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Posted by: Mihaela Bucatari

News / Economic

14 May 2019 / 11:27

WB recommends reducing the number of state-owned companies and strengthening private ones

The state's presence in the Moldovan economy is high, and state-owned enterprises exhibit lower productivity levels than private sector ones. The study of the World Bank "The re-launch of economic dynamism," presented in Chisinau shows. For comparison, in Moldova, companies with full or majority state ownership are present in at least 19 of the 30 economic sectors, while in Estonia, for example, only in eight sectors, reports IPN.

"Given that the productivity of a large number of companies is low, Moldova is less able to compete in global markets, and while trade is a substantial share of GDP, the country's exports are rising more slowly than in other countries," said one of the study's authors, Elisa Gamberoni. She also mentioned other factors that explain the low productivity of Moldovan enterprises, which, according to the World Bank forecast, in the medium term could slow down the country's economic growth rate. These factors include the migration of qualified employees, including young people, from Moldovan enterprises.

A strong leverage to increase productivity is competition. But only 41 Moldovan production markets are really competitive, being monopolies or group monopolies. The study also shows that fiscal policies have created a number of facilities to support companies. But these tax incentives are granted by chance, non-transparently. And instead of encouraging increased productivity, facilities keep non-productive companies on the market. An important aspect, says Elisa Gamberoni, is how innovations come into production. But the incentives for innovation and the efficient use of resources, including human resources, are very limited. One Moldovan worker produces in a year what his colleague in Germany produces in 18 days.

World Bank experts recommend reducing the number of state-owned companies through transparent privatization and strengthening private sector, more productive companies with foreign investment. Tax policies are to be reviewed systematically throughout the system, ensuring that general revenue is not shrinking. In terms of human capital, people need to be able to raise their lifelong skills. It is necessary to increase the contribution of the higher education system, it needs to make a greater contribution to skills development, diversification and economic growth. "Of course, priority remains to improve governance indicators, tackling corruption, which is the main constraint in business development and high productivity by companies," concludes the study.

The World Bank forecasts an increase in the Moldovan economy by 3.4% in 2019, 3.6% in 2020 and 3.8% in 2021. In 2018 Moldova achieved an economic growth of 4%. The Moldova 2020 Strategy sets an economic growth of no less than 6% annually.

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