First comprehensive assessment of Moldova’s trade corridors carried out with USAID support

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11:58, 19 Jul 2018

First comprehensive assessment of Moldova’s trade corridors carried out with USAID support

The largest part of international trade is performed through corridors - particular routes by which the goods are transported by road, sea, or air. Corridor-based trade enables to apply economies of scale, to obtain chain effects and to appropriately organize the resources for improving the transport sector. The Moldova Structural Reform Program, with financial support from the United States Agency for International Development (USAID), carried out a study to assess the trade corridors of the Republic of Moldova. The study reveals a wide range of problems that influence the time and cost of transporting goods by Moldovan traders and carriers. The delays at border crossing points negatively affect the performance of trade corridors and, finally, the commercial flows.





Moldova does not have access to the sea, only one post in Giurgiulesti

At the presentation of the study held on July 18, program’s Chief of Party Douglas Muir said the study included interviews and data collection. The experts paid a series of visits to border crossing points not only in the Republic of Moldova, but also in the neighboring states. When it goes to the trade corridors of the Republic of Moldova, it is ascertained that the country has rather difficult neighborhood and among the major problems are the lack of access to the sea and the presence of only one port in Giurgiulesti. Even if the ports in Constanta or Odessa are also used, these belong to other states. Another problem is related to the Transnistrian region as it was established that the circulation of goods in the eastern part of the country meets with particular difficulties.

The expert also noted another aspect, related to the border with Romania, which is not only the border with a neighboring state, but also an external border of the European Union. The external borders of the EU differ from most of the national borders, representing a gate of access to a region with 28 countries and a population with over half a billion people. Douglas Muir mentioned among the problems the poor state of the roads towards the border to the EU and to Ukraine as well. This aspect hampers the commercial activity, mainly for particular products.

In Moldova, the trade corridors are used to transport both national freight and transit freight, including through railroad and road connections and inland waterways, while the air freight routes start or end usually in the main commercial centers of the country, Chisinau and Balti, or from such economic centers as Bucharest, southern Germany, Milan and Moscow, and from the regional ports, including Odessa, Chernomorsk, Giurgiulesti and Constanta, from where these are taken to final destinations. However, the road transport accounts for the largest part of trade in Moldova, making the road system and terrestrial border crossing points the most important trade corridors of Moldova.

Time is money

Kristen Hartpence, logistics specialist, Nathan Associates, said time is money and the study showed the time spent at Moldova’s borders, especially at the border with Romania, can entail substantial delays. The dispatchers and carriers repeatedly said they need one-three days to cross the Leuseni-Albita border crossing point. Delays were also reported with reference to the Sculeni border crossing point and to the northern border with Ukraine. In general, the carriers said it is easier to cross the border through the Tudora-Starokazacie point, usually during about three hours.

There is also empirical evidence that problems are experienced both at the level of customs authorities and at the level of the border police of Romania. The Romanian border police regularly keep vehicles in the “no one’s land” area and this leads to significant delays without the official statistics being affected by the Romanian side. A part of the problem is generated by the fact that this is a border of the EU.

The study says the border delays extend the transit period, reduce the reliability of corridors and generate an indirect impact on the transport corridors owing to the reduced utilization of trucks. Such delays have a specially negative impact on the time-sensitive goods, including value added products such as spare car parts and perishable products or fruit and vegetables. These two sub-sectors have a specially promising potential for the rise in exports in the long run.

Kristen Hartpence said the access to information and the lack of information systems are also among the problems, but in the modern business environment, the information systems and networks play an essential role in terms of the efficiency and, respectively, profitability of the trade corridors and logistics performance. The absence of such systems, together with other market inefficiencies, can lead to the appearance of asymmetric information problems that, for their part, influence the time and cost of trading and also limits the traders’ capacity to enter new markets. 

Infrastructure necessitates urgent rehabilitation

The study shows the general state of the transport infrastructure in Moldova is mainly inappropriate and necessitates urgent rehabilitation, especially owing to the delay in maintenance works. The research authors consider many roads in Moldova necessitate rehabilitation and completely new road infrastructure is needed in some areas – from roads to bypassing routes – so as to enable to optimize traffic, for example, by using bypassing roads so as to avoid transit through villages.

According to the experts, the railways face significant railway maintenance and rehabilitation and rolling stock renewal needs. The cargo terminal of the Chisinau International Airport needs to be significantly modernized so as to cope with the transport of freight, especially the value added and perishable products. The two airports in Balti municipality are not ready to cope with the traffic in the current conditions and feasibility studies are required. Both of the airports necessitate sufficient investments – from the illumination of the runway to the construction of new airstrips and terminals, etc.

Paul E. Kent, Senior Vice President, Nathan Associates, said the elaboration of efficient infrastructure ensures better connection. Greater transparency should be ensured in terms of the trade corridors of the Republic of Moldova and their functionality. This will attract more foreign investment as the foreigners most of the times have to use the services of a jurist to inform themselves about the methods of starting a business.

Decisive factors and strategic actions

The study contains a strategy proposed to Moldova for improving the performance of the logistics sector. The strategy includes seven decisive strategic factors, the associated objectives and actions. The decisive factors include the improvement of institutional efficiency of the logistics sector and ensuring of implementation of sector support policies, the legislative and regulatory frameworks. It is also about the development of efficient and productive infrastructure and of efficient transport sector logistics, facilitation of sustainable financing and promotion of the logistics sector.

Aurelia Ieseanu, program’s Deputy Chief of Party, said the Republic of Moldova should consider working out a general freight transport logistic plan that would cover a series of feasibility studies and financing options that would support the Government, international finance institutions and potential private investors in the process of prioritizing the projects. The study shows that the Republic of Moldova should make effort to increase the use of funds from the private sector and the public-private partnership, including to ensure the open and complete character of the procurement procedures and appropriate surveillance of government procurement.

Another recommendation says the investments in infrastructure should be first of all aimed at improving the access to the main border crossing points and to ports. The experts consider that when the important trade corridors have appropriate infrastructure, the second stage should envision the improvement of access to the secondary border crossing points in order to attenuate the congestion situation.

Study as radiography of trade corridors with solutions for achieving results

In the study presentation event, U.S. Ambassador to the Republic of Moldova James Pettit said Moldova has a favorable geographical position, being situated at the border with traditional economies and markets and with the largest export market, of the European Union. However, the restricted access to the sea generates challenges for the national economy. Optimal solutions are needed for the trade with the countries of the region and with countries that are thousands of kilometers away. During many years, the U.S. Government has supported the development of value-added products in the Republic of Moldova, especially wines, textiles, agricultural products, such as table grapes and berries.

“To be exported, these goods need to cover trade corridors with road, railway or maritime transport and these corridors often witness a number of problems. Thus, USAID decided to conduct a study to assess the trade corridors of Moldova. It is a unique study that will offer more practical solutions for improving the performance of commercial corridors, reducing costs and, what is more important, increasing the competitiveness of Moldovan products on international markets,” stated James Pettit.

Iuliana Dragalin, Secretary of State at the Ministry of Economy and Infrastructure, said the study represents radiography of the trade corridors and of the trade facilitation level. This offers the authorities the necessary instruments for working out and implementing efficient policies and measures that will improve the situation in the field of infrastructure, the transport and logistic services. “Our goal is to develop a modern transport and logistics system in Moldova, which will attract more investments to the sector and will contribute to creating more jobs for the citizens,” stated Iuliana Dragalin.

Deputy Director of the Customs Service Iurie Ceban said this study is extremely important for the facilitation  of trade. “I would like to note our efficient cooperation in conducting this study that materialized in visits by teams of experts to customs posts and in the intense dialogue with decision makers of the central staff of the Customs Service. The Customs Service took notice of the conducted study and we want to say thank you for the assiduous work done and the addressing of problems and also for the formulated recommendations. These will serve as an additional argument in our relations with the development partners and eventual donors,” stated Iurie Ceban.

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During the four-year implementation period – September 2017- September 2021- the Moldova Structural Reform Program financed by USAID will support the Government of the Republic of Moldova in the process of integrating the country into regional and world commercial systems. The program will help Moldova achieve the commitments assumed under the Association Agreement with the EU, which includes the Deep and Comprehensive Free Trade Agreement, and also those stipulated in the new Trade Facilitation Agreement with the World Trade Organization. The program will contribute to promoting the Moldovan products on larger and more dynamic markets through multiple actions, starting from the simplification of the legal conditions and regulation with a view to supporting the growth and modernization of businesses to the optimization and facilitation of the trade and logistics channels of Moldova.

Elena Nistor, IPN

11:58, 19 Jul 2018
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