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Manufacturing Industry Unexplored opportunities

Edition 2016/2017 GAGAUZIA PROFILE Political and administrative status Autonomous Territorial Unit of Gagauzia Total area 1,848 km2 Currency Moldovan Leu (MDL) Capital Comrat (26,200 inhabitants) Total population 162,000 people (4.6% of the Moldovan population) Spoken languages Gagauzian, Russian, Turkish, Romanian

LOCATION COMRAT Situated in the southern part of the 26,200 KIRSOVO inhabitants 7,100 Republic of Moldova, Gagauzia is inhabitants bordered by the Ukrainian district CONGAZ of Odessa to the East and has 12,230 CHADIR- administrative border with the inhabitants LUNGA districts of Leova, Cantemir, and 22,900 Cahul to the West. By car, it takes inhabitants 1.5 hours to travel from the capital BAURCHI of Gagauzia, Comrat, to the capital 8,250 of Moldova, Chisinau. Its location inhabitants in the South of Moldova is close to VULCANESTI COPCHEAK the Danube ports of Giurgiulesti 16,700 inhabitants 10,120 (International Free Port, Moldova), inhabitants and to the river ports of Galati (Romania), Reni, and Ismail (both Ukraine).

1320 km 2612 km 992 km

2061 km 232 km

1928 km 218 km

1263 km 177 km

112 km 100 km

London Milano Frankfurt Vienna Chisinau Istanbul Moscow Ungheni Comrat Odessa Giurgiulesti Galati CONTENT

Gagauzia profile 1

Economic cooperation 3

Manufacturing industry overview 4

Sub-sectors 5

Top reasons to invest in the manufacturing industry in Gagauzia 9

Human resources are one of the most important assets of Gagauzia 10

Operating costs 12

Free Economic Zone ”Valcanes” 13

Industrial Park Comrat 13

Success stories 16

Invest in Moldova & Invest Gagauzia help you 18 ECONOMIC COOPERATION The Republic of Moldova has signed 43 Free Trade Agreements (FTA), all of them are valid also for Gagauzia, including:

DCFTA Deep and Comprehensive Free Trade Agreement with the European Union – 500 million customers;

FTA with CIS countries – 250 million customers;

FTA with Turkey – 80 million customers;

CEFTA Central European Free Trade Agreement (Moldova, Macedonia, Albania, Serbia, Montenegro, Bosnia and Herzegovina, and UNMIK (Kosovo) – 30 million customers;

GUAM Organization for Democracy and Economic Development (Georgia, Ukraine, Azerbaijan, and Moldova) – 60 million customers. 880 million costumers free trade area A total of 150 enterprises (out of which MANUFACTURING 40 large ones) represent the current industrial base of Gagauzia. In 2015, the INDUSTRY industrial production registered a growth OVERVIEW of 6.9% compared to 2014, amounting to 50.6 million EUR. The share of the Gagauzia’s current manufacturing industry manufacturing sector of Gagauzia accounts builds on its strong industrial past. The for 5% out of its total economy and employs Manufacturing industry of Gagauzia is about 6000 people. vibrant and growing, and consists of labor intensive enterprises. They are active in producing apparel, leather goods, furniture, (%) construction materials, equipment and Export by destination, 2015 spare parts for agricultural machinery, 13.4 Turkey cosmetics, pharmaceutical products, and EU 47.4 refined petrolium. More over, several industrial skills are well-preserved.

Industrial production, 2011-2015 (thousand EUR)

80 000 34.1 CIS 60 000 Other coutries 5.1 40 000

20 000 Source: Customs Service of the RM 0

2011 2012 2013 2014 2015

Structure of deliveries of production (%)

Export 71

Internal market 29

4 Out of the total value of production of Share of manufacturing industry the manufacturing industry, 71 percent, activities: are being exported and the rest is being consumed in the domestic market. The share in the Industry manufacturing industry in 2015, % A large number of enterprises are located in the biggest districts of Gagauzia, which Textile, Apparel 18 have potential for labor intensive activities. Furniture manufacturing 2 Comrat 26,200 inhabitants Construction materials 32 Chadir-Lunga 22,900 inhabitants Mechanical engineering 2 Vulcanesti 16,700 inhabitants Cosmetics production 4

Pharmaceutics 4 Industry distribution across districts (rayons), 2015 Products from plastic 2 District District Petroleum refinery 26 share, % Source: Economic development Department of the Comrat 41 Executive Committee of ATU Gagauzia

Chadir-Lunga 25

Vulcanesti 34

Source: Economic development Department of the SUB-SECTORS Executive Committee of ATU Gagauzia TEXTILE, APPAREL, FOOTWEAR AND LEATHER Main traded goods: GOODS INDUSTRY Boilers, Fuel/industrial oils, Paper, EU: The manufacturing of ready-made garments Vehicles, Cotton has successfully expanded in Gagauzia over the recent years. Traditional industries Fuel/industrial oils, Boilers, Wood CIS: such as wool processing have as well been products rediscovered. Apparel manufacturing is an industry with long-standing traditions in Knitwear, Boilers, Paper, Metal Turkey: producing and exporting a wide range of products products. Since 1990, this industry has been restructured, upgraded and re-equipped in order to meet market economy demands. The share of the manufacturing industry in The sector is structured as follows: the total volume of production of Gagauzia • Apparel manufacturing stands at 56.5%. 5 (clothes, knitwear); Petrol” and “Industrial Invest”. • Leather, leather products, accessories; — ”Industrial Invest” (42 jobs, heating oil • Footwear manufacturing; production) etc. • Wool processing (sheep); — “Arnaut-Petrol” ‒ active in refining and • Blankets and pillows manufacturing wholesale of petroleum products since (connected to sheep). 1997.

As manufacturing moves to lower cost Export destination: EU; Employees: 57 regions, Gagauzia remains an attractive Production capacity: 1921 thousand EUR opportunity for investment in this sector. Export amount: 1175 thousand EUR The apparel sub-sector has become one of the leading exporting sectors in Gagauzia. The competitiveness of the Gagauz products in the Textile, Apparel, Footwear and Leather (TAFL) industry is a direct result of a combination of high quality levels of finished production that are guaranteed by modern systems of quality control, the timely realization of contractual obligations with foreign clients, and a speedy delivery to the main markets in EU and CIS countries. Due to its location, Gagauzia delivers Fast Fashion.

• Within one truck day, goods are delivered to Eastern Europe, within 2 truck days to Western Europe. • 3The Gagauzian apparel industry is competitive in prices and maintains social and labor security standards at the same time. • The proximity to the EU market also gives customers the possibility to outsource large Source: Arnaut Petrol ‒ refined petroleum production parts of the value chain. • The French cosmetics production • Price, quality, lead time, flexibility to company ”Marigold” cooperates with produce smaller orders are the main Western European manufacturers of strengths of this industry. perfumes and cosmetics. The assortment counts more than 450 items of cosmetics, OTHER MANUFACTURING decorative cosmetics, body, and hair care INDUSTRIES products. In 2011, based on the latest development • There are two companies active in of one of the world’s leading producers of refining petroleum in Gagauzia: “Arnaut ingredients for cosmetics ‒ the German

6 company BASF and Roncosmetic GmbH ‒ MariGold developed a new line of products for body and hair care, which includs 75 items. The products are based on innovative technologies with natural biologically active substances ‒ natural oils of olive, avocado, tea tree oil, wheat germ oil, sea buckthorn oil, and others.

Source: Marigold ‒ cosmetics production

• Two engineering plants operate in the town of Ceadir-Lunga, namely a research plant and “ZETO” SA, which produces thermal electric equipment and heating boilers.

• “Dormin-Grup”, a manufacturer of high- quality aluminum profiles, is using the latest modern equipment and extrudes profiles based on individual orders, as well as performs polymer painting of profiles. The factory produces a wide range of high quality aluminum profiles and has designed and manufactured its own line of powder painting of aluminum profiles in electrostatic field. Aluminum profiles are manufactured using foreign equipment by extrusion on a 1,100 tons press, which has an automatic ingots input line and an element of intensive air cooling of profiles. Source: Dormin-Grup The press has a capacity of 300 tones of aluminium profiles per month.

7 • “Batstractor” is a manufacturer of spare parts for agricultural machinery and tractors assembler.

Source: ”Goliat-Vita” ‒ furniture production

• Moldovan - American Company Source: ”Batstractor” ‒ production of spare parts for “Vitapharm-Com” was established in 2003, agricultural machinery as a successor of the American company Vitapharm. Production is located in the • Production of construction fiber glass South of Moldova in Comrat town. The main mesh is done by “Terra Impex”. The activity of Vitapharm is the manufacture of product is exported to the EU. The company medical products and biologically active has generated 227 jobs. additives to food.

• “Betacon” sells and produces concrete products.

• Furniture Producers: there are many companies active in producing upholstered & office furniture, kitchen sets: ”Goliat- Vita”, ”Oguz Ozdun”, ”Mebella”, ”Gariv Mobella”.

8 Source: ”Vitapharm-Com” ‒ manufacture of medical products

TOP REASONS TO INVEST IN MANUFACTURING INDUSTRIES IN GAGAUZIA In Gagauzia there is also a big potential for the production of automotive components (wire harnesses, car covers, car seat covers).

Competitive labor and production costs in the region (Labor: Average net wage ca. 180 EUR/month, Production cost: 0.05 EUR per minute). This creates a competitive business environment for manufacturing. Human resources are one of the most important assets of Gagauzia. Gagauzia offers an active, skilled and multilingual workforce. Widely spoken Labor force languages: Romanian, Russian, Gagauzian, Turkish, English, Bulgarian, Ukranian.

Flexible, reliable and quick delivery tailored to customer needs. Most major destinations both from the EU and CIS can be reached within 2 truck days. Flexibility and Orders are executed and delivered on average within 2 weeks, with no short delivery minimum order restrictions. time

Gagauzia’s trade is largely liberalized to both the European Union, the Proximity and Commonwealth of Independent States and Turkey. easy access to major markets

Industry tradition is stretching over decades, including an experienced labor force in Apparel clothes, knitwear, etc., leather processing & leather goods; wool processing (sheep); blankets and pillows manufacturing (connected to Long standing sheep). experience

9 Goods that can be produced competitively in Moldova:

Automotive components Footwear and Leather goods

Textile Furniture

Apparel

HUMAN RESOURCES ARE ONE OF THE MOST IMPORTANT ASSETS OF GAGAUZIA 104.8 thousand Working age population (15 to 64 years old) (64.8 % of the total population)

Employment rate (ratio of the employed to 33.3% the working age population)

Unemployment rate 3.1%

Average net wage ca. 180 EUR / month

Full load labor cost ca. 1.8 EUR / hour

Gagauzia’s labor force combines competitive cost with high productivity, deriving from the industrial experience and history of the region. While the medium age of the Gagauzian population stands at 34.6 years, companies operating in the region have the possibility to develop their business with the help of qualified professionals with multilingual skills.

Available workforce 50 000 45350 40 000 across districts, 39758

2015 30 000

Working age population 20 000 17170 10338 12458 Students 10 000 5117 4550

Unemployed 3315 0 704 Source: General Department for Economic Comrat Chadir-Lunga Vulcanesti Development, ATU Gagauzia district district district

10 EDUCATION in 2015: 180. Specialties: agronomy, accounting, transport, agricultural Well educated graduates are available mechanization, marketing, agricultural to work in companies and increase their technology. productivity: • Three vocational schools (Comrat, • The State University of Comrat is Chadir-Lunga, Vulcanesti); Graduates organized into four faculties with a 4 year in 2015: 351. Specialties: seamstress, cycle study. As of 2016, the total number of carpenter, mechanic, electrician, plasterer, students in Comrat University is 1625. carpenter, builder/constructor. The University prepares highly qualified specialists in the field of economics, • Professional Training Center, with law and agriculture. During the 2014- branches in 8 localities, where students are 2015 academic year Comrat University being trained in: wood carving, mechanics, reported 615 graduates. Foreign languages seamstress, accounting, cosmetics etc.; department of Comrat University offers Graduates in 2015: 311. Russian is the study study of Gagauzian, Romanian, English, language in all educational institutions in German, and Greek. Gagauzia, though Gagauzian and Romanian are taught as compulsory languages. • Two Colleges: Pedagogical College and English and German languages are taught Agriculture Technical College; Graduates as foreign languages. OPERATING COSTS Monthly net wages, 2015 (EUR)

Romania 423

Bulgaria 376

Serbia 361

Macedonia 361

Labor cost Albania 357

ATU Gagauzia 180

0 100 200 300 400 500

Electricity Water Gas Sewerage 0.10 EUR/kWh 0.726 EUR/m3 0.34 EUR/m3 0.586 EUR/m3 in Comrat

1.7 EUR/m3 Utility cost in the region

Office and industrial space 1.5 ‒ 7.3 EUR/m² Rental price

Personal 7% < 29,640 MDL annual income < 18% income tax

Corporate 12% income tax (CIT) 7% for farm enterprises 6% within FEZs 3% within Free Port (outside Gagauzia)

Social security 6% for employee 23% for employer Taxes Health 4.5% for employee insurance 4.5% for employer

VAT 20% 8% for bread and diary 6% for natural gases 0% for export

12 Incentives offered: FREE ECONOMIC • Free Economice Zones (FEZ) are connected to important transport routes ZONE “VALCANES” and have access to all regions through the national and international roads; Location: Vulcanesti • Customs Office available on site, operating 7 days/week (if necessary 24 Residents: «DK-Intertrade» SRL (144 jobs, hours/day); alcohol production) , «Terra Impex» SRL • Exemption from customs duties and (227 jobs, construction net production) , excise duties on goods imported into the (42 jobs, heating oil «Industrial Invest» SRL FEZs and subsequently exported; production) , and others. • VAT for equipment and machinery: 0%; • Corporate tax rate stands at 6%; Activities that can be carried out: • Customs procedures tax: 0.1% from • Industrial production customs value of goods (outside FEZs 0.4%); • Foreign trade activity • 10 years state guarantee for protection • Sorting, packaging, labeling, etc. against adverse changes in legislation (15 • Public services, warehousing, years in Free Port); construction, and others. • Free connection to utilities in FEZs and Industrial Parks; • EUR/ USD payment among FEZs residents; • Exemption from CIT for a period of 3 years, when investing 1 million USD in fix assets of the company and/or in FEZ infrastructure development (for 5 years, Free Economic Zone “Valcanes” when investing 5 million USD).

• European route E584 - B class INDUSTRIAL PARK road connecting the cities Galati (ROU) COMRAT and Poltava (UKR). • National road R35 – connecting Industrial Parks are delimited territories cities: Comrat and Basarabeasca; in which industrial production, services • National road R37 – connecting cities: Ciadir-Lunga – Comrat – provision, applied scientific research and / Cantemir. or technological development are carried out under some preferences. The Industrial The railway serves the city and is Park “Comrat” was established in 2014. operated by Moldovan Railways. Industrial Park (IP) is located in the northern It provides rail connections to Basarabeasca railway border part of Comrat municipality. The IP is crossing point with Ukraine and delimited to the east along European road Giurgiulesti International Free E584 connecting the cities Poltava (UKR) Port. and Glati (ROU). The subzone is situated in the proximity of 4 km from the city center. Proximity to Chisinau The land plot size is 50,3 hectares. International Airport – 100 km

13 UTILITIES IN THE INDUSTRIAL PARK COMRAT

Water supply Electric power Natural gas Sewerage: artesian wells – transmission pipeline – in development 50m³/hour line – 800 kW 0.155-0.25 MPa (500m³/hour)

INVESTMENT PROPOSAL • Reduced rental price for state land; • Free connection to utilities; The favorable geographic location • Minimal state inspection and control of Moldova provides an exceptional regime investment platform with opportunities to export to EU and CIS countries as well as to Turkey. Many foreign manufacturing companies are interested to extend their production capacities in Moldova. It increases the demand for ready-to-use production halls for quick production start but also demand for development of build- to-suit (BTS) projects. The IP “Comrat” is located on 50 hectares IP RESIDENT FEES* of greenfield designed for industrial production, manufacturing and services Fees for tender participation 20 EUR provision. The companies are given legal Registration fee 1 EUR and consulting support in obtaining licenses, permits and approvals. Consulting * fees to be paid at the beginning of activity services also include project development, personnel recruitment, knowledge management, marketing, etc. LAND LEASE & PURCHASE IP Comrat is created on a free land plot of • Land lease fee 50.3 hectares which allows implementing per 1 m²/year the industrial real estate development projects. IP land plot 0.5 – 1.0 EUR Land plot (general regime) 0.75 – 1.5 EUR IP INCENTIVES • Adjacent land purchasing • Free re-zoning of agricultural into Land plot under constructions within IP can industrial land; be purchased on state norm price • Normative (below market) prices of the purchased land; Land purchase norm price 1.5 EURO/m2

14 Success stories

& Industrial

P r

competencies u 2 7 9 10

18 21 24

i R

v Comrat

E e

r Avdarma Kirsovo

Tomai N

1 22

Congaz

Baurci

M I

Chadir-Lunga

3 6 11 12 13 Svetlii A

A 16 17 19 20 23

Copcheak

P K r

4 5 14 15

U r i

v Vulcanesti Chisinau

A r

Etulia

Giurgiulesti Port

Companies: 9. Arnaut Petrol - petroleum 18. Goliat Vita – furniture; refinery; 19. Brennus Grup ‒ machine 1. AsenaTextil ‒ clothing; 10. Marigold ‒ cosmetics; bulding; 2. Ridiager ‒ clothing; 11. Zeto ‒ boilers; 20. Oguz Ozdun ‒ furniture; 3. Euro Jersey ‒ clothing and 12. Stil ‒ clothing; 21. Mebella ‒ furniture; knitwear; 13. Yapaa-Servis ‒ pillows, 22. Gariv Mobella ‒ furniture; 4. Terra Impex ‒ construction blankets, mattresses; 23. Com Intercris ‒ plastic; material; 14. TricotCuatro-F ‒ knitwear; 24. Vitafarm ‒ pharmaceutics; 5. Stil ‒ apparel; 15. Dar ‒ carpets production and 6. Coraf ‒ quilted products, souvenir production, knitwear; blankets etc.; 16. Yapaa-Servis ‒ blankets, 7. Deri Cristal ‒ leather, furs; pillows; 8. Batstractor ‒ agricultural 17. Dormin Prim ‒ mashine machinery; bulding; SUCCESS STORIES SRL ”Asena Textil” (Location: Chadir-Lunga)

“Аsena Textil”, a Moldovan-Turkish joint venture produces garments for renowned brands and exports to Turkey. The company owns three plants and employs 240 people. Range of products: sewing, knitting products in stock (T-shirts, shorts, pants). The volume of production in 2015: 4275000 pieces. The number of employees 2015: 1052. The export volume 2015: 3 million EUR.

SRL ”Ridiager-SV” (Location: Comrat)

“Ridiager-SV” is represented four garment factories, and has ten specialized lines for the production of garments: dresses, blouses, skirts, pants, jerseys. The company produces high-quality products which are being exported to the EU markets. At the moment the company is developing a new direction in the activity ─ its own collection of fashionable women’s clothing (“Gagauz Malari”).

SRL ”Terra Impex” (Location: Vulcanesti, FEZ ”Vulcanes”)

«Terra Impex», a Romanian investment, started with a greenfield investment in 2011 in the Free Economic Zone Valcanes. The company is specialized in the production of construction fiber glass mesh. Export market: EU. Cooperation: Romania, Poland, Hungary, Portugal, Czech Republic, Spain, Bulgaria, Slovakia, Cyprus; The volume of production in 2015: 4.4 million EUR. The number of employees: 177. The export volume in 2015: 4.8 million EUR.

SRL ”Arnaut Petrol” (Location: Comrat)

Arnaut Petrol is engaged in the extraction and processing of diesel fuel. The Company develops and implements complete suppliers of technologies and management systems for fuel and crude oil product storages and terminals.

16 Our company is focused on production, which is exported. We operate in Gagauzia in the Free Economic Zone «Valkanes». This gives us certain benefits – it is profitable to work here. For the moment, we have 227 jobs created, and we have both the capability and the willingness to expand our production.

“We have been working in Gagauzia for 15 years. There are four our factories operating in the Autonomy: in Etulia, Kopchak, Congaz and Ceadir-Lunga. In total there are 1,200 people employed in our production. In general, it’s profitable to run business in the Gagauz Autonomy.” Leon Tatiana Director

“In my opinion, Gagauzia has very important and significant advantages for running business here: • New investment law helps investors to develop their business; • Professional and strong team of the Executive Committee, headed by the Bashkan (Governor) of Gagauzia Irina Vlach, is very interested in economic development of the region. At present, much attention is paid to investors who want to develop their business on the territory of the Autonomy. The new investment law and the authorities’ openness to the business are the best indication of it. We are confident that the work on the territory of Gagauzia is not only possible but necessary. Our company creates new jobs and looks forward with confidence and optimism to the future, because we really feel the support of the Gagauz Authorities.”

Kamilciu Svetlana General Director

17 INVEST IN MOLDOVA & INVEST GAGAUZIA HELP YOU

DECISION& STRATEGY EVALUATION INVESTMENT

PROJECT MANAGEMENT ASSISTANCE AND PROVIDING INFORMATION General data Joint project Sector-specific Coordination Identification and statistics management details & and support of of sector specific for investors assistance negotiations information of together with investors feasability study with local legislation FEZs & IPs support administration authorities LOCATION CONSULTING / SCOPING MISSION SUPPORT Site visit Identification of organization project-specific Relevant site locoations Information Arranging presetantion Final site on suitable meetings with decision and public Identification locations support preselection authorities, of sourcing relevant opportunities private sector representatives AFTERCARE / POSTINVESTMENT SUPPORT SERVICES Facilitation and Identification Connecting communication of and general Supporting with relevant with public local information on investors and recruitment, and central Advice on relevant tax, administrative associations in legal, tax and authorities, as their efforts to legal and and legal issues other consulting well as relevant improve the administrative companies private sector business climate issues representatives 196, Lenin str., Comrat mun., MD-3805, ATU Gagauzia, Republic of Moldova +373 (298) 2-46-36 www.investgagauzia.md +373 (298) 2-12-22 [email protected] +373 (298) 2-20-34

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Sankt Petersburg 0 km Stockholm 150

Nijnii Novgorod 1000 k Moscow m Copenhagen Kaluga Tolyatti Minsk

Breman Glewice

Amsterdam Poznan Wolfsburg km 1 0 5 50 Katowice 0

Mlada Boleslav Kiev k 2 m 0 Kolin 0 Lviv 0

Sindelfingen k Paris Bratislava

Munchen

Zaporoje

Esztergom

Gyor Iassy

Graz Chisinau Oradea 5

Comrat 0

Novo Mesto

Timisoara k

Bucuresti

Turin Pitesti m

Sarajevo 0 0

Pamplona k 2

Vals Istambul

Bursa

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k 0

0 0

Jerusalim m

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