Carolina Bugaian, Moldcell: FIA consolidates our common position, which ensures a constructive dialogue to improve the business environment
For 20 years, the largest foreign investors in Moldova, united in the Foreign Investors Association (FIA), have been working together with the authorities to improve the investment climate in the country. These are the most active enterprises generating progress in their sectors and influencing the sustainable development of the economy as a whole and the social sphere of Moldova. Why foreign investors unite in associations and what are the achievements of FIA and what priorities foreign investors see today and in the future in the interview with Carolina Bugaian, Moldcell General Director.
– Why, in your opinion, was the first Association of Foreign Investors created in Moldova, and what do such associations provide to business today?
The Foreign Investors Association was created due to the need for cooperation between us and the authorities in order to create a favourable business environment in our country. Today, by developing the FIA activity, Moldcell, together with other foreign investors, consolidates a common position that ensures a constructive dialogue in order to create a business environment contributing to economic development and sustainable improvement of standards of living in the Republic of Moldova.
Foreign investments, besides capital and investments, bring with them best management practices, sustainable leadership, know-how and modern technologies. This knowledge, as well as the exchange of experience, raises the level of professionalism of employees in the Republic of Moldova, inspires with a positive mindset, solution-orientation and resilience in the face of instability and crises.
– Which of the FIA suggestions have led to a significant improvement in the business environment in your industry or the economy as a whole?
We appreciate the FIA’s efforts to develop and implement the White Book, improving both the business environment in general and in our telecoms industry. For example, just recently, the anachronism of the 2000s when mobile phones and cellular communications were considered a luxury was eliminated and the government introduced a luxury tax of 2.5% of operators’ revenue. Since that time, the mobile phone, and then the smartphone entered every family, and today mobile communication and internet are used, I am not afraid to say, in every Moldovan house. Moreover, the development of technology and remote work during the pandemic has led to the fact that the smartphone has become not just a method of communication, but also a production instrument. Therefore, the cancellation of this tax was long overdue, and now, after the increase in electricity prices and inflation, it has allowed us to keep the prices of services for users at the same level.
A large number of measures have been taken to optimize the tax system, which has been simplified and made much more transparent, the number of procedures and operations has been reduced, and interaction has been almost completely digitalized. The most balanced fiscal and customs policy has been developed and is being implemented.
In addition to the White Book, FIA’s work in addressing current issues through the organization of systematic dialogue with the authorities, both through participation in expert economic councils and in its own thematic formats of meetings with heads of government agencies, has been quite productive. Besides, we see the result of joint promotion of transparent and proportional attitude to the business environment on the part of the state, which was extremely important, in particular in cases of changing the approach of the State Fiscal Service in the framework of business control, development of the Fiscal Policy, laws on critical infrastructure and on competition, changes in the legal framework in relation to the subject of public interest, etc.
– What are one of the priorities you can highlight in the proposals for the 2023 White Book?
There are so many important proposals for improving the business environment, a great number of which are carried over from the past period, and work in these directions should be continued. From the continuation of justice reform, critical both for business and for the future of the Republic of Moldova, to the need to revise the quantum of licence fees for the radio frequencies used, which we have 3 times higher than in the EU, if you benchmark against DGP per capita. This will allow telecom operators to reallocate funds and increase investments in the development of technologies for further digitalization and growth of our country’s competitiveness.
I would like to emphasize the need to improve the legal framework in regard to the proportionality and predictability of government policies and legislation that have a significant impact on the business environment. This has become even more relevant in the current conditions, when Moldova has intensified the amendments of normative acts, dictated by the process of our country’s potential accession to the EU. The Association of Foreign Investors believes that it is necessary to develop a normative guideline establishing two main principles:
Firstly, it is mandatory to carry out an impact analysis and if the new regulations affect the business environment by at least 25 %, they should be implemented in stages over a period of time. For example, in the European Union, such changes usually come into force within two to five years.
Secondly, in case of development of new laws or amendments to current ones that require modification of any secondary legislation, a regulation should be established on their entry into force 2 years after publication (similar to the EU practice). Or the date should be determined by the development of this secondary legislation. For example, the Law should come into force within six months from the date of change of the relevant regulatory framework, with an attached list of documents that also need to be changed. Today there are many situations where the secondary legislative framework has remained unchanged, and these regulatory contradictions complicate the work of both businesses and government institutions.
In this context, in particular, it is necessary to reschedule and set the date for the implementation of the concepts of “Transfer Price” and “Transaction Re-qualification” 2 years after the development of the secondary regulatory framework. It is necessary firstly to develop a mechanism for assessing taxation of services rendered to us – foreign investors – by parent companies. Such a mechanism exists in other countries, including the EU, and we follow these regulations by default.
Transition period for the implementation of the legislation related to “Transfer Pricing” and “Transaction Reclassification” two years after the development of the secondary regulatory framework. Such a mechanism exists in other countries, including the EU, and within our parent companies we follow these standards by default. This delay is necessary to provide additional time for preparation and familiarization with the new rules and regulations, both for state-authorized institutions and affected entities. Additionally, Moldovan companies will be able to initiate discussions with business partners (including affiliates) to clarify the way transactions are carried out that will help maintain solid commercial relationships. In addition, companies will be able to ensure the existence of adequate human and technical resources to implement and comply with the new legal requirements, which can reduce uncertainty and pressure on them.