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Business Process Outsourcing -your next regional nearshoring destination

Edition 2020/2021 KEY FACTS Official name: Inflation rate, 2019: The Republic of 7.5 % Autonomous Territorial Unit of Gagauzia (ATU) Flat tax rate on turnover 7% for IT park residents Area: 1,848 km² Corporate tax (CIT): 12 % Population: 145,816 inhabitants VAT: 20%, 8% Language: Gagauzian (Turkic Language Family), Employment rate in Gagauzia, 2019: Russian and Romanian are the most 35.1% spoken languages in Gagauzia The average gross monthly Capital of ATU Gagauzia: wage in the IT sector in Moldova, 2019:* Comrat (22,886 people) 894 EUR

Currency: (MDL) *Source: www.statistica.md CONTENTS

Why choose Gagauzia for outsourcing ...... 2

BPO in Moldova and opportunities for development in Gagauzia ...... 4

Telecommunications ...... 7

Telephony ...... 8

Internet ...... 8

Moldova IT Park ...... 10

Invest in Moldova & Invest Gagauzia help you ...... 13 WHY CHOOSE GAGAUZIA FOR OUTSOURCING

Human capital Location Gagauzia is an autonomous region of the Republic of Moldova. Comrat is located 100 km from the The region has a population of 145,000 inhabitants. Comrat capital of the Republic of Moldova, Chisinau; municipality is the administrative center of Autonomous Territorial Unit with 22,886 inhabitants. Over 80 percent of Direct flights to Chisinau from: , , the total population speaks which is closely Frankfurt, , Milano, , , , linked to Turkic language family. That enables , and others; to speak and understand Turkish and Azerbaijani languages. Russian and Romanian are second most spoken languages Time compatibility with most European and CIS in Gagauzia. English is widely spoken and understood by the youth. countries. Central European Time + 1 hour;

90.1 thousand people represent the employable USA, EU, and CIS citizens can travel visa-free population, making up 61.8% of the total population; to the Republic of Moldova.

970 students graduated in 2019 from the State University of Comrat, two colleges and three vocational schools.

3h 2h 1h 1:30h 2h/3h

London Vienna/Munich Chisinau Comrat Istanbul/Kiev Moscow KIV airport

2 Cost efficient destination

Competitive operational costs – rent prices Monthly net wages, 2019 (EUR) for offices, utilities; 385€ Lowest labor costs in Europe; Moldova

Small Tax load – personal and corporate income 391€ taxes, social security contributions; Bulgaria 639€ 12% Corporate Income Tax (CIT); 686€ One of the best wired connections in the world at some of the lowest price per Mbit; Romania 725€ 7% Flat tax rate on turnover for residents Turkey 820€ of IT Park. Source: National Bureau of Statistics of each country

CERTAINTY FOR INVESTORS Stable and predictable economic situation in the region; Openness and flexibility of regional authorities in regard to the stimulation of investment activity; Support provided to investors by the and her team; Well-developed infrastructure of modern means of communication.

GENERAL INCENTIVES FOR INVESTORS IN GAGAUZIA

Provision of natural grants – transfer of land, buildings, structures, machinery and equipment; Tax incentives – refund of Corporate Income Tax every calendar year for a period of 5 years; Investment subsidies – reimbursement of up to 30% (not more than 5 million MDL , equivalent ca. 250,000 Euro) of the actual costs for construction and installation works, purchase of equipment without VAT; reimbursement of up to 50% of the costs of training or retraining of industrial sector personnel; The «one-stop shop» principle – assistance provided to investors in collecting and preparing documents by reducing the time for issuing permits.

3 BUSINESS PROCESS Even though most of these companies are located in Chisinau, there is a growing interest for new locations, that have OUTSOURCING AND ICT Universities and are even more cost-efficient. Comrat is one of Servicing new markets the 5 major locations in Moldova, offering higher education. From Gagauzia a company would be able to service customers in the EU, USA, Turkey and CIS countries with inherent cost Currently the BPO segment represents approximately 12% advantages and in multiple languages. of the outsourcing market in Moldova. It is estimated by an IDC (International Data Corporation) report, that it will Moldova offers one of the best Internet connections at some record significant growth, reaching a value of $30.42M by of the lowest costs, which is essential for a BPO operation. 2024, compared to $17.76M in 2019. The sector provides Gagauzia can provide BPO services at the lowest operational opportunities for significant increases in employment, and in costs in Europe. BPO has the potential to become the fastest the diversity and complexity of jobs. growing segment under the Information Technology sector in Gagauzia. Considering the availability of highly skilled and There are already many international companies in the BPO multilingual human capital and modern infrastructure, BPO in & Shared Services Centers (SSC) sector operating successfully Gagauzia can be a real employment generator, especially for in Moldova, servicing external markets and representing young people. various sectors: Travel, Banking, Logistics, Recruiting, etc. Furthermore, the types of activities are very diverse in nature, Gagauzia has also put the fundamentals for IT education to ranging from the basic to the highly sophisticated ones: support the development of BPO, namely of the higher added value subsectors of IT: software development, application and infrastructure administration, web platforms development, etc. ICT sector in Moldova and development perspectives in Gagauzia

ICT is one of the most dynamic sectors in the Moldovan economy and represents one of the priority areas for development and expansion for the Moldovan Government. During 2015-2019, the IT industry recorded a triple increase of the annual sales revenue - from $126 M to $396 M, representing 3.1% of GDP and an increase of over $79.2 M, only in 2019. In the reference year, together with the sales volume in the electronic communications industry of $408 M, the ICT sector accounted for 7.1% of national GDP. The volume of exports of ICT products and services exceeded $300 M in 2019. In the forecast period 2019–2024, the annual growth rate (CAGR) is estimated to be at 7.86%, reaching $ 262.26

4 million by 2024. Since Moldova is still considered the main Business for IT candidate for the export of niche services, outsourcing will still The goal of the project is to develop the Business for IT prevail: it accounted for 78% of the total market IT services in curriculum and provide students who want to become IT 2018 and its share is projected to increase to 82% by 2024. entrepreneurs with the necessary skills to start and run their To meet the high demand for IT specialists for rapidly growing own business. ICT sector in Moldova and to foster the ICT investment The main activities planned within the project are: opportunities in the region, Gagauzian authorities are 1. Development of the curriculum «Business for IT»; determined to provide proper academic environment for IT 2. Development of an electronic course on the Moodle education. platform; 3. A training course «Business for IT» (beneficiary – students/ has launched 2 projects that will graduates of KGU from the specialty of «Informatics”); be implemented within the framework of the «Tekwill 4. Development of a business plan for students to conduct Ambassadors 2020: UTeach edition» program. This was business in the field of IT. possible thanks to the participation of teachers of the Department of Information Technology, Mathematics and Physics in the competition, which was announced by the national Association of IT companies (ATIC), launching the program «Tekwill Ambassador, UTeach edition», within the Costs «Development of the Center of Excellence in the field of ICT in Internet: Moldova» Tekwill project. Price per 1 Gbit of bandwidth is as low as 2,39 EUR/month Development and dissemination of E-teaching (modern technologies of learning through ICT) in educational Office rental price: 1,5 – 7,3 EUR/m² institutions of the Republic of Moldova The goal of the project is to train modern teachers who can Electricity: effectively use ICT in their professional activities to solve 0.10 EUR/kWh various pedagogical tasks. A number of events are planned within the project, including: 1. Courses of continuing education of pedagogical staff under the program «E-Teaching (Advanced teaching technologies through the use of ICT)»; ICT Development th out of 175 2. Development of an electronic MOOC course on E-teaching; 59 Index 3. Development of an electronic methodological guide for Network Readiness th out of 139 E-teaching; 66 Index 4. Conducting webinars on E-teaching; 5. Development of the «Implementation of E-teaching at th e-Government 79 out of 193 Development Index Comrat state University for 2020-2025» strategy. The Global th out of 128 59 Innovation Index

59 из 175 Индекс развития ICT 5

66 из 139 Индекс готовности сети

из 193 Индекс развития электронного 79 правительства 59 из 128 Глобальный инновационный индекс University has established collaborations with many EDUCATION international educational institutions in countries like Well educated young students, majoring in relevant fields for Germany, Switzerland, Turkey, Ukraine, Russia, etc. BPO specialties such as foreign languages, finance, healthcare, Two Colleges: commerce, etc., are available to work in BPO companies and There are 2 colleges in Gagauzia: 223 increase their productivity. students graduated from the Comrat Pedagogical College and Agricultural and Technical College in Russian is the study language in all educational institutions Svetlii in 2019. Some of the specializations in Gagauzia, though Gagauzian and Romanian are taught as are: agronomy, accounting, logistics, marketing, compulsory languages. English and German languages are agricultural technology. taught as foreign languages. Three Vocational Schools in the of Comrat, The State University of Comrat (KDU) is organized into Ceadir-Lunga, and Vulcanesti offer the following four faculties with a 4 year study cycle. The University specializations: seamstress, carpenter, mechanic, prepares highly qualified specialists in the field of electrician, plasterer, builder, etc. The total number of economics, law and agriculture. During the 2018- graduates in 2019 was 285 . 2019 academic year, 465 students graduated from The Professional Training Center Comrat State University. Most of them are specialized offers training in in Languages and Business studies, which are the becoming a: tractor driver, seamstress, accountant, perfect backgrounds for BPO employees. The Foreign chef , cosmetologist, wood carver, mechanic, etc. The Languages department offers the following languages: total number of graduates in 2019 was 135. Romanian, English, German, Greek. The Comrat

In order to increase the competitiveness and image of the reorientation of unemployed citizens in the ICT sector - region, as well as to develop the IT and BPO sector there are about 70 thousand people; c) attraction of investors and plans to create a Digital Innovation Hub which will become anchor companies – customers of the products. the center of business life not only in Gagauzia (coverage of the population of 162 thousand people), but also in the whole southern part of the Republic of Moldova (population of the districts: Cantemir, , , - 57.6 thousand people). The center for the development of digital technologies is planned to be located in the second building of the Comrat State University. In general, the implementation of the project will contribute to: a) the development and growth of the regional economic potential; b) the preservation and attraction of the regional labor force based on the creation of highly paid jobs (the average monthly salary in the IT sector is ca. 820 Euro, and the number of people employed in various sectors of the economy in ATU Gagauzia is only 35% of the working-age population, which means that there is a vast unutilized human resource capital, which can be tapped into with a correct organization of retraining programs and The State University of Comrat

6 TELECOMMUNICATIONS

Telecommunications infrastructure in Gagauzia is very well developed, with excellent coverage in both wired and wireless communications. Landline is available everywhere, however the number of mobile subscriptions is growing very fast compared to the landline.

There are 3 telecommunication companies offering /4G to their customers.

KEY FACTS

The penetration rate of a fixed line internet connection has reached 47.1 % in Gagauzia region (country wide – 49.5 %);

International companies, like Orange and Teliasonera, have been present in the local telecoms market for around 20 years;

Moldova is ranked 5th in the world for lowest fixed costs;

Number of users of 4G services in 2019, has increased by 51.6%, compared to 2018, reaching 1.55 Million users;

4G territory coverage in Moldova has grown 2.5 times reaching 97%;

Number of users of internet services in Moldova both land lines and mobile has reached 3.45 million;

Mobile has reached the penetration rate of 88,8 %.

7 TELEPHONY INTERNET

In 2018, the capacity of channels from Moldova increased to 375 Gbps. This evolution was caused by The fixed telephony market is dominated by Moldtelecom an increase of investments in the development of fiber optic – a joint-stock company with the state being the unique and 4G networks, based on a growing demand. stockholder. The company provides fixed telephony and Fixed line internet internet services of national coverage. The market structure by type of connection also is a proof that wired internet services in Moldova are at an advanced stage of development, since Fiber Optic is the most common type MOBILE TELEPHONY of connection.

The mobile market in Moldova as well as in Gagauzia is served Largest providers of internet services: by two international groups: Orange (French) and Teliasonera (Swedish). Moldtelecom is also prezent on mobile telephony Moldtelecom 62,6% market with its subsidiary UNITE. With a total number of Starnet 21,5% 4,4 million subscriptions, Mobile Telephony reached 134.8% penetration level, in 2019. 5,6% Others 10,3%

Mobile telephony market, 2019 (%) FTTx (Optic fiber) Download speed (September 2019)

Country Speed (Mbps) Rank

84,79 Slovakia 43

Moldova 81,11 44

80,03 5,9% Austria 45

75,91 30,2% Russia 47 63,9% 71,21 Estonia 49

60,83 Bulgaria 57

Source: www.anrceti.md Sources: www.speedtest.net;

8 FIXED INTERNET SUBSCRIBERS BY TYPE OF ACCESS IN GAGAUZIA

8,3% Fixed internet subscribers by type of acces 2019 (%) 8,3% 24,3% 24,3% 67,4% xDSL (Copper line) 67,4% FTTx (Optic Fiber) Other

Source: www.anrceti.md

Penetration rate per 100 people 47,1%

Dynamic structure of

number of subscriber in 67,4

Gagauzia 2013-2019 (%) 63,3 61,1 56,7 54 52,7 51,1 48,8 46,9 45,9

xDSL (Copper line) 43,3

FTTx (Optic Fiber) 38,4 29,2 24,3

Source: www.anrceti.md 2013 2014 2015 2016 2017 2018 2019

9 MOBILE INTERNET KEY FACTS

Since 2008, all mobile network operators have been offering 3G and 4G internet access throughout the country including Gagauzia region;

Long-Term Evolution (LTE) standard for high-speed wireless communication for mobile phones and data terminals was launched in 2012 by Orange Moldova and and at the moment it can be accessed throughout the country at 150 MBps;

Penetration level 88,8%, which means the market still has a lot of room to grow;

Orange Moldova, Moldcell and Moldtelecom are the main providers of mobile internet services.

MOLDOVA IT PARK The law no. 77 on IT parks regulates the creation and simultaneously by all control authorities; functioning of information and technological parks. The The State provides five years guarantee on the activity under purpose of the law is to stimulate development of the IT the preferential regime prescribed by law. The guarantee has industry in Moldova by offering incentives for the IT park been extended until 2026. resident companies. The law came into force on 01.01.2017. The major incentives provided to domestic and foreign investors – residents of IT parks – are the following: Notable is that the parks shall be “virtual” and the residents may work from their own offices situated anywhere on the 7% flat tax rate on turnover, which is to replace: Corporate territory of the Republic of Moldova. IT companies will Income Tax (CIT); Personal Income Tax (PIT); social security become virtual residents in the IT parks after registration as and medical insurance taxes; local and real estate taxes; residents and assumption of all the obligations stipulated in IT Visa can be obtained through a simplified process, as an the law. additional benefit to the IT Park residents. The work and residence permit can be issued for up to 4 years for Managers, There are more than 550 resident companies in the Moldova IT and up to 2 years for IT Specialists, both with the possibility of Park as of September 2020, with a combined forecasted 2020 extension; revenue of $240.3 M, coming from 33 countries(Belgium, UK, State inspections over the IT park residents’ activity are Switzerland, the Netherlands, Romania, etc.). conducted every three years (as required by the law) and

10 0.4% Local tax Flat tax 7% Real estate tax Distribution of Corporate income tax 29.5% single tax Personal income tax among Road tax budgets 15.4% Medical insurance (employee & employer) Revenue 93% after tax

54.7% Social security** (employee & employer)

Revenue Budgets ** All IT Park employees benefit from social security coverage limited to 2/3 of an average salary in the economy (EUR ~350 x 2/3 = EUR 235, as of 2019)

Eligible activities for IT Park residents1:

Customized software development activities (customer oriented software) (62.01)*; Manufacture of electronic components (26.11)*;

Data processing, web page management and Computer game editing activities (58.21)*; related activities (63.11)*;

Editing of other software products (58.29)*; Web portal activities (63.12)*;

Management activities (management and Information technology consulting activities operation) of computing means (62.03)*; (62.02)*;

Motion picture, video, and television programme Other information technology service activities post-production activities (59.12)*; (62.09)*;

Other research and experimental development on Research and experimental development on natural sciences and engineering (72.19)*; biotechnology (72.11)*;

Other education n.e.c., limited to computer training (85.59)*; Specialised design activities (74.10)*;

1 Companies that provide BPO services enabled by Information Technology may also become the residents of IT parks and benefit from incentives, provided that company type(s) of activity (registered at the State Chamber of Registration) correspond to type(s) of activities stipulated in the law on IT parks. * According to Clasification of Activities in the Moldovan Economy (CAEM Rev 2)

11 DIRECT FLIGHTS FROM CHISINAU AIRPORT Austria Vienna (VIE) Bologna (BLQ) Milan (BGY, MXP) Belarus Parma (PMF) (MSQ) Rome (CIA, FCO) Turin (TRN) Belgium Venice (TSF, VCE) (CRL) Verona (VRN)

Cyprus Poland Larnaca (LCA) (WAW)

Denmark Portugal (CPH) (LIS)

Egypt Romania Sharm-El-Sheikh (SSH)* Bucharest (OTP)

France Russia Nice (NCE) Moscow (DME, SVO, VKO) Paris (BVA, CDG) Sankt Petersburg (LED) Krasnodar (KRR) Germany (SXF) Dortmund (DTM) Chisinau (BCN) Friedrichshafen (FDH) KIV (MAD) Memmingen (FMM) Frankfurt am Main (FRA) Switzerland (GVA) Great Britain London (LGW, LTN, Turkey SEN, STN) Antalya (AYT)* Istanbul (IST) Greece Izmir (ADB)* (ATH) Dalaman (DLM)* Heraklion (HER)* Bodrum (BJV)* Thessaloniki (SKG) Ukraine Ireland (KBP) (DUB)

Israel Tel Aviv (TLV) * charter flights

12 INVEST MOLDOVA & INVEST GAGAUZIA HELP YOU THE ONE-STOP SHOP FOR ALL YOUR INVESTMENT QUESTIONS ASSISTANCE & INFORMATION

Provide Assist Connect Information on the investment climate Scoping missions (agenda, logistics, follow With relevant partners: up) Sector-specific information Embassies Investment incentive application Consulting on suitable locations – FEZ, IP Government authorities (Invest Moldova database) Information on business providers - HR, Business associations Legal, Consulting, etc. Information on relevant tax, legal and Existing investors administrative issues

INVESTMENT ATTRACTION & PROMOTION ACTIVITIES

G2B and B2B Missions abroad International events- promotion of the Moldova Business Week investment climate of the Republic of Moldova

AFTERCARE Platforms for Investors Council for the promotion of projects of national importance, chaired by Prime Minister Economic Council to the Prime Minister of the Republic of Moldova 41 associative structures of the business community 43 state institutions 16 representatives of the scientific and research community 6 working groups Eliminating constraints in entrepreneurial activity: Coordinator - American Chamber of Commerce (AMCHAM) Facilitation of trans-border trade: Coordinator - European Business Association (EBA) Stimulation and retention of private investments : Coordinator - Foreign Investors Association (FIA) Contact us: +373 69 88 00 69 196, Lenin str., Comrat mun., +373 69 96 38 38 MD-3805, ATU Gagauzia, +373 29 88 18 33 Republic of Moldova [email protected] © Invest Gagauzia 2020 www.investgagauzia.gov.md

In close cooperation with, and supported by:

Sankt Petersburg

Nijnii Novgorod Moscow

Copenhagen Kaluga Tolyatti Minsk

Glewice Breman

Amsterdam Poznan

Wolfsburg

Katowice

Mlada Boleslav Kiev

Kolin Lviv

Sindelfingen

Paris

Munchen Zaporoje

Esztergom

Iassy

Gyor Chisinau

Graz Oradea Comrat

Novo Mesto Timisoara

Bucuresti

Turin Pitesti

Sarajevo

Pamplona

Vals Istambul

Bursa

Ankara

Jerusalim