Germany Remains one of the Most Important Trading Partners of the Republic of Moldova

Author Renata Lupacescu
Photo symbol ©Renata Lupăcescu
Photo symbol ©Renata Lupăcescu

For five years, the Federal Republic of Germany has numbered among the largest foreign trade partners of the Republic of Moldova. There are some major direct investments of German companies in the country, especially in the automotive industry. Among the ten largest exporters in the Republic of Moldova, three are German companies. The Moldovan government is working to increase the intensity of economic relations. Interest in Moldova as a location for investment continues to grow, especially for free economic zones. The Association Agreement with the European Union and the Agreement on the creation of the Deep and Comprehensive Free Trade Area are fundamental impulses and contribute to the significant growth of trade with the countries of the European Union.

One of the engines of a transition economy is foreign capital

Moldova is making considerable efforts to revive the national economy and create a favourable climate for developing profitable businesses and attracting foreign investors.

In this context, Moldovan-German relations have an economic side. Thanks to the good diplomatic relations of more than 20 years between the two states, some German investors have ventured to invest in the Moldovan business environment.

The data of the Moldovan State Registration Chamber show that, between the 1st January and 1st September 2019, 427 enterprises started with German capital totalling 773 million euros, and the German investment balance constitutes 66 million euros.

In addition, in the past two decades, the German government has implemented several projects in Moldova, totalling more than 38 million euros, and several economic forums have been organised.

The data from recent years regarding the volume of foreign trade between the Republic of Moldova and Germany show positive growth dynamics. In the first nine months of this year, the volume of foreign trade between the two states registered over 182 million USD. Compared to the same period in 2018, the volume of foreign trade increased by 8.38%, following the increase of the import of goods from this country.

Dual-education in Moldova is supported by the German ‘Eberhard Shoeck’ foundation © Renata Lupăcescu
Dual-education in Moldova is supported by the German ‘Eberhard Shoeck’ foundation © Renata Lupăcescu

“German investors are contributing by creating working places, paying taxes, and using local service partners. There are several areas where Germans invest in Moldova: the car sector, trade, supermarket changes, and banking finance. The main challenges for the investors is finding qualified staff and, specifically, to increase the number of these employees. It isn’t enough just to be open for investors, it’s necessary to create the environment that facilitates such investment”, emphasises Uwe Konst, Economist and Editor of ‘Moldauer Wirtschaftsnachrichten’.

Germany is not only a direct investor in the national economy, but also a significant trading partner of the Republic of Moldova

The analysis of the evolution of exports by countries in January-September 2019, compared to the similar period in 2018, shows an increase of exports to Germany of +11.1%. The Federal Republic of Germany forms 8.98% of the total trade of the Republic of Moldova, and it ranks third in the list of countries with which Moldova has commercial relations, after Romania and Italy.

The balance of the trade recorded between January and September 2019 was a deficit to Germany of 176,013.580 million USD and puts Germany second among the partner countries of the Republic of Moldova after Romania.

The total volume of exports of goods destined to the countries of the European Union, with a total value of 508 million USD, almost seven percent, or about 33.4 million USD, represents goods exported to Germany, and this is one-third less than in the same period last year. At the same time, the export of goods in 2019 was over 1328.7 million USD, or 2.6% less compared to January-September 2018. Germany ranks third in the countries to which the Republic of Moldova exports, with a weighting of 3.2% in the total volume of the exports of the Republic of Moldova.

The import of goods from Germany to the Republic of Moldova, registered in the first nine months of 2019, amounted to US $ 358,061 million.

German investors could change the lives of Moldova’s people

Germany is one of the most important trading partners of the Republic of Moldova, ranking fifth according to the total volume of trade, and second among the EU countries.

The main Moldovan goods exported to Republic of Germany are textiles, leather, food, beverages and tobacco products. The main imported goods are machinery, electrical and electronic equipment, textile products, automobiles and spare parts, chemicals, and plastic and rubber products.  Among the largest German companies operating in the Republic of Moldova are ‘Südzucker’, ‘Knauf’, ‘Metro’, ‘Steilmann’, and ‘Mabanaft’.

Nowadays, the automotive industry coming from Germany is a key growth sector for the Moldovan economy

The total imports in the automotive industry sector registered a growth of 37.1%, with a share of 14% in total exports.  Presently, large direct German investors prefer to be located in Moldova’s Free Economic Zones (FEZ).  An excellent location for industrial development and production orientated on exports. Production concentrates on cables, wiring harnesses for cars, car-seat covers, plastic moulding injection, metal processing, electronics and electronic components, and assembly. Important companies are the Lear Corporation, Dräxlmaier Automotive, Gebauer & Griller, Sammy Cablaggi / Kablem, Elektromanufacturing, SUMIDA, Confezioni Andrea Covercar, LEONI, SEBN Sumitomo Electric Bordnetze, Fujikura Automotive, Coroplast Fritz Mueller, APM Automotive, Blacksea EMS, Dräxlmaier DSM and Arobs Software.

Automotive industry in Moldova, Causeni December 2019 © Renata Lupăcescu
Automotive industry in Moldova, Causeni December 2019 © Renata Lupăcescu

Auto cable assemblies specialist, Coroplast Fritz Müller, which set up a new plant in Moldova in 2017, is already expanding capacity and will more than double its 600-strong workforce there. The group, based in Wuppertal, Germany, is investing around €17.3m overall with an additional production plant being built on a site in the Căuşeni sub-zone of the Balti Free Economic Zone, south of the capital, Chisinau.  “Our local subsidiary, Coroplast Harness Technology SRL, expects to increase the local workforce to 1,000 with the expansion scheme.  As well as serving East European markets and exporting further afield, the Moldova operation is expected to supply cable products to the country’s local growing automotive industry.  Coroplast Harness Technology SRL is reported to have annual sales worth €15.6m with its current output going to export markets”, said Andreas DAAP, General Manager of Coroplast.

German companies are leaders in the car supply industry and employ around 10,000 people in Moldova

German investors do not regret the decision to come to the Republic of Moldova and consider that they have made good investments. German Ambassador to Chisinau, Angela Ganninger, said that “German investors sometimes have problems finding a qualified workforce”.

According to the diplomat, German investors have been in Moldova for some time, and others are still coming. “Last week I saw the Kaufland case, which has opened a few stores. There is also the production sector. All these companies settled in free-trade locations, thanks to the functional services, for example, the fast and correct customs services”, said Angela Ganninger. The ambassador also spoke about certain particular cases when German investors encountered problems arising from ‘insufficient justice’, but he hopes these will remain in the past.  The German diplomat also stated that “the fields of democracy, civil society, public administration, but also the development of a sustainable economy, are part of the two priority directions identified by Germany and the Moldovan authorities in which German support is needed”.

Germany could contribute to the economic development of the Republic of Moldova!

The subject was also recently discussed during meetings at the Bundestag.

The new parliament could seriously fight against corruption structures in the administration, which would indeed make Moldova interesting for investment.  You have a beautiful country, it makes sense to invest. Investors always want to be sure that the venture capital of their investment will only be used for developing that investment. After the DSFTA (Deep and Comprehensive Free Trade Area with European Union) programme, the Moldovan economy is developing rather well and I hope that, in a few years, Moldova will become more attractive for other countries”, said Fritz Felgentreu, a member of the Bundestag of the Federal Republic of Germany, and President of the German Moldovan Forum.

Until the present, 57 additional agreements and documents have been signed between the Republic of Moldova and the German Federal Republic

Main Economic Agreements: Agreement between the Republic of Moldova and the Federal Republic of Germany on the mutual promotion and protection of investments (signed in Chisinau, 28th February 1994); Protocol of amendment to the Agreement between the Republic of Moldova and the Federal Republic of Germany on mutual promotion and protection of investments (signed in Berlin, 26th August 2003); Agreement between the Government of the Republic of Moldova and the Government of the Federal Republic of Germany on the international road transport of persons and goods (signed in Bonn, 11th October 1995).The economic relations between Germany and the Republic of Moldova date back to 1981, when the Agreement of the Union of Socialist Republics and the Federal Republic of Germany was signed in order to avoid double-taxation of income and property. Germany has been providing development assistance to Moldova since 1992.

About the author

Renata Lupacescu

Moldova

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Photo symbol ©Renata Lupăcescu

Germany Remains one of the Most Important Trading Partners of the Republic of Moldova

For five years, the Federal Republic of Germany has numbered among the largest foreign trade partners of the Republic of Moldova. There are some major direct investments of German companies in the country, especially in the automotive industry. The Moldovan government is working to increase the intensity of economic relations. The Association Agreement with the European Union and the Agreement on the creation of the Deep and Comprehensive Free Trade Area are fundamental impulses and contribute to the significant growth of trade with the countries of the European Union.