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Emerging Markets: Republic of Moldova

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Emerging Markets: Republic of Moldova

Energy and infrastructure sectors in the Republic of Moldova experience an influx of western capital. Financiers, manufacturers and distributors are realizing the economic appeal of the Moldova, including its favorable corporate taxation laws, quasi off-shore free economic zones structures, inexpensive yet educated labor force, and equally-convenient access to markets of the European Union as well as Ukraine and Russia. Our firm helps prospective investors and businesses to assess and circumnavigate through the risks inherently associated with the emerging markets, including the Moldovan market.

Taxation Generally

Moldovan standard Value Added Tax rate is 20%. However, for natural and liquefied gas the tax rate is 6%.  Standard corporate tax rate for 2012 is fixed at 12%. Companies operating as residents of Free Economic Zones, are taxed at one half of the standard rate. Additionally, companies with a capital investment (expense) of $250,000 enjoy a 50% reduction rate. With an increase in the investment amount, the Moldovan Government provides additional tax insensitives, including tax exemptions for a period between 1 and 4 years. Employer must contribute 23% of payroll to Social Security Fund, and 3.5% to Health Insurance Fund. Commercial and industrial real estate is taxed at 0.1%. Residential real property at 0.25%.

Moldova is an inured beneficiary of the Convention between the USA and the USSR on Matters of Taxation, the so-called "double tax" treaty.

Framework for Resolution of International Disputes

Moldova and the United States of America signed a Bilateral Investment Treaty. Under the BIT the investor can take an investment dispute to binding arbitration after six months from the date the dispute arises. Investor may choose between International Center for the Settlement of Investment Disputes (ICSID) and ad hoc arbitration using the Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL). Moldova has also ratified the Convention on the Settlement of Investment Disputes, actually permitting US investors that have an investment dispute to resolve it through ICSID.

With respect to enforcement of foreign arbitral awards in Moldova, Moldova has ratified the 1958 New York Convention on Recognition and Enforcement of Foreign Arbitral Awards, and adhered to 1961 Geneva Convention on International Commercial Arbitration.


There is a significant opportunity for domestic electric energy production to be filled, when Moldova consumes circa 3,500 GWh, 70% of which is imported.

The electric energy market in Moldova is regulated similar to other monopolies. The essential primary legislation includes The Law on Energy, The Law on Electric Energy, The Law on Renewable Energy, and The Law Regulating Entrepreneurial Activity Through Licensing.

ANRE is the regulatory public body overseeing the electricity and gas market in Moldova, and to some degree the petroleum market. ANRE licenses the suppliers of imported electric energy, licenses the distributors, sets tariffs for transmission and for distribution of electric and thermal energy, as well as sets tariffs on natural gas. ANRE also regulates profits obtained by distributors and suppliers of energy.

The Moldovan producers of energy are fairly few: CHP-1 Chisinau (66 MW), CHP-2 Chisinau (240 MW), CHP-Nord (28.5 MW), HPP-Costesti (16 MW), in addition to miscellaneous CHPs at sugar factories (98 MW). Recently the energy was imported from Ukrainian DTEK Power Trade company, and from Молдавская ГРЭС (Transnistria), a hydro-electric power plant, the interest in which is owned by a Russian company INTER RAO UES.

The transmission lines are owned and operated by Moldelectrica S.A..

Distribution of electric energy is accomplished through three main entities: RED Nord, RED Nord-Vest, and RED Union Fenosa. The first two are state-controlled, and the third is owned by Union Fenosa Internacional S.A. All three entities are also licensed to supply energy at ANRE-regulated prices.

Waste-to-Energy. Moldovan Renewable Energy Law classifies the biomass from certain wastes as a renewable energy source. The Moldovan law mandates all local providers of electricity, and petroleum importers, to purchase electrical energy produced in Moldova from renewable sources, in volumes/proportions determined by their respective market shares. This means that the demand for locally produced electricity from renewable sources is created by the legislative mandate, which creates favorable conditions for WTE projects.

I.M. Regia "Autosalubritate" is a waste management company owned by the municipality of Chisinau that also owns and operates the municipal landfill located near the village Tsintsareni. Autosalubritate processes and discards circa 195,000 tons of SMW per year into the municipal landfill. While there have been attempts to set up a lucrative system of waste processing, many western companies are still looking at the Tsintsareni landfill as a good business opportunity to set WTE projects.