Marin CIOBANU: We are creating opportunities for business development in Moldova, not only in free economic zones.
Moldova has a completely new industry for the country over the past 10 years, it’s the automotive industry. The pioneer was the German company "Draexlmaier" which contributed to the foundation of Balti FEZ (hereinafter - ZELB). Today, the "Free Economic Zone of Balti" (ZELB) is 11.5 thousand workplaces with an average salary of 10 thousand lei; 67 residents of foreign companies with a total investment of $203 million (185 million euro) and industrial exports of 410 million euro per year. ZELB provides more than half of the export of all free zones of the country. FEZ not only attracting foreign investments and new residents but develop related directions. It is difficult to overestimate the role of the personality, ZELB administrator Marin Ciobanu. InfoMarket editor met with him at the beginning of 2020 and found out that new industries can be developed in Moldova in the next one and a half or two years; it will not only increase ZELB turnover by 1.5 times but will stimulate further development of industry in the country.
InfoMarket: Is it true that it was the entire initiative of "Draexlmaier" to establish the SEZ in Balti?
Marin CIOBANU: It is true. The company tried to test the working conditions, possible problems and ways to solve them in 2007 in our country. It was not easy to work with customs, the money intended for VAT, more than 3 million euro, was blocked by the government. Yes, the company would have returned it sooner or later, but for the investor this is hold of funds. The "Draexlmaier" decided: either a free economic zone will be created in Moldova, since all the company's products are exported, or they will not invest any more in our country. The government then, in my opinion, took the right decision in 2010, the law on the free enterprise zone in Balti was adopted and "Draexlmaier" became the first resident of FEZ. They asked me to head their mission for six months, since I studied in Germany and familiar with German business approach as well as internal problems in our country.
InfoMarket: After about a year, a new resident appeared in the Balti Free Economic Zone, right?
Marin CIOBANU: We had an agreement with "Draexlmaier", we needed new residents in order to develop ZELB and this company has almost 2.2 thousand partners, so I asked them to help with attracting new investors. A year after the opening of ZELB, the vice president of "Draexlmaier" informed me that "Gebauer & Griller" showed interest in our project. Representatives of this company agreed to visit Moldova, aided by the government and local authorities we gathered all government agencies that affect business, such as the tax service, fire department, environmental inspection, etc. So, the representatives of "Gebauer & Griller" did not have "knocking at the doors" since all the issues were discussed "in one day" virtually.
InfoMarket: So, the next residents were established on the same procedure?
Marin CIOBANU: When "Gebauer & Griller" decided to open their production, I asked them to recommend ZELB to one of their partners (since they were fine with everything). I was invited to take part in a trip of the "Gebauer & Griller" delegation to Sumitomo two years later, in 2013, to meet with the management of the corporation. It also coincided that parliament speaker Igor Corman was planning his visit to Berlin, so we managed to organize an informal meeting with the leadership of Sumitomo. This is important for German business: not everyone can meet with a speaker of parliament.
InfoMarket: Eventually, personal contact and seriousness of intentions solve a lot in business, isn’t it?
Marin CIOBANU: Undoubtedly. I was told more than once that companies are considering different regions to expand their business, but they want to work with those who familiar with their mentality and are able to provide local support.
InfoMarket: Eventually, Igor Corman led the Sumitomo representation office in Moldova, the SEBN.MD plant in Orhei...
Marin CIOBANU: By the way, when the plant was just opening there, 2,700 workplaces were defined in the business plan. Today, 4200 people work there. If a company pays good salaries, provides social security, transportation, meals, so let’s say a husband and a wife work at the same enterprise, then such family no longer have a desire to leave the country. Salary is not the only motivation. There is modern corporate management, discipline and work culture at ZELB enterprises as a rule. People work in good conditions and live in the country, meet with friends and relatives.
InfoMarket: Do you expect new residents or new projects in ZELB this year?
Marin CIOBANU: The construction of the new resident's plant, the "Fritzmeier" company, begins in February in Crihana Veche village, Cahul’s region. It will be an automated and robotic plant for the production of components for the automotive industry. The initial investment will be 8 million euro; about 100 jobs will be created. "Fritzmeier" plans to expand its presence in Moldova in the future.
InfoMarket: Business complains that there is a shortage of labor in the country...
Marin CIOBANU: As for the ZELB, I would divide the workers into several groups, those with low qualifications who need to take courses at the plant and get to work; another group is people that have secondary special qualifications, technicians, craftsmen, operators and third group is management with high qualifications. So, the biggest lack of personnel is in the second group; the country no longer trains such specialists. Large enterprises had their own training centers in Soviet times. Almost all enterprises went bankrupt with the collapse of the USSR, so the training centers no longer exist...
InfoMarket: But, as far as I know, ZELB has opened its own engineering college in Straseni for the needs of your residents, they’re working in new conditions...
Marin CIOBANU: …Yes, this year will be the first graduation. This project was worth intensive efforts. We started it in 2013, and only after 5 years were able to open it. Then no one wanted to hear about any dual education, and now it has become fashionable. Today, 74 people study at the college, whose training costs about 2000 euro for two years. The training itself is 600 euro per year, plus the company pays the student either a scholarship or a salary. Students go to college for 2 months, and then 2 months apply the acquired knowledge in their enterprise.
We were able to create a completely new educational institution where the most modern laboratories are installed thanks to public-private partnerships, moreover, there as comfortable as at home. We do not plan to graduate specialists on a large scale so that graduates have nowhere to work. We train by order: we have contracts with 19 enterprises, moreover, we are not talking only about residents of ZELB, but also other companies that work for the domestic market. Our partners need 5 to 15 specialists per year. Students have the opportunity to put their knowledge into practice. They are involved in real processes.
The other day a delegation from Gagauzia visited the college. They want to create something similar at their region with financial support from Turkey. But it’s not enough to get financing, it’s even more important to invest it wisely and I think our engineering college is a very good example.
InfoMarket: Do the students want to study in Moldova?
Marin CIOBANU: We have very talented young people who are looking for the best way to be actualized. Why do people leave the country? They do not believe in the state that high-quality educational institutions and good jobs can be created here. We prove that people can study and work in decent conditions for honorable salaries in our country.
InfoMarket: Are there any risks that after a few years ZELB residents will begin to transfer their production to other countries? For example, the Ukraine, the same way they came to us from Romania and Bulgaria.
Marin CIOBANU: We still have the potential to attract new residents and expand car industry in Moldova. Today, we have about 20 companies in our country that work for the automotive industry but our western neighbors have more than two hundreds companies involved in the automotive industry. We have about 17 thousand people work in this industry; Romania had about 210 thousand people in the industry 5 years ago and the share of the automobile industry in the country's GDP was 14%.
InfoMarket: You’ve negotiated with "TÜV Thüringen" company at the end of last year. This company provides product certification services...
Marin CIOBANU: These negotiations are ongoing as part of the import substitution program. Today, our enterprises, including residents, import a lot of components. We identified about 300 Moldovan companies that could produce certain components on the spot and I think 50 companies will be selected at the final stage, whose products we certify according to TUV standards. The state budget provides 15 million lei for this project. We expect that this project will be implemented within a year or 1.5 year. The state will be able to improve its trade balance and this will be good for large companies, both due to lower production costs and lower logistics costs. An important factor for them is the speed of the supplier’s response to customer needs. International studies show that such companies create about 100 jobs on average. That is, up to 5 thousand new jobs will be created in two years with other added value, but they will not be residents of the SEZ.
InfoMarket: So the government is supporting you?
Marin CIOBANU: We would do everything faster with the support of the government. We created the Patronage Association of Manufacturing Companies (APIP) back in 2013. In 2018, we worked out Moldova’s industrial development strategy for 2020-2030, which, we submitted last week to the government, with the support of the Ministry of Economy and Infrastructure, and received support.
InfoMarket: What is the Strategy?
Marin CIOBANU: When ZELB opened the first subzone in Balti on an area of 20 hectares, no one except us believed that it could be filled by residents, but we succeeded. What we did: we prepared technical projects, went to the state for financing, turned to the local authorities for support, we brought all the communal and communication networks. When an investor sees that all the necessary connection points are ready at a distance of up to 100 m, the high-voltage lines are connected, an investor begins construction immediately. Investors do not need knocking the doors of the authorities; they only build a structure according to their needs and begin the work process immediately.
So, the Strategy says that in 13 out of 32 regions of Moldova do not have industrial parks or free economic zones or subzones, so the regions are lagging behind in their development potential as a result. In case the sites with the communications will be made, then investors will appear. This is the minimum requirement that can be made by the state to stimulate industrial development and create new jobs in the country.
The Strategy is divided into three stages of four years each, the investment is set at 50 million euro for every four years. All the subjects are included in the document, only the action plan is 28 pages.
One of the most important subjects in the Strategy, in my opinion, is the foundation of engineering research and innovation parks in all regions of the country.
Marin CIOBANU: HiTech Center in the industry is a completely new level for Moldova. ZELB has a subzone of 2.5 hectares of land in Chisinau and the building of the former Physics and Mathematics Institute at Grenoble street. We are now completing a feasibility study for the project with the signatures of 27 companies and we will hand it over to the government. The state does not need to invest anything. I talked with the Austrian Ministry of Finance, they are ready to provide an interest-free loan for 25 years in the amount of 5 million euro to this center, of which 1.5 million euro will be used for the reconstruction of the building and premises and 2.5 million euro for the purchase and installation of up-to-date laboratory equipment.
According to our plan, the center should work on the conditions that the state provided to IT parks, a single tax of 7% of the turnover. This will give the state additional income in the amount of 40-50% of what ZELB gives today.
Each company conducts research in its field, so there should be different laboratories and different equipment. We equip some of the laboratories with the support of the Austrian government with robotics, pneumatic technologies, metal processing etc. We will also provide part of the premises to companies so that they can independently equip them to their requirements.
We have an example, "Draexlmaier" has been renting 400 sq m within 4 years in Chisinau (at Riscani district). There are 20 engineers working to improve car design, such as "Maserati" and these persons are very highly paid Moldovan experts.
The center will cover the needs of corporations. Today, many businessmen who use high-precision equipment and technologies at their enterprises are forced, in case of failures, to travel to Lviv (Ukraine) to test, measure, etc. Not every company can afford its own laboratory, which costs 0.5- 1 million euro. The Center will be able to provide such an opportunity on the spot. In addition, there are other partners for its equipment: Partners from Austria are ready to allocate 0.9 million euro for the acquisition of three EMCO machines and the foundation of a center for the study of equipment with numerical control. US partners can also provide 2 million euro for foundation of two laboratories.
We really need these types of centers that will create a fundamentally new industry, new highly qualified and highly paid jobs.
InfoMarket: Where can you find specialists for training and work in these types of centers?
Marin CIOBANU: Educate them. We plan to create a regional master's program for the best students from Moldova, Romania and Ukraine in applied and digital mechanics. How can Moldova attract students from neighboring countries? We will offer them two diplomas, one of which is one of the most prestigious technical universities in Europe, the Rhein-Westfalian Technical University of Aachen (RWTH Aachen University). After studying in Moldova, students will be invited to Aachen for a second diploma to study within six months there. We have held the negotiations with this university, they are waiting for our students.
I believe that we will have highly qualified specialists, which means that over time, we will be able to expand Moldovan automobile industry, for example, attract a factory for the assembly of gearboxes or batteries for cars. Everything is possible with the right strategy! We plan to launch the master’s program in 2020.
We create opportunities for business development in Moldova, not only in free economic zones. Nothing is impossible, because 10 years ago no one believed that the automotive industry could be implemented in our country...
PS: In December 2019, by a decree of the President of Moldova "As a sign of high appreciation of special merits in the implementation of investment projects and the creation of stable workplaces in the Republic of Moldova, as well as for a significant contribution to the development of socio-economic infrastructure", ZELB Administrator Marin Ciobanu was awarded the "Gloria Muncii" Order (Labor Glory). // 29.01.2020 - InfoMarket.