With accession ambitions accelerating and energy security still front-of-mind, Moldova has secured a sizable EU support package. Cobzac & Partners Managing Partner Daniel Cobzac analyzes the size, conditions, priority sectors, and likely immediate impact on investment and private-sector growth.
What’s in the Package
Framed around the country’s reform agenda and integration with EU markets, the package is both broad and strategic.
“The European Union support package for the Republic of Moldova is worth EUR 1.9 billion, representing financial support that is based on the Reform Agenda of the Republic of Moldova, which includes the main socio-economic and fundamental reforms that it intends to undertake to accelerate growth and convergence with the EU, as well as priority investment needs,” Cobzac outlines. According to him, the support package plays an essential role in the implementation of the EU’s “comprehensive strategy for energy independence and resilience of the Republic of Moldova, which aims to decouple the country from insecurities related to Russian energy supplies and fully integrate it into the EU energy market.”
At the same time, the financial support is designed to help Moldova address “structural vulnerabilities, support macroeconomic stability and advance on its path to EU integration.” As Cobzac puts it, “it is important to underline that this financial support will cover all sectors vital for promoting the economic growth of the Republic of Moldova.”
The Capacity Test
Disbursements hinge on a detailed reform and investment roadmap, plus robust safeguards, requirements that likely stand to stretch administrative bandwidth.
According to Cobzac, Moldova “must include in the reform agenda clear reform measures and priority investment areas, set payment conditions with measurable steps showing progress or completion, provide an implementation calendar and a list of planned investment projects under the Neighborhood Investment Platform, and demonstrate an effective system to prevent and address irregularities, corruption, fraud, conflicts of interest” as well as “avoid double funding from the facility, other than EU programs, or donors.”
However, Cobzac feels the endeavor could face challenges. “This is because Moldova’s administrative capacity remains under pressure, and the effective absorption of such a significant amount of EU assistance will require sustained coordination between institutions. Ensuring the continuity of reforms in the context of political transitions and maintaining alignment between domestic priorities and EU expectations are probably among the most important tests.” Still, these conditions are “boosting growth in all vital areas.”
Take Note Where the Money Goes
Priority areas mirror EU policy pillars, including green, digital, connectivity, and human capital, alongside agriculture and rural development.
“Besides the fact that the financial support is aimed at increasing the financial assistance over the next three years and to enhance access to the European Union’s single market,” Cobzac says that “key areas of the financial support are social and economic development.” Specifically, these cover “connectivity, infrastructure, including sustainable transport, decarbonization, energy, green and digital transitions, agriculture and food industry, rural development, as well as education, labor market participation and skills development, with a particular focus on children and youth and on raising the standard of living throughout the country.”
Finally, setting the stage for a boost of the private-sector momentum are stronger legal certainty, infrastructure upgrades, and cheaper cross-border payments.
“In our view, the financial package has the potential to fundamentally reshape the investment landscape of the Republic of Moldova,” Cobzac opines. “EU support is expected to increase investor confidence and stimulate private sector growth by providing legal certainty, improving infrastructure, and expanding access to finance. For example, Moldova’s recent accession to the Single Euro Payments Area will significantly reduce transaction costs for companies and facilitate exports to the European Union, giving Moldovan entrepreneurs direct access to the world’s largest financial market.” As he ultimately puts it, the development of the investment sector “will generate competitive wages and lower administrative costs, as well as other economic benefits.”
This article was originally published in Issue 12.9 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.
