1. Dependence of the country on fuel imports

Moldova has no energy resources and most of its energy needs are satisfied with imported natural gas, petrol and electricity. Alternative sources of energy are being developed on a marginal scale.

2. Transnistria - a breakaway region in the eastern part of the country

Transnistria (also referred to as Pridnestrovye, or PMR), broke away from Moldova in the early 1990s, followed by a brief armed conflict. The region has not been recognized by the international community and remains under the control of the separatist regime. Russian peacekeepers have been deployed to the region to monitor the conflict. Russia maintains approximately 1,500 troops in the region, as well as a large stockpile of munitions. The main risk for investors comes from the difficult cargo transit through the region. In the past, Transnistria has repeatedly blocked railway traffic as a blackmail tool. A circumventive railroad has been launched to bypass the region, which has lengthened the route to Moscow and other eastward destinations.

3. High dependence of the economy on exports to Russia

Russia remains Moldova's largest trade partner, buying the biggest share of Moldovan exports. Thus, Moldovan economy remains vulnerable to the sate of the Russian economy. This was illustrated in 1998, when Russian economic crisis echoed in Moldova, annihilating Moldova's economic growth and significantly depreciating Moldovan currency. In 2006, Russian authorities banned import of Moldovan wines and agricultural products, putting Moldovan economy under significant pressure. However, Moldovan economy seems to be handling this quite well.

4. Concentration of the economy in the agricultural sector

Moldova traditionally has been an agricultural country. About 39% of its GDP comes from agriculture, while about 37% of labor force is involved in agriculture (source: Bureau of Statistics, www.statistica.md). The agricultural specialization was in part caused by the lack of natural resources, as well as by the Soviet regime, which built most factories and plants on the territory of Transnistria. Nonetheless, Moldova has a relatively strong sewing and food processing industries, and the availability of cheap labor facilitates the development of other labor-intensive manufacturing.

5. Consumption dominates Moldovan economy

The level of foreign direct investment has been relatively low, when compared to other countries in the region. The large amount of remittances sent by Moldovans working abroad (up to $1 billion per year, according to some estimates) are used mainly for current consumption or purchase of real estate. This put additional inflationary pressure on consumer prices and deprives the business sector from investment capital.

6. Corruption

Typical for a transitional economy, Moldova still suffers from a relatively high level of corruption. Moldova's Corruption Perceptions Index equalled 2.9 (on a 1 to 10 scale, with 1 being the worst) in 2005, which is much lower than EU's median of 6.7, but slightly higher than the median for the CIS - 2.4 (Source: Transparency International Moldova, www.transparency.md ). A set of reforms and measures are being implemented to cut on the corruption, such as the "Guillotine law", which reduced the number of legislative acts issued by various state institutions. The process of fighting the corruption is still ongoing.

7. Moldova is a landlocked country

Moldova had no direct access to sea trade routes until October 2006, the closest ports being Odessa in Ukraine (183 km) and Constanta in Romania (318 km). On October 26, Moldova launched a port on the Danube river, but freight and passenger traffic will not pass through the port for some time (such facilities should be built within the next two year). For the time being, the port will be used only for oil imports. The necessity to cross borders to reach Odessa or Constanta seaports means potential delays and extra costs when shipping cargo.

8. Slow reforms

Although economic and social reforms are being implemented, they are considered by many to be too small and too slow.

9. Old infrastructure

Most Moldovan roads are in a poor shape. Some repairs are performed regularly, but limited financing and the disrepair mean that large portions of roads remain in a bad state. Many industrial buildings also need repairs.

Please find more on Moldova's weaknesses and threats in our Investment Guide section