For further economic development, Moldova should abandon the promotion of competitiveness based on low labor costs and bet on efficiency - Expert-Grup
This is one of the conclusions of the State of the Country in 2024 report, which was presented at the annual MACRO international conference. The event, organized by the Expert-Grup Independent Think Tank in cooperation with the Friedrich Ebert Foundation in Moldova, was held for the 12th time. The authors of the study note that in recent years, the state has increased the resources allocated to support the private sector and the economy as a whole, but they have had a limited effect. More than 4 billion lei were allocated only for budget programs to support small and medium-sized businesses, as well as agriculture in 2022-2023. However, the relevant resources were not managed in the most adequate way due to the lack of coordination between different programs (e.g., multiple cases of financial assistance to the same investment project from different programs) against the background of the absence of a single register of all support programs. Financial assistance was also allocated to companies that, in fact, should not have received concessional financing because they are affiliated or de facto part of large economic groups (the legal framework remains rather liberal in this respect); and money was distributed without establishing clear priorities for processing or value-added activities (a vivid example of this is subsidies in agriculture, which also applied to economic activities related to processing According to experts, to support the transition from a competitiveness model based on the cost of resources to one based on efficiency, the government should reconsider the way financial resources are planned and allocated in the economy. “Financial support instruments - primarily agricultural subsidies and Entrepreneurship Development Organization programs - should give clear priority to economic activities that create added value: processing of local raw materials, technologization of production processes, introduction of innovations at the enterprise level and export orientation. At the same time, it is important to establish a mechanism of coordination between different programs, including through the creation of a register that unites them, to avoid financial support under different programs for the same investment object, but also to make distribution mechanisms for more efficient use of financial resources,” said Expert-Grup. At the same time, it is important to change the approach from mechanical and formal assessment of financial documents to an assessment based on the risks of added value created and the impact of business on the sector and the economy as a whole. The Competition Council should play a more active role in identifying and punishing attempts to benefit from government funding programs - through companies hiding their affiliations with each other. More attention should also be paid to the management of the distribution of financial support to the private sector to avoid corrupt arrangements or clientelism. The separation of evaluation, implementation and monitoring functions; the independence of funding decisions; and the quality of governance bodies should be important aspects of governance. //13.12.2024 - InfoMarket.
