries, applying diagnostic tools, creating boost exports and employment. Follow on work artistic skills involving creativity. Examples If one defines an industry not by its products but strategies and identifying specific strategic and should start soon to build in the momentum and include industrial design, graphic design, architectural by its core capabilities, it becomes clear that policy initiatives. The team began this process by interest created by this work to date. design, computer animation, studio video production "creative industries" can be considered a applying SWOT Analysis and the Porter Diamond. created demand for certain precision engineering much value-added MCP could provide. While we products. Emerging demand from the EU and early don’t see a role for MCP to support this sector, we signs that investors are coming to Moldova is a do recommend that USAID, EU or other donors good sign of areas for Moldovan competitiveness. consider providing a workforce training fund available to future investors who are considering The team then conducted further analysis and investing in Moldova but may be worried about the conducted extensive interviews with firms from these lack of trained personnel. This would have the The objective of this report was to identify one and footwear), wine, and tourism. Agricultural five industries to determine the suitability of each for triple advantage of benefitting Moldovan workers, or two attractive Moldovan industries for sectors were also excluded as the focus of the project assistance. We used the "self-selection" ensuring that all training funds went to people support by the USAID funded MCP project project was on non – agricultural sectors. Information criteria which focused on how receptive industry guaranteed to have jobs and also influencing using rigorous analytics. The USAID-funded for the sector assessments was collected through potentially indecisive investors to invest in Moldova. Moldova Competitiveness Project (MCP), available reports, offline and online data, government leaders were to project assistance. We also examined implemented by Chemonics, is helping to build statistical information and more than 60 interviews. the needs or gaps and whether MCP was in a The soft drink industry has high turnover but is competitiveness in four Moldovan industries. MCP Some industries seemed attractive but were not position to do something useful to fill them. We similarly concentrated among a few large has been assisting wine and vine, light manufacturing included in the short list because they are not took into consideration the potential for contributing companies. It was not selected since it is highly (textiles, apparel and footwear), tourism and export-oriented. Construction, for example, had to the competitiveness of other industries, if concentrated and has not created new jobs. Sales information technology industries to build their very high turnover and accounts for over 30,000 relevant. Finally, special factors were taken into are growing and sales per employee look attractive. competitiveness. Per the MCP project plan, MCP jobs but it is not export-oriented. consideration such as impact on youth who might Exports also grew by 3.6% between 2011 and 2015. will now choose one or two additional industries. otherwise emigrate, impact on women and the However, the industry is characterized by a few large This report presents analysis for industries being impact on disadvantaged regions. companies and it is unclear what the project could MCP subcontractor J.E. Austin Associates (JAA) assisted as well as new potential industries. The actually do to help the industry that it is not already implemented this study by analyzing the best team consciously included industries currently being The automotive supply sector was highly doing for itself. Furthermore, the industry is fairly data available and spending six person-weeks assisted in the analysis to review their attractiveness competitive and very attractive and might well capital intensive and generates less than 1,000 jobs. interviewing industry representatives. JAA is the relative to new industries. The analysis generally be the most competitive emerging industry in And there has been almost no growth in jobs in US-based small business that introduced confirmed the wisdom of MCP industry choices to the manufacturing sector. The data presented in recent years. competitiveness initiatives to USAID in 1998 and date. Textile and apparel exports account for about this report show that this sector is perhaps the co-authored the World Bank guide called Clusters US$274M along with employment nearing 20,000 most dynamic and competitive, generating new The furniture industry generates over US$100M for Competitiveness which provided a series of with textiles alone contributing nearly 1,500 jobs in jobs, exports and employment. It is also creating in exports, has been growing modestly and the competitiveness assessment tools. recent years. Tourism-related industries generated jobs outside of Chisinau in some disadvantaged industry is open to project assistance which over US$209M in export revenues with wine regions. Firms that currently operate in Moldova could do useful things. With a larger number of The team made a very important clarification generating nearly another US$100M. Exports of supply global brands, such as BMW, Mercedes, smaller companies, the project could provide early on by defining an industry by its capabilities computer services are nearly US$60M and growing Volkswagen and even Japanese firms producing in industry experts, upgrade training, and foster instead of by its products. The former can be rapidly. German. From these criteria, the industry was industry-education linkages. Had we been able to used to produce multiple products. Therefore placed at the top of our list. recommend three industries we would probably precision engineering includes a variety of products The team applied eight quantitative criteria to have included furniture. Based on the need to but relies on similar skills. Likewise creative identify five attractive industries: furniture, soft However, Moldova's automotive supply industry select only one or two industries, we did not services cover a variety of export services such as drinks, automotive supplies, precision engineering is characterized by a relatively small number of include furniture because there are fewer than animation, design, advertising and others. and creative industries. Criteria included exports, foreign firms who need less of the kind of help 5,000 jobs in the industry, employment has actually export growth, employment, employment growth, the project can provide. They have their own been declining, and these are basically low-wage Service industries and service exports were also turnover, growth in turnover, and sales per market linkages already established. They understand jobs in an industry that has relatively low turnover included in our review. The team look not only at employee as a proxy for the ability to generate their manufacturing processes and standards. And per employee. Prospects for growth also seem product exports but also at service exports and relatively high-paying jobs. This analysis was largely production is concentrated among a relatively small modest in the context of the overall growth of trends in the service industry. The global economy quantitative and yielded a short list of five leading number of foreign companies. They have been able European housing and furniture market. and most national economies are having larger industries for further analysis: furniture, soft drinks, to address workforce training gaps to date. Based service industry components so this was an important automotive supplies, precision engineering and on interviews with this sector it was unclear how thing to keep in mind while doing this analysis. creative services. The report identifies the leading industries in each criteria area and then provides a PRECISION ENGINEERING measuring equipment, iron and steel reservoirs This study began by analyzing 50 product summary analysis. The consultants paid special metalworking involving heat transformation and a categories to identify a short list of five leading attention to regional trends such as the Deep and Precision engineering (PE) was found to be variety of other products. Moldova was an historical industries for further analysis. This list was Comprehensive Free Trade Area (DC-FTA) attractive, is open to MCP assistance and the exporter of precision engineering products for the developed on the basis of the MCP’s Scope of agreement which gives Moldova access to EU project could do useful things to boost its Soviet defense industry and many of the skills still Work, to exclude industries that were already markets. This has already begun to attract investors competitiveness during a time of transition. The exist. As the industry involves many products, it is under assistance, such as IT, light industry (apparel in the automotive supply value chain and has industry involves communications equipment, hard to get accurate estimates at times and the

legitimate industry cluster. Creative industries in The creative services industry is growing and is Moldova do self-identify. Those we met do think of one that could retain talented young people and themselves as being a part of creative industries. has been showing signs of promise. The creative They would like to work together. And there are services industry has potential for growth as some commonalities captured in the definition Europeans and Russians outsource these functions above. There is usually something unique. The to Moldovans already. Moldovans have linguistic work may involve a computer but computers skills and are bi-cultural understanding people and cannot do the work. Creative work is hard to cultures in the West as well as those from countries outsource to computers. of the former Soviet Union, making them capable of adapting creative products for both sides. Barriers The creative industries can also add value and to entry are relatively low. And most importantly, enhance competitiveness of all other Moldovan the industry leaders meeting with MCP were industries by contributing to the design of furniture enthusiastic about collaborating and identified and apparel, or the packaging, branding and advertising useful things MCP could do to assist. of Moldovan wine. This industry also helps Moldova's "brand" internationally. While no good statistics Moldova can capitalize on EU demand through exist, JAA estimated about 10,000 people using a projects such as “Creative Europe”3 and move Delphi process through industry experts. Export towards more service oriented, high value jobs. Photo credit: Sergiu Rabii / Photo caption: Employees of a metal engineering company explaining the production process, June 13, 2016 revenues may not show up in the statistics. Many of Globally, the proportion of GDP is shifting to the firms interviewed seem to be experiencing services. While agriculture and manufacturing challenge is to help firms in this industry reorient the last few years. Therefore the industry is very good growth. continue to grow in value, most countries as they themselves to higher value products and markets, a open to assistance as it seeks to expand markets, become more developed have over half the economy potential role for MCP. The industry tends to be to diversify products and to deploy the engineering in the service industry. This trend will likely continue. product focused rather than simply being used for skills for which Moldova is well known. The firms outsourcing. This will provide some resilience. interviewed seemed very open to the idea of coming together and working with the project to For many products, turnover per employee in reposition there industry in global markets. The the PE industry is healthy ranging from 444,000 team met several larger firms that are re-orienting to 524,000 MDL. This compares favorably to their processes and sales efforts to serve EU 292,000 MDL for non-precision engineering and markets. The industry is going through a transition 278,000MDL for furniture. The industry is period to redeploy its skills to new products and sufficiently attractive as to have motivated both markets where MCP assistance might be particularly foreign investors and entrepreneurial startups. helpful. Exports are US$58M and the industry employs 5,763 people. The team found that many precision engineering products are growing at 20%1. And most importantly, The PE industry has gone through a mild these companies are growing because of exports. downturn and is open to engaging with MCP Given the prominence of precision engineering and and can use help. It lost 754 jobs in the last few related products in export growth its employment years, although those jobs remaining seem more ranked 8th among selected industries with 5,763 productive. Exports have gone down by 3.1% over jobs2.

7 1. JAA analysis, 2010 to 2014, based on data from the National Bureau of Statistics (NBS) 2. Ibid created demand for certain precision engineering much value-added MCP could provide. While we products. Emerging demand from the EU and early don’t see a role for MCP to support this sector, we signs that investors are coming to Moldova is a do recommend that USAID, EU or other donors good sign of areas for Moldovan competitiveness. consider providing a workforce training fund available to future investors who are considering The team then conducted further analysis and investing in Moldova but may be worried about the conducted extensive interviews with firms from these lack of trained personnel. This would have the The objective of this report was to identify one and footwear), wine, and tourism. Agricultural five industries to determine the suitability of each for triple advantage of benefitting Moldovan workers, or two attractive Moldovan industries for sectors were also excluded as the focus of the project assistance. We used the "self-selection" ensuring that all training funds went to people support by the USAID funded MCP project project was on non – agricultural sectors. Information criteria which focused on how receptive industry guaranteed to have jobs and also influencing using rigorous analytics. The USAID-funded for the sector assessments was collected through potentially indecisive investors to invest in Moldova. Moldova Competitiveness Project (MCP), available reports, offline and online data, government leaders were to project assistance. We also examined implemented by Chemonics, is helping to build statistical information and more than 60 interviews. the needs or gaps and whether MCP was in a The soft drink industry has high turnover but is competitiveness in four Moldovan industries. MCP Some industries seemed attractive but were not position to do something useful to fill them. We similarly concentrated among a few large has been assisting wine and vine, light manufacturing included in the short list because they are not took into consideration the potential for contributing companies. It was not selected since it is highly (textiles, apparel and footwear), tourism and export-oriented. Construction, for example, had to the competitiveness of other industries, if concentrated and has not created new jobs. Sales information technology industries to build their very high turnover and accounts for over 30,000 relevant. Finally, special factors were taken into are growing and sales per employee look attractive. competitiveness. Per the MCP project plan, MCP jobs but it is not export-oriented. consideration such as impact on youth who might Exports also grew by 3.6% between 2011 and 2015. will now choose one or two additional industries. otherwise emigrate, impact on women and the However, the industry is characterized by a few large This report presents analysis for industries being impact on disadvantaged regions. companies and it is unclear what the project could MCP subcontractor J.E. Austin Associates (JAA) assisted as well as new potential industries. The actually do to help the industry that it is not already implemented this study by analyzing the best team consciously included industries currently being The automotive supply sector was highly doing for itself. Furthermore, the industry is fairly data available and spending six person-weeks assisted in the analysis to review their attractiveness competitive and very attractive and might well capital intensive and generates less than 1,000 jobs. interviewing industry representatives. JAA is the relative to new industries. The analysis generally be the most competitive emerging industry in And there has been almost no growth in jobs in US-based small business that introduced confirmed the wisdom of MCP industry choices to the manufacturing sector. The data presented in recent years. competitiveness initiatives to USAID in 1998 and date. Textile and apparel exports account for about this report show that this sector is perhaps the co-authored the World Bank guide called Clusters US$274M along with employment nearing 20,000 most dynamic and competitive, generating new The furniture industry generates over US$100M for Competitiveness which provided a series of with textiles alone contributing nearly 1,500 jobs in jobs, exports and employment. It is also creating in exports, has been growing modestly and the competitiveness assessment tools. recent years. Tourism-related industries generated jobs outside of Chisinau in some disadvantaged industry is open to project assistance which over US$209M in export revenues with wine regions. Firms that currently operate in Moldova could do useful things. With a larger number of The team made a very important clarification generating nearly another US$100M. Exports of supply global brands, such as BMW, Mercedes, smaller companies, the project could provide early on by defining an industry by its capabilities computer services are nearly US$60M and growing Volkswagen and even Japanese firms producing in industry experts, upgrade training, and foster instead of by its products. The former can be rapidly. German. From these criteria, the industry was industry-education linkages. Had we been able to used to produce multiple products. Therefore placed at the top of our list. recommend three industries we would probably precision engineering includes a variety of products The team applied eight quantitative criteria to have included furniture. Based on the need to but relies on similar skills. Likewise creative identify five attractive industries: furniture, soft However, Moldova's automotive supply industry select only one or two industries, we did not services cover a variety of export services such as drinks, automotive supplies, precision engineering is characterized by a relatively small number of include furniture because there are fewer than animation, design, advertising and others. and creative industries. Criteria included exports, foreign firms who need less of the kind of help 5,000 jobs in the industry, employment has actually export growth, employment, employment growth, the project can provide. They have their own been declining, and these are basically low-wage Service industries and service exports were also turnover, growth in turnover, and sales per market linkages already established. They understand jobs in an industry that has relatively low turnover included in our review. The team look not only at employee as a proxy for the ability to generate their manufacturing processes and standards. And per employee. Prospects for growth also seem product exports but also at service exports and relatively high-paying jobs. This analysis was largely production is concentrated among a relatively small modest in the context of the overall growth of trends in the service industry. The global economy quantitative and yielded a short list of five leading number of foreign companies. They have been able European housing and furniture market. and most national economies are having larger industries for further analysis: furniture, soft drinks, to address workforce training gaps to date. Based service industry components so this was an important automotive supplies, precision engineering and on interviews with this sector it was unclear how thing to keep in mind while doing this analysis. creative services. The report identifies the leading industries in each criteria area and then provides a PRECISION ENGINEERING measuring equipment, iron and steel reservoirs This study began by analyzing 50 product summary analysis. The consultants paid special metalworking involving heat transformation and a categories to identify a short list of five leading attention to regional trends such as the Deep and Precision engineering (PE) was found to be variety of other products. Moldova was an historical industries for further analysis. This list was Comprehensive Free Trade Area (DC-FTA) attractive, is open to MCP assistance and the exporter of precision engineering products for the developed on the basis of the MCP’s Scope of agreement which gives Moldova access to EU project could do useful things to boost its Soviet defense industry and many of the skills still Work, to exclude industries that were already markets. This has already begun to attract investors competitiveness during a time of transition. The exist. As the industry involves many products, it is under assistance, such as IT, light industry (apparel in the automotive supply value chain and has industry involves communications equipment, hard to get accurate estimates at times and the

Photo credit: Viorica Obreja / Photo caption: Open Doors Day ZIPhouse, TUM CREATIVE SERVICES including commercials, advertising, cultural events, "App" design, creation and invention, website The industry may also help retain Moldovan Next steps will include fielding competitiveness INDUSTRY (CSI) design, social media, event managers, visual artists, youth in Moldova as many are attracted to experts and industry experts to engage the industries, Creative services can be defined as those trainers, speakers, computer graphics (CG), fashion work in the creative services industries. do the "cluster mustering," and with them apply design, entertainment, music composing, arranging diagnostics and identify the most promising initiatives producing tangible economic value-added We therefore recommend engaging PE and CSI through conceptual, logical, communication and and performance and many other specialties. to build the competitiveness of these industries and industries, applying diagnostic tools, creating boost exports and employment. Follow on work artistic skills involving creativity. Examples If one defines an industry not by its products but strategies and identifying specific strategic and should start soon to build in the momentum and include industrial design, graphic design, architectural by its core capabilities, it becomes clear that policy initiatives. The team began this process by interest created by this work to date. design, computer animation, studio video production "creative industries" can be considered a applying SWOT Analysis and the Porter Diamond.

3. Creative Europe is the European Commission's framework program for support to the culture and audiovisual sectors. It has a budget of €1.46 billion and aims at supporting 8 Europe's cultural and creative sectors. ■ Potential for contributing to the competitiveness of other industries (if relevant) I. BACKGROUND FOR ■ Special factors such as impact on regions and women.

THIS REPORT The team then benchmarked the two selected industries and applied additional tools to identify The USAID-financed Competitiveness Project public and private sectors to increase investment binding constraints and promising areas of action by implemented by Chemonics seeks to improve the and improve the business environment. using competitiveness tools. The team then suggested competitiveness of key industries in Moldova in the specific initiatives and any recommendations including The Project now seeks to add one or two additional context of the June 2014 signature of the Association sequencing based on their knowledge of the global industries to the four initial high-potential industries Agreement and the Deep and Comprehensive Free industry and what buyers want. Trade Agreement (DC-FTA) with the European of vine/wine, textiles/apparel, tourism and ICT. The Union (EU). Moldova stands to benefit from duty-free project recently completed a skills gap assessment The identification of an additional industry or access to one of the world’s most prosperous relevant to these industries. Per the project design, industries will contribute to the success of the markets. To maximize the benefits of these it will now add an additional area of focus based on project objectives. More importantly, by contributing agreements, the project focuses improving the prospects for maximum impact on investment, to the competitiveness of a leading high-potential quality of Moldovan products and services as the employment, exports/foreign exchange generation industry, this will help improve exports, economic key to preparing Moldova’s private sector to or savings, and contribution to economic growth. growth and the generation of good jobs. It will also compete on EU and other higher-value markets. facilitate the transition of the Moldovan economy It is important to identify the most attractive and which faced the crisis of the collapse of demand in high potential industries that are also receptive and To achieve this objective, the project invests in some eastern markets and the transition to becoming where MCP could be of clear practical help. workforce development initiatives to promote the a competitive supplier to EU-based economies. Chemonics asked competitiveness experts from its development of skills in high-potential Moldovan This requires a focus on quality, cost-efficiency, subcontractor JE Austin Associates (JAA) in industries. The project promotes the adoption of productivity, innovation, packaging, meeting EU conjunction with Moldovan project staff and new technologies, manufacturing processes, and standards and other challenges. Boosting an consultants, to conduct this analysis. JAA introduced other innovations to increase the quality of Moldovan additional attractive industry will also help generate competitiveness initiatives to USAID in 1998, products. It seeks to build demand for Moldovan not just jobs but good jobs that are productive, co-authored the World Bank report on tools for products both domestically and internationally by that pay attractive wages and that are sustainable. promoting market linkages and supporting Moldovan competitiveness assessment and has worked on brands. It facilitates collaboration between the competitiveness projects in over 20 countries. Definitions were redefined around key capabilities such as "precision engineering" rather than broader or narrower product-marker categories. Two OBJECTIVES AND The team applied a mix of quantitative and qualitative cross-sector areas of focus were added including criteria to analyze industry attractiveness. creative industries and entrepreneurial ventures. METHODOLOGY The quantitative factors included the following: Overlap was also noted such as between precision engineering and creative industries. The objective of this report was to identify one or ■ Potential for employment generation two of the most attractive non-agricultural industries ■ Potential for future exports The team was provided with or otherwise where project assistance could make the biggest ■ Potential for GDP contribution secured many important studies as inputs to impact. To do this, the team began with a long list of ■ Potential for future additional investment this analysis. These included data charts and Moldovan industries. Applying a series of quantitative mobilization or attraction illustrations for the International Trade Centre in criteria, and in discussion with project staff and Geneva, the list of the top 50 exporters from The qualitative factors applied in the analysis USAID, this was quickly reduced to a manageable Moldova in 2014, macroeconomic data 2009-2015 included the following: set of potentially attractive industries for further from the National Bureau of Statistics (NBS), a list analysis. The project hired a local firm to access ■ Receptivity and interest of the industry to cooperate of 17 European companies in Moldova, a list of data and conduct quantitative analysis under the with the project as reflected in the commitment potential investment projects, industry-specific data team's direction. Three consultants spent two to signing an MoU which reflects commitments and reports, the top 10 manufactured products in weeks each in Moldova, traveling to different of both parties Moldova 2013-14, export data 2011-15, service regions to engage with companies in each of these ■ Ability of the project to contribute something export data from 2011-15 (NBS), Foreign Direct industries. useful to the industry that would make a difference Investment data 2009-15 from the National Bank of (convening power, technical assistance, grants, study Moldova. tours, assistance at trade shows, facilitating public-private dialogue, etc.

9 ■ Potential for contributing to the competitiveness of other industries (if relevant) ■ Special factors such as impact on regions and women.

The team then benchmarked the two selected industries and applied additional tools to identify binding constraints and promising areas of action by using competitiveness tools. The team then suggested specific initiatives and any recommendations including sequencing based on their knowledge of the global industry and what buyers want.

The identification of an additional industry or industries will contribute to the success of the project objectives. More importantly, by contributing to the competitiveness of a leading high-potential industry, this will help improve exports, economic growth and the generation of good jobs. It will also facilitate the transition of the Moldovan economy which faced the crisis of the collapse of demand in some eastern markets and the transition to becoming a competitive supplier to EU-based economies. This requires a focus on quality, cost-efficiency, productivity, innovation, packaging, meeting EU standards and other challenges. Boosting an additional attractive industry will also help generate not just jobs but good jobs that are productive, that pay attractive wages and that are sustainable.

Definitions were redefined around key capabilities such as "precision engineering" rather than broader or narrower product-marker categories. Two OBJECTIVES AND The team applied a mix of quantitative and qualitative cross-sector areas of focus were added including criteria to analyze industry attractiveness. creative industries and entrepreneurial ventures. METHODOLOGY The quantitative factors included the following: Overlap was also noted such as between precision engineering and creative industries. The objective of this report was to identify one or ■ Potential for employment generation two of the most attractive non-agricultural industries ■ Potential for future exports The team was provided with or otherwise where project assistance could make the biggest ■ Potential for GDP contribution secured many important studies as inputs to impact. To do this, the team began with a long list of ■ Potential for future additional investment this analysis. These included data charts and Moldovan industries. Applying a series of quantitative mobilization or attraction illustrations for the International Trade Centre in criteria, and in discussion with project staff and Geneva, the list of the top 50 exporters from The qualitative factors applied in the analysis USAID, this was quickly reduced to a manageable Moldova in 2014, macroeconomic data 2009-2015 included the following: set of potentially attractive industries for further from the National Bureau of Statistics (NBS), a list analysis. The project hired a local firm to access ■ Receptivity and interest of the industry to cooperate of 17 European companies in Moldova, a list of data and conduct quantitative analysis under the with the project as reflected in the commitment potential investment projects, industry-specific data team's direction. Three consultants spent two to signing an MoU which reflects commitments and reports, the top 10 manufactured products in weeks each in Moldova, traveling to different of both parties Moldova 2013-14, export data 2011-15, service regions to engage with companies in each of these ■ Ability of the project to contribute something export data from 2011-15 (NBS), Foreign Direct industries. useful to the industry that would make a difference Investment data 2009-15 from the National Bank of (convening power, technical assistance, grants, study Moldova. tours, assistance at trade shows, facilitating

public-private dialogue, etc. Photo credit: Viorica Obreja / Photo caption: Open Doors Day ZIPhouse, TUM

622 5. Employment: Workforce development and 8. Usefulness: Some industries may pass the tests creating a competitive workforce through industry- above but there may be little the project can do for II. INDUSTRY SELECTION: responsive education and training is also an important them. Therefore, we looked at the extent to which element of the project. USAID seeks to make a project offerings in technical assistance could From Long List to Short List positive impact on the lives of people and to actually be of assistance in practical and major promote inclusive growth. Therefore, the ability of ways. these exports and economic activity to create jobs 1. Economic Size: The starting point for the is also very important. Some industries and some 9. Self-Selection: We believe that establishment of selection of industries to work with understandably To select additional industries of exports will be more capital intensive than others the appropriate psychological contract between the begins by looking at the largest industries. We focus for the project, the team and therefore less attractive for our purposes. project and the industry is all-important. If an began by analyzing the "long list" of excluded agriculture which is the mandate of industry passes the attractiveness test there is still over 50 industry/product/sectors in another USAID project, not this one. We also 6. Employment Growth: We also looked at the question of whether the industry can come existing sources for Moldovan excluded services not related to exports such retail employment growth as a proxy for emerging together and whether the industry wants to work exports and GDP. We then identified and wholesale trade, personal services and the like. competitiveness and the likely future potential with the project. It is not a good idea for a project appropriate criteria for selecting While exports will be a primary consideration, impact on job creation which supplements the to show up saying an industry has been chosen for potentially attractive sectors in the some industries produce for both. Therefore, size prior analysis of economic growth and export assistance. This sets up a bad dynamic where the "short list". These criteria are of the industry in terms of sales is a good place to growth. industry says, Ok, what do you have to offer summarized below and will be start. GDP or value added statistics are not available us...what are you going to give us? Rather, it is discussed in turn. at the level of disaggregation that we are using. 7. Productive Jobs: The project is also interested important to set hurdles and conditions and to Therefore we took sales as an imperfect but next in helping the economy create not just any job but have at least the semblance of a competitive best proxy fully realizing that industries have economically sustainable and higher paying jobs. process. Therefore, competitiveness projects often They include: different levels of value-addition. Indeed, one definition of competitiveness is the engage multiple industries with useful information ability of an economy to generate sustainable and potential services, but industries should in 1. Economic Size: Current importance 2. Economic Growth: Since some industries may increases in productivity in ways that benefit the some way compete with each other for project in the overall economy still be emerging, we also looked at growth rates. average citizen, a definition often used by Harvard assistance. At the very least, the industry through We are looking at future competitiveness, and not 2. Economic Growth: Recent growth University competitiveness expert, Dr. Michael some group of representatives should be willing to past performance alone. Therefore recent growth Porter. Creating jobs at minimum wages is not as sign an MoU indicating that they will meet regularly, rates were used as a proxy for economic growth 3. Exports: Current importance in attractive as jobs which pay well. Also, jobs that are participate in diagnostic sessions, help develop potential. exports paying relatively low wages may be vulnerable to strategies for repositioning their industries in global competitiveness challenges should the relatively 3. Exports and Service Exports: The markets and exercise active leadership in the 4. Export Growth: Recent years as a low wage rates in Moldova begin to rise. We do USAID-funded Moldova Competiveness Project strategic and/or policy initiatives selected. proxy for emerging competitiveness hope they rise because that will mean that the seeks to boost Moldova exports. Therefore, the aspirations for boosting inclusive growth and 10. Other Factors: The team took notice of other 5. Employment Size impact on exports is very important. prosperity are succeeding. Some minimum wage factors such as the potential of an industry to 6. Employment Growth 4. Export Growth Potential: The Deep and jobs at the low end of the scale related to agricultural contribute to the competitiveness of other industries Comprehensive Free Trade Agreement (DC-FTA) production and light manufacturing might be at risk. in addition to its own and to impacts on women 7. High Value: Sales per person as a means that there may be some emerging exports Therefore, we decided to also look at productivity. and to economically disadvantaged regions. This proxy for productivity and good that will likely be more competitive in the future But productivity data is notoriously unreliable even was a more qualitative analysis. wages than they have been in the past. Therefore it is also in developed countries and much more so in Sources of Data: For most data on the economy, important to look at export growth rates even if emerging economies, especially at the disaggregated employment and sales, we used the official data 8. Self-Selection: Interest by the sector level we are dealing with here. Therefore as a in engaging the project the current size of exports may be modest. We from the Government of Moldova National Bureau used recent economic growth rates as a proxy. proxy we took sales per employee. We realize that of Statistics for which data are available through this masks other variables such as capital-intensity 9. Project Relevance: Ability of the We realize there may be entirely new products 2014. For export data we relied primarily on project offerings to make an important that may grow fast that are currently under the or the percentage of raw materials involved in UNCOMTRADE which was available through 2015, contribution radar screen entirely. Therefore, we will at a later production. Therefore, we do not allege that we while also referencing Government of Moldova stage of this report encourage the project to look are dealing with true labor productivity that data. For Service Exports we relied on data from 10. Other factors such as regional not merely at products but to identify industries by translates into real wages. Still, it can provide a the ITC in Geneva. impact, poverty reduction, gender and their underlying capabilities and skills. general approximation of whether an industry can contributions to the competitiveness afford to pay higher wages. This too we factored of all other sectors into the evaluation equation.

11 5. Employment: Workforce development and 8. Usefulness: Some industries may pass the tests creating a competitive workforce through industry- above but there may be little the project can do for responsive education and training is also an important them. Therefore, we looked at the extent to which element of the project. USAID seeks to make a project offerings in technical assistance could positive impact on the lives of people and to actually be of assistance in practical and major promote inclusive growth. Therefore, the ability of ways. these exports and economic activity to create jobs 1. Economic Size: The starting point for the is also very important. Some industries and some 9. Self-Selection: We believe that establishment of selection of industries to work with understandably To select additional industries of exports will be more capital intensive than others the appropriate psychological contract between the begins by looking at the largest industries. We focus for the project, the team and therefore less attractive for our purposes. project and the industry is all-important. If an began by analyzing the "long list" of excluded agriculture which is the mandate of industry passes the attractiveness test there is still over 50 industry/product/sectors in another USAID project, not this one. We also 6. Employment Growth: We also looked at the question of whether the industry can come existing sources for Moldovan excluded services not related to exports such retail employment growth as a proxy for emerging together and whether the industry wants to work exports and GDP. We then identified and wholesale trade, personal services and the like. competitiveness and the likely future potential with the project. It is not a good idea for a project appropriate criteria for selecting While exports will be a primary consideration, impact on job creation which supplements the to show up saying an industry has been chosen for potentially attractive sectors in the some industries produce for both. Therefore, size prior analysis of economic growth and export assistance. This sets up a bad dynamic where the "short list". These criteria are of the industry in terms of sales is a good place to growth. industry says, Ok, what do you have to offer summarized below and will be start. GDP or value added statistics are not available us...what are you going to give us? Rather, it is discussed in turn. at the level of disaggregation that we are using. 7. Productive Jobs: The project is also interested important to set hurdles and conditions and to Therefore we took sales as an imperfect but next in helping the economy create not just any job but have at least the semblance of a competitive best proxy fully realizing that industries have economically sustainable and higher paying jobs. process. Therefore, competitiveness projects often They include: different levels of value-addition. Indeed, one definition of competitiveness is the engage multiple industries with useful information ability of an economy to generate sustainable and potential services, but industries should in 1. Economic Size: Current importance 2. Economic Growth: Since some industries may increases in productivity in ways that benefit the some way compete with each other for project in the overall economy still be emerging, we also looked at growth rates. average citizen, a definition often used by Harvard assistance. At the very least, the industry through We are looking at future competitiveness, and not 2. Economic Growth: Recent growth University competitiveness expert, Dr. Michael some group of representatives should be willing to past performance alone. Therefore recent growth Porter. Creating jobs at minimum wages is not as sign an MoU indicating that they will meet regularly, rates were used as a proxy for economic growth 3. Exports: Current importance in attractive as jobs which pay well. Also, jobs that are participate in diagnostic sessions, help develop potential. exports paying relatively low wages may be vulnerable to strategies for repositioning their industries in global competitiveness challenges should the relatively 3. Exports and Service Exports: The markets and exercise active leadership in the 4. Export Growth: Recent years as a low wage rates in Moldova begin to rise. We do USAID-funded Moldova Competiveness Project strategic and/or policy initiatives selected. proxy for emerging competitiveness hope they rise because that will mean that the seeks to boost Moldova exports. Therefore, the aspirations for boosting inclusive growth and 10. Other Factors: The team took notice of other 5. Employment Size impact on exports is very important. prosperity are succeeding. Some minimum wage factors such as the potential of an industry to 6. Employment Growth 4. Export Growth Potential: The Deep and jobs at the low end of the scale related to agricultural contribute to the competitiveness of other industries Comprehensive Free Trade Agreement (DC-FTA) production and light manufacturing might be at risk. in addition to its own and to impacts on women 7. High Value: Sales per person as a means that there may be some emerging exports Therefore, we decided to also look at productivity. and to economically disadvantaged regions. This proxy for productivity and good that will likely be more competitive in the future But productivity data is notoriously unreliable even was a more qualitative analysis. wages than they have been in the past. Therefore it is also in developed countries and much more so in Sources of Data: For most data on the economy, important to look at export growth rates even if emerging economies, especially at the disaggregated employment and sales, we used the official data 8. Self-Selection: Interest by the sector level we are dealing with here. Therefore as a in engaging the project the current size of exports may be modest. We from the Government of Moldova National Bureau used recent economic growth rates as a proxy. proxy we took sales per employee. We realize that of Statistics for which data are available through this masks other variables such as capital-intensity 9. Project Relevance: Ability of the We realize there may be entirely new products 2014. For export data we relied primarily on project offerings to make an important that may grow fast that are currently under the or the percentage of raw materials involved in UNCOMTRADE which was available through 2015, contribution radar screen entirely. Therefore, we will at a later production. Therefore, we do not allege that we while also referencing Government of Moldova stage of this report encourage the project to look are dealing with true labor productivity that data. For Service Exports we relied on data from 10. Other factors such as regional not merely at products but to identify industries by translates into real wages. Still, it can provide a the ITC in Geneva. impact, poverty reduction, gender and their underlying capabilities and skills. general approximation of whether an industry can contributions to the competitiveness afford to pay higher wages. This too we factored of all other sectors into the evaluation equation.

612 EXHIBIT 1: INDUSTRIES RANKED BY TURNOVER IN 2014, MILLION LEI Food and beverage is the largest sector and precision engineering was in the top five Value, Nr. Sectors million lei4 1 D15 Food and beverage industries 18,905

2 D26 Manufacture of non-metallic mineral products 4,137

3 H Hotels and restaurants 2,558

4 I62 Air transport 2,483

5 Medical, precision and optical instruments, production of watches+ D28 2,004 Manufacture of fabricated metal products except machinery and equipment [Precision Engineering]5

6 D18 Manufacture of wearing apparel; dressing and dyeing of furs 1,816

7 D31 Manufacture of electrical machinery and apparatus [Precision Engineering] 1,789

8 D17 Manufacture of textiles 1,777

9 D36 Manufacture of furniture and other manufacturing industries 1.380

10 Advertising [Creative Service Industries] 1,234

11 D29 Manufacture of machinery and equipment [Precision Engineering] 1,025

Source: National Bureau of Statistics (NBS), 2015

Economic Importance: Exhibit 1 presents the top hotels, restaurants and air transport including air 11 industries by turnover, used as a proxy as GDP cargo. Precision engineering related industries are data were unavailable to us at this level disaggregation. also in the top five along with other manufactures. Food and beverage has the largest turnover, Advertising, a creative industry comes within the followed by tourism-related industries such as top ten.

Potential Impact on Future Economic Growth: growth in electrical machinery and apparatus, which As Moldova is undergoing important economic flags for our attention the growth in automotive-related changes and structural change and as access to EU inputs. Precision engineering related products are markets open up new possibilities, new growth growing at 20%. Textiles and apparel both enjoyed industries may emerge. Therefore it is not enough growth in the top 10 but the project is already to look at current economic size. It is also important working in that industry as it is in tourism where to look at future potential. As a proxy for this, we hotels and restaurants grew at 16.9%. Rubber and analyzed the compound annual growth rate plastic products also did quite well 18%. Creative (CAGR) for the industry between 2010 and 2014, industry services such as advertising and architecture the last year for which data were available. Here were also experiencing 11% growth. Soft drinks, we decided to look at all categories where but not overall food and beverage, made the cut at sustained growth of 11% or more has been registered 14% growth. in sales. Of particular interest is the 61.4% fast

Photo credit: Racceeva Elena / Photo caption: Demo day for robotics and electronics supported by USAID Moldova Competitiveness Project and Atelier 99 during Makers’ Day Chisinau – June 14, 2016

13 4. USD=13MDL, as of June 2014. Current exchange rates 1USD=19.5MDL, June 2016. Source: https://www.oanda.com/currency/converter/. 5. Blue items, in part or in whole, relate to precision engineering; red items are for creative industries. EXHIBIT 2: GROWTH IN SALES RANKED BY INDUSTRY 2010-2014 (CAGR) Electrical machinery, communication equipment and textiles show strong growth

Nr. Sector Value

1 D31 Manufacture of electrical machinery and apparatus [Precision Engineering] 61.4%

2 D32 Manufacture of radio television and communication equipment and 34.3% apparatus [Precision Engineering]

3 D17 Manufacture of textiles 30.5%

4 D33 Manufacture of medical equipment and apparatus precision measuring 26.2% equipment optical goods watches and clocks [Precision Engineering]

5 K72 Computer and related activities 20.9%

6 Medical, precision and optical instruments, production of watches [Precision 20.0% Engineering]

7 D25 Manufacture of rubber and plastic products 18.0%

8 D18 Manufacture of wearing apparel; dressing and dyeing of furs 17.0%

9 H Hotels and restaurants 16.9%

10 D24 Chemical industry 14.5%

11 D29 Manufacture of machinery and equipment 13.7%

12 D36 Manufacture of furniture and other manufacturing industries 13.2% Economic Importance: Exhibit 1 presents the top hotels, restaurants and air transport including air 13 D26 Manufacture of non-metallic mineral products 12.2% 11 industries by turnover, used as a proxy as GDP cargo. Precision engineering related industries are 14 Beverages (soft drinks) 11.0% data were unavailable to us at this level disaggregation. also in the top five along with other manufactures. Food and beverage has the largest turnover, Advertising, a creative industry comes within the 15 Activities in the field of architecture and civil engineering [Creative Service 11.0% followed by tourism-related industries such as top ten. Industries] 16 Advertising [Creative Service Industries] 11.0%

Source: JAA analysis based on data from National Bureau of Statistics (NBS), 2016

614 EXHIBIT 3: TOP EXPORTS OF PRODUCTS FROM TARGETED SECTORS IN 2015, THOU USD Automotive-related exports including insulated wire/cable and car seats are quite large

Nr. Code Product label 2015, 1000’s $

1 '8544 Insulated wire/cable 212,556

2 9401 Seats (includes auto seats) 80,953

3 2009 Fruit & vegetable juices, unfermented 34,712

4 '9028 Gas/ liquid/ electricity supply/production meter – [Precision eng.] 15,145

5 '9403 Other furniture and parts thereof 13,370

6 '8413 Pumps for liquids; liquid elevators – [Precision eng.] 13,143

7 '8802 Aircraft, (helicopter, aeroplanes) & spacecraft (satellites) – 4,328 [Precision eng.]

8 '7326 Articles of iron or steel, no special category 3,953

9 '8501 Electric motors and generators (excluding generating sets) – 3,939 [Precision eng.]

10 '8479 Machines & mechanical appliances having individual functions, no 3,775 special category – [Precision eng.]

11 '9031 Measuring or checking machines, nes – [Precision eng.] 3,384

12 '7308 Structures (rods, angle, plates) of iron & steel nes – [Precision eng.] 3,330

13 '2202 Non-alcoholic beverages (excl. water, fruit or vegetable juices and mi 3,312

14 '9406 Prefabricated buildings - Furniture 2,990

15 '7309 Iron & steel reservoirs, tanks, vats (cap >300l) – [Precision eng.] 2,952

16 '8708 Parts & access of motor vehicles - Automotive 2,734

17 '8414 Air, vacuum pumps; - [Precision eng.] 2,683

18 '8548 Electrical parts of machinery/app, nes – [Precision eng.] 2,585

19 '8302 Base metal mountings, fittings, suitable for furniture, doors, etc 2,525

20 '9014 Direction finding compasses; other navigational instruments & 2,272 appliances – [Precision eng.]

21 '9503 Other toys, scale model (puzzles of all kinds, stuffed toys) 1,951

22 '8466 Machinery parts & accessories 1,820

23 '8714 Parts and accessories of motorcycles & cycles - Automotive 1,631

24 '8421 Centrifuges, including centrifugal dryers; filtering/purifying machinery 1,042 – [Precision eng.]

25 '8411 Turbo-jets, turbo-propellers and other gas turbines - [Precision eng.] 1,038

Source: National Bureau of Statistics (NBS), 2015

Exports: Boosting exports growth is a principal components: insulated wire and cable with objective of the competitiveness project. We about $212.5M and automotive seats with examined the top 25 exports, which correlated $80.9M. These are emerging as manufacturing roughly with any exports above US$1M. The top export champions for Moldova. Many export two categories were related to the auto industry categories are related or potentially related to

15 precision engineering and these were written in is becoming a new export champion for Moldova blue above although it is sometimes unclear how driven largely by foreign investors, the largest being much is basic versus precision engineering. Up to German automotive component supplier Draxlmaier half of the total categories, some 13 out of 25, group in Balti Free Economic Zone. The growth of are related or potentially related to precision exports related to insulated wire and cable, related engineering and while export values are difficult mostly to the automotive industry, is not only a to determine with precision could be as high as large category as shown immediately above but also $58M. Furniture related categories include two, one of the fastest growing. Indeed, the top two one in the top 10 and accounted for $16M. Juices categories are automotive related as the second one were also important at #3 with $34M in exports. involves automotive seats, led by Lear Corporation manufacturing plant in Ungheni Free Economic Export Growth: Moldova used to export Zone. This would seem to justify automotive being sophisticated products to the Soviet Union, often among the short list of industries to be considered. defense related. The country is still in the process Nonetheless, the industry is represented by a few of transition. So it is important to look at where foreign firms, and further growth of the industry new exports are developing to see the emerging would require significant investment attraction. competitiveness. However, from a low base, high Moreover, the MCP assistance might duplicate the percentage growth may be misleading in and of efforts, since this industry is already assisted by GIZ itself. Therefore, we first looked at export growth Investment Attraction Team. in absolute terms as additional millions of dollar on average from 2011 to 2015. We then added a Precision Engineering: The next categories second column to capture percentage growth. J.E. involve precision engineering and related products. Austin Associates defined high growth exports as However, one sees that there are categories of those where a country can achieve growth that of products related to precision engineering that are the overall average of global trade. Global trade declining in recent years such as boilers, aircraft growth has unfortunately fallen off significantly to and/or satellite parts, and optical and medical only 2.8% in 2015 and is expected to remain at devices. It seems that the industry is in transition about 3% or below for 2016 and 2017. Trade and therefore it could be highly needed to provide growth used to average a more robust 5-8% intensive, time-bound technical assistance to help growth per year. companies make transitions to new products and new buyers such as water tanks exported to Automotive Related (Wire and Cable and Seats): emerging economies. Indeed, helping the industry Insulated wire and cable, mostly related to automotive identify new products and new markets for its supply, grew by almost $18M a year at 11.5%, capabilities could be a very useful area for technical almost twice the growth in global trade over the assistance, especially in light of access to the EU period. Seats have little to do with barber shops market. The importance of this industry would also and everything to do with automotive. Automotive seem to justify its inclusion in the short list.

Photo credit: Racceeva Elena / Photo caption: Demo day for robotics and electronics supported by USAID Moldova Competitiveness Project and Atelier 99 during Makers’ Day Chisinau – June 14, 2016

16 EXHIBIT 4: EMPLOYEES IN MOLDOVAN INDUSTRY SECTORS Food/beverage, construction, apparel and hotel/restaurant are leading industries

Nr. Sector Value, #

1 D15 Food and beverage industries 34,627

2 F Construction 30,083

3 K74 Other business activities 27,258

4 D18 Manufacture of wearing apparel; dressing and dyeing of furs 14,635

5 H Hotels and restaurants 14,169

6 K72 Computer and related activities 10,340

7 I63 Supporting and auxiliary transport activities; activities of travel agencies 7,344

8 Precision Engineering - Medical, precision and optical instruments, production of 5,763 watches / manufacture of fabricated metal products except machinery and equipment

9 D26 Manufacture of non-metallic mineral products 4,959

10 D36 Manufacture of furniture and other manufacturing industries 4,954

11 D17 Manufacture of textiles 4,244

12 D31 Manufacture of electrical machinery and apparatus 4,029

13 D25 Manufacture of rubber and plastic products 3,802

14 D19 Manufacture of leather products of leather and footwear 3,761

15 D29 Manufacture of machinery and equipment 3,514

16 Activities in the field of architecture and civil engineering [Creative Service 3,504 Industries]

Source: National Bureau of Statistics (NBS), 2015

Employment: Generating jobs is a key indicator of here in employment ranked 8th among selected economic success and social inclusiveness. We have industries with 5,763 jobs. Furniture employed just excluded agriculture focused on other sectors. We under 5,000 people. Creative services seem to be find that most manufacturing jobs are in the food creating new jobs and relatively attractive jobs but and beverage industry with 34,627 jobs. precise numbers are difficult to determine. However, Construction generated over 30,000 jobs. Apparel architectural services alone accounts for 3,500 jobs. comes in fourth with 14,635 where the project is A rough guess for creative services as we have currently working and possibly significantly more in defined it would put the industry between 5,000 the informal sector. The project also works in and 10,000 jobs, although many are domestic in tourism and hotels and restaurants accounted for focus. Indeed, as seen in Exhibit 4, the employment over 14,000 jobs as well although a significant category that is growing the fastest is in "other portion of restaurants is not dedicated to tourism business activities" with 5,747 net new jobs in the but for local pleasure and consumption. Given the last four years and some of these fall into this prominence of precision engineering and related category. products in export growth, we have highlighted it

17 EXHIBIT 5: TOP GROWTH IN EMPLOYMENT (NET NEW JOBS) IN TARGETED SECTORS, 2014/10 "Other business activities" including creative industries lead employment growth

Nr. Sector Net new jobs

1 K74 Other business activities [Creative Service Industries] 5,747

2 K72 Computer and related activities 3,199

3 D31 Manufacture of electrical machinery and apparatus 1,555

4 H Hotels and restaurants 1,508

5 D17 Manufacture of textiles 1,494

6 Activities in the field of architecture and civil engineering 739

7 F Construction 726

8 Advertising [Creative Service Industries] 609

9 D24 Chemical industry 593

10 D25 Manufacture of rubber and plastic products 493

11 D33 Manufacture of medical equipment and apparatus precision measuring 52 equipment optical goods watches [precision engineering]

12 D32 Manufacture of radio television and communication equipment and 26 apparatus [precision engineering]

13 D30 Manufacture of office computing and accounting machinery -8

14 D36 Manufacture of furniture and other manufacturing industries -208

Source: National Bureau of Statistics (NBS), 2015

Growth in Employment: The largest increase in Construction, which is a large employer, added numbers of jobs between 2010 and 2014 came in only 726 new jobs. Architecture, civil engineering the field of "other business activities" some of and advertising were among the creative industries which may be creative industries. Computer-related adding hundreds of jobs. It is interesting to note activities added over 3,000 jobs while electrical that while furniture has appeared as attractive with machinery manufacture added 1,500. The others in some of the previous metrics; it has actually shed the top six job creators were related to tourism 208 jobs. and textiles where the project is already working.

618 EXHIBIT 6: TOP PRODUCTIVE JOBS (ANNUAL SALES/ EMPLOYEE) OF TARGETED SECTORS, THOU MDL Breakdown of sales per employee was of limited value to our analysis

Value, 1000s’ Nr. Sector MDL 1 D30 Manufacture of office computing and accounting machinery 1,088

2 I63 Supporting and auxiliary transport activities; activities of travel agencies 794

3 Beverages (soft drinks) 668

4 D21 Manufacture of paper and cardboard 607

5 D15 Food and beverage industries 546

6 D32 Manufacture of radio television and communication equipment and 524 apparatus [precision engineering]

7 D25 Manufacture of rubber and plastic products 498

8 D31 Manufacture of electrical machinery and apparatus [precision engineering] 444

9 Advertising 427

10 D17 Manufacture of textiles 419

11 D28 Manufacture of fabricated metal products except machinery and equipment 385

12 D29 Manufacture of machinery and equipment 292

13 D33 Manufacture of medical equipment and apparatus precision measuring 291 equipment optical goods watches and clocks [precision engineering]

14 D36 Manufacture of furniture and other manufacturing industries 278

15 K72 Computer and related activities 264

Source: JAA analysis based on data from National Bureau of Statistics (NBS), June 2016

Sales per Employee: Exhibit 6 provides some expensive air tickets. Advertising and apparel both sense of sales/employee figures but as it does not sells goods of over 400,000 MDL per employee, reflect value-added per employee and was found to but in the case of apparel value added is only about be of limited value for our analysis as will be shown 25% of the export values as the industry has a very below. We had hoped that sales per employee high import content. For example, travel agents would be a good proxy of the ability of an industry may sell expensive packages but they themselves to be commercially sustainable and be able to earn modest margins and salaries. And as sales afford better than average salaries to employees. move increasingly to the Internet those jobs may Lacking this data, we turned to annual sales/ be under threat and their margins will be squeezed. employee. Manufacturing of office computing and Soft drinks also had relatively high sales per accounting machinery led the list with sales of over employee given the level of automation in that 1M MDL (about US$50,000 per employee). Travel industry. And furniture has a low sales/employee agencies also ranked attractively, although perhaps ratio compared to other manufactures. it is because each employee sells a high volume of

19 EXHIBIT 7: TOP EXPORTS OF SERVICES FROM TARGETED SECTORS IN 2015, THOUSAND USD Ranked after travel and tourism related services, professional services generate US$59M

2015, 1000s’ Nr. Service label USD 1 — Travel, Personal 137 700

2 — Air transport 99 770

3 — Passenger transport, All modes (alternative breakdown) 81 230

4 — Travel, Business 71 890

5 — Professional and management consulting services [includes some creative services] 59 210

6 — Computer services 59 060

7 — Technical, trade-related, and other business services [includes some creative services] 25 430

8 Charges for the use of intellectual property n.i.e. 4 480

9 — Research and development (R&D) 1 100

Source: National Bureau of Statistics (NBS), 2015

Service Exports: Moldovans can export what they true values generated from service exports in do with their minds as well as what they do with Moldova. The reason is that much of this work is in their hands. And the world is moving towards a the informal economy. It is easier to record and tax more service-oriented economy, so we examined goods that leave on trucks than by "clicks". Given data for service exports. We are also curious to the ability of Moldovans to travel and relatives see which ones might have good value added since abroad, it is similarly easy to have payments deposited some of them involve knowledge work and creative into foreign accounts in Euros or dollars or by work which is presumably higher value added. PayPal rather than be formal wire transfer to Travel-and-tourism related service came out as the Moldovan accounts where they might show up in top four categories. Management consulting the statistics. And there are websites that are services came next generating $59M. Categories designed to link providers and consumers of related to creative industries such as charges for services. intellectual property and for R&D were 8th and 9th ranked respectively. But Moldova is only getting Only computer related services are growing less than $5M in registered royalties and about robustly while R&D and royalty/patent income is $1M for R&D indicating great scope for expansion. actually declining. Management consulting services are growing slowly but surely (see Exhibit 7). True Service Exports Likely to be Larger. These numbers are likely to considerably understate the

620 EXHIBIT 8: ANNUAL EXPORT GROWTH OF SERVICES FROM TARGETED SECTORS Computer services and business travel are growing at 9% or above

Average growth Average Nr. Service label 2011-2015, growth 1000s’ USD 2011-2015, % 1 — Computer services 5 985 14,2%

2 — Travel, Business 5 418 9,7%

3 — Passenger transport, All modes (alternative breakdown) 3 578 5,6%

4 — Professional and management consulting services 2 240 4,3%

5 — Air transport 1 778 3,0%

6 — Travel, Personal 373 0,8%

7 — Research and development (R&D) -130 -5,7%

8 Charges for the use of intellectual property n.i.e. -208 -0,5%

9 — Technical, trade-related, and other business services -3 083 -8,2%

Source: JAA analysis based on data from National Bureau of Statistics (NBS), 2016

SUMMARY ANALYSIS AND Precision Engineering is experiencing very high growth in sales and although it covers a variety of SELECTION OF SHORT products it tends to be high sales/employee. It also LISTED INDUSTRIES represents a use of Moldova's core strengths and capabilities. The analysis above is summarized in Exhibit 9 of the next page and reveals the top five industries for Soft Drinks have made the cut thanks to strong further consideration. These include automotive - growth and high sales/employee although growth in related products of automotive seats and insulated employment has been modest and export values are cables and wires, precision engineering products, similarly modest. creative services, furniture and soft drinks. The Creative Industries made the cut and include a analysis also affirms the choice of industries already variety of activities including architecture, advertising, made by the project as apparel, textiles, tourism, wine, animation and many others. The team made the IT-related industries are all revealed to be important decision to define an industry not by a single for Moldova. product but by the capabilities that produce that Construction was revealed to have high employment, product as these same capabilities can be used to although low employment growth and was in any case produce many other products or services of a excluded as it is not export-oriented. Industries similar kind. Therefore like precision engineering, currently being covered by the project were also creative industries are one of the attractive industries removed from consideration (wine, apparel, textiles, that made the cut because of growth in employment travel and tourism and IT-related). Industries experiencing and potential future service exports. The team also notable loss in exports and jobs such as non-precision made allowances for the fact that much of service engineering, rubber products and non-metallic exports goes unreported and is probably much minerals were dropped for this reason. higher than official statistics report. The jobs tend to be good jobs with good value added. And Automotive-related exports are emerging as Moldova has low barriers to entry in many of these Moldova's current success story. Investors are industries. showing up to outsource jobs to Moldova generating high export values which are growing at over 8% per Furniture also made the short list because of high year. Employment is also growing. And this industry export values and fairly good growth of 4% despite has higher value added than many others. It should relatively modest sales per employee. clearly be on the list for consideration. 21 EXHIBIT 9: SUMMARY TABLE: AUTOMOTIVE-RELATED, PRECISION ENGINEERING, CREATIVE INDUSTRIES, SOFT DRINKS AND FURNITURE ARE SHOWN TO BE IMPORTANT INDUSTRIES FOR BEING "SHORT-LISTED" FOR FURTHER ANALYSIS6

Service label Turn- Average Sales/ Growth in Growth Exports Growth Short Service label number Employ- in over, Employ- in Sales, 2015, Exports, listed? million of ee, thou ment CAGR, thou annual employ- (#s), average lei ees MDL 2014/10 2014/10 USD 15/11

Furniture 1 380 4 954 278 -208 13,2% 101 071 4,1% Yes Exports attractive; export growth average

Precision 2 004 5 763 484 -754 26,3% 58 484 -3,0% Yes High overall turnover, Engineering reasonable export values and high sales per employee

Architecture and 438 3 504 125 739 11,0% 25 430 -8,2% Yes Employment growth civil engineering strong… a creative industry Advertising Employment growth 1 234 2 887 427 609 11,0% Yes [Creative strong… a creative Industries] industry Beverages [soft 583 873 668 0 11,0% 3 312 3,6% Yes Highly productive, drinks] exports growing, low employment

Automotive 1 789 4 029 444 1 555 61,4% 216 921 8,1% Yes Large exports and growing fast…emerging champion

Textiles 1 777 4 244 419 1 494 30,5% 49 019 -10,9% N/A Already being assisted by project Computer and 2 729 10 340 264 3 199 20,9% 59 060 14,2% N/A Already being assisted related activities by project Rubber and 1 892 3 802 498 493 18,0% 40 283 -9,7% No Exports falling plastic products

Apparel 1 816 14 635 124 -907 17,0% 224 733 -4,3% N/A Already being assisted by project Wine 2 388 5 969 403 -500 5,0% 97 719 -6,3% N/A Already being assisted by project

Hotels and 2 558 14 169 181 1 508 16,9% N/A Already being assisted restaurants by project

Chemical 1 943 2 981 652 593 14,5% 42 753 8,4% No Modest export values industry with some growth

Non-Precision 1 025 3 514 292 -666 13,7% 27 380 -1,4% No Losing jobs, Mach & unproductive jobs, only Equipment modest sales

Non-metallic 4 137 4 959 834 -1 148 12,2% 10 058 -9,9% No Big loss in exports, loss mineral products in employment

Transportation & 5 830 7 344 794 -399 11,5% 209 590 3,3% No Already being assisted Travel by project

Construction 13 383 30 083 445 726 12,9% 4 610 2,4% No High employment, but not export-oriented

6. Color coding: from deep red too green. Red is critically low and green is very high 622 example of barber chair seats, automotive seats fall engineering capabilities, relevant to Moldova's historic under this category and this is what is driving the exports in years past, are still relevant to a variety of III. FURTHER positive Moldovan performance. This shows that product categories and should be considered for Moldovan exports have been gaining market share. assistance. COMPETITIVENESS Moreover, imports grew at an average of 5% per year from 2011-2015 despite these being lackluster Exhibit 14 shows that wine is by far the largest growth years for growth in global imports. The size export but global growth has been modest and ANALYSIS OF THE 5 of exports is by far the largest in this overall Moldova has not increased market share. Wine, product category. On the left side, furniture fermented beverages and distilled spirits are in the SHORT-LISTED INDUSTRIES exports have not been growing, do not have above attractive upper right quadrant. But wine is the average global market share and have experienced largest export by value as shown by the size of the more modest global growth at around 3%. This circle. It also has the largest relative global market Having selected five attractive industries for the "short list" using the methodology used above, analysis would tend to favor automotive seats and share being the farthest to the right of all products. the team then used various methods to further analyze and cross check out findings. automotive exports in general over traditional However, global import values from 2011-2015 furniture exports. This is yet another product have not experience robust growth as may be seen REVEALED COMPETITIVENESS fruits, nuts, oilseeds and vegetable oil, cereals and category confirming the attractiveness of products from its position only halfway up on the lateral "X" beverages and spirits, sugar and dairy. However, in ANALYSIS (RCA) related to the automotive cluster, supply chain and axis. Finally, the yellow color means that it has been the upper left quadrant one notes a number of cluster and therefore deserves close consideration. losing rather than gaining global market share lately The team secured data and illustrations from the manufactures that while not having a greater share This is one of Moldova's emerging export champions. as is understandable given the difficulties experienced United Nations International Trade Centre based of global exports than the average Moldovan in exporting to the former Soviet Union in recent in Geneva (ITC). For some years, the ITC has exports are either large (apparel and textiles) or Exhibit 13 shows that exports related to years. As wine is already an industry being assisted placed trade data from all countries into a system gaining global market share (electrical and electronic specialized machinery involving heat exchange by the project it will not be analyzed further. And that analyzes revealed competitiveness by showing equipment and furniture). Note that this exhibit is and pumps seem to be competitive. Many of the while distilled spirits, such as cognac and others, the size of a country's exports, whether it is gaining at the aggregate or "2-digit" level in the international products shown involve capabilities that can be might be increasing in global market share, it is not or losing global market share and whether it is in a trade categories and is quite aggregated. To understand grouped under the category of "precision engineering" an industry that would be considered for assistance growing or declining industry in terms of global this better, one has to go to the 4-digit level in requiring more than simple fabrication. Precision by the project and USAID. trade. Some four of these charts are found in Exhibits 11, 12 and 13. Exhibits 10-13. Moldova has about .012% of global Exhibit 11 shows that exports of insulated wire exports, or about one-eighth of one percent of the and cable are the clear competitive winner global market. Therefore, products which have a among electrical and electronic exports. At the greater share than this in global markets are said to 4-digit product category level, one can clearly see be relatively more competitive than Moldova's that this product category is what drive's recent other exports that have less than this and are to improvements in global market share in category the right of center in those charts. Products that 84, electrical and electronic equipment. This are in the upper half of the graph represent industries product is related to the automotive industry being and products that are growing in world trade while a component produced in Moldova. As one can see those in the lower half are declining. Therefore, in the illustration, this export category has been those industries and products in the upper right growing in world trade at about 2% a year. It is by hand corner are attractive representing Moldova's far the largest export category for Moldova in this growing competiveness in presumably attractive overall trade category. And Moldova's market share higher-growth market segments. The color blue in global trade is superior to its average participation means that Moldova's market share is growing in world trade. This is clearly a competitive product while the color yellow means it is declining. The and is improving in its performance. It deserves to size of the circle represents the value of the be considered as a competitive industry, perhaps exports with larger circles meaning larger export with other automotive component products. values. Exhibit 12 shows that automotive seats in the Exhibit 107 shows that Moldova's competitive 9401 category are a truly competitive export exports tend to be agriculture related including category where Moldova is also improving. The wine but apparel, furniture and electric/ large blue circle representing this category is the electronic equipment are rising. These are only product in the attractive upper right quadrant grouped in the upper right quadrant and include of Exhibit 12. While the code itself gives the

23 7. Because of their size, the exhibits 10-13 are included in the Annex A. Exhibits

FURNITURE below. There are about 400 furniture companies in opening the way to collaboration. TUM is very can keep alive a higher set of skills, it can help keep CAN "CREATIVE INDUSTRIES" If one defines an industry not by its products but by the industry and they produce for the domestic as open to working closely with the industry as well. talent from migrating and provide above average its core capabilities, it becomes clear that "creative This sector was assisted by the USAID’s CEED II well as foreign markets. Companies understand One can see the possibility of adding value by jobs. Numerous businesses in Moldova emphasize BE CONSIDERED AS A TRUE industries" can be considered a legitimate industry program, which was a predecessor to the MCP that export growth can only be achieved if they helping the industry identify even higher value high value, high quality specialty design and manufacture INDUSTRY CLUSTER? cluster. Creative industries in Moldova do self-identify. project. CEED II supported the sector from 2011 focus on selling to high value European markets. added market segments and other products beyond of precision-engineered tools, components and Those we met do think of themselves as being a to 2013. Assistance was mainly focused on creating One of the largest furniture producers in Moldova those being targeted at the moment. As the industry equipment. Unlike wine or apparel, one can argue that "Creative part of creative industries. They would like to work innovative joint marketing opportunities, developing has started increasing its exports from 5% in 2008 Industries" are not really an industry at all but a together. And there are some commonalities conglomeration of very different kinds of companies stronger brand recognition and business strategies to 50% in 2015. Not all services involving mental value added can be captured in the definition above. There is usually DEFINITION AND and self-employed people. But other industries are for Moldovan firms, raising industry cooperation, of Moldovans. The sector lends itself well to considered part of the creative industries cluster. something unique. The work may involve a computer The team visited and interviewed representatives of examined the issue of industry "self-selection" or the Starting wages in the sector are about 3000MDL CREATIVE SERVICES a collection of quite diverse firms. For example, the and expanding domestic market presence. It also entrepreneurship. While data is lacking on salaries DESCRIPTION Creativity is not absolutely required in all knowledge but computers cannot do the work. Creative work the five leading industries found to be competitive and extent to which the industry leaders interviewed (about $150/month) and can go as high as tourism industry is also a conglomeration of very included a revitalization of the Association of INDUSTRIES or value added for such a disparate sector, work. For example, lawyers may indeed need to be is hard to outsource to computers. that could be chosen for further assistance. The demonstrated the desire to come together, whether Furniture Producers, and setting up the first 15,000MDL. Some of the larger enterprises that different kinds of companies from capital intensive Creative services includes many different specific lifestyle-wise young people are drawn to creative Creative services can be defined as providers creative from time to time, but law firms mainly team first and foremost focused on whether MCP they would sign a Memo of Understanding (MoU) common furniture shopping center – Mobimall. are producing furniture in large volumes, such as air carriers to family-owned restaurants to individual categories that are not always caught in the statistical services. of services involving higher order functions involve the standard application of norms and could actually do helpful things for the industry in and contribute in time and co-investment with the The latter was managed through joint partnership Ambianta, are capital intensive and their productivity tour guides. data as they include many relatively small specialty of the mind that produce tangible economic guidelines and following of logical procedures. The question. We focused on whether there were any project to further the competitiveness of their between an investor and the association – and is relatively higher than the smaller firms that do MCP already has experience with the industry via areas. Nonetheless, architecture and engineering value-added through conceptual, logical, same is true for accounting despite the frequent special considerations involved apart from the industry. improved design and branding. With a 2 million not use too many machines and are labor intensive. its work with other sectors. One of the aspects services alone generated $25M in service exports. communication and artistic skills involving use of the term "creative accounting". However, more quantitative analysis shown above. We also Euro private investment, Mobimall was launched in The later straggle to find and retain employees and that most recommends the focus on this industry is producers need attractive labels and good marketing, Both the architecture/engineering category and creativity. CSI includes a diversity and even architectural companies can be considered firms a IMPORTANCE OF CREATIVE August 2013, highlighting more than 20 brands and come up with nontraditional approaches such as how 12 representatives of the industry came advertising and communications strategies. Artists advertising have reported growth of 11% annually disparity of kinds of companies. Some are creative industry because they involve creative INDUSTRIES placing 3,000 furniture and home products on sale hiring couples to produce furniture. together in MCP headquarters, highly motivated to and designers also contribute to the country over the last 4 years. Architecture and engineering artistic and visual such as design. Others are interpretation and design features. There can be in 15,000 square meters of retail space; a milestone work together, sign an MoU, be mutually supportive Export of services can provide high value added. "brand" internationally. Creative industries provide actually do for them that they cannot do for While the sector has been growing at a modest 4% generated 739 additional jobs while advertising methodical rather than inspirational such as many semantic differences over what falls into or AUTOMOTIVE PARTS in the development of Moldova’s home furnishing and move forward. A subset of these returned for Exporting what one does with the mind often has potential for value added jobs and entrepreneurial themselves. These companies know their markets. per year8 industry has been shedding jobs and now created 609 new jobs. Many of these creative architecture. Some are visual such as animation. out of creative industries. The point is not to get sector. another strategy and working session and the team higher value-added than what one exports with opportunities that can potentially produce higher This industry is among the fastest growing export They are able to train employees in their own services are under the radar. One firm in our focus Still others such as advertising agencies and too hung up on definitions but rather to recognize has under 5,000 total people formally employed identified one helpful initiative of creating a ones hands. The creative industries can also add incomes than current benchmarks for "good jobs" category that was also generating employment. company techniques. By definition they have found group is exporting animation services and growing communications involve creativity in the that there is such a thing as "creative industries" Currently, the Association is no longer managing although this does not include informal employment. common website where international buyers could value and enhance competitiveness of all other in Moldova. Recent investment has also been in various regions the business environment to be relatively conducive. rapidly. realm of words. and they have commonalities. the center. Iurie Bors, a private furniture manufacturer There are a number of modest sized firms and find at one gateway portal a variety of creative Moldovan industries. For example, Moldovan wine of Moldova and not just in Chisinau. Furthermore, The green corridor arrangement for speedy firms seemed relatively interested in assistance. who made the initial investment in the Mobimall, As in the case of precision industries, the team and industry services, find companies and click on their in the automotive seat category it can generate transport across borders seems to be working MCP could facilitate market linkages, provide has enlarged the space and directly manages it. our Moldovan counterparts identified multiple products and services. This industry would also employment for women who have relevant textile, well. The industry does not need to be organized technical support on market linkages and help subsectors in this category. They include advertising, contributes to the competitiveness of other courses, and visit companies and even work and apparel skills that can be potentially transferable. into a cluster where the project could be of use as Moldovan furniture exports are a very respectable facilitate industry-wide coalescence and action. EXAMPLES OF CREATIVE We believe it should be included on the list as MARKET TREND ANALYSIS: marketing, architecture, animation, design, multimedia, industries through its capabilities in design, marketing, bring back ideas and customers. Moldovan industries Insulated cables are also an area where Moldova a catalyst, coach or provider of technical assistance. US101M and the industry has 4,954 employees. However, the industry already received assistance information technology and software development artistic productions and others. There tend to be branding, advertising and social media promotion. INDUSTRIES IN MOLDOVA FAVORABLE TRENDS IN THE such as wine, apparel and tourism face the has been doing well. Proximity to Europe and the So while the industry is quite attractive, we did not Turnover is 1380M MDL so turnover per employee under the CEED project. And the relatively low is very tied up with the creation of new "apps" and many smaller firms at work, opening the way for A creative services industry could also help announce GLOBAL AND REGIONAL challenge of "selling West" and integrating into the relatively high wages for workers (higher than conclude it should be among the one or two is relatively low at about 278,000 MDL per employee wage levels and uncertain prospects for employment The following is a list which is illustrative but not is therefore a creative service. As noted earlier, apparel for example), makes it an excellent candidate industries to receive priority attention. That being technical assistance to be well received. This focus the re-branding or re-imaging of Moldova for global creative services may also be a part of other ECONOMIC CONTEXT EU regional and global economy and this requires as compared to 484,000 MDL per employee in the resulted in this not being chosen as one of the top buyers, global investors and Moldovan young people exhaustive of creative industries and professions in communication and creative skills. Globally, the for selection. The automotive supply chain cluster said, we did recommend the possibility of a workforce precision engineering industry as will be seen dovetails nicely with the expertise of TUM and the Moldova. Information technology could also be on industries such as the fashion component of apparel two industries. who will decide whether to remain in Moldova to Globally, the proportion of GDP is shifting to services sector is growing as a percentage of GDP is emerging as a new export champion for Moldova. development initiative under which donor funding new facilities designed to encourage creative this list although to some extent it is already a production or the branding, labeling, marketing and work. Jobs in creative services could be quite appealing services. While agriculture and manufacturing as mechanization increases in both agriculture and However, this sector is also characterized by a might entice further FDI in this industry by offering industries such as Zip House fashion accelerator, focus of MCP and three is a debate about whether advertising of wine. relatively concentrated set of foreign investors such financial incentives for workforce training so that Tekwill technology center and Atelier 99 makers to young people who might otherwise emigrate. And it continue to grow in value, most countries as they manufacturing. Creative industries represent an (TUM) is a notable example. These skills are now software programming is a creative service. as Draexlmaier. Interviews with the industry this industry does not bump up against the PRECISION ENGINEERING space. This industry is open to potential unending is open equally to women as well as men as evidenced become more developed have over half the economy important component of the services sector and being used to produce a large variety of products showed that they seem to have things under constraints of trained personnel. growth limited only by the creativity and dynamism by the gender balance in the focus group. in the service industry. This trend will likely continue. therefore represent the future of the economy. The team made an important insight in the process with various product classifications often related to control. It is unclear what the project could Economic stagnation in Europe is putting pressure Services are also being taken over by machines are of examining products and industries. As we electrical equipment, electronic equipment, pumps on EU companies which are looking for opportunities increasingly taking over human services and the understood the nature of many of the export and others. With US$58M in sales and 5,000–6,000 ■ Information technology (aspects) ■ Graphic arts and design including stills and visual employment and turnover per employee yielded a to outsource. Most Moldovans have Romania interface with consumers. products, it became clear that one could define the employees, the precision and related industries ■ Industrial Design ■ App design, creation and invention what the project could really do to assist in boosting short list of five attractive industries. The most passports allowing them to travel in the EU, take BEVERAGES - SOFT DRINKS industry not just by the product but also by the have a very high turnover per employee ratio. ■ Graphical Design ■ Website design its competitiveness. The bottlers seem to be attractive is auto parts in the supply chain but this capabilities involved. Moldova has a talent base and However, the industry has struggled to grow its ■ Architecture and Design ■ Social media advisors Soft drinks was chosen because of its modest competitive on their own as they invest in machinery will likely do well without the need for project critical mass of capability in precision engineering. exports recently indicating a transition to competi- ■ Interior Decorating ■ Conference planners and event managers survey and focus group. Of these 10 were for-profit growth in exports and high overall sales growth at and improve their productivity without generating assistance as it is managed by competent foreign CURRENT SITUATION This was an asset historically when Moldova was tive products that could be helped by project ■ Computer animation (including those now exporting ■ Corporate executive coaches and trainers of groups companies and 2 were social enterprises that over 11% along with very high value in turnover lots of jobs for the time being. With only about firms. The soft drink industry also seems concentrated part of the Soviet Union and exported products for technical assistance. The firms interviewed seemed to Russia) ■ Visual artists There are no good statistics on the number of generate jobs and revenues but no retained earnings. per employees at 668,000 MDL making it seemingly 3,000 employees and no recent growth in employment, and run by competent bottlers, with less need for the Soviet defense industry. The industry shifted very open to the idea of coming together and ■ In-studio video production including commercials ■ Youth Training for students such as Rocket Academy people earning a living in creative industries. The The firms surveyed were relatively recent and time attractive. On closer analysis, the industry is very it was decided not to select this industry. project help and only modest prospects for growth and the products were understandably no longer working with the project on repositioning itself in ■ Full service advertising from strategy to production - a two week course JAA team assembled a group of 12 people from 11 in business ranged from a low of 3 years to a high concentrated and capital intensive and it is unclear in exports and employment despite robust increases sold. But many of the capabilities remained, including global markets. The firms also have a variety of ■ Marketing, advertising and strategic communications ■ Computer Graphics (CG) creative industry companies for a brief informal of 12 years. in sales. The furniture industry seems less dynamic the universities that trained people with these products and do not always compete with each ■ Cultural events and cultural productions ■ Fashion and clothing design and received earlier assistance. capabilities. The Technical University of Moldova other with the same strategies and products, ■ Film-making ■ Entertainment ■ PR - research to implementation, based on data as ■ Music composing, arranging and performance well as creativity ■ Landscaping and beautification of public spaces example of barber chair seats, automotive seats fall engineering capabilities, relevant to Moldova's historic under this category and this is what is driving the exports in years past, are still relevant to a variety of positive Moldovan performance. This shows that product categories and should be considered for Moldovan exports have been gaining market share. assistance. Moreover, imports grew at an average of 5% per year from 2011-2015 despite these being lackluster Exhibit 14 shows that wine is by far the largest growth years for growth in global imports. The size export but global growth has been modest and of exports is by far the largest in this overall Moldova has not increased market share. Wine, product category. On the left side, furniture fermented beverages and distilled spirits are in the exports have not been growing, do not have above attractive upper right quadrant. But wine is the average global market share and have experienced largest export by value as shown by the size of the more modest global growth at around 3%. This circle. It also has the largest relative global market analysis would tend to favor automotive seats and share being the farthest to the right of all products. automotive exports in general over traditional However, global import values from 2011-2015 furniture exports. This is yet another product have not experience robust growth as may be seen REVEALED COMPETITIVENESS fruits, nuts, oilseeds and vegetable oil, cereals and category confirming the attractiveness of products from its position only halfway up on the lateral "X" beverages and spirits, sugar and dairy. However, in ANALYSIS (RCA) related to the automotive cluster, supply chain and axis. Finally, the yellow color means that it has been the upper left quadrant one notes a number of cluster and therefore deserves close consideration. losing rather than gaining global market share lately The team secured data and illustrations from the manufactures that while not having a greater share This is one of Moldova's emerging export champions. as is understandable given the difficulties experienced United Nations International Trade Centre based of global exports than the average Moldovan in exporting to the former Soviet Union in recent in Geneva (ITC). For some years, the ITC has exports are either large (apparel and textiles) or Exhibit 13 shows that exports related to years. As wine is already an industry being assisted placed trade data from all countries into a system gaining global market share (electrical and electronic specialized machinery involving heat exchange by the project it will not be analyzed further. And that analyzes revealed competitiveness by showing equipment and furniture). Note that this exhibit is and pumps seem to be competitive. Many of the while distilled spirits, such as cognac and others, the size of a country's exports, whether it is gaining at the aggregate or "2-digit" level in the international products shown involve capabilities that can be might be increasing in global market share, it is not or losing global market share and whether it is in a trade categories and is quite aggregated. To understand grouped under the category of "precision engineering" an industry that would be considered for assistance growing or declining industry in terms of global this better, one has to go to the 4-digit level in requiring more than simple fabrication. Precision by the project and USAID. trade. Some four of these charts are found in Exhibits 11, 12 and 13. Exhibits 10-13. Moldova has about .012% of global Exhibit 11 shows that exports of insulated wire exports, or about one-eighth of one percent of the and cable are the clear competitive winner global market. Therefore, products which have a among electrical and electronic exports. At the greater share than this in global markets are said to 4-digit product category level, one can clearly see be relatively more competitive than Moldova's that this product category is what drive's recent other exports that have less than this and are to improvements in global market share in category the right of center in those charts. Products that 84, electrical and electronic equipment. This are in the upper half of the graph represent industries product is related to the automotive industry being and products that are growing in world trade while a component produced in Moldova. As one can see those in the lower half are declining. Therefore, in the illustration, this export category has been those industries and products in the upper right growing in world trade at about 2% a year. It is by hand corner are attractive representing Moldova's far the largest export category for Moldova in this growing competiveness in presumably attractive overall trade category. And Moldova's market share higher-growth market segments. The color blue in global trade is superior to its average participation means that Moldova's market share is growing in world trade. This is clearly a competitive product while the color yellow means it is declining. The and is improving in its performance. It deserves to size of the circle represents the value of the be considered as a competitive industry, perhaps exports with larger circles meaning larger export with other automotive component products. values. Exhibit 12 shows that automotive seats in the Exhibit 107 shows that Moldova's competitive 9401 category are a truly competitive export exports tend to be agriculture related including category where Moldova is also improving. The wine but apparel, furniture and electric/ large blue circle representing this category is the electronic equipment are rising. These are only product in the attractive upper right quadrant grouped in the upper right quadrant and include Figure: The interior design of the new common store Din Inima on St.cel Mare street, Chisinau of Exhibit 12. While the code itself gives the

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FURNITURE below. There are about 400 furniture companies in opening the way to collaboration. TUM is very can keep alive a higher set of skills, it can help keep CAN "CREATIVE INDUSTRIES" If one defines an industry not by its products but by the industry and they produce for the domestic as open to working closely with the industry as well. talent from migrating and provide above average its core capabilities, it becomes clear that "creative IV. QUALITATIVE ANALYSIS This sector was assisted by the USAID’s CEED II well as foreign markets. Companies understand One can see the possibility of adding value by jobs. Numerous businesses in Moldova emphasize BE CONSIDERED AS A TRUE industries" can be considered a legitimate industry program, which was a predecessor to the MCP that export growth can only be achieved if they helping the industry identify even higher value high value, high quality specialty design and manufacture INDUSTRY CLUSTER? cluster. Creative industries in Moldova do self-identify. OF THE FIVE LEADING project. CEED II supported the sector from 2011 focus on selling to high value European markets. added market segments and other products beyond of precision-engineered tools, components and Those we met do think of themselves as being a to 2013. Assistance was mainly focused on creating One of the largest furniture producers in Moldova those being targeted at the moment. As the industry equipment. Unlike wine or apparel, one can argue that "Creative part of creative industries. They would like to work innovative joint marketing opportunities, developing has started increasing its exports from 5% in 2008 Industries" are not really an industry at all but a together. And there are some commonalities conglomeration of very different kinds of companies INDUSTRIES stronger brand recognition and business strategies to 50% in 2015. Not all services involving mental value added can be captured in the definition above. There is usually DEFINITION AND and self-employed people. But other industries are for Moldovan firms, raising industry cooperation, of Moldovans. The sector lends itself well to considered part of the creative industries cluster. something unique. The work may involve a computer The team visited and interviewed representatives of examined the issue of industry "self-selection" or the Starting wages in the sector are about 3000MDL CREATIVE SERVICES a collection of quite diverse firms. For example, the and expanding domestic market presence. It also entrepreneurship. While data is lacking on salaries DESCRIPTION Creativity is not absolutely required in all knowledge but computers cannot do the work. Creative work the five leading industries found to be competitive and extent to which the industry leaders interviewed (about $150/month) and can go as high as tourism industry is also a conglomeration of very included a revitalization of the Association of INDUSTRIES or value added for such a disparate sector, work. For example, lawyers may indeed need to be is hard to outsource to computers. that could be chosen for further assistance. The demonstrated the desire to come together, whether Furniture Producers, and setting up the first 15,000MDL. Some of the larger enterprises that different kinds of companies from capital intensive Creative services includes many different specific lifestyle-wise young people are drawn to creative Creative services can be defined as providers creative from time to time, but law firms mainly team first and foremost focused on whether MCP they would sign a Memo of Understanding (MoU) common furniture shopping center – Mobimall. are producing furniture in large volumes, such as air carriers to family-owned restaurants to individual categories that are not always caught in the statistical services. of services involving higher order functions involve the standard application of norms and could actually do helpful things for the industry in and contribute in time and co-investment with the The latter was managed through joint partnership Ambianta, are capital intensive and their productivity tour guides. data as they include many relatively small specialty of the mind that produce tangible economic guidelines and following of logical procedures. The question. We focused on whether there were any project to further the competitiveness of their between an investor and the association – and is relatively higher than the smaller firms that do MCP already has experience with the industry via areas. Nonetheless, architecture and engineering value-added through conceptual, logical, same is true for accounting despite the frequent special considerations involved apart from the industry. improved design and branding. With a 2 million not use too many machines and are labor intensive. its work with other sectors. One of the aspects services alone generated $25M in service exports. communication and artistic skills involving use of the term "creative accounting". However, more quantitative analysis shown above. We also Euro private investment, Mobimall was launched in The later straggle to find and retain employees and that most recommends the focus on this industry is producers need attractive labels and good marketing, Both the architecture/engineering category and creativity. CSI includes a diversity and even architectural companies can be considered firms a IMPORTANCE OF CREATIVE August 2013, highlighting more than 20 brands and come up with nontraditional approaches such as how 12 representatives of the industry came advertising and communications strategies. Artists advertising have reported growth of 11% annually disparity of kinds of companies. Some are creative industry because they involve creative INDUSTRIES placing 3,000 furniture and home products on sale hiring couples to produce furniture. together in MCP headquarters, highly motivated to and designers also contribute to the country over the last 4 years. Architecture and engineering artistic and visual such as design. Others are interpretation and design features. There can be in 15,000 square meters of retail space; a milestone work together, sign an MoU, be mutually supportive Export of services can provide high value added. "brand" internationally. Creative industries provide actually do for them that they cannot do for While the sector has been growing at a modest 4% generated 739 additional jobs while advertising methodical rather than inspirational such as many semantic differences over what falls into or AUTOMOTIVE PARTS in the development of Moldova’s home furnishing and move forward. A subset of these returned for Exporting what one does with the mind often has potential for value added jobs and entrepreneurial themselves. These companies know their markets. per year8 industry has been shedding jobs and now created 609 new jobs. Many of these creative architecture. Some are visual such as animation. out of creative industries. The point is not to get sector. another strategy and working session and the team higher value-added than what one exports with opportunities that can potentially produce higher This industry is among the fastest growing export They are able to train employees in their own services are under the radar. One firm in our focus Still others such as advertising agencies and too hung up on definitions but rather to recognize has under 5,000 total people formally employed identified one helpful initiative of creating a ones hands. The creative industries can also add incomes than current benchmarks for "good jobs" category that was also generating employment. company techniques. By definition they have found group is exporting animation services and growing communications involve creativity in the that there is such a thing as "creative industries" Currently, the Association is no longer managing although this does not include informal employment. common website where international buyers could value and enhance competitiveness of all other in Moldova. Recent investment has also been in various regions the business environment to be relatively conducive. rapidly. realm of words. and they have commonalities. the center. Iurie Bors, a private furniture manufacturer There are a number of modest sized firms and find at one gateway portal a variety of creative Moldovan industries. For example, Moldovan wine of Moldova and not just in Chisinau. Furthermore, The green corridor arrangement for speedy firms seemed relatively interested in assistance. who made the initial investment in the Mobimall, As in the case of precision industries, the team and industry services, find companies and click on their in the automotive seat category it can generate transport across borders seems to be working MCP could facilitate market linkages, provide has enlarged the space and directly manages it. our Moldovan counterparts identified multiple products and services. This industry would also employment for women who have relevant textile, well. The industry does not need to be organized technical support on market linkages and help subsectors in this category. They include advertising, contributes to the competitiveness of other courses, and visit companies and even work and apparel skills that can be potentially transferable. into a cluster where the project could be of use as Moldovan furniture exports are a very respectable facilitate industry-wide coalescence and action. EXAMPLES OF CREATIVE We believe it should be included on the list as MARKET TREND ANALYSIS: marketing, architecture, animation, design, multimedia, industries through its capabilities in design, marketing, bring back ideas and customers. Moldovan industries Insulated cables are also an area where Moldova a catalyst, coach or provider of technical assistance. US101M and the industry has 4,954 employees. However, the industry already received assistance information technology and software development artistic productions and others. There tend to be branding, advertising and social media promotion. INDUSTRIES IN MOLDOVA FAVORABLE TRENDS IN THE such as wine, apparel and tourism face the has been doing well. Proximity to Europe and the So while the industry is quite attractive, we did not Turnover is 1380M MDL so turnover per employee under the CEED project. And the relatively low is very tied up with the creation of new "apps" and many smaller firms at work, opening the way for A creative services industry could also help announce GLOBAL AND REGIONAL challenge of "selling West" and integrating into the relatively high wages for workers (higher than conclude it should be among the one or two is relatively low at about 278,000 MDL per employee wage levels and uncertain prospects for employment The following is a list which is illustrative but not is therefore a creative service. As noted earlier, apparel for example), makes it an excellent candidate industries to receive priority attention. That being technical assistance to be well received. This focus the re-branding or re-imaging of Moldova for global creative services may also be a part of other ECONOMIC CONTEXT EU regional and global economy and this requires as compared to 484,000 MDL per employee in the resulted in this not being chosen as one of the top buyers, global investors and Moldovan young people exhaustive of creative industries and professions in communication and creative skills. Globally, the for selection. The automotive supply chain cluster said, we did recommend the possibility of a workforce precision engineering industry as will be seen dovetails nicely with the expertise of TUM and the Moldova. Information technology could also be on industries such as the fashion component of apparel two industries. who will decide whether to remain in Moldova to Globally, the proportion of GDP is shifting to services sector is growing as a percentage of GDP is emerging as a new export champion for Moldova. development initiative under which donor funding new facilities designed to encourage creative this list although to some extent it is already a production or the branding, labeling, marketing and work. Jobs in creative services could be quite appealing services. While agriculture and manufacturing as mechanization increases in both agriculture and However, this sector is also characterized by a might entice further FDI in this industry by offering industries such as Zip House fashion accelerator, focus of MCP and three is a debate about whether advertising of wine. relatively concentrated set of foreign investors such financial incentives for workforce training so that Tekwill technology center and Atelier 99 makers to young people who might otherwise emigrate. And it continue to grow in value, most countries as they manufacturing. Creative industries represent an (TUM) is a notable example. These skills are now software programming is a creative service. as Draexlmaier. Interviews with the industry this industry does not bump up against the PRECISION ENGINEERING space. This industry is open to potential unending is open equally to women as well as men as evidenced become more developed have over half the economy important component of the services sector and being used to produce a large variety of products showed that they seem to have things under constraints of trained personnel. growth limited only by the creativity and dynamism by the gender balance in the focus group. in the service industry. This trend will likely continue. therefore represent the future of the economy. The team made an important insight in the process with various product classifications often related to control. It is unclear what the project could Economic stagnation in Europe is putting pressure Services are also being taken over by machines are of examining products and industries. As we electrical equipment, electronic equipment, pumps on EU companies which are looking for opportunities increasingly taking over human services and the understood the nature of many of the export and others. With US$58M in sales and 5,000–6,000 ■ Information technology (aspects) ■ Graphic arts and design including stills and visual employment and turnover per employee yielded a to outsource. Most Moldovans have Romania interface with consumers. products, it became clear that one could define the employees, the precision and related industries ■ Industrial Design ■ App design, creation and invention what the project could really do to assist in boosting short list of five attractive industries. The most passports allowing them to travel in the EU, take BEVERAGES - SOFT DRINKS industry not just by the product but also by the have a very high turnover per employee ratio. ■ Graphical Design ■ Website design its competitiveness. The bottlers seem to be attractive is auto parts in the supply chain but this capabilities involved. Moldova has a talent base and However, the industry has struggled to grow its ■ Architecture and Design ■ Social media advisors Soft drinks was chosen because of its modest competitive on their own as they invest in machinery will likely do well without the need for project critical mass of capability in precision engineering. exports recently indicating a transition to competi- ■ Interior Decorating ■ Conference planners and event managers survey and focus group. Of these 10 were for-profit growth in exports and high overall sales growth at and improve their productivity without generating assistance as it is managed by competent foreign CURRENT SITUATION This was an asset historically when Moldova was tive products that could be helped by project ■ Computer animation (including those now exporting ■ Corporate executive coaches and trainers of groups companies and 2 were social enterprises that over 11% along with very high value in turnover lots of jobs for the time being. With only about firms. The soft drink industry also seems concentrated part of the Soviet Union and exported products for technical assistance. The firms interviewed seemed to Russia) ■ Visual artists There are no good statistics on the number of generate jobs and revenues but no retained earnings. per employees at 668,000 MDL making it seemingly 3,000 employees and no recent growth in employment, and run by competent bottlers, with less need for the Soviet defense industry. The industry shifted very open to the idea of coming together and ■ In-studio video production including commercials ■ Youth Training for students such as Rocket Academy people earning a living in creative industries. The The firms surveyed were relatively recent and time attractive. On closer analysis, the industry is very it was decided not to select this industry. project help and only modest prospects for growth and the products were understandably no longer working with the project on repositioning itself in ■ Full service advertising from strategy to production - a two week course JAA team assembled a group of 12 people from 11 in business ranged from a low of 3 years to a high concentrated and capital intensive and it is unclear in exports and employment despite robust increases sold. But many of the capabilities remained, including global markets. The firms also have a variety of ■ Marketing, advertising and strategic communications ■ Computer Graphics (CG) creative industry companies for a brief informal of 12 years. in sales. The furniture industry seems less dynamic the universities that trained people with these products and do not always compete with each ■ Cultural events and cultural productions ■ Fashion and clothing design and received earlier assistance. capabilities. The Technical University of Moldova other with the same strategies and products, ■ Film-making ■ Entertainment ■ PR - research to implementation, based on data as ■ Music composing, arranging and performance well as creativity ■ Landscaping and beautification of public spaces 25 example of barber chair seats, automotive seats fall engineering capabilities, relevant to Moldova's historic under this category and this is what is driving the exports in years past, are still relevant to a variety of positive Moldovan performance. This shows that product categories and should be considered for Moldovan exports have been gaining market share. assistance. Moreover, imports grew at an average of 5% per year from 2011-2015 despite these being lackluster Exhibit 14 shows that wine is by far the largest growth years for growth in global imports. The size export but global growth has been modest and of exports is by far the largest in this overall Moldova has not increased market share. Wine, product category. On the left side, furniture fermented beverages and distilled spirits are in the exports have not been growing, do not have above attractive upper right quadrant. But wine is the average global market share and have experienced largest export by value as shown by the size of the more modest global growth at around 3%. This circle. It also has the largest relative global market analysis would tend to favor automotive seats and share being the farthest to the right of all products. automotive exports in general over traditional However, global import values from 2011-2015 furniture exports. This is yet another product have not experience robust growth as may be seen REVEALED COMPETITIVENESS fruits, nuts, oilseeds and vegetable oil, cereals and category confirming the attractiveness of products from its position only halfway up on the lateral "X" beverages and spirits, sugar and dairy. However, in ANALYSIS (RCA) related to the automotive cluster, supply chain and axis. Finally, the yellow color means that it has been the upper left quadrant one notes a number of cluster and therefore deserves close consideration. losing rather than gaining global market share lately The team secured data and illustrations from the manufactures that while not having a greater share This is one of Moldova's emerging export champions. as is understandable given the difficulties experienced United Nations International Trade Centre based of global exports than the average Moldovan in exporting to the former Soviet Union in recent in Geneva (ITC). For some years, the ITC has exports are either large (apparel and textiles) or Exhibit 13 shows that exports related to years. As wine is already an industry being assisted placed trade data from all countries into a system gaining global market share (electrical and electronic specialized machinery involving heat exchange by the project it will not be analyzed further. And that analyzes revealed competitiveness by showing equipment and furniture). Note that this exhibit is and pumps seem to be competitive. Many of the while distilled spirits, such as cognac and others, the size of a country's exports, whether it is gaining at the aggregate or "2-digit" level in the international products shown involve capabilities that can be might be increasing in global market share, it is not or losing global market share and whether it is in a trade categories and is quite aggregated. To understand grouped under the category of "precision engineering" an industry that would be considered for assistance growing or declining industry in terms of global this better, one has to go to the 4-digit level in requiring more than simple fabrication. Precision by the project and USAID. trade. Some four of these charts are found in Exhibits 11, 12 and 13. Exhibits 10-13. Moldova has about .012% of global Exhibit 11 shows that exports of insulated wire exports, or about one-eighth of one percent of the and cable are the clear competitive winner global market. Therefore, products which have a among electrical and electronic exports. At the greater share than this in global markets are said to 4-digit product category level, one can clearly see be relatively more competitive than Moldova's that this product category is what drive's recent other exports that have less than this and are to improvements in global market share in category the right of center in those charts. Products that 84, electrical and electronic equipment. This are in the upper half of the graph represent industries product is related to the automotive industry being and products that are growing in world trade while a component produced in Moldova. As one can see those in the lower half are declining. Therefore, in the illustration, this export category has been those industries and products in the upper right growing in world trade at about 2% a year. It is by hand corner are attractive representing Moldova's far the largest export category for Moldova in this growing competiveness in presumably attractive overall trade category. And Moldova's market share higher-growth market segments. The color blue in global trade is superior to its average participation means that Moldova's market share is growing in world trade. This is clearly a competitive product while the color yellow means it is declining. The and is improving in its performance. It deserves to size of the circle represents the value of the be considered as a competitive industry, perhaps exports with larger circles meaning larger export with other automotive component products. values. Exhibit 12 shows that automotive seats in the Exhibit 107 shows that Moldova's competitive 9401 category are a truly competitive export exports tend to be agriculture related including category where Moldova is also improving. The wine but apparel, furniture and electric/ large blue circle representing this category is the electronic equipment are rising. These are only product in the attractive upper right quadrant grouped in the upper right quadrant and include of Exhibit 12. While the code itself gives the

8. JAA analysis, 2010 to 2014, based on data from the National Bureau of Statistics (NBS) 626 example of barber chair seats, automotive seats fall engineering capabilities, relevant to Moldova's historic under this category and this is what is driving the exports in years past, are still relevant to a variety of positive Moldovan performance. This shows that product categories and should be considered for Moldovan exports have been gaining market share. assistance. Moreover, imports grew at an average of 5% per year from 2011-2015 despite these being lackluster Exhibit 14 shows that wine is by far the largest growth years for growth in global imports. The size export but global growth has been modest and of exports is by far the largest in this overall Moldova has not increased market share. Wine, product category. On the left side, furniture fermented beverages and distilled spirits are in the exports have not been growing, do not have above attractive upper right quadrant. But wine is the average global market share and have experienced largest export by value as shown by the size of the more modest global growth at around 3%. This circle. It also has the largest relative global market analysis would tend to favor automotive seats and share being the farthest to the right of all products. automotive exports in general over traditional However, global import values from 2011-2015 furniture exports. This is yet another product have not experience robust growth as may be seen REVEALED COMPETITIVENESS fruits, nuts, oilseeds and vegetable oil, cereals and category confirming the attractiveness of products from its position only halfway up on the lateral "X" beverages and spirits, sugar and dairy. However, in ANALYSIS (RCA) related to the automotive cluster, supply chain and axis. Finally, the yellow color means that it has been the upper left quadrant one notes a number of cluster and therefore deserves close consideration. losing rather than gaining global market share lately The team secured data and illustrations from the manufactures that while not having a greater share This is one of Moldova's emerging export champions. as is understandable given the difficulties experienced United Nations International Trade Centre based of global exports than the average Moldovan in exporting to the former Soviet Union in recent in Geneva (ITC). For some years, the ITC has exports are either large (apparel and textiles) or Exhibit 13 shows that exports related to years. As wine is already an industry being assisted placed trade data from all countries into a system gaining global market share (electrical and electronic specialized machinery involving heat exchange by the project it will not be analyzed further. And that analyzes revealed competitiveness by showing equipment and furniture). Note that this exhibit is and pumps seem to be competitive. Many of the while distilled spirits, such as cognac and others, the size of a country's exports, whether it is gaining at the aggregate or "2-digit" level in the international products shown involve capabilities that can be might be increasing in global market share, it is not or losing global market share and whether it is in a trade categories and is quite aggregated. To understand grouped under the category of "precision engineering" an industry that would be considered for assistance growing or declining industry in terms of global this better, one has to go to the 4-digit level in requiring more than simple fabrication. Precision by the project and USAID. trade. Some four of these charts are found in Exhibits 11, 12 and 13. Exhibits 10-13. Moldova has about .012% of global Exhibit 11 shows that exports of insulated wire exports, or about one-eighth of one percent of the and cable are the clear competitive winner global market. Therefore, products which have a among electrical and electronic exports. At the greater share than this in global markets are said to 4-digit product category level, one can clearly see be relatively more competitive than Moldova's that this product category is what drive's recent other exports that have less than this and are to improvements in global market share in category the right of center in those charts. Products that 84, electrical and electronic equipment. This are in the upper half of the graph represent industries product is related to the automotive industry being and products that are growing in world trade while a component produced in Moldova. As one can see those in the lower half are declining. Therefore, in the illustration, this export category has been those industries and products in the upper right growing in world trade at about 2% a year. It is by hand corner are attractive representing Moldova's far the largest export category for Moldova in this growing competiveness in presumably attractive overall trade category. And Moldova's market share higher-growth market segments. The color blue in global trade is superior to its average participation means that Moldova's market share is growing in world trade. This is clearly a competitive product while the color yellow means it is declining. The and is improving in its performance. It deserves to size of the circle represents the value of the be considered as a competitive industry, perhaps exports with larger circles meaning larger export with other automotive component products. values. Exhibit 12 shows that automotive seats in the Exhibit 107 shows that Moldova's competitive 9401 category are a truly competitive export exports tend to be agriculture related including category where Moldova is also improving. The wine but apparel, furniture and electric/ large blue circle representing this category is the electronic equipment are rising. These are only product in the attractive upper right quadrant grouped in the upper right quadrant and include of Exhibit 12. While the code itself gives the

FURNITURE below. There are about 400 furniture companies in opening the way to collaboration. TUM is very can keep alive a higher set of skills, it can help keep CAN "CREATIVE INDUSTRIES" If one defines an industry not by its products but by the industry and they produce for the domestic as open to working closely with the industry as well. talent from migrating and provide above average its core capabilities, it becomes clear that "creative This sector was assisted by the USAID’s CEED II well as foreign markets. Companies understand One can see the possibility of adding value by jobs. Numerous businesses in Moldova emphasize BE CONSIDERED AS A TRUE industries" can be considered a legitimate industry program, which was a predecessor to the MCP that export growth can only be achieved if they helping the industry identify even higher value high value, high quality specialty design and manufacture INDUSTRY CLUSTER? cluster. Creative industries in Moldova do self-identify. project. CEED II supported the sector from 2011 focus on selling to high value European markets. added market segments and other products beyond of precision-engineered tools, components and Those we met do think of themselves as being a to 2013. Assistance was mainly focused on creating One of the largest furniture producers in Moldova those being targeted at the moment. As the industry equipment. Unlike wine or apparel, one can argue that "Creative part of creative industries. They would like to work innovative joint marketing opportunities, developing has started increasing its exports from 5% in 2008 Industries" are not really an industry at all but a together. And there are some commonalities conglomeration of very different kinds of companies stronger brand recognition and business strategies to 50% in 2015. Not all services involving mental value added can be captured in the definition above. There is usually DEFINITION AND and self-employed people. But other industries are for Moldovan firms, raising industry cooperation, of Moldovans. The sector lends itself well to considered part of the creative industries cluster. something unique. The work may involve a computer The team visited and interviewed representatives of examined the issue of industry "self-selection" or the Starting wages in the sector are about 3000MDL CREATIVE SERVICES a collection of quite diverse firms. For example, the and expanding domestic market presence. It also entrepreneurship. While data is lacking on salaries DESCRIPTION Creativity is not absolutely required in all knowledge but computers cannot do the work. Creative work the five leading industries found to be competitive and extent to which the industry leaders interviewed (about $150/month) and can go as high as tourism industry is also a conglomeration of very included a revitalization of the Association of INDUSTRIES or value added for such a disparate sector, work. For example, lawyers may indeed need to be is hard to outsource to computers. that could be chosen for further assistance. The demonstrated the desire to come together, whether Furniture Producers, and setting up the first 15,000MDL. Some of the larger enterprises that different kinds of companies from capital intensive Creative services includes many different specific lifestyle-wise young people are drawn to creative Creative services can be defined as providers creative from time to time, but law firms mainly team first and foremost focused on whether MCP they would sign a Memo of Understanding (MoU) common furniture shopping center – Mobimall. are producing furniture in large volumes, such as air carriers to family-owned restaurants to individual categories that are not always caught in the statistical services. of services involving higher order functions involve the standard application of norms and could actually do helpful things for the industry in and contribute in time and co-investment with the The latter was managed through joint partnership Ambianta, are capital intensive and their productivity tour guides. data as they include many relatively small specialty of the mind that produce tangible economic guidelines and following of logical procedures. The question. We focused on whether there were any project to further the competitiveness of their between an investor and the association – and is relatively higher than the smaller firms that do MCP already has experience with the industry via areas. Nonetheless, architecture and engineering value-added through conceptual, logical, same is true for accounting despite the frequent special considerations involved apart from the industry. improved design and branding. With a 2 million not use too many machines and are labor intensive. its work with other sectors. One of the aspects services alone generated $25M in service exports. communication and artistic skills involving use of the term "creative accounting". However, more quantitative analysis shown above. We also Euro private investment, Mobimall was launched in The later straggle to find and retain employees and that most recommends the focus on this industry is producers need attractive labels and good marketing, Both the architecture/engineering category and creativity. CSI includes a diversity and even architectural companies can be considered firms a IMPORTANCE OF CREATIVE August 2013, highlighting more than 20 brands and come up with nontraditional approaches such as how 12 representatives of the industry came advertising and communications strategies. Artists advertising have reported growth of 11% annually disparity of kinds of companies. Some are creative industry because they involve creative INDUSTRIES placing 3,000 furniture and home products on sale hiring couples to produce furniture. together in MCP headquarters, highly motivated to and designers also contribute to the country over the last 4 years. Architecture and engineering artistic and visual such as design. Others are interpretation and design features. There can be in 15,000 square meters of retail space; a milestone work together, sign an MoU, be mutually supportive Export of services can provide high value added. "brand" internationally. Creative industries provide actually do for them that they cannot do for While the sector has been growing at a modest 4% generated 739 additional jobs while advertising methodical rather than inspirational such as many semantic differences over what falls into or AUTOMOTIVE PARTS in the development of Moldova’s home furnishing and move forward. A subset of these returned for Exporting what one does with the mind often has potential for value added jobs and entrepreneurial themselves. These companies know their markets. per year8 industry has been shedding jobs and now created 609 new jobs. Many of these creative architecture. Some are visual such as animation. out of creative industries. The point is not to get sector. another strategy and working session and the team higher value-added than what one exports with opportunities that can potentially produce higher This industry is among the fastest growing export They are able to train employees in their own services are under the radar. One firm in our focus Still others such as advertising agencies and too hung up on definitions but rather to recognize has under 5,000 total people formally employed identified one helpful initiative of creating a ones hands. The creative industries can also add incomes than current benchmarks for "good jobs" category that was also generating employment. company techniques. By definition they have found group is exporting animation services and growing communications involve creativity in the that there is such a thing as "creative industries" Currently, the Association is no longer managing although this does not include informal employment. common website where international buyers could value and enhance competitiveness of all other in Moldova. Recent investment has also been in various regions the business environment to be relatively conducive. rapidly. realm of words. and they have commonalities. the center. Iurie Bors, a private furniture manufacturer There are a number of modest sized firms and find at one gateway portal a variety of creative Moldovan industries. For example, Moldovan wine of Moldova and not just in Chisinau. Furthermore, The green corridor arrangement for speedy firms seemed relatively interested in assistance. who made the initial investment in the Mobimall, As in the case of precision industries, the team and industry services, find companies and click on their in the automotive seat category it can generate transport across borders seems to be working MCP could facilitate market linkages, provide has enlarged the space and directly manages it. our Moldovan counterparts identified multiple products and services. This industry would also employment for women who have relevant textile, well. The industry does not need to be organized technical support on market linkages and help subsectors in this category. They include advertising, contributes to the competitiveness of other courses, and visit companies and even work and apparel skills that can be potentially transferable. into a cluster where the project could be of use as Moldovan furniture exports are a very respectable facilitate industry-wide coalescence and action. EXAMPLES OF CREATIVE We believe it should be included on the list as MARKET TREND ANALYSIS: marketing, architecture, animation, design, multimedia, industries through its capabilities in design, marketing, bring back ideas and customers. Moldovan industries Insulated cables are also an area where Moldova a catalyst, coach or provider of technical assistance. US101M and the industry has 4,954 employees. However, the industry already received assistance information technology and software development artistic productions and others. There tend to be branding, advertising and social media promotion. INDUSTRIES IN MOLDOVA FAVORABLE TRENDS IN THE such as wine, apparel and tourism face the has been doing well. Proximity to Europe and the So while the industry is quite attractive, we did not Turnover is 1380M MDL so turnover per employee under the CEED project. And the relatively low is very tied up with the creation of new "apps" and many smaller firms at work, opening the way for A creative services industry could also help announce GLOBAL AND REGIONAL challenge of "selling West" and integrating into the relatively high wages for workers (higher than conclude it should be among the one or two is relatively low at about 278,000 MDL per employee wage levels and uncertain prospects for employment The following is a list which is illustrative but not is therefore a creative service. As noted earlier, apparel for example), makes it an excellent candidate industries to receive priority attention. That being technical assistance to be well received. This focus the re-branding or re-imaging of Moldova for global creative services may also be a part of other ECONOMIC CONTEXT EU regional and global economy and this requires as compared to 484,000 MDL per employee in the resulted in this not being chosen as one of the top buyers, global investors and Moldovan young people exhaustive of creative industries and professions in communication and creative skills. Globally, the for selection. The automotive supply chain cluster said, we did recommend the possibility of a workforce precision engineering industry as will be seen dovetails nicely with the expertise of TUM and the Moldova. Information technology could also be on industries such as the fashion component of apparel two industries. who will decide whether to remain in Moldova to Globally, the proportion of GDP is shifting to services sector is growing as a percentage of GDP is emerging as a new export champion for Moldova. development initiative under which donor funding new facilities designed to encourage creative this list although to some extent it is already a production or the branding, labeling, marketing and work. Jobs in creative services could be quite appealing services. While agriculture and manufacturing as mechanization increases in both agriculture and However, this sector is also characterized by a might entice further FDI in this industry by offering industries such as Zip House fashion accelerator, focus of MCP and three is a debate about whether advertising of wine. relatively concentrated set of foreign investors such financial incentives for workforce training so that Tekwill technology center and Atelier 99 makers to young people who might otherwise emigrate. And it continue to grow in value, most countries as they manufacturing. Creative industries represent an (TUM) is a notable example. These skills are now software programming is a creative service. as Draexlmaier. Interviews with the industry this industry does not bump up against the PRECISION ENGINEERING space. This industry is open to potential unending is open equally to women as well as men as evidenced become more developed have over half the economy important component of the services sector and being used to produce a large variety of products showed that they seem to have things under constraints of trained personnel. growth limited only by the creativity and dynamism by the gender balance in the focus group. in the service industry. This trend will likely continue. therefore represent the future of the economy. The team made an important insight in the process with various product classifications often related to control. It is unclear what the project could Economic stagnation in Europe is putting pressure Services are also being taken over by machines are of examining products and industries. As we electrical equipment, electronic equipment, pumps on EU companies which are looking for opportunities increasingly taking over human services and the understood the nature of many of the export and others. With US$58M in sales and 5,000–6,000 ■ Information technology (aspects) ■ Graphic arts and design including stills and visual employment and turnover per employee yielded a to outsource. Most Moldovans have Romania interface with consumers. products, it became clear that one could define the employees, the precision and related industries SUMMARY ON INDUSTRY ■ Industrial Design ■ App design, creation and invention what the project could really do to assist in boosting short list of five attractive industries. The most passports allowing them to travel in the EU, take BEVERAGES - SOFT DRINKS industry not just by the product but also by the have a very high turnover per employee ratio. ■ Graphical Design ■ Website design its competitiveness. The bottlers seem to be SELECTION attractive is auto parts in the supply chain but this capabilities involved. Moldova has a talent base and However, the industry has struggled to grow its ■ Architecture and Design ■ Social media advisors Soft drinks was chosen because of its modest competitive on their own as they invest in machinery will likely do well without the need for project critical mass of capability in precision engineering. exports recently indicating a transition to competi- The team recommended a focus on the precision ■ Interior Decorating ■ Conference planners and event managers survey and focus group. Of these 10 were for-profit growth in exports and high overall sales growth at and improve their productivity without generating assistance as it is managed by competent foreign CURRENT SITUATION This was an asset historically when Moldova was tive products that could be helped by project engineering industry and the creative services ■ Computer animation (including those now exporting ■ Corporate executive coaches and trainers of groups companies and 2 were social enterprises that over 11% along with very high value in turnover lots of jobs for the time being. With only about firms. The soft drink industry also seems concentrated part of the Soviet Union and exported products for technical assistance. The firms interviewed seemed industry. After analyzing over 50 industry/product to Russia) ■ Visual artists There are no good statistics on the number of generate jobs and revenues but no retained earnings. per employees at 668,000 MDL making it seemingly 3,000 employees and no recent growth in employment, and run by competent bottlers, with less need for the Soviet defense industry. The industry shifted very open to the idea of coming together and categories, the team applied a series of quantitative ■ In-studio video production including commercials ■ Youth Training for students such as Rocket Academy people earning a living in creative industries. The The firms surveyed were relatively recent and time attractive. On closer analysis, the industry is very it was decided not to select this industry. project help and only modest prospects for growth and the products were understandably no longer working with the project on repositioning itself in criteria to pinpoint the five most attractive ■ Full service advertising from strategy to production - a two week course JAA team assembled a group of 12 people from 11 in business ranged from a low of 3 years to a high concentrated and capital intensive and it is unclear in exports and employment despite robust increases sold. But many of the capabilities remained, including global markets. The firms also have a variety of export-oriented industries other than agriculturally- ■ Marketing, advertising and strategic communications ■ Computer Graphics (CG) creative industry companies for a brief informal of 12 years. in sales. The furniture industry seems less dynamic the universities that trained people with these products and do not always compete with each related industries or industries already being ■ Cultural events and cultural productions ■ Fashion and clothing design and received earlier assistance. capabilities. The Technical University of Moldova other with the same strategies and products, assisted by the project. The analytic process using ■ Film-making ■ Entertainment both the size and recent growth in exports, sales, ■ PR - research to implementation, based on data as ■ Music composing, arranging and performance well as creativity ■ Landscaping and beautification of public spaces 27 example of barber chair seats, automotive seats fall engineering capabilities, relevant to Moldova's historic under this category and this is what is driving the exports in years past, are still relevant to a variety of positive Moldovan performance. This shows that product categories and should be considered for Moldovan exports have been gaining market share. assistance. Moreover, imports grew at an average of 5% per year from 2011-2015 despite these being lackluster Exhibit 14 shows that wine is by far the largest growth years for growth in global imports. The size export but global growth has been modest and of exports is by far the largest in this overall Moldova has not increased market share. Wine, product category. On the left side, furniture fermented beverages and distilled spirits are in the exports have not been growing, do not have above attractive upper right quadrant. But wine is the average global market share and have experienced largest export by value as shown by the size of the more modest global growth at around 3%. This circle. It also has the largest relative global market analysis would tend to favor automotive seats and share being the farthest to the right of all products. automotive exports in general over traditional However, global import values from 2011-2015 furniture exports. This is yet another product have not experience robust growth as may be seen REVEALED COMPETITIVENESS fruits, nuts, oilseeds and vegetable oil, cereals and category confirming the attractiveness of products from its position only halfway up on the lateral "X" beverages and spirits, sugar and dairy. However, in ANALYSIS (RCA) related to the automotive cluster, supply chain and axis. Finally, the yellow color means that it has been the upper left quadrant one notes a number of cluster and therefore deserves close consideration. losing rather than gaining global market share lately The team secured data and illustrations from the manufactures that while not having a greater share This is one of Moldova's emerging export champions. as is understandable given the difficulties experienced United Nations International Trade Centre based of global exports than the average Moldovan in exporting to the former Soviet Union in recent in Geneva (ITC). For some years, the ITC has exports are either large (apparel and textiles) or Exhibit 13 shows that exports related to years. As wine is already an industry being assisted placed trade data from all countries into a system gaining global market share (electrical and electronic specialized machinery involving heat exchange by the project it will not be analyzed further. And that analyzes revealed competitiveness by showing equipment and furniture). Note that this exhibit is and pumps seem to be competitive. Many of the while distilled spirits, such as cognac and others, the size of a country's exports, whether it is gaining at the aggregate or "2-digit" level in the international products shown involve capabilities that can be might be increasing in global market share, it is not or losing global market share and whether it is in a trade categories and is quite aggregated. To understand grouped under the category of "precision engineering" an industry that would be considered for assistance growing or declining industry in terms of global this better, one has to go to the 4-digit level in requiring more than simple fabrication. Precision by the project and USAID. trade. Some four of these charts are found in Exhibits 11, 12 and 13. Exhibits 10-13. Moldova has about .012% of global Exhibit 11 shows that exports of insulated wire exports, or about one-eighth of one percent of the and cable are the clear competitive winner global market. Therefore, products which have a among electrical and electronic exports. At the greater share than this in global markets are said to 4-digit product category level, one can clearly see be relatively more competitive than Moldova's that this product category is what drive's recent other exports that have less than this and are to improvements in global market share in category the right of center in those charts. Products that 84, electrical and electronic equipment. This are in the upper half of the graph represent industries product is related to the automotive industry being and products that are growing in world trade while a component produced in Moldova. As one can see those in the lower half are declining. Therefore, in the illustration, this export category has been those industries and products in the upper right growing in world trade at about 2% a year. It is by hand corner are attractive representing Moldova's far the largest export category for Moldova in this growing competiveness in presumably attractive overall trade category. And Moldova's market share higher-growth market segments. The color blue in global trade is superior to its average participation means that Moldova's market share is growing in world trade. This is clearly a competitive product while the color yellow means it is declining. The and is improving in its performance. It deserves to size of the circle represents the value of the be considered as a competitive industry, perhaps exports with larger circles meaning larger export with other automotive component products. values. Exhibit 12 shows that automotive seats in the Exhibit 107 shows that Moldova's competitive 9401 category are a truly competitive export exports tend to be agriculture related including category where Moldova is also improving. The wine but apparel, furniture and electric/ large blue circle representing this category is the electronic equipment are rising. These are only product in the attractive upper right quadrant grouped in the upper right quadrant and include of Exhibit 12. While the code itself gives the

FURNITURE below. There are about 400 furniture companies in opening the way to collaboration. TUM is very can keep alive a higher set of skills, it can help keep CAN "CREATIVE INDUSTRIES" If one defines an industry not by its products but by the industry and they produce for the domestic as open to working closely with the industry as well. talent from migrating and provide above average its core capabilities, it becomes clear that "creative This sector was assisted by the USAID’s CEED II well as foreign markets. Companies understand One can see the possibility of adding value by jobs. Numerous businesses in Moldova emphasize V. CREATIVE SERVICES BE CONSIDERED AS A TRUE industries" can be considered a legitimate industry program, which was a predecessor to the MCP that export growth can only be achieved if they helping the industry identify even higher value high value, high quality specialty design and manufacture INDUSTRY CLUSTER? cluster. Creative industries in Moldova do self-identify. project. CEED II supported the sector from 2011 focus on selling to high value European markets. added market segments and other products beyond of precision-engineered tools, components and INDUSTRY (CSI) Those we met do think of themselves as being a to 2013. Assistance was mainly focused on creating One of the largest furniture producers in Moldova those being targeted at the moment. As the industry equipment. Unlike wine or apparel, one can argue that "Creative part of creative industries. They would like to work innovative joint marketing opportunities, developing has started increasing its exports from 5% in 2008 Competitiveness Assessment for Moldovan Creative Services Industry Cluster Industries" are not really an industry at all but a together. And there are some commonalities conglomeration of very different kinds of companies stronger brand recognition and business strategies to 50% in 2015. Not all services involving mental value added can be captured in the definition above. There is usually DEFINITION AND and self-employed people. But other industries are for Moldovan firms, raising industry cooperation, of Moldovans. The sector lends itself well to considered part of the creative industries cluster. something unique. The work may involve a computer The team visited and interviewed representatives of examined the issue of industry "self-selection" or the Starting wages in the sector are about 3000MDL CREATIVE SERVICES a collection of quite diverse firms. For example, the and expanding domestic market presence. It also entrepreneurship. While data is lacking on salaries DESCRIPTION Creativity is not absolutely required in all knowledge but computers cannot do the work. Creative work the five leading industries found to be competitive and extent to which the industry leaders interviewed (about $150/month) and can go as high as tourism industry is also a conglomeration of very included a revitalization of the Association of INDUSTRIES or value added for such a disparate sector, work. For example, lawyers may indeed need to be is hard to outsource to computers. that could be chosen for further assistance. The demonstrated the desire to come together, whether Furniture Producers, and setting up the first 15,000MDL. Some of the larger enterprises that different kinds of companies from capital intensive Creative services includes many different specific lifestyle-wise young people are drawn to creative Creative services can be defined as providers creative from time to time, but law firms mainly team first and foremost focused on whether MCP they would sign a Memo of Understanding (MoU) common furniture shopping center – Mobimall. are producing furniture in large volumes, such as air carriers to family-owned restaurants to individual categories that are not always caught in the statistical services. of services involving higher order functions involve the standard application of norms and could actually do helpful things for the industry in and contribute in time and co-investment with the The latter was managed through joint partnership Ambianta, are capital intensive and their productivity tour guides. data as they include many relatively small specialty of the mind that produce tangible economic guidelines and following of logical procedures. The question. We focused on whether there were any project to further the competitiveness of their between an investor and the association – and is relatively higher than the smaller firms that do MCP already has experience with the industry via areas. Nonetheless, architecture and engineering value-added through conceptual, logical, same is true for accounting despite the frequent special considerations involved apart from the industry. improved design and branding. With a 2 million not use too many machines and are labor intensive. its work with other sectors. One of the aspects services alone generated $25M in service exports. communication and artistic skills involving use of the term "creative accounting". However, more quantitative analysis shown above. We also Euro private investment, Mobimall was launched in The later straggle to find and retain employees and that most recommends the focus on this industry is producers need attractive labels and good marketing, Both the architecture/engineering category and creativity. CSI includes a diversity and even architectural companies can be considered firms a IMPORTANCE OF CREATIVE August 2013, highlighting more than 20 brands and come up with nontraditional approaches such as how 12 representatives of the industry came advertising and communications strategies. Artists advertising have reported growth of 11% annually disparity of kinds of companies. Some are creative industry because they involve creative INDUSTRIES placing 3,000 furniture and home products on sale hiring couples to produce furniture. together in MCP headquarters, highly motivated to and designers also contribute to the country over the last 4 years. Architecture and engineering artistic and visual such as design. Others are interpretation and design features. There can be in 15,000 square meters of retail space; a milestone work together, sign an MoU, be mutually supportive Export of services can provide high value added. "brand" internationally. Creative industries provide actually do for them that they cannot do for While the sector has been growing at a modest 4% generated 739 additional jobs while advertising methodical rather than inspirational such as many semantic differences over what falls into or AUTOMOTIVE PARTS in the development of Moldova’s home furnishing and move forward. A subset of these returned for Exporting what one does with the mind often has potential for value added jobs and entrepreneurial themselves. These companies know their markets. per year8 industry has been shedding jobs and now created 609 new jobs. Many of these creative architecture. Some are visual such as animation. out of creative industries. The point is not to get sector. another strategy and working session and the team higher value-added than what one exports with opportunities that can potentially produce higher This industry is among the fastest growing export They are able to train employees in their own services are under the radar. One firm in our focus Still others such as advertising agencies and too hung up on definitions but rather to recognize has under 5,000 total people formally employed identified one helpful initiative of creating a ones hands. The creative industries can also add incomes than current benchmarks for "good jobs" category that was also generating employment. company techniques. By definition they have found group is exporting animation services and growing communications involve creativity in the that there is such a thing as "creative industries" Currently, the Association is no longer managing although this does not include informal employment. common website where international buyers could value and enhance competitiveness of all other in Moldova. Recent investment has also been in various regions the business environment to be relatively conducive. rapidly. realm of words. and they have commonalities. the center. Iurie Bors, a private furniture manufacturer There are a number of modest sized firms and find at one gateway portal a variety of creative Moldovan industries. For example, Moldovan wine of Moldova and not just in Chisinau. Furthermore, The green corridor arrangement for speedy firms seemed relatively interested in assistance. who made the initial investment in the Mobimall, As in the case of precision industries, the team and industry services, find companies and click on their in the automotive seat category it can generate transport across borders seems to be working MCP could facilitate market linkages, provide has enlarged the space and directly manages it. our Moldovan counterparts identified multiple products and services. This industry would also employment for women who have relevant textile, well. The industry does not need to be organized technical support on market linkages and help subsectors in this category. They include advertising, contributes to the competitiveness of other courses, and visit companies and even work and apparel skills that can be potentially transferable. into a cluster where the project could be of use as Moldovan furniture exports are a very respectable facilitate industry-wide coalescence and action. EXAMPLES OF CREATIVE We believe it should be included on the list as MARKET TREND ANALYSIS: marketing, architecture, animation, design, multimedia, industries through its capabilities in design, marketing, bring back ideas and customers. Moldovan industries Insulated cables are also an area where Moldova a catalyst, coach or provider of technical assistance. US101M and the industry has 4,954 employees. However, the industry already received assistance information technology and software development artistic productions and others. There tend to be branding, advertising and social media promotion. INDUSTRIES IN MOLDOVA FAVORABLE TRENDS IN THE such as wine, apparel and tourism face the has been doing well. Proximity to Europe and the So while the industry is quite attractive, we did not Turnover is 1380M MDL so turnover per employee under the CEED project. And the relatively low is very tied up with the creation of new "apps" and many smaller firms at work, opening the way for A creative services industry could also help announce GLOBAL AND REGIONAL challenge of "selling West" and integrating into the relatively high wages for workers (higher than conclude it should be among the one or two is relatively low at about 278,000 MDL per employee wage levels and uncertain prospects for employment The following is a list which is illustrative but not is therefore a creative service. As noted earlier, apparel for example), makes it an excellent candidate industries to receive priority attention. That being technical assistance to be well received. This focus the re-branding or re-imaging of Moldova for global creative services may also be a part of other ECONOMIC CONTEXT EU regional and global economy and this requires as compared to 484,000 MDL per employee in the resulted in this not being chosen as one of the top buyers, global investors and Moldovan young people exhaustive of creative industries and professions in communication and creative skills. Globally, the for selection. The automotive supply chain cluster said, we did recommend the possibility of a workforce precision engineering industry as will be seen dovetails nicely with the expertise of TUM and the Moldova. Information technology could also be on industries such as the fashion component of apparel two industries. who will decide whether to remain in Moldova to Globally, the proportion of GDP is shifting to services sector is growing as a percentage of GDP is emerging as a new export champion for Moldova. development initiative under which donor funding new facilities designed to encourage creative this list although to some extent it is already a production or the branding, labeling, marketing and work. Jobs in creative services could be quite appealing services. While agriculture and manufacturing as mechanization increases in both agriculture and However, this sector is also characterized by a might entice further FDI in this industry by offering industries such as Zip House fashion accelerator, focus of MCP and three is a debate about whether advertising of wine. relatively concentrated set of foreign investors such financial incentives for workforce training so that Tekwill technology center and Atelier 99 makers to young people who might otherwise emigrate. And it continue to grow in value, most countries as they manufacturing. Creative industries represent an (TUM) is a notable example. These skills are now software programming is a creative service. as Draexlmaier. Interviews with the industry this industry does not bump up against the PRECISION ENGINEERING space. This industry is open to potential unending is open equally to women as well as men as evidenced become more developed have over half the economy important component of the services sector and being used to produce a large variety of products showed that they seem to have things under constraints of trained personnel. growth limited only by the creativity and dynamism by the gender balance in the focus group. But apart from the creative services that may in part form part of other Moldovan industries, in the service industry. This trend will likely continue. therefore represent the future of the economy. The team made an important insight in the process with various product classifications often related to control. It is unclear what the project could creative services can be said to include: Economic stagnation in Europe is putting pressure Services are also being taken over by machines are of examining products and industries. As we electrical equipment, electronic equipment, pumps on EU companies which are looking for opportunities increasingly taking over human services and the understood the nature of many of the export and others. With US$58M in sales and 5,000–6,000 ■ Information technology (aspects) ■ Graphic arts and design including stills and visual employment and turnover per employee yielded a to outsource. Most Moldovans have Romania interface with consumers. products, it became clear that one could define the employees, the precision and related industries ■ Industrial Design ■ App design, creation and invention what the project could really do to assist in boosting short list of five attractive industries. The most passports allowing them to travel in the EU, take BEVERAGES - SOFT DRINKS industry not just by the product but also by the have a very high turnover per employee ratio. ■ Graphical Design ■ Website design its competitiveness. The bottlers seem to be attractive is auto parts in the supply chain but this capabilities involved. Moldova has a talent base and However, the industry has struggled to grow its ■ Architecture and Design ■ Social media advisors Soft drinks was chosen because of its modest competitive on their own as they invest in machinery will likely do well without the need for project critical mass of capability in precision engineering. exports recently indicating a transition to competi- ■ Interior Decorating ■ Conference planners and event managers survey and focus group. Of these 10 were for-profit growth in exports and high overall sales growth at and improve their productivity without generating assistance as it is managed by competent foreign CURRENT SITUATION This was an asset historically when Moldova was tive products that could be helped by project ■ Computer animation (including those now exporting ■ Corporate executive coaches and trainers of groups companies and 2 were social enterprises that over 11% along with very high value in turnover lots of jobs for the time being. With only about firms. The soft drink industry also seems concentrated part of the Soviet Union and exported products for technical assistance. The firms interviewed seemed to Russia) ■ Visual artists There are no good statistics on the number of generate jobs and revenues but no retained earnings. per employees at 668,000 MDL making it seemingly 3,000 employees and no recent growth in employment, and run by competent bottlers, with less need for the Soviet defense industry. The industry shifted very open to the idea of coming together and ■ In-studio video production including commercials ■ Youth Training for students such as Rocket Academy people earning a living in creative industries. The The firms surveyed were relatively recent and time attractive. On closer analysis, the industry is very it was decided not to select this industry. project help and only modest prospects for growth and the products were understandably no longer working with the project on repositioning itself in ■ Full service advertising from strategy to production - a two week course JAA team assembled a group of 12 people from 11 in business ranged from a low of 3 years to a high concentrated and capital intensive and it is unclear in exports and employment despite robust increases sold. But many of the capabilities remained, including global markets. The firms also have a variety of ■ Marketing, advertising and strategic communications ■ Computer Graphics (CG) creative industry companies for a brief informal of 12 years. in sales. The furniture industry seems less dynamic the universities that trained people with these products and do not always compete with each ■ Cultural events and cultural productions ■ Fashion and clothing design and received earlier assistance. capabilities. The Technical University of Moldova other with the same strategies and products, ■ Film-making ■ Entertainment ■ PR - research to implementation, based on data as ■ Music composing, arranging and performance well as creativity ■ Landscaping and beautification of public spaces 628 example of barber chair seats, automotive seats fall engineering capabilities, relevant to Moldova's historic under this category and this is what is driving the exports in years past, are still relevant to a variety of positive Moldovan performance. This shows that product categories and should be considered for Moldovan exports have been gaining market share. assistance. Moreover, imports grew at an average of 5% per year from 2011-2015 despite these being lackluster Exhibit 14 shows that wine is by far the largest growth years for growth in global imports. The size export but global growth has been modest and of exports is by far the largest in this overall Moldova has not increased market share. Wine, product category. On the left side, furniture fermented beverages and distilled spirits are in the exports have not been growing, do not have above attractive upper right quadrant. But wine is the average global market share and have experienced largest export by value as shown by the size of the more modest global growth at around 3%. This circle. It also has the largest relative global market analysis would tend to favor automotive seats and share being the farthest to the right of all products. automotive exports in general over traditional However, global import values from 2011-2015 furniture exports. This is yet another product have not experience robust growth as may be seen REVEALED COMPETITIVENESS fruits, nuts, oilseeds and vegetable oil, cereals and category confirming the attractiveness of products from its position only halfway up on the lateral "X" beverages and spirits, sugar and dairy. However, in ANALYSIS (RCA) related to the automotive cluster, supply chain and axis. Finally, the yellow color means that it has been the upper left quadrant one notes a number of cluster and therefore deserves close consideration. losing rather than gaining global market share lately The team secured data and illustrations from the manufactures that while not having a greater share This is one of Moldova's emerging export champions. as is understandable given the difficulties experienced United Nations International Trade Centre based of global exports than the average Moldovan in exporting to the former Soviet Union in recent in Geneva (ITC). For some years, the ITC has exports are either large (apparel and textiles) or Exhibit 13 shows that exports related to years. As wine is already an industry being assisted placed trade data from all countries into a system gaining global market share (electrical and electronic specialized machinery involving heat exchange by the project it will not be analyzed further. And that analyzes revealed competitiveness by showing equipment and furniture). Note that this exhibit is and pumps seem to be competitive. Many of the while distilled spirits, such as cognac and others, the size of a country's exports, whether it is gaining at the aggregate or "2-digit" level in the international products shown involve capabilities that can be might be increasing in global market share, it is not or losing global market share and whether it is in a trade categories and is quite aggregated. To understand grouped under the category of "precision engineering" an industry that would be considered for assistance growing or declining industry in terms of global this better, one has to go to the 4-digit level in requiring more than simple fabrication. Precision by the project and USAID. trade. Some four of these charts are found in Exhibits 11, 12 and 13. Exhibits 10-13. Moldova has about .012% of global Exhibit 11 shows that exports of insulated wire exports, or about one-eighth of one percent of the and cable are the clear competitive winner global market. Therefore, products which have a among electrical and electronic exports. At the greater share than this in global markets are said to 4-digit product category level, one can clearly see be relatively more competitive than Moldova's that this product category is what drive's recent other exports that have less than this and are to improvements in global market share in category the right of center in those charts. Products that 84, electrical and electronic equipment. This are in the upper half of the graph represent industries product is related to the automotive industry being and products that are growing in world trade while a component produced in Moldova. As one can see those in the lower half are declining. Therefore, in the illustration, this export category has been those industries and products in the upper right growing in world trade at about 2% a year. It is by hand corner are attractive representing Moldova's far the largest export category for Moldova in this growing competiveness in presumably attractive overall trade category. And Moldova's market share higher-growth market segments. The color blue in global trade is superior to its average participation means that Moldova's market share is growing in world trade. This is clearly a competitive product while the color yellow means it is declining. The and is improving in its performance. It deserves to size of the circle represents the value of the be considered as a competitive industry, perhaps exports with larger circles meaning larger export with other automotive component products. values. Exhibit 12 shows that automotive seats in the Exhibit 107 shows that Moldova's competitive 9401 category are a truly competitive export exports tend to be agriculture related including category where Moldova is also improving. The wine but apparel, furniture and electric/ large blue circle representing this category is the electronic equipment are rising. These are only product in the attractive upper right quadrant grouped in the upper right quadrant and include of Exhibit 12. While the code itself gives the

FURNITURE below. There are about 400 furniture companies in opening the way to collaboration. TUM is very can keep alive a higher set of skills, it can help keep CAN "CREATIVE INDUSTRIES" If one defines an industry not by its products but by the industry and they produce for the domestic as open to working closely with the industry as well. talent from migrating and provide above average its core capabilities, it becomes clear that "creative This sector was assisted by the USAID’s CEED II well as foreign markets. Companies understand One can see the possibility of adding value by jobs. Numerous businesses in Moldova emphasize BE CONSIDERED AS A TRUE industries" can be considered a legitimate industry program, which was a predecessor to the MCP that export growth can only be achieved if they helping the industry identify even higher value high value, high quality specialty design and manufacture INDUSTRY CLUSTER? cluster. Creative industries in Moldova do self-identify. project. CEED II supported the sector from 2011 focus on selling to high value European markets. added market segments and other products beyond of precision-engineered tools, components and Those we met do think of themselves as being a to 2013. Assistance was mainly focused on creating One of the largest furniture producers in Moldova those being targeted at the moment. As the industry equipment. Unlike wine or apparel, one can argue that "Creative part of creative industries. They would like to work innovative joint marketing opportunities, developing has started increasing its exports from 5% in 2008 Industries" are not really an industry at all but a together. And there are some commonalities conglomeration of very different kinds of companies stronger brand recognition and business strategies to 50% in 2015. Not all services involving mental value added can be captured in the definition above. There is usually DEFINITION AND and self-employed people. But other industries are for Moldovan firms, raising industry cooperation, of Moldovans. The sector lends itself well to considered part of the creative industries cluster. something unique. The work may involve a computer The team visited and interviewed representatives of examined the issue of industry "self-selection" or the Starting wages in the sector are about 3000MDL CREATIVE SERVICES a collection of quite diverse firms. For example, the and expanding domestic market presence. It also entrepreneurship. While data is lacking on salaries DESCRIPTION Creativity is not absolutely required in all knowledge but computers cannot do the work. Creative work the five leading industries found to be competitive and extent to which the industry leaders interviewed (about $150/month) and can go as high as tourism industry is also a conglomeration of very included a revitalization of the Association of INDUSTRIES or value added for such a disparate sector, work. For example, lawyers may indeed need to be is hard to outsource to computers. that could be chosen for further assistance. The demonstrated the desire to come together, whether Furniture Producers, and setting up the first 15,000MDL. Some of the larger enterprises that different kinds of companies from capital intensive Creative services includes many different specific lifestyle-wise young people are drawn to creative Creative services can be defined as providers creative from time to time, but law firms mainly team first and foremost focused on whether MCP they would sign a Memo of Understanding (MoU) common furniture shopping center – Mobimall. are producing furniture in large volumes, such as air carriers to family-owned restaurants to individual categories that are not always caught in the statistical services. of services involving higher order functions involve the standard application of norms and could actually do helpful things for the industry in and contribute in time and co-investment with the The latter was managed through joint partnership Ambianta, are capital intensive and their productivity tour guides. data as they include many relatively small specialty of the mind that produce tangible economic guidelines and following of logical procedures. The question. We focused on whether there were any project to further the competitiveness of their between an investor and the association – and is relatively higher than the smaller firms that do MCP already has experience with the industry via areas. Nonetheless, architecture and engineering value-added through conceptual, logical, same is true for accounting despite the frequent special considerations involved apart from the industry. improved design and branding. With a 2 million not use too many machines and are labor intensive. its work with other sectors. One of the aspects services alone generated $25M in service exports. communication and artistic skills involving use of the term "creative accounting". However, more quantitative analysis shown above. We also Euro private investment, Mobimall was launched in The later straggle to find and retain employees and that most recommends the focus on this industry is producers need attractive labels and good marketing, Both the architecture/engineering category and creativity. CSI includes a diversity and even architectural companies can be considered firms a IMPORTANCE OF CREATIVE August 2013, highlighting more than 20 brands and come up with nontraditional approaches such as how 12 representatives of the industry came advertising and communications strategies. Artists advertising have reported growth of 11% annually disparity of kinds of companies. Some are creative industry because they involve creative INDUSTRIES placing 3,000 furniture and home products on sale hiring couples to produce furniture. together in MCP headquarters, highly motivated to and designers also contribute to the country over the last 4 years. Architecture and engineering artistic and visual such as design. Others are interpretation and design features. There can be in 15,000 square meters of retail space; a milestone work together, sign an MoU, be mutually supportive Export of services can provide high value added. "brand" internationally. Creative industries provide actually do for them that they cannot do for While the sector has been growing at a modest 4% generated 739 additional jobs while advertising methodical rather than inspirational such as many semantic differences over what falls into or AUTOMOTIVE PARTS in the development of Moldova’s home furnishing and move forward. A subset of these returned for Exporting what one does with the mind often has potential for value added jobs and entrepreneurial themselves. These companies know their markets. per year8 industry has been shedding jobs and now created 609 new jobs. Many of these creative architecture. Some are visual such as animation. out of creative industries. The point is not to get sector. another strategy and working session and the team higher value-added than what one exports with opportunities that can potentially produce higher This industry is among the fastest growing export They are able to train employees in their own services are under the radar. One firm in our focus Still others such as advertising agencies and too hung up on definitions but rather to recognize has under 5,000 total people formally employed identified one helpful initiative of creating a ones hands. The creative industries can also add incomes than current benchmarks for "good jobs" category that was also generating employment. company techniques. By definition they have found group is exporting animation services and growing communications involve creativity in the that there is such a thing as "creative industries" Currently, the Association is no longer managing although this does not include informal employment. common website where international buyers could value and enhance competitiveness of all other in Moldova. Recent investment has also been in various regions the business environment to be relatively conducive. rapidly. realm of words. and they have commonalities. the center. Iurie Bors, a private furniture manufacturer There are a number of modest sized firms and find at one gateway portal a variety of creative Moldovan industries. For example, Moldovan wine of Moldova and not just in Chisinau. Furthermore, The green corridor arrangement for speedy firms seemed relatively interested in assistance. who made the initial investment in the Mobimall, As in the case of precision industries, the team and industry services, find companies and click on their in the automotive seat category it can generate transport across borders seems to be working MCP could facilitate market linkages, provide has enlarged the space and directly manages it. our Moldovan counterparts identified multiple products and services. This industry would also employment for women who have relevant textile, well. The industry does not need to be organized technical support on market linkages and help subsectors in this category. They include advertising, contributes to the competitiveness of other courses, and visit companies and even work and apparel skills that can be potentially transferable. into a cluster where the project could be of use as Moldovan furniture exports are a very respectable facilitate industry-wide coalescence and action. EXAMPLES OF CREATIVE We believe it should be included on the list as MARKET TREND ANALYSIS: marketing, architecture, animation, design, multimedia, industries through its capabilities in design, marketing, bring back ideas and customers. Moldovan industries Insulated cables are also an area where Moldova a catalyst, coach or provider of technical assistance. US101M and the industry has 4,954 employees. However, the industry already received assistance information technology and software development artistic productions and others. There tend to be branding, advertising and social media promotion. INDUSTRIES IN MOLDOVA FAVORABLE TRENDS IN THE such as wine, apparel and tourism face the has been doing well. Proximity to Europe and the So while the industry is quite attractive, we did not Turnover is 1380M MDL so turnover per employee under the CEED project. And the relatively low is very tied up with the creation of new "apps" and many smaller firms at work, opening the way for A creative services industry could also help announce GLOBAL AND REGIONAL challenge of "selling West" and integrating into the relatively high wages for workers (higher than conclude it should be among the one or two is relatively low at about 278,000 MDL per employee wage levels and uncertain prospects for employment The following is a list which is illustrative but not is therefore a creative service. As noted earlier, apparel for example), makes it an excellent candidate industries to receive priority attention. That being technical assistance to be well received. This focus the re-branding or re-imaging of Moldova for global creative services may also be a part of other ECONOMIC CONTEXT EU regional and global economy and this requires as compared to 484,000 MDL per employee in the resulted in this not being chosen as one of the top buyers, global investors and Moldovan young people exhaustive of creative industries and professions in communication and creative skills. Globally, the for selection. The automotive supply chain cluster said, we did recommend the possibility of a workforce precision engineering industry as will be seen dovetails nicely with the expertise of TUM and the Moldova. Information technology could also be on industries such as the fashion component of apparel two industries. who will decide whether to remain in Moldova to Globally, the proportion of GDP is shifting to services sector is growing as a percentage of GDP is emerging as a new export champion for Moldova. development initiative under which donor funding new facilities designed to encourage creative this list although to some extent it is already a production or the branding, labeling, marketing and work. Jobs in creative services could be quite appealing services. While agriculture and manufacturing as mechanization increases in both agriculture and However, this sector is also characterized by a might entice further FDI in this industry by offering industries such as Zip House fashion accelerator, focus of MCP and three is a debate about whether advertising of wine. relatively concentrated set of foreign investors such financial incentives for workforce training so that Tekwill technology center and Atelier 99 makers to young people who might otherwise emigrate. And it continue to grow in value, most countries as they manufacturing. Creative industries represent an (TUM) is a notable example. These skills are now software programming is a creative service. as Draexlmaier. Interviews with the industry this industry does not bump up against the PRECISION ENGINEERING space. This industry is open to potential unending is open equally to women as well as men as evidenced become more developed have over half the economy important component of the services sector and being used to produce a large variety of products showed that they seem to have things under constraints of trained personnel. growth limited only by the creativity and dynamism by the gender balance in the focus group. in the service industry. This trend will likely continue. therefore represent the future of the economy. The team made an important insight in the process with various product classifications often related to control. It is unclear what the project could Economic stagnation in Europe is putting pressure Services are also being taken over by machines are of examining products and industries. As we electrical equipment, electronic equipment, pumps on EU companies which are looking for opportunities increasingly taking over human services and the understood the nature of many of the export and others. With US$58M in sales and 5,000–6,000 ■ Information technology (aspects) ■ Graphic arts and design including stills and visual employment and turnover per employee yielded a to outsource. Most Moldovans have Romania interface with consumers. products, it became clear that one could define the employees, the precision and related industries ■ Industrial Design ■ App design, creation and invention what the project could really do to assist in boosting short list of five attractive industries. The most passports allowing them to travel in the EU, take BEVERAGES - SOFT DRINKS industry not just by the product but also by the have a very high turnover per employee ratio. ■ Graphical Design ■ Website design its competitiveness. The bottlers seem to be attractive is auto parts in the supply chain but this capabilities involved. Moldova has a talent base and However, the industry has struggled to grow its ■ Architecture and Design ■ Social media advisors Soft drinks was chosen because of its modest competitive on their own as they invest in machinery will likely do well without the need for project critical mass of capability in precision engineering. exports recently indicating a transition to competi- ■ Interior Decorating ■ Conference planners and event managers survey and focus group. Of these 10 were for-profit growth in exports and high overall sales growth at and improve their productivity without generating assistance as it is managed by competent foreign CURRENT SITUATION This was an asset historically when Moldova was tive products that could be helped by project ■ Computer animation (including those now exporting ■ Corporate executive coaches and trainers of groups companies and 2 were social enterprises that over 11% along with very high value in turnover lots of jobs for the time being. With only about firms. The soft drink industry also seems concentrated part of the Soviet Union and exported products for technical assistance. The firms interviewed seemed to Russia) ■ Visual artists There are no good statistics on the number of generate jobs and revenues but no retained earnings. per employees at 668,000 MDL making it seemingly 3,000 employees and no recent growth in employment, and run by competent bottlers, with less need for the Soviet defense industry. The industry shifted very open to the idea of coming together and ■ In-studio video production including commercials ■ Youth Training for students such as Rocket Academy people earning a living in creative industries. The The firms surveyed were relatively recent and time attractive. On closer analysis, the industry is very it was decided not to select this industry. project help and only modest prospects for growth and the products were understandably no longer working with the project on repositioning itself in ■ Full service advertising from strategy to production - a two week course JAA team assembled a group of 12 people from 11 in business ranged from a low of 3 years to a high concentrated and capital intensive and it is unclear in exports and employment despite robust increases sold. But many of the capabilities remained, including global markets. The firms also have a variety of ■ Marketing, advertising and strategic communications ■ Computer Graphics (CG) creative industry companies for a brief informal of 12 years. in sales. The furniture industry seems less dynamic the universities that trained people with these products and do not always compete with each ■ Cultural events and cultural productions ■ Fashion and clothing design and received earlier assistance. capabilities. The Technical University of Moldova other with the same strategies and products, ■ Film-making ■ Entertainment ■ PR - research to implementation, based on data as ■ Music composing, arranging and performance well as creativity ■ Landscaping and beautification of public spaces 29 are ample opportunities to team with Romanian to good business models and introduce them back SURVEY OF CREATIVE INDUSTRIES9 and other EU creative industry clusters and to in Moldova. learn from their successes as well their mistakes. Firm Years in Bus Estimated Growth Employees The current threats include the stagnant EU The Internet makes it easy to participate with economy which could dampen demand and the 1 5 15% 40 international clients and even to be paid via PayPal. availability of opportunities outside the country Moldovans can easily see examples of creative 2 7 30% 20 which could draw successful entrepreneurs and industries abroad and through visits can be exposed talented Moldovans away from the country. 3 4 30% 8

4 3 0% 12

5 10 0% 2

6 5 20% 3

7 8 300% 13

8 3 0% 40

9 12 150% 8

10 8 10% N/A

11 8 Unknown N/A

Averages 6.6 56% 16

Source: Creative Services companies in focus group at MCP headquarters; JAA team analysis.

Though a Delphi process of 12 experts from Based on the same survey, the average time in creative industries it was estimated that there are business was 6.6 years. Some firms were stagnant in about 10,000 people currently deriving their growth while others were growing quite rapidly at livelihoods from such industries in Moldova if one 20% or 30% a year for several years. One firm has had includes both formal and informal activities. a spurt of growth and reported growing at 300% per Meantime, there are few shows, showcases, year. The average number of employees per company creative events and expositions currently in was 16 although there was a bimodal distribution with Moldova. two companies reporting 40 employees and others having 8 or 12 or even just 2.

9. Focus group meeting with 12 participants, June 15, 2016 630 are ample opportunities to team with Romanian to good business models and introduce them back and other EU creative industry clusters and to in Moldova. learn from their successes as well their mistakes. The current threats include the stagnant EU The Internet makes it easy to participate with economy which could dampen demand and the international clients and even to be paid via PayPal. availability of opportunities outside the country Moldovans can easily see examples of creative which could draw successful entrepreneurs and industries abroad and through visits can be exposed talented Moldovans away from the country.

PORTER DIAMOND. CREATIVE INDUSTRIES

+ Proven entrepreneurial capacity + Environment for startups is fairly good + Labor cost advantages + Many companies reorienting to the EU market + Good location in EU; + Strong tradition for creativity and arts - Weak international marketing + Firms are aware of each other; many B2B collaborations - University programs are few and don’t provide skills needed in the market - Some procedural and bureaucratic barriers to sound logistics, cost management, workforce - Weak education and training availability +/- Low barriers to entry - VAT tax issue 01 Context for Though a Delphi process of 12 experts from Based on the same survey, the average time in Firm Strategy creative industries it was estimated that there are business was 6.6 years. Some firms were stagnant in and Rivalry about 10,000 people currently deriving their growth while others were growing quite rapidly at livelihoods from such industries in Moldova if one 20% or 30% a year for several years. One firm has had includes both formal and informal activities. a spurt of growth and reported growing at 300% per Meantime, there are few shows, showcases, year. The average number of employees per company creative events and expositions currently in was 16 although there was a bimodal distribution with 04 02 Moldova. two companies reporting 40 employees and others Demand having 8 or 12 or even just 2. Factor (Input) Conditions Conditions

SWOT ANALYSIS. CREATIVE Weaknesses include the low numbers and low critical mass of students coming of age given the INDUSTRY demographic collapse Moldova has faced. Nonetheless, 03 Strengths in Moldova include the residual history the emergence of attractive creative industries Related and of strong training programs related to design could bring some of them back. The local universities Supporting including faculty at TUM who focus on design. and training institutes are also not as strong as they Industries Another strength is the recent investment in once were or could be when it comes to professors stimulating students for these industries, with some supporting infrastructure including ZIP House and + Availability of premises at several locations + Direct engagement with sophisticated and Tekwill. There has been a recent attraction of both notable exceptions. (Zip House, Tekwill) demanding buyers and consumers students and young professionals to creative Opportunities include major new co-funding, + Many actors know and engage with each + Good connections with CIS and EU markets industries and the entrepreneurship that often goes other because of Russian and Romanian/Italian publicity and promotion from the “Creative with creative industries. Young talent is more language skills Europe” project and the inclusion of Moldova as + TUM has a design engineering department attracted to this profession than some of the other + Emerging linkages to EU customers via EU eligible for funding. Moldova is a cost-effective area - No active association or platform Moldovan export-related industries such as apparel investors for creative industries and even Ukraine has - No specialized institutions or automotive supply. +/- Emerging local market outsourced animation to a Moldovan firm. There - Historic customer relationships are with CIS countries

31 Demand Factors: The existing companies and Moldovan firms in creative industry expositions promoting Moldovan Creative Industries in free be packaged together to meet international surveyed seemed quite able to be in direct touch abroad would help. Including "creative industries" in and cost-effective way; demand. The better the firms know each other the with sophisticated and demanding consumers the focus for FDI promotion would also signal better they can combine capabilities. ■ Reach out to students to increase the supply of abroad. But more could be done to strengthen Moldova as a site and destination for creative creative offer by enticing them with the prospects Prizes: If the association can host an annual prize, these direct connections such as having a common industries. We recommend that this be part of to pursue careers in the Creative Industries or with a serious international jury, this will raise the website for creative industries where buyers, future Moldovan country "branding" and that even start one; visibility and attract both new talent and new contractors and consumers abroad could see and specific success stories and services by highlighted customers and collaborators. contact the creative service providers. and promoted. The only public policy issue identified ■ Promote linkages between the Creative Industries in the industry focus group, apart from the inadequacy cluster and other key industries such that the Convening: The CI would like help from the Supply Factors: University programs could be of educational pedagogy was the VAT tax paid on former strengthen the marketing, advertising, project at the beginning as a convener, catalyst and strengthened. Training could be inculcated even at their services by foreign "importers" who find it branding, packaging, labels, social media connections coach "to make us more open to each other." the primary and secondary as well as tertiary level hard to deduct this in their countries and so end up and websites in ways that promote the Internships Abroad: Raising strategic sights, encouraging young people to pursue careers in paying two taxes if they outsource to Moldova. competitiveness of these other industries. The learning from others in other places. creative industries. Perhaps there could be a way to be VAT exempt implications for the wine industry are obvious. Connecting: Linking to clients abroad and other for the export of services. Clusters: Premises will soon be available at Tekwill, Internet-enabled services are now feasible based on centers of excellence while promoting the industry ZIPHouse and TUM and even venues with machinery access to this technology. Costs are lower in and having a monthly meeting with speakers Recommendations for the Project: The project Moldova and yet the quality of work can be to develop prototypes. While co-location does not should follow up on this meeting, ensure that the Coaching: Do it faster; (governance, effective automatically lead to clustering, there is more comparable. There is fluency in Romanian and firms themselves are in the driver's seat regarding Russian with growing fluency in English and other association). likelihood that it will in the creative industries, the formation of the association and provide the global languages. There is a growing global market Catching: EU funding, clients and contracts; finding versus say an industrial park. The project could following: promote clustering by facilitating a formal or in services. Barriers to entry are relatively low. local contribution inside the country. Unlike manufactured products, there are few issues informal creative industry association and providing ■ Catalyze the Creative Industry Association by Someday, perhaps the heterogeneity will lead to with customs clearance or tariffs when ideas or technical assistance and advice that would help providing a staff person part time to advise and breaking up into more specific associations with creative value added arrive in the EU from simply convene, coach and catalyze businesses in this assist; narrower industry focuses. But that would not be hitting the "send" button. Unlike some other industry. a bad outcome. There are some other associations ■ Provide STTA for a competitiveness expert to industries, one does not have to emigrate to get a such as Design, Architects with different levels of engage in "cluster mustering" which involves job abroad. Strategy, Structure and Rivalry: From our survey association. of 12 creative industry companies, there seems to motivation, strategic direction, examples from similar clusters around the globe and moving Employment: Although there are no good numbers be a HIGH level of cooperation and communication and much depends on definitions, there are Direct Quotes from Participants: among them. They compete in their own way. quickly to a Memo of Understanding between MCP and the CSI; anywhere between 2,000 and possibly as many as They tend not to copy or compete in the narrowly 10,000 people already participating in CSI. "Association would be a good thing. It could do same way on the basis of price and this differentiation ■ Provide near term "quick win" by jump starting things for the county." strengthens competitiveness. There are relatively initial funding for a "Moldovan Creative Industries" Growth Rate: While these vary, the average low barriers to entry in that these are usually not website where international buyers could quickly growth rate among the 12 companies interviewed "It will be easier to be seen from the cosmos... capital-intensive endeavors. Even working capital access service providers, visualize their products was 56%. Furthermore, these tend to be good jobs or at least from Google." needs are often modest. These low barriers to and see the company website and examples of with higher output per person and higher salaries entry promote a higher level of dynamism. The company work; than in apparel or even tourism. The project will "We are small. Nobody sees us." soon be able to get good numbers on average surveyed group did report that new entrants often Provide industry-specific technical expertise for ■ sales/person by interacting with firms. "You spend 5 years at design school to be able to do compete on price for jobs and sometimes this is promising sub-industries; resented but also understood as many got their Facilitate an Association of Creative Industries: produce bad logos meanwhile you can study for 3 months and learn how to do good ones." start that way. Intense rivalry tends to promote ■ Facilitate industry-university initiatives; It would be good for the image of Moldova. It competitiveness as firms tend to constantly would facilitate connections with international ■ Identify short training courses that could gap-fill "Our business is not really here in Moldova from upgrade their services and differentiate their specific skills; associations and organizations. An association the money point of view, so we are not really products. Rivalry more often expresses itself would encourage creative people to commercialize Sponsor participation in expositions and competitors." through differentiation rather than price. The ■ their capabilities. This would also encourage conferences on creative industries, especially examples of successful firms does at times stimulate teaming for providing a set of capabilities. It will in Romania and Europe; "Moldova has a mindset to guard things closely but emulation if not jealousy and serves as a prod to ignite and maintain a healthy ecosystem for these the creative industries can show the way to a more try new things. ■ Facilitate public-private dialogue so that Creative industries by inspiring young people and maintain open and cooperative mentality" Industries are flagged in embassies abroad, proper inflow of people and helping them thrive. Public Policy Implications: Greater investment in promotional materials are developed; This would strengthen a sense of identity for the "It's not only about creative competitiveness but public goods such as training in creative industries also business competitiveness and we need to Use the Creative Industries themselves to industry. It would also promote collaboration and facilitation of participation by both students ■ learn from what others do." develop videos, social media, advertising and PR where different kinds of creative services need to

632 Demand Factors: The existing companies and Moldovan firms in creative industry expositions promoting Moldovan Creative Industries in free be packaged together to meet international surveyed seemed quite able to be in direct touch abroad would help. Including "creative industries" in and cost-effective way; demand. The better the firms know each other the with sophisticated and demanding consumers the focus for FDI promotion would also signal better they can combine capabilities. ■ Reach out to students to increase the supply of abroad. But more could be done to strengthen Moldova as a site and destination for creative creative offer by enticing them with the prospects Prizes: If the association can host an annual prize, these direct connections such as having a common industries. We recommend that this be part of to pursue careers in the Creative Industries or with a serious international jury, this will raise the website for creative industries where buyers, future Moldovan country "branding" and that even start one; visibility and attract both new talent and new contractors and consumers abroad could see and specific success stories and services by highlighted customers and collaborators. contact the creative service providers. and promoted. The only public policy issue identified ■ Promote linkages between the Creative Industries in the industry focus group, apart from the inadequacy cluster and other key industries such that the Convening: The CI would like help from the Supply Factors: University programs could be of educational pedagogy was the VAT tax paid on former strengthen the marketing, advertising, project at the beginning as a convener, catalyst and strengthened. Training could be inculcated even at their services by foreign "importers" who find it branding, packaging, labels, social media connections coach "to make us more open to each other." the primary and secondary as well as tertiary level hard to deduct this in their countries and so end up and websites in ways that promote the Internships Abroad: Raising strategic sights, encouraging young people to pursue careers in paying two taxes if they outsource to Moldova. competitiveness of these other industries. The learning from others in other places. creative industries. Perhaps there could be a way to be VAT exempt implications for the wine industry are obvious. Connecting: Linking to clients abroad and other for the export of services. Clusters: Premises will soon be available at Tekwill, Internet-enabled services are now feasible based on centers of excellence while promoting the industry ZIPHouse and TUM and even venues with machinery access to this technology. Costs are lower in and having a monthly meeting with speakers Recommendations for the Project: The project Moldova and yet the quality of work can be to develop prototypes. While co-location does not should follow up on this meeting, ensure that the Coaching: Do it faster; (governance, effective automatically lead to clustering, there is more comparable. There is fluency in Romanian and firms themselves are in the driver's seat regarding Russian with growing fluency in English and other association). likelihood that it will in the creative industries, the formation of the association and provide the global languages. There is a growing global market Catching: EU funding, clients and contracts; finding versus say an industrial park. The project could following: promote clustering by facilitating a formal or in services. Barriers to entry are relatively low. local contribution inside the country. Unlike manufactured products, there are few issues informal creative industry association and providing ■ Catalyze the Creative Industry Association by Someday, perhaps the heterogeneity will lead to with customs clearance or tariffs when ideas or technical assistance and advice that would help providing a staff person part time to advise and breaking up into more specific associations with creative value added arrive in the EU from simply convene, coach and catalyze businesses in this assist; narrower industry focuses. But that would not be hitting the "send" button. Unlike some other industry. a bad outcome. There are some other associations ■ Provide STTA for a competitiveness expert to industries, one does not have to emigrate to get a such as Design, Architects with different levels of engage in "cluster mustering" which involves job abroad. Strategy, Structure and Rivalry: From our survey association. of 12 creative industry companies, there seems to motivation, strategic direction, examples from similar clusters around the globe and moving Employment: Although there are no good numbers be a HIGH level of cooperation and communication and much depends on definitions, there are Direct Quotes from Participants: among them. They compete in their own way. quickly to a Memo of Understanding between MCP and the CSI; anywhere between 2,000 and possibly as many as They tend not to copy or compete in the narrowly 10,000 people already participating in CSI. "Association would be a good thing. It could do same way on the basis of price and this differentiation ■ Provide near term "quick win" by jump starting things for the county." strengthens competitiveness. There are relatively initial funding for a "Moldovan Creative Industries" Growth Rate: While these vary, the average low barriers to entry in that these are usually not website where international buyers could quickly growth rate among the 12 companies interviewed "It will be easier to be seen from the cosmos... capital-intensive endeavors. Even working capital access service providers, visualize their products was 56%. Furthermore, these tend to be good jobs or at least from Google." needs are often modest. These low barriers to and see the company website and examples of with higher output per person and higher salaries entry promote a higher level of dynamism. The company work; than in apparel or even tourism. The project will "We are small. Nobody sees us." soon be able to get good numbers on average surveyed group did report that new entrants often Provide industry-specific technical expertise for ■ sales/person by interacting with firms. "You spend 5 years at design school to be able to do compete on price for jobs and sometimes this is promising sub-industries; resented but also understood as many got their Facilitate an Association of Creative Industries: produce bad logos meanwhile you can study for 3 months and learn how to do good ones." start that way. Intense rivalry tends to promote ■ Facilitate industry-university initiatives; It would be good for the image of Moldova. It competitiveness as firms tend to constantly would facilitate connections with international ■ Identify short training courses that could gap-fill "Our business is not really here in Moldova from upgrade their services and differentiate their specific skills; associations and organizations. An association the money point of view, so we are not really products. Rivalry more often expresses itself would encourage creative people to commercialize Sponsor participation in expositions and competitors." through differentiation rather than price. The ■ their capabilities. This would also encourage conferences on creative industries, especially examples of successful firms does at times stimulate teaming for providing a set of capabilities. It will in Romania and Europe; "Moldova has a mindset to guard things closely but emulation if not jealousy and serves as a prod to ignite and maintain a healthy ecosystem for these the creative industries can show the way to a more try new things. ■ Facilitate public-private dialogue so that Creative industries by inspiring young people and maintain open and cooperative mentality" Industries are flagged in embassies abroad, proper inflow of people and helping them thrive. Public Policy Implications: Greater investment in promotional materials are developed; This would strengthen a sense of identity for the "It's not only about creative competitiveness but public goods such as training in creative industries also business competitiveness and we need to Use the Creative Industries themselves to industry. It would also promote collaboration and facilitation of participation by both students ■ learn from what others do." develop videos, social media, advertising and PR where different kinds of creative services need to

33 VI. PRECISION ENGINEERING Competitiveness Assessment for Moldovan Precision Engineering and Manufacturing Cluster

DEFINITION AND sophistication – Moldova also produced everyday agricultural machinery, for example. Moldova’s DESCRIPTION markets for both precision and other manufactures were largely the former Soviet and CIS countries. The unifying theme for the Precision The current cluster includes companies that Engineering and Manufacturing Industry is the manufacture: high tolerance pumps, components high precision, high tolerance manufacture of for vehicles, equipment and components for the componentry, instruments and finished aerospace sector, the oil and gas sector, and tools products. While not formally defined in and instrumentation. These include both foreign international or national statistics, this cluster companies but also many Moldovan-owned is evident in Moldova as a subsector of a companies. At least one substantial investor larger manufacturing, metalworking and produces electronic and electrical components of machining industry, along with supporting high quality. The definition of the cluster may be design and testing activities. extended to include some manufacturers of components for more traditional agricultural In Soviet times Moldova was a center for high equipment. Not all machining, manufacturing and performance, high tolerance, high quality engineering design activities would be considered as part of this and manufacturing, substantially related to the cluster. The defining emphasis is that of high defense and oil and gas industries. Of course, not precision and manufacturing tolerances. all equipment design and manufacturing was of such

EXAMPLES OF PRECISION IMPORTANCE OF PRECISION ENGINEERING AND ENGINEERING AND MANUFACTURING BUSINESSES MANUFACTURING BUSINESSES The following list which is illustrative but not These businesses provide high value added, often exhaustive of Precision Engineering and Manufacture with a strong service component in terms of Businesses tries and professions in Moldova: discussing product requirements with customers, and developing innovative, creative solutions. ■ High tolerance pumps Precision Engineering and Manufacturing Businesses ■ Machined components provide higher paying, value added jobs. It offers ■ Metallic structures opportunity for entrepreneurial business startups, ■ Finished products and is attractive to foreign investors. The businesses ■ High value electrical and electronic components are not restricted to Chisinau; they are able to ■ Finished electronic products prosper in FEZ and other locations throughout ■ Instrumentation Moldova. The industry is almost entirely ■ Precision tool manufacture export-focused; and actual and potentials ■ Quality testing export markets are substantial. ■ Design engineering

634 MARKET AND Production trends for the past decades have Much has changed within the industry over the last partnership with Moldovan engineers. At the same extended supply chains beyond national borders. 5 years or so. Domestic and foreign investors are time, there is a strong entrepreneurial development COMPETITIVENESS TREND Global supply chains are commonplace, and Moldova’s recognizing Moldova as a sound location for high within the cluster, as Moldovans establish and grow ANALYSIS: FAVORABLE Precision Engineering and Manufacturing Businesses quality, low cost, logistically satisfactory location to new precision engineering businesses. These TRENDS IN THE GLOBAL are increasingly participating in these value chains. It locate component and full product manufacturing. patterns were not apparent when USAID last was not too long ago that companies moved their Several foreign-linked investments are demonstrating looked at the manufacturing industry. AND REGIONAL ECONOMIC production from Ireland and similar locations to the success of this business model, often in CONTEXT emerging economies like Poland, the Czech Republic and Slovakia. Romania, Ukraine and Turkey then EU import statistics demonstrate a large import followed. Now, cost advantages and sound logistical market for the components, finished products and connectivity are encouraging value chains to move instruments of which precision manufactured and to countries such as Moldova and the Balkan engineered products form a part. Statistics do not countries. permit ready understanding of the size and opportunity of the precision component of the Economic stagnation in Europe is putting pressure data, however. on EU companies which are looking for opportunities to outsource. Most Moldovans have Romania The team’s discussions in Moldova, including passports allowing them to travel in the EU, take meetings with 9 firms, demonstrated that, at least courses, and visit companies and even work and anecdotally, the market is attractive. It is sufficiently bring back ideas and customers. Moldovan industries substantial and attractive to have brought many such as wine, apparel and tourism face the foreign investors to Moldova to serve EU markets, challenge of "selling west" and integrating into the and to have generated several entrepreneurial EU regional and global economy and this requires startups. We met several larger firms that are communication and creative skills. Globally, the re-orienting their processes and sales efforts to services sector is growing as a percentage of GDP serve EU markets. as mechanization increases in both agriculture and manufacturing. Creative industries represent an Critical competitive factors in this industry are important component of the services sector and quality (More than one company director termed therefore represent the future of the economy. this “quality, quality, quality!”), cost advantage, and Services are also being taken over by machines are reliable delivery to the customer. Moldova offers all increasingly taking over human services and the of these advantages, and investors have been willing interface with consumers. to expend substantial time and resources to get their enterprises “up to speed”.

CURRENT SITUATION Moldova has a tradition of quality and specialty equipment and component manufacture. While Moldova historically boasted a strong manufacturing, there are thousands of registered metalworking machining and electronics sector, largely serving and machinery companies, and many engineering Soviet and post-Soviet CIS markets. Many companies firms, most are not in the “precision and quality” produced agricultural equipment. Designated as a category. There are about 25 precision and quality location to provide highly specialized parts and manufacturers in Moldova, and about 15 components for the defense and oil and gas industries, world-class design firms. The industry also has Moldova was home to many talented and highly technical linkages with the large scale automotive respected manufacturing organizations, and investors, with the IT industry, and possibly with supporting schools and universities. the creative industries.

In the post-Soviet era, Moldova’s traditional There are few accurate numbers and much markets have shrunk or disappeared. Schools have depends on definitions. There are probably 2500 failed to provide world-class training, and students people directly employed in this cluster, excluding have decreasingly seen this industry as a desirable, part time employees that provide a substantial remunerative or status-providing career. surge resource.

35 MARKET AND Production trends for the past decades have Much has changed within the industry over the last partnership with Moldovan engineers. At the same extended supply chains beyond national borders. 5 years or so. Domestic and foreign investors are time, there is a strong entrepreneurial development COMPETITIVENESS TREND Global supply chains are commonplace, and Moldova’s recognizing Moldova as a sound location for high within the cluster, as Moldovans establish and grow ANALYSIS: FAVORABLE Precision Engineering and Manufacturing Businesses quality, low cost, logistically satisfactory location to new precision engineering businesses. These TRENDS IN THE GLOBAL are increasingly participating in these value chains. It locate component and full product manufacturing. patterns were not apparent when USAID last was not too long ago that companies moved their Several foreign-linked investments are demonstrating looked at the manufacturing industry. AND REGIONAL ECONOMIC production from Ireland and similar locations to the success of this business model, often in CONTEXT emerging economies like Poland, the Czech Republic and Slovakia. Romania, Ukraine and Turkey then EU import statistics demonstrate a large import followed. Now, cost advantages and sound logistical SWOT ANALYSIS. PRECISION ENGINEERING market for the components, finished products and connectivity are encouraging value chains to move instruments of which precision manufactured and to countries such as Moldova and the Balkan STRENGTHS WEAKNESSES engineered products form a part. Statistics do not countries. permit ready understanding of the size and Cost competitive Variable quality of university training opportunity of the precision component of the Economic stagnation in Europe is putting pressure Tradition of manufacturing quality Old plant and equipment data, however. on EU companies which are looking for opportunities Entrepreneurship in the industry Policies/procedures - unclear government responsive- to outsource. Most Moldovans have Romania ness The team’s discussions in Moldova, including passports allowing them to travel in the EU, take Strong linkages with customers via the VC and investors meetings with 9 firms, demonstrated that, at least courses, and visit companies and even work and Availability of land and vacant buildings/ plants High local interest rates (doesn’t seem to be a anecdotally, the market is attractive. It is sufficiently bring back ideas and customers. Moldovan industries constraint) substantial and attractive to have brought many such as wine, apparel and tourism face the foreign investors to Moldova to serve EU markets, challenge of "selling west" and integrating into the and to have generated several entrepreneurial EU regional and global economy and this requires OPPORTUNITIES THREATS startups. We met several larger firms that are communication and creative skills. Globally, the re-orienting their processes and sales efforts to services sector is growing as a percentage of GDP Large EU market - Moldova can sell to this market Fewer graduates available to the industry serve EU markets. as mechanization increases in both agriculture and DC -FTA Competition from the Balkans manufacturing. Creative industries represent an Critical competitive factors in this industry are Value chains are seeking to cut costs Downturn in the EU economy important component of the services sector and quality (More than one company director termed therefore represent the future of the economy. Foreign investment this “quality, quality, quality!”), cost advantage, and Services are also being taken over by machines are reliable delivery to the customer. Moldova offers all increasingly taking over human services and the of these advantages, and investors have been willing interface with consumers. to expend substantial time and resources to get their enterprises “up to speed”.

36 PORTER DIAMOND. PRECISION ENGINEERING

+ Many good professionals with sound networks + Companies reorienting to the EU market + Proven entrepreneurial capacity + Several new entrants to the industry + Deserved reputation for quality + Strong tradition of quality manufacture and + Availability of international market and + Customized and differentiated products investment partners + Models for backward VC investment to Moldova + Labor cost advantag + Continual upgrading of equipment - Some procedural and bureaucratic barriers to sound logistics, cost management, workforce + Good location re EU; good logistics availability + Several good technical designers - Bulk of the manufacturing industry is outdated +/- FEZ facilities available, but in poor Condition +/- Old equipment and plant available +/- Power cost and reliability +/- Few local inputs; relatively easy access to inputs - Weak international partner and market network - Students not focused on Manufacturing or Precision industry as a career – hard to get new staff - Weak education and training, offering little practical experience; companies do their own training 01 - No contract R&D Context for Firm Strategy and Rivalry

04 02 Factor (Input) Demand Conditions Conditions

03 Related and Supporting Industries

+ Limited self-identity as "precision industry " + Good linkages to demanding buyers and + Investments by large automatic parts firms customers may have positive spin-offs + High standards flow down to Moldovan + Firms are aware of each other; some B2B exporters collaboration + Emerging linkages to EU customers via EU + TUM is developing more relevant curriculum investors but needs help and facilities - Minimal local market +/- Raw materials have to be imported / but - Historic customer relationships are with CIS sources are close by countries - No active association or platform - Selling to demanding customers – German - Lack of welding standards firms, oil and gas industry - No galvanization capacity

37 CAN PRECISION ENGINEERING and customization, and more whole-product development and delivery. BE CONSIDERED AS AN INDUSTRY OR CLUSTER? Recommendations for the Project: The project should follow up on this meeting, ensure that the In industry statistics, the various manufacturing and precision engineering firms themselves are in the related businesses that can be considered to be driver's seat in cooperating with MCP. MCP can do high precision are not readily apparent; they are the following: mixed with “everyday” manufactures and services. The statistics include mass-produced components ■ Catalyze the Precision Engineering and and standard products, variously categorized as Manufacturing industry by providing a staff “D33. Manufacture of medical equipment and person part time to advise and assist; apparatus precision measuring equipment optical ■ Provide STTA for a competitiveness expert to goods watches and clocks, which are destined for engage in "cluster mustering" which involves relatively undiscerning markets or customers. motivation, strategic direction, examples from Meantime, industries like Wine or Apparel are similar clusters around the globe from similar defined by a core product. Tourism incorporates industries and moving quickly to a Memo of many diverse businesses, defined nonetheless by a Understanding with MCP; readily recognizable set of services provided to a readily defined set of customers. Precision ■ Apply diagnostic tools and benchmarking with the Engineering and Manufacturing Businesses is broad industry to assess its current competitive position in terms of possible products and value chains, but and identify opportunities; is defined by the technical and engineering quality ■ Create a strategy and identify feasible high-impact of the products and related services. Much like the strategic initiatives; proposed Creative Industries cluster, Precision ■ Facilitate industry-university initiatives; Engineering and Manufacturing Businesses is defined by its core capabilities and target market ■ Identify short training courses that could gap-fill requirements. Members of this group of companies specific skills; recognize each other and respect each other and ■ Foster and strengthen networks between the respect each other’s capabilities. Moldovan industry and buyers in EU countries that could provide contracts and technical Looking forward, the industry trends and economics assistance; offer substantial opportunity for new growth and investment. The bigger win will be, however, that ■ Facilitate public-private dialogue to strengthen companies in the industry continually take on more skills and the business environment for precision complex engineering and manufacturing tasks engineering and manufacturing. within global supply chains, including more R&D

CONCLUSION interest of these two industries and momentum to date. Specific recommendations for engagement, The team analyzed virtually all the Moldovan export diagnostics, strategy development and implementation products and services. We identified and analyzed a of initiatives were provided for each. We recommend short list of attractive industries and selected two a follow-on STTA for competitiveness experts to that meet the criteria we established for this engage with both industries, leading to Memos of purpose. We recommend that MCP engage Understanding, diagnostic benchmarking and expeditiously in the next steps to capture the strategic plans.

38 ANNEX A. EXHIBITS

Exhibit 10: Size of national supply and international demand for all Moldovan productsat aggregated "2 digit" level (2015) At the 2-digit level, Moldova's competitive exports tend to be agriculture-related but several manufactures are growing

6 85 - Electrical, electronic equipment 33 - Essential oils, perfumes, cosmetics, toiletries 30 - Pharmaceutical products Scale: 40,000 US 4 61 - Articles of apparel, accessories, knit or crochet Dollar thousand 62 - Articles of apparel, accessories, not knit or crochet 08 - Edible fruits, nuts, peel of citrus fruit, melons 2 10 - Cereals

0 12 - Oil seed, oleaginous fruits, grain, seed, fruit, etc.

22 - Beverages, Spirits and vinegar -2 70 - Glass and glassware 90 - Optical, photo, technical, medical, etc. apparatus 20 - Vegetable, fruit, nut, etc food preparation 94 - Furniture, lighting, signs, prefabricated buildings 64 - Footwear, gaiters and the like, parts thereof -4 84 - Machinery, nuclear reactors, boilers, etc. 42 - Articles of leather, animal gut, harness, travel goods 04 - Dairy products, eggs, honey, edible animal products

-6 15 - Animal, vegetable fats and oils, cleavage products, etc.

-8 39 - Plastics and articles thereof 17 - Sugars and sugar confectionery

Annual growth of world imports between 2011-2015, % Annual growth -10 0 0.05 0.1 0.15 0.2 0.25 World market share of the Republic of Moldova, 2015, %

The Republic of Moldova has lost world The Republic of Moldova has increased Reference The bubble size is proportional to market share for this product world market share for this product bubble export value

Exhibit 11: Size, market share and growth (blue) in market share of Moldovan electrical equipment exports in 2015 Exports of insulated wire and cable are the clear competitive winner among electrical and electronic exports

8 Scale: 40,000 US Dollar thousand

6 8517 - Electric app for line telephony, including current line system 8537 - Board & panels, equipped with two/more switches, fuses 8518 – Microphones & stand; loudspeaker; headphone/earphone; sound amplifier set 4 8542 - Electronic integrated circuits and microassemblies 8547 - Insulating fitting for electric machine, app/equip (o/t insulator of hd no85.4) 8533 - Electrical resistor (incl. rheostats), o/t heating resistor 2 8543 - Electrical machine & app having individual function 8501 - Electric motors and generators (excluding generating sets) 8548 - Electrical parts of machinery/app 8536 - Electrical app for switching (ex. fuses, switches, etc.) not exceeding 1000 volt 0 8504 - Electric transformer, static converter (ex. rectifiers) 8516 - Electric instantaneous water heater, space heating; hair dryer 8538 - Part suitable for for use solely/principally with boards, panels, fuses, switches -2 8515 - Electric laser/photon beam/plasma arc solderg with cut capabilities, etc. 8523 - Prepared unrecorded media for sound record (tapes) 8503 - Parts suitable for users solely/principally with machines of hd no 85.01/85.02 8514 - Industrial/laboratory electric furnaces & ovens -4 8528 - Television receivers (including video monitors & video projectors) 8525 - Television camera, transmission app for radio-telephony 8544 - Insulated wire/cable

Annual growth of world imports between 2011-2015, % Annual growth -6 0 0.05 0.1 0.15 0.2 World market share of the Republic of Moldova, 2015, % The Republic of Moldova has lost world The Republic of Moldova has increased Reference The bubble size is proportional to market share for this product world market share for this product bubble export value

39 Exhibit 12: Size, market share and improvement in market share for furniture, lighting, signs, prefab buildings (2015) Automotive seats in the 9401 category are the only truly competitive export category where Moldova is improving

10 Annual growth of world imports between 2011-2015, %

9405 - Lamps & lighting fittings: signs, illuminated nameplates Scale: 10,000 US 8 Dollar thousand

4 9403 - Other furniture and parts thereof

9404 - Mattress supports: mattresses, quilts, etc.

2 9402 – Medical, surgery, dental furniture (e.g. dentists' & barbers' chairs)

0 9401 - Seat (o/t) dentists' & barbers' chars, etc.) & part thereof 9406 - Prefabricated buildings -2

-4 0 0.02 0.04 0.06 0.08 0.1 0.12 World market share of the Republic of Moldova, 2015, %

Exhibit 13: Size, market share and growth (blue) in market share of Moldovan machinery export categories in 2015 Exports related to specialized machinery involving heat exchange and pumps seem to be competitive

6 Annual growth of world imports between 2011-2015, % Scale: 2,000 US 8411 - Turbo-jets, turbo-propellers and other gas turbines Dollar thousand 8438 - Machinery for the industrial preparation or manufacturing of food or drink 8419 - Machinery, plant/lab. involving a change of temp ex heating, cooking, etc. 4 8424 - Mechanical appl. for projecting/dispersing/spray; sand blasting machine, etc. 8481 - Tap, cock, valve for pipe, tank for the like, including pressure reducing valve 8421 - Centrifuges, including centrifugal dryers; filtering/purifying machinery 8477 - Machinery for working rubber/plastic/for the manufacturing of products from these material 8418 - Refrigerator, freezer, etc. 2 8414 - Air vacuum pumps; hoods incorporating a fan 8422 - Dish washing machines; machinery for aerating bottles

8413 - Pumps for liquids; liquid elevators 0

8466 - Machinery parts & accessories (machinery for hd 84.56 to 84.65) 8479 – Machines & mechanical appliances having individual functions -2 8432 - Agricultural, horticulture, forest machinery for soil prep/cultivation 8415 - Air conditioning machines, with motor-driven elements

8474 - Machinery for sorting/screening/washg; agglomeratg/shapg mineral produc 8471 - Automatic data processing machines; optical reader, etc. -4 8412 - Engines and motors 8431 - Machinery part (hd 84.25 to 84.30) 8462 - Machine-tool for working metal by forging/hammering, etc.

-6 0 0.005 0.01 0.015 0.02 0.025 0.03 World market share of the Republic of Moldova, 2015, % The Republic of Moldova has lost world The Republic of Moldova has increased Reference The bubble size is proportional to market share for this product world market share for this product bubble export value

40 Exhibit 14: Size, market share, attractiveness and growth in market share of Moldovan beverage-related exports Wine is by far the largest export but global growth has been modest and Moldova has not increased market share

6 2202 - Non-alcoholic beverages (excl. water, fruit or vegetable juices and milk) 2203 - Beer made from malt Scale: 10,000 US 4 Dollar thousand

2208 - Spirits, liqueurs, other spirit beverages, alcoholic preparations 2 2209 - Vinegar and substitutes for vinegar with very large (and old) plant and equipment, for 2201 - Mineral & aerated waters PRECISION ENGINEERING 2206 - Fermented beverages the most part lying unused or underutilized. They 0 INTERVIEW SUMMARIES have invested in quite a bit of more modern We visited 2 large manufacturers, both earnestly equipment (from Germany), and according to the -2 DG, the new equipment delivers ¾ of the revenue. 2204 - Wine of fresh grapes working (struggling) to adapt to new market realities. They have ISO9001 and TüV certifications. -4 Company 1 was (and remains) an important Contrast these above two companies, struggling to reorient themselves and find new markets, with -6 manufacturer or agricultural equipment and machinery. several other examples below: 2207 - Ethyl alcohol & other spirits (if undenatured then higher than 80%) It was founded in 1944 and privatized in 1999 by 3 owners. Its Moldovan and CIS market is declining – -8 2205 – Vermouth & other grape wine flavoured with plants or aromatic substances Company 3 is an electronics and electrics company, economic problems and declining ruble value have a production arm of a long-established German caused its sales to this market to drop dramatically. Annual growth of world imports between 2011-2015, % Annual growth -10 company. Company 3 came to Moldova 9 years Moldovan market is also suffering – the tight 0 0.05 0.1 0.15 0.2 0.25 0.3 0.35 ago, attracted by (low cost labor, opportunity to economy has cut its sales to smaller and mid-sized World market share of the Republic of Moldova, 2015, % produce quality, and the vision of the younger buyers, while larger operators are increasingly The Republic of Moldova has lost world The Republic of Moldova has increased Reference The bubble size is proportional to Company 3). Company 3’s manager in Romania market share for this product world market share for this product bubble export value purchasing global brands (e.g. John Deere). Since convinced Company 3 to come to Moldova. 2013, the company’s sales dropped by 40%. Even Interestingly, Company 3’s Romanian operation had local sales have dropped; no one is buying. Their originally been located in the Czech Republic.). exports dropped from 70% of total sales in 2013 to Persistent in the face of some startup difficulties, 52% in 2015. Company 1 is trying to tap Western the Moldovan Company now produces components markets. They have some longstanding relationships and (soon) finished products for name brands and with Western buyers, and has some small contracts discerning customers in Western markets. Some of with companies in Italy and Germany. They have its Moldovan-manufactured products have been ISO9001 and six sigma certifications. moved from Romania. Company 3 says that operating Founded in 1972, Company 2 was a supplier of in Moldova involves no insurmountable difficulties, very high performance components for Soviet but they cite Lack of technology and lack of local aircraft production; its sole client was “Salute” in suppliers. They train all staff themselves, but cite a Russia. In a thrown loose from the “mother company”, real lack of maintenance and service engineers for Company 2 has worked hard to increase its plastics equipment. There is no Moldovan strategy customer base, and now sells to 4 CIS customers. for attracting investors. Customs has a big impact However, orders fluctuate and the ruble decline on logistics – and the costs have a financial impact. has moderated the attractiveness of its Staff come completely unskilled – they train them. eastward-looking market. Revenues have declined Engineers’ school knowledge in insufficient from about USD10m to about USD5 m or less. Company 4, in Goyan, is 10 years old, established Company 2 has tried to develop EU markets, thus by a German company. It produces entirely for far with minimal success; they have managed to this German company. The decision to set up obtain some orders, but had difficulty in delivering production in Moldova was made by the on time. Seen by the EU and US as linked to the engineer/designer/inventor/owner who was also a post-Soviet military complex, it has difficulty lecturer in a German university, and who became procuring some instrumentation from western close to some of his students from Moldova. The sources. Company 2s sales have declined to 2 company produces measuring equipment, which are Photo credit: Valeriu Podborschii million Euros, and its personnel to 180; is burdened Photo caption: Study visit of Technical University from Moldova (TUM) Rector, Viorel Bostan, to Aalborg University (Denmark), Making Aria Department of Architecture, sold throughout the world to companies such as Design and Media Technology, February 2016

Airbus, NASA, Bosch, Siemens, and many others. Company 6 is a recent investment, founded in his caliber. Such skill could be a capacity constraint while exporting their products. Company 8 notes The owner brought equipment to Moldova, and April 2015 by a German consultant at a leading to be addressed under other parts of the MCP the difficulty in finding qualified welders in Moldova. rented space. Early production was fraught, however, industrial firm in this industry. The company has project focusing on how to fill critical skills gaps. Company 8 uses bank loans for its working capital, with missed delivery schedules, quality issues, and a about 20 full time employees plus part-timers, and Alternatively, part of the investment promotion paying 12% for MDL loans and 6-7% for Euro loans. key person who stole funds. The owner then is looking to grow. Company 6 does specialty strategy could be to focus on bringing such talent decided to work with young employees of machining and metalworking: welding; edging and to Germany where such skilled people could start Company 9 was founded in 2014 and produces Elektromechanika, and replaced the management. bending; milling and drilling. stamping and grinding. up and/or expand such businesses. finished products and installations for the oil and Since then, quality has improved there has now They fulfill orders sourced by the German company. gas industry. It also provides workers, mostly been incremental investment and production has A small company with limited investment, it Company 8 was founded in 2005 and focused on welders, who install equipment on on-shore expanded. Company 4 claims to have unique outsources laser and plasma cutting, zinc coating metal fabrication (metal frames) and cutting when it platforms and ships. Its clients are from Italy, abilities to design and shape materials. Clients come (Germany) and most painting. They claim strength was purchased by an Italian investor. Turnover Norway, Azerbaijan, UAE and Singapore. The to them via the owner. Their clients are often loyal, in their networks – with the university and professional grew to 1.2 Mil Euros in both 2014 and 2015 – company offers good quality at a low price. Raw and they are becoming more and more technically schools in Balti, materials suppliers in Moldova, remaining flat because of the economic stagnation materials come from Romania and Italy. As a and quality demanding. Some of their concerns Romania, Bulgaria and Germany; and preferred in Europe. They only produce equipment that is subcontractor to another firm, Company 9 also include difficulty in near-sourcing of raw materials logistics partners. The sales are sourced through customized for orders they receive as they do not produces water filtering tanks for UN. The founder which tend to come from Germany; potential taxes the German company, MWR. Their customers are have design capability. Company 8 has about 30 and primary owner, with a 90% stake in the company, on these raw materials imports; excise tax on German, and are said to be very focused on quality. employees. It has commercial agents in Italy, is from Italy. Company 9’s turnover was about equipment, and burdensome Government The firm is deeply involved in discussing products, Belgium, and France, and an agent covering Romanian 800K Euros in 2015 but 2016 revenues may be procedures. Customers are requiring galvanizing, customization and modifications with their clients. and Moldova. The company uses raw materials lower because low oil prices result in reduced for example, and they have applied to import They produce transport containers for the from Moldova but also imports them from Italy and orders. The company employs 10 people. The galvanizing equipment; it has been a year without automotive industry, metal components, and tools. Germany. Operations are ISO 3834 certified owner has worked with Don Bosco to establish a receiving approval. In the meantime, Company 4 (welding). They welcome interns from a technical training school for welders in Moldova. The owner sends parts to Germany for galvanizing, and then They do not have I/O (green corridor) status. They college in Chisinau. Company 8 has issues with has 10+ years of experience in metal processing receives them back for assembly. are aiming to achieve ISO9001 status in 2016. Since customs, when importing used equipment for the and knows many companies in the field. He indicated startup, Company 6 has made careful, new plant. Company 8 is trying to negotiate offsetting that there about 10 very active firms in metal Company 5 is a manufacturer of specialty, high investments in equipment. They want to start payment during imports with VAT credits they get processing in Moldova and cited firms listed here. tolerance pumps, for industries like liquefied gas, oil their own R&D and design (AutoCAD) activities. and gas, petrochemicals. It is reportedly one of three high quality pump manufacturers in Moldova. The Director says that it is difficult to work in this Worldwide, there are reportedly very few pump industry alone. Companies like his need networks. manufacturers of such high quality. They employ They need to be able to subcontract and refer about 100 people, and added 7 in the past year. business when they are at capacity, to cover bigger For quality purposes, they feel that they need to orders. He says that there are 5-10 serious companies minimize dependencies, and to be self-sufficient, so in Moldova, who work with external clients. They they produce their own molds and castings and to should see each other face to face more frequently. not rely on suppliers. The owner of Company 5 This interview reinforced the need for an industry was originally a partner in a larger company, but association and industry networking, something the owners separated. He continued on his own. where MCP could add some significant value. Company 5's main markets have been to Russia, Company 7 is a design engineering company, Ukraine and other CIS countries, but he realizes specialized structural, piping and mechanical design, that he has to expand to Western markets, and is 3D modeling, strength calculations, manufacturing starting by trying to sell to clients in Romania and and assembling drawings, and digital drawings, Bulgaria where they face Austrian and German primarily for the oil and gas industry. They are competition. They are expecting to meet European low-cost in comparison to EU companies. They standards, starting with ISO 9001 by the end of work with closely with companies such as COSL, 2016. Their main business objective is to diversify Westcon Yard, Roxel Aanestad, Semco Marine and to new markets, and to do so they need certifications, others, on a service outsourcing basis. The employees business promotion, and the ability to provide are all former students of the Managing Director, maintenance services to their customers. They also who is a lecturer at the Polytechnik. Company 7 see a need for an industry association, a platform was founded in 2011.The Managing Director says for discussion and cooperation, something that that there are about 10 really good design companies MCP could very much assist. in Moldova; and maybe 10-15 design engineers of ANNEX B. Select Interview Notes and Summary Matrixes

PRECISION ENGINEERING with very large (and old) plant and equipment, for the most part lying unused or underutilized. They INTERVIEW SUMMARIES have invested in quite a bit of more modern We visited 2 large manufacturers, both earnestly equipment (from Germany), and according to the working (struggling) to adapt to new market DG, the new equipment delivers ¾ of the revenue. realities. They have ISO9001 and TüV certifications.

Company 1 was (and remains) an important Contrast these above two companies, struggling to manufacturer or agricultural equipment and machinery. reorient themselves and find new markets, with It was founded in 1944 and privatized in 1999 by 3 several other examples below: owners. Its Moldovan and CIS market is declining – Company 3 is an electronics and electrics company, economic problems and declining ruble value have a production arm of a long-established German caused its sales to this market to drop dramatically. company. Company 3 came to Moldova 9 years Moldovan market is also suffering – the tight ago, attracted by (low cost labor, opportunity to economy has cut its sales to smaller and mid-sized produce quality, and the vision of the younger buyers, while larger operators are increasingly Company 3). Company 3’s manager in Romania purchasing global brands (e.g. John Deere). Since convinced Company 3 to come to Moldova. 2013, the company’s sales dropped by 40%. Even Interestingly, Company 3’s Romanian operation had local sales have dropped; no one is buying. Their originally been located in the Czech Republic.). exports dropped from 70% of total sales in 2013 to Persistent in the face of some startup difficulties, 52% in 2015. Company 1 is trying to tap Western the Moldovan Company now produces components markets. They have some longstanding relationships and (soon) finished products for name brands and with Western buyers, and has some small contracts discerning customers in Western markets. Some of with companies in Italy and Germany. They have its Moldovan-manufactured products have been ISO9001 and six sigma certifications. moved from Romania. Company 3 says that operating Founded in 1972, Company 2 was a supplier of in Moldova involves no insurmountable difficulties, very high performance components for Soviet but they cite Lack of technology and lack of local aircraft production; its sole client was “Salute” in suppliers. They train all staff themselves, but cite a Russia. In a thrown loose from the “mother company”, real lack of maintenance and service engineers for Company 2 has worked hard to increase its plastics equipment. There is no Moldovan strategy customer base, and now sells to 4 CIS customers. for attracting investors. Customs has a big impact However, orders fluctuate and the ruble decline on logistics – and the costs have a financial impact. has moderated the attractiveness of its Staff come completely unskilled – they train them. eastward-looking market. Revenues have declined Engineers’ school knowledge in insufficient from about USD10m to about USD5 m or less. Company 4, in Goyan, is 10 years old, established Company 2 has tried to develop EU markets, thus by a German company. It produces entirely for far with minimal success; they have managed to this German company. The decision to set up obtain some orders, but had difficulty in delivering production in Moldova was made by the on time. Seen by the EU and US as linked to the engineer/designer/inventor/owner who was also a post-Soviet military complex, it has difficulty lecturer in a German university, and who became procuring some instrumentation from western close to some of his students from Moldova. The sources. Company 2s sales have declined to 2 company produces measuring equipment, which are million Euros, and its personnel to 180; is burdened sold throughout the world to companies such as

Airbus, NASA, Bosch, Siemens, and many others. Company 6 is a recent investment, founded in his caliber. Such skill could be a capacity constraint while exporting their products. Company 8 notes The owner brought equipment to Moldova, and April 2015 by a German consultant at a leading to be addressed under other parts of the MCP the difficulty in finding qualified welders in Moldova. rented space. Early production was fraught, however, industrial firm in this industry. The company has project focusing on how to fill critical skills gaps. Company 8 uses bank loans for its working capital, with missed delivery schedules, quality issues, and a about 20 full time employees plus part-timers, and Alternatively, part of the investment promotion paying 12% for MDL loans and 6-7% for Euro loans. key person who stole funds. The owner then is looking to grow. Company 6 does specialty strategy could be to focus on bringing such talent decided to work with young employees of machining and metalworking: welding; edging and to Germany where such skilled people could start Company 9 was founded in 2014 and produces Elektromechanika, and replaced the management. bending; milling and drilling. stamping and grinding. up and/or expand such businesses. finished products and installations for the oil and Since then, quality has improved there has now They fulfill orders sourced by the German company. gas industry. It also provides workers, mostly been incremental investment and production has A small company with limited investment, it Company 8 was founded in 2005 and focused on welders, who install equipment on on-shore expanded. Company 4 claims to have unique outsources laser and plasma cutting, zinc coating metal fabrication (metal frames) and cutting when it platforms and ships. Its clients are from Italy, abilities to design and shape materials. Clients come (Germany) and most painting. They claim strength was purchased by an Italian investor. Turnover Norway, Azerbaijan, UAE and Singapore. The to them via the owner. Their clients are often loyal, in their networks – with the university and professional grew to 1.2 Mil Euros in both 2014 and 2015 – company offers good quality at a low price. Raw and they are becoming more and more technically schools in Balti, materials suppliers in Moldova, remaining flat because of the economic stagnation materials come from Romania and Italy. As a and quality demanding. Some of their concerns Romania, Bulgaria and Germany; and preferred in Europe. They only produce equipment that is subcontractor to another firm, Company 9 also include difficulty in near-sourcing of raw materials logistics partners. The sales are sourced through customized for orders they receive as they do not produces water filtering tanks for UN. The founder which tend to come from Germany; potential taxes the German company, MWR. Their customers are have design capability. Company 8 has about 30 and primary owner, with a 90% stake in the company, on these raw materials imports; excise tax on German, and are said to be very focused on quality. employees. It has commercial agents in Italy, is from Italy. Company 9’s turnover was about equipment, and burdensome Government The firm is deeply involved in discussing products, Belgium, and France, and an agent covering Romanian 800K Euros in 2015 but 2016 revenues may be procedures. Customers are requiring galvanizing, customization and modifications with their clients. and Moldova. The company uses raw materials lower because low oil prices result in reduced for example, and they have applied to import They produce transport containers for the from Moldova but also imports them from Italy and orders. The company employs 10 people. The galvanizing equipment; it has been a year without automotive industry, metal components, and tools. Germany. Operations are ISO 3834 certified owner has worked with Don Bosco to establish a receiving approval. In the meantime, Company 4 (welding). They welcome interns from a technical training school for welders in Moldova. The owner sends parts to Germany for galvanizing, and then They do not have I/O (green corridor) status. They college in Chisinau. Company 8 has issues with has 10+ years of experience in metal processing receives them back for assembly. are aiming to achieve ISO9001 status in 2016. Since customs, when importing used equipment for the and knows many companies in the field. He indicated startup, Company 6 has made careful, new plant. Company 8 is trying to negotiate offsetting that there about 10 very active firms in metal Company 5 is a manufacturer of specialty, high investments in equipment. They want to start payment during imports with VAT credits they get processing in Moldova and cited firms listed here. tolerance pumps, for industries like liquefied gas, oil their own R&D and design (AutoCAD) activities. and gas, petrochemicals. It is reportedly one of three high quality pump manufacturers in Moldova. The Director says that it is difficult to work in this Worldwide, there are reportedly very few pump industry alone. Companies like his need networks. manufacturers of such high quality. They employ They need to be able to subcontract and refer about 100 people, and added 7 in the past year. business when they are at capacity, to cover bigger For quality purposes, they feel that they need to orders. He says that there are 5-10 serious companies minimize dependencies, and to be self-sufficient, so in Moldova, who work with external clients. They they produce their own molds and castings and to should see each other face to face more frequently. not rely on suppliers. The owner of Company 5 This interview reinforced the need for an industry was originally a partner in a larger company, but association and industry networking, something the owners separated. He continued on his own. where MCP could add some significant value. Company 5's main markets have been to Russia, Company 7 is a design engineering company, Ukraine and other CIS countries, but he realizes specialized structural, piping and mechanical design, that he has to expand to Western markets, and is 3D modeling, strength calculations, manufacturing starting by trying to sell to clients in Romania and and assembling drawings, and digital drawings, Bulgaria where they face Austrian and German primarily for the oil and gas industry. They are competition. They are expecting to meet European low-cost in comparison to EU companies. They standards, starting with ISO 9001 by the end of work with closely with companies such as COSL, 2016. Their main business objective is to diversify Westcon Yard, Roxel Aanestad, Semco Marine and to new markets, and to do so they need certifications, others, on a service outsourcing basis. The employees business promotion, and the ability to provide are all former students of the Managing Director, maintenance services to their customers. They also who is a lecturer at the Polytechnik. Company 7 see a need for an industry association, a platform was founded in 2011.The Managing Director says for discussion and cooperation, something that that there are about 10 really good design companies MCP could very much assist. in Moldova; and maybe 10-15 design engineers of PRECISION ENGINEERING with very large (and old) plant and equipment, for the most part lying unused or underutilized. They INTERVIEW SUMMARIES have invested in quite a bit of more modern We visited 2 large manufacturers, both earnestly equipment (from Germany), and according to the working (struggling) to adapt to new market DG, the new equipment delivers ¾ of the revenue. realities. They have ISO9001 and TüV certifications.

43 PRECISION ENGINEERING with very large (and old) plant and equipment, for the most part lying unused or underutilized. They INTERVIEW SUMMARIES have invested in quite a bit of more modern We visited 2 large manufacturers, both earnestly equipment (from Germany), and according to the working (struggling) to adapt to new market DG, the new equipment delivers ¾ of the revenue. realities. They have ISO9001 and TüV certifications.

Airbus, NASA, Bosch, Siemens, and many others. Company 6 is a recent investment, founded in his caliber. Such skill could be a capacity constraint while exporting their products. Company 8 notes The owner brought equipment to Moldova, and April 2015 by a German consultant at a leading to be addressed under other parts of the MCP the difficulty in finding qualified welders in Moldova. rented space. Early production was fraught, however, industrial firm in this industry. The company has project focusing on how to fill critical skills gaps. Company 8 uses bank loans for its working capital, with missed delivery schedules, quality issues, and a about 20 full time employees plus part-timers, and Alternatively, part of the investment promotion paying 12% for MDL loans and 6-7% for Euro loans. key person who stole funds. The owner then is looking to grow. Company 6 does specialty strategy could be to focus on bringing such talent decided to work with young employees of machining and metalworking: welding; edging and to Germany where such skilled people could start Company 9 was founded in 2014 and produces Elektromechanika, and replaced the management. bending; milling and drilling. stamping and grinding. up and/or expand such businesses. finished products and installations for the oil and Since then, quality has improved there has now They fulfill orders sourced by the German company. gas industry. It also provides workers, mostly been incremental investment and production has A small company with limited investment, it Company 8 was founded in 2005 and focused on welders, who install equipment on on-shore expanded. Company 4 claims to have unique outsources laser and plasma cutting, zinc coating metal fabrication (metal frames) and cutting when it platforms and ships. Its clients are from Italy, abilities to design and shape materials. Clients come (Germany) and most painting. They claim strength was purchased by an Italian investor. Turnover Norway, Azerbaijan, UAE and Singapore. The to them via the owner. Their clients are often loyal, in their networks – with the university and professional grew to 1.2 Mil Euros in both 2014 and 2015 – company offers good quality at a low price. Raw and they are becoming more and more technically schools in Balti, materials suppliers in Moldova, remaining flat because of the economic stagnation materials come from Romania and Italy. As a and quality demanding. Some of their concerns Romania, Bulgaria and Germany; and preferred in Europe. They only produce equipment that is subcontractor to another firm, Company 9 also include difficulty in near-sourcing of raw materials logistics partners. The sales are sourced through customized for orders they receive as they do not produces water filtering tanks for UN. The founder which tend to come from Germany; potential taxes the German company, MWR. Their customers are have design capability. Company 8 has about 30 and primary owner, with a 90% stake in the company, on these raw materials imports; excise tax on German, and are said to be very focused on quality. employees. It has commercial agents in Italy, is from Italy. Company 9’s turnover was about equipment, and burdensome Government The firm is deeply involved in discussing products, Belgium, and France, and an agent covering Romanian 800K Euros in 2015 but 2016 revenues may be procedures. Customers are requiring galvanizing, customization and modifications with their clients. and Moldova. The company uses raw materials lower because low oil prices result in reduced for example, and they have applied to import They produce transport containers for the from Moldova but also imports them from Italy and orders. The company employs 10 people. The galvanizing equipment; it has been a year without automotive industry, metal components, and tools. Germany. Operations are ISO 3834 certified owner has worked with Don Bosco to establish a receiving approval. In the meantime, Company 4 (welding). They welcome interns from a technical training school for welders in Moldova. The owner sends parts to Germany for galvanizing, and then They do not have I/O (green corridor) status. They college in Chisinau. Company 8 has issues with has 10+ years of experience in metal processing receives them back for assembly. are aiming to achieve ISO9001 status in 2016. Since customs, when importing used equipment for the and knows many companies in the field. He indicated startup, Company 6 has made careful, new plant. Company 8 is trying to negotiate offsetting that there about 10 very active firms in metal Company 5 is a manufacturer of specialty, high investments in equipment. They want to start payment during imports with VAT credits they get processing in Moldova and cited firms listed here. tolerance pumps, for industries like liquefied gas, oil their own R&D and design (AutoCAD) activities. and gas, petrochemicals. It is reportedly one of three high quality pump manufacturers in Moldova. The Director says that it is difficult to work in this TABLE. 1. DATA FROM MEETINGS WITH PRECISION ENGINEERING FIRMS Worldwide, there are reportedly very few pump industry alone. Companies like his need networks. They need to be able to subcontract and refer manufacturers of such high quality. They employ 10 2 3 4 5 6 7 8 9 about 100 people, and added 7 in the past year. business when they are at capacity, to cover bigger 1

For quality purposes, they feel that they need to orders. He says that there are 5-10 serious companies name Company minimize dependencies, and to be self-sufficient, so in Moldova, who work with external clients. They Company Company Company Company Company Company Company Company Company should see each other face to face more frequently. Sales 3-6 m 15m euros 0.5m 3-3.5m 100k Euros 350k Euros 1.2 Mil 800K they produce their own molds and castings and to euros (expected Euros Euros (2-15) (2-15) Euros Euros not rely on suppliers. The owner of Company 5 This interview reinforced the need for an industry (expected 2016) (2015) (expected (2014, (2015) was originally a partner in a larger company, but association and industry networking, something 2016) 2016) 2015) the owners separated. He continued on his own. where MCP could add some significant value. Sales trend -40% -50-80% Upwards, Upwards Upwards Upwards Variable Flat Upwards (2014 Company 5's main markets have been to Russia, (last 3 +25% in (started (started Company 7 is a design engineering company, years) last year operating operating startup) Ukraine and other CIS countries, but he realizes specialized structural, piping and mechanical design, in 2015) in 2015) that he has to expand to Western markets, and is 3D modeling, strength calculations, manufacturing Export Exports Down- Upwards, Upwards Upwards Upwards Variable Flat Upwards starting by trying to sell to clients in Romania and and assembling drawings, and digital drawings, trend dropped ward, but +25% in (started (started (2014 Bulgaria where they face Austrian and German from 70% of highly last year operating operating startup) primarily for the oil and gas industry. They are competition. They are expecting to meet European total sales variable in 2015) in 2015) low-cost in comparison to EU companies. They standards, starting with ISO 9001 by the end of in 2013 to work with closely with companies such as COSL, 52% in 2015 2016. Their main business objective is to diversify Russia, Westcon Yard, Roxel Aanestad, Semco Marine and Export CIS CIS EU, via EU, via EU, via EU EU Italy, to new markets, and to do so they need certifications, Ukraine, Norway, others, on a service outsourcing basis. The employees destina- countries, countries Germany Germany other CIS; Germany business promotion, and the ability to provide targeting Azerbaijan, are all former students of the Managing Director, tions Italy, (mostly UAE, maintenance services to their customers. They also Germany Romania and who is a lecturer at the Polytechnik. Company 7 Russia) Bulgaria Singapore see a need for an industry association, a platform was founded in 2011.The Managing Director says Employees 180 250 80 100 20 6 30 10 for discussion and cooperation, something that that there are about 10 really good design companies (full time) MCP could very much assist. in Moldova; and maybe 10-15 design engineers of

10. Company names are not provided here as the table contains sensitive sales and employment data shared with consultants, June 2016 44 CREATIVE INDUSTRIES: Company 2: Provides services related to animation, of companies would appreciate to get USAID’s elements of manufacturing production and specialized with strong growth in the eastern markets and support for projects for creative tools and this creative services. This also fits in well with the Group Meeting with the Creative Sector – 5 expanding employment. emphasis fits well with the White House focus on current USAID and MCP focus on creating a hub for participants, June 9, 2016 entrepreneurship, which is often associated with creative industries at Tekwill. Other participants and capabilities: Commercial creative industries, new software applications, design Many Moldovans have creative talents and the point is video; animation, advertising production and export; to develop creative services industries inside Moldova strategic communication and creative forms of and retain this talent in the country. Barriers to entry communication; services for supporting and advising are relatively low. And this industry links with other young filmmakers for the domestic market); elaboration industries and contributes to them. There is art and of strategies based on data, not on creativity, validation design in many products. It is cross cutting and can of communication strategies, communication and PR help in the branding of wine or apparel. There is research and implementation; graphic design; digital demand for Moldovan artistic or other products by and creative communication, developing apps, social the diaspora abroad as “everyone wants a piece of media, organization of academies, conferences related to home”. Working with creative industries allows local creative industry, promotion of media management; artist to develop products for domestic and Diaspora work events, establishing international collaboration. markets. The group was vocally supportive of the idea The discussion was focused on the challenges faced by of a creative services association, something that MCP companies, the advantages of creative industry’s could perhaps support. They saw MCP having convening development, achieved results (growth) for previous power as a neutral broker. MCP could help them years and expectations of companies, ideas and develop a common agenda. Everyone in the sector is recommendations for developing creative industry, self-education. An association could provide trainings, as well as their further expectations. courses. It’s a big problem for the sector – training is now at the level of specific companies. An association Challenges: They are mostly small companies with could advocate for more cultural and entertainment limited exposure to international markets. Linkages events. Creative Moldovans also have a competitive with Moldovan and international firms need to be advantage understanding both east and west and strengthened. Also, it’s a challenge to explain to the helping to interpret one to the other11. Moldova has local clients the importance, the impact of good good linguistic capability in Russian, the romance services, in terms of long planning and strategic languages and English. Much of the sector operates communication for further development of the informally – non-registered services and freelance business. In order to extend their list of external consultants using PayPal to sell their services abroad. clients, companies no longer deliver services for some They are seeking grants for purchase of legal software local clients. Employers noticed a lack of qualitative for design. Moldova needs a production studio. Adobe high education and the absence of university specialties and others offer internships, learning programs for such as copy-writer, graphical design. More internship students in Moldova. There are many creative NGOs linkages are needed. Those purchasing Moldovan seeking grants from EU. “Creative Europe” (EU) funds service exports may face a double VAT tax first in are available for Moldova. Romania and Ukraine are Moldova and second in their own country. seen as having better developed creative industries Recommendations: Those gathered would like MCP than Moldova. There is also a need for a stronger to facilitate a creative services association. The first design school, perhaps with summer school/summer priority would be creating a common website portal camps. Apparently students from TUM are more in that could lead international buyers immediately to a demand than those from the fine arts faculty. comprehensive set of creative services, linking to Company 1 (Architecture): This family company specific companies and capabilities and bringing up started in 2006. They enters international competition examples of their products and services. MCP could and have placed their work in Milan and Shanghai. also link them to other industries being assisted (wine, There are said to be 100+ architectural offices in apparel, tourism IT) along with others. In addition, Chisinau. It’s not remunerative to win international identifying workforce constraints and addressing competitions. They did the Turkish Embassy in them, perhaps via Tekwill and TUM, would be another Chisinau. Hotel chains are supposed to be coming to legitimate product activity. MCP could help identify Moldova and they this as an opportunity. policy and institutional constraints, especially related to intellectual property and copyrighting. Representatives

45 11. It refers to the fact that many Moldovans speak Russian and understand CIS market (East). Meantime they have a very good connection with Romania and other EU markets (West). So they can be seen as a link between these two. CREATIVE INDUSTRIES: Company 2: Provides services related to animation, of companies would appreciate to get USAID’s elements of manufacturing production and specialized with strong growth in the eastern markets and support for projects for creative tools and this creative services. This also fits in well with the Group Meeting with the Creative Sector – 5 expanding employment. emphasis fits well with the White House focus on current USAID and MCP focus on creating a hub for participants, June 9, 2016 entrepreneurship, which is often associated with creative industries at Tekwill. Other participants and capabilities: Commercial creative industries, new software applications, design Many Moldovans have creative talents and the point is video; animation, advertising production and export; to develop creative services industries inside Moldova strategic communication and creative forms of and retain this talent in the country. Barriers to entry communication; services for supporting and advising are relatively low. And this industry links with other young filmmakers for the domestic market); elaboration industries and contributes to them. There is art and of strategies based on data, not on creativity, validation design in many products. It is cross cutting and can of communication strategies, communication and PR help in the branding of wine or apparel. There is research and implementation; graphic design; digital demand for Moldovan artistic or other products by and creative communication, developing apps, social the diaspora abroad as “everyone wants a piece of media, organization of academies, conferences related to home”. Working with creative industries allows local creative industry, promotion of media management; artist to develop products for domestic and Diaspora work events, establishing international collaboration. markets. The group was vocally supportive of the idea The discussion was focused on the challenges faced by of a creative services association, something that MCP companies, the advantages of creative industry’s could perhaps support. They saw MCP having convening development, achieved results (growth) for previous power as a neutral broker. MCP could help them years and expectations of companies, ideas and develop a common agenda. Everyone in the sector is recommendations for developing creative industry, self-education. An association could provide trainings, as well as their further expectations. courses. It’s a big problem for the sector – training is now at the level of specific companies. An association Challenges: They are mostly small companies with could advocate for more cultural and entertainment limited exposure to international markets. Linkages events. Creative Moldovans also have a competitive with Moldovan and international firms need to be advantage understanding both east and west and strengthened. Also, it’s a challenge to explain to the helping to interpret one to the other11. Moldova has local clients the importance, the impact of good good linguistic capability in Russian, the romance services, in terms of long planning and strategic languages and English. Much of the sector operates communication for further development of the informally – non-registered services and freelance business. In order to extend their list of external consultants using PayPal to sell their services abroad. clients, companies no longer deliver services for some They are seeking grants for purchase of legal software local clients. Employers noticed a lack of qualitative for design. Moldova needs a production studio. Adobe high education and the absence of university specialties and others offer internships, learning programs for such as copy-writer, graphical design. More internship students in Moldova. There are many creative NGOs linkages are needed. Those purchasing Moldovan seeking grants from EU. “Creative Europe” (EU) funds service exports may face a double VAT tax first in are available for Moldova. Romania and Ukraine are Moldova and second in their own country. seen as having better developed creative industries Recommendations: Those gathered would like MCP than Moldova. There is also a need for a stronger to facilitate a creative services association. The first design school, perhaps with summer school/summer priority would be creating a common website portal camps. Apparently students from TUM are more in that could lead international buyers immediately to a demand than those from the fine arts faculty. comprehensive set of creative services, linking to Company 1 (Architecture): This family company specific companies and capabilities and bringing up started in 2006. They enters international competition examples of their products and services. MCP could and have placed their work in Milan and Shanghai. also link them to other industries being assisted (wine, There are said to be 100+ architectural offices in apparel, tourism IT) along with others. In addition, Chisinau. It’s not remunerative to win international identifying workforce constraints and addressing competitions. They did the Turkish Embassy in them, perhaps via Tekwill and TUM, would be another Chisinau. Hotel chains are supposed to be coming to legitimate product activity. MCP could help identify Moldova and they this as an opportunity. policy and institutional constraints, especially related to intellectual property and copyrighting. Representatives

Photo credit: Racceeva Elena Photo caption: Creative items produced by students from Industrial and Product Design Department, Technical University of Moldova, presented at Makers’ Day Chisinau, June 14, 2016 46 The USAID Moldova Competitiveness Project 14, Nicolae Iorga str. MD-2012, Chisinau, Moldova Tel.: (+373) 22 908 280 Fax: (+373) 22 908 290 [email protected]