IDIS Viitorul INEKO Regional Business Environment Development Index 2016 Authors Liubomir Chiriac, PhD, Vice Director IDIS Viitorul Tatiana Lariusin, PhD, Senior Economist, IDIS Viitorul Ion Butmalai, Economist, IDIS Viitorul Peter Golias, PhD, Director, INEKO Official Development Assistance of the Slovak Republic is an intrinsic instrument of the Slovak foreign policy, which to a large extent shapes Slovakia’s relations with aid recipients and relevant international organizations. Having committed itself to the fulfillment of the Millennium Development Goals, Slovakia shares the responsibility for global development and poverty reduction endeavors in developing countries, aiming to promote their sustainable development. INEKO Institute is a non-governmental non-profit organization established in support of economic and social reforms which aim to remove barriers to the long-term positive development of the Slovak economy and society. Mission The Institute’s mission is to support a rational and efficient economic and social reform process in the Slovak Republic (SR), through research, information development and dissemination, advice to senior government, political and selfgoverning officials, and promotion of the public discourse. It also focuses on those areas of social policy on the regional as well as the European level critical to the economic transformation of the SR. It draws on the best experience available from other transition countries and members of the European Union (EU) and the OECD. Regional Business Environment Development Index 2016 Authors Liubomir Chiriac, PhD, Vice Director IDIS Viitorul Tatiana Lariusin, PhD, Senior Economist, IDIS Viitorul IDIS is an independent think tank, established in 1993 as a Ion Butmalai, Economist, IDIS Viitorul research and advocacy think tank, incorporated by Moldovan Peter Golias, PhD, Director, INEKO laws on non-for-profit and NGOs. As an independent think tank, IDIS is combining social, political and economic research with solid advocacy components. It undertakes applied The study was created with the financial support of the field research and monitor targeted issues in several fields: Official Development Assistance of the Slovak Republic economics, subsidiarity, social policy, EU policies, regional (SlovakAid) and the U.S. Embassy. It is part of the project development, but also security risks and foreign policy, but, “Transparent, financially healthy and competitive local it also plans and implement regular policy debates and governments in Moldova” implemented by Slovak non- conferences, conduct considerable outreach activities, and governmental non-profit organization INEKO and by IDIS regularly uphold an active presence in mass media. ”Viitorul” Contents Foreword 5 Chapter 1: Key Results 7 Regional Business Environment Index 8 Analysis of sub ratings 13 Chapter 2: Analyses and recommendations 27 Key problems of regional development 28 Recommendations for Moldova 30 Chapter 3: Methodology 33 Formation of the indicators 34 Overview of the indicators 40 Chapter 4: Region profiles 47 Explanatory notes 48 List of regions 49 Region profiles 50 Chapter 5: Indicators 121 Explanatory notes 122 List of indicators 123 Indicators 124 Foreword Any regional differences in terms of economic and social National Business Agency is an informal advocacy platform development pretty frequently lead to disequilibria and for business environment, which brings together some tensions among countries. Such disequilibria cannot be 35 business associations and the Chamber of Commerce addressed only through classical leverages the Government and Industry around the discussion table. Lately, the NBA has at hand. This statement is applicable also to the situation promoted a series of business environment priorities of the Republic of Moldova. The economic development of a through the public-private dialogue. Hence, in 2015, IDIS country directly depends on a series of factors such as quality Viitorul created the Local Business Agency with the support of business environment, natural resources, quality of labour provided by the Chamber of Commerce and Industry, with force, geographical location, etc. In order to ensure balanced the aim to foster economic development of regions through and sustainable economic development of any country it is the involvement of business environment representatives paramount to identify the barriers affecting/hampering the in the decision-making process. In this way, the business development of business environment as the latter forms environment of country districts had the opportunity to mostly the country GDP. set forth its priorities at the local level to be subsequently promoted into the authorities’ public agenda through IDIS From the other hand, the central and local authorities are Viitorul and the Chamber of Commerce and Industry. fully aware of disequilibria in the economic development of the regions. As per some estimates, at present circa 70 % of The analyses of this study, conclusions and recommendations the country economy is concentrated in Chisinau. This fact are based on the data collected by IDIS Viitorul from two creates negative phenomena such as migration of labour sources: the National Bureau of Statistics (NBS) and the force, unemployment and decline of tax base, lowering the Survey conducted in March – May 2016. Hence, the Study competitiveness of regions, as well as their attractiveness analyses are based on quantitative and qualitative data. for potential investors. To identify some optimal solutions The collected data were subject to analysis through an aimed at eradicating such divergences a series of studies econometric model developed by INEKO from Slovakia. and analyses were carried out, which, ultimately, became IDIS analysed the data collected from 766 Questionnaires, part of development strategies of regions, and three regional each of the 33 districts filled in 20 Questionnaires and Balti development agencies have been established. However, no and Chisinau Municipalities filled in 106 Questionnaires. clear answers or interpretations have been found to explain The sample on which based the Survey was conducted was why some regions are more developed than the others. The represented by small and medium-sized companies from main issues encountered by the central and local authorities all economic sectors and by local public administration are related to clear identification and setting of objectives authorities. while relying also on the support and involvement of public The Report comprises five Chapters, where the elements policy subjects. Given this situation, the resources the state that created development differences among districts would channel to address those divergences could fail were subject to an in-depth analysis. Chapter 1 presents a attaining the expected outcomes. comprehensive description of the Region Competitiveness This Project pursues the goal to set an interactive tool, which Index and its Sub indexes. The Introduction to Chapter could be used by the authorities in the process of developing I displays the structure of the Business Environment and implementing public policies targeting the removal of Development Index. The next part portrays an Index business environment barriers and contributing at the end of Summary for each district via tables and charts, keeping in the day to the economic development of regions. mind that the Index is composed of smaller elements, namely of 4 Sub-indexes, each of them being composed of two 2 Hence, this tool could help identify the barriers due to which Pillars. Chapter 1 describes those four Sub indexes, each of business environment is facing difficulties, while the state them being illustrated by the allocation on the country map. authorities would have the opportunity to improve the business environment or to enhance further the advantages Chapter 2 reflects the information that enables the Reader already in place. One of the Project Beneficiaries would be to get into greater details of the analyses underpinning the the state, which would have the possibility to efficiently use Study, which summarises not only the conclusions, but also the resources, acting also through targeted policy. All of the the recommendations for both the central and the local above would bring their contribution to the development of authorities. business environment throughout the regions, leading to the Chapter 3 describes the methodology for computing creation of new jobs, enabling higher labour remuneration and setting the Index. The Chapter starts with a detailed and better living conditions. explanation of all elements used as basis for setting the Over the last eight years, IDIS “Viitorul” has acquired a Index. Subsequently the operation of a mathematic model great deal of experience in strengthening the Moldovan is presented, which transforms the gross data collected business environment by having established the National from surveys and statistical data into indicators forming the Business Agency (NBA), granting it the needed support. The Index. The Chapter ends with an overview of all indicators 5 along with detailed explanations, sources and meanings relative to the general framework of the Index. The Chapter is supplemented with charts and tables providing specific insights of certain properties such as the consistency index of Survey responses or the accuracy of mathematical relations in question. Chapter 4 is the largest one. Each district profile is described on two pages,