Europe & Central Asia
Moldova risk report
Moldova's business environment is one of the most challenging in the region and is weakened by pervasive government corruption and a burdensome regulatory environment. The government lacks transparency, and Moldova's public officials commit acts of corruption with impunity. The judiciary is one of the weakest in the world in relation to independence from the political elite, and judges and prosecutors regularly extort bribes in exchange for reducing charges or imposing milder penalties. International companies pay bribes and kickbacks to obtain construction permits and operating licenses and to secure government contracts. Moldova's Criminal Code prohibits active and passive bribery, extortion, abuse of office, bribery of foreign public officials and trading in influence. However, Moldova's anti-corruption legislative framework is deficient as a result of inadequate financing and monitoring and a general lack of resources. Facilitation payments are often expected when operating in Moldova and are not addressed in law.
Judicial system Very high risk
Risks of corruption in Moldova's judiciary are very high. Businesses report that irregular payments and bribes in return for favorable judgments are very common (GCR 2015-2016). The judiciary in Moldova is subject to political interference and subversion (BTI 2016; HRR 2016). Accordingly, businesses report the level of judicial independence in Moldova to be very poor (GCR 2016-2017). Moldovans cite the judiciary as among the four most corrupt institutions in the country (CISR 2016). Court processes lack transparency and enjoy low public levels of trust (ICS 2017). It is commonly expected that court rulings will be in favor of public officials in court cases in which public authorities are involved (ICS 2017). In an effort to curb rent-seeking among judges, their wages have been increased by more than a hundred percent since 2013 (BTI 2016). Judicial anti-corruption reforms – mainly amendments allowing the criminal prosecution of judges suspected of passive bribery, influence peddling, money laundering or illicit enrichment – were blocked by the Superior Council of Magistrates who argued that the amendments would affect the independence of judges (BTI 2016).
Former Prime Minister Vlad Filat was sentenced to nine years in jail on corruption charges relating to abuse of office in 2016 (RadioFreeEurope, Jun. 2016). Filat was indicted for taking bribes relating to the theft of USD 1 billion from Moldova's banks, which almost caused the collapse of the country's economy (OCCRP, Jun. 2016). As of August 2017, Filat is appealing the case at the European Court of Human Rights, arguing that his stripping of parliamentary immunity and unseating was in violation of domestic law (Crime Moldova, Aug. 2017).
Foreign arbitral awards are generally enforceable in Moldova, based on the principle of reciprocity (ICS 2017). Moldova launched a new initiative in 2016 to financially incentivize businesses to attempt mediation (DB 2017). Companies should be aware that enforcing a contract in Moldova takes longer than in neighboring countries (DB 2017). Moldova is a signatory to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, and it is member state to the International Centre for the Settlement of Investment Disputes (ICSID).
Police Very high risk
There is a high risk of corruption when interacting with Moldova's police. Three out of four Moldovans perceive the police as corrupt (GCB 2013). Police impunity is common in Moldova (BTI 2016). Companies report insufficient confidence in the reliability of police services in protecting them from crime and enforcing the law (GCR 2016-2017). Four out of five firms pay for private security (ES 2013). The lion's share of corruption offenses investigated by the country's anti-corruption authorities involved law enforcement employees (HRR 2016).
Public services Very high risk
There is a high risk of corruption in Moldova's public services sector. Companies cite policy instability and inefficient government bureaucracy as being among the biggest obstacles to doing business in Moldova (GCR 2016-2017). Around one in seven companies indicate they expect to give gifts in Moldova to 'get things done' and one-third of businesses expect to give gifts when obtaining an electrical connection (ES 2013). Businesses often face bureaucratic procedures that are not transparent, and red tape makes processing licenses, registrations and other procedures unnecessarily burdensome (ICS 2017). Discretionary decisions by public officials often provide room for abuse and corruption (ICS 2017). The government has taken steps to reduce red tape, but implementation of these measures is still lacking (ICS 2017).
Starting a business in Moldova takes the same amount of steps as the regional average, but it requires significantly less time than elsewhere in the region (DB 2017). It takes 27 procedures and 276 days to obtain a construction permit, almost double the average number of steps and days required elsewhere in the region (DB 2017).
Land administration Moderate risk
There is a moderate risk of corruption in Moldova's land administration. Companies report that protection of property rights is poor (GCR 2016-2017). Nearly half of businesses report expecting to give gifts when obtaining a construction permit (ES 2013). Foreign companies are able to own all types of land, except for agricultural and forest land (ICS 2017). The law permits the government to expropriate property for purposes of public utility provided it is done in a non-discriminatory way with adequate compensation (ICS 2017). Since 2001, the government has canceled several privatizations after accusing investors of failing to meet investment schedules; companies have been able to obtain compensation in these cases, although some had to apply to the European Court of Human Rights (ECHR) to enforce compensation payments (ICS 2017). Registering property takes five steps in Moldova, and requires only five days compared to the regional average of twenty days (DB 2017).
Dutch banking group Rabobank has been accused of 'land grabbing' (EU Observer, Nov. 2015). Local villagers have taken the bank to court claiming they never sold the land to the fund (EU Observer, Nov. 2015). In at least eleven separate cases, plots of land owned by the bank are part of investigations into forgery and fraud (EU Observer, Nov. 2015). There were no further updates on the case at the time of review.
Former Deputy Minister of Economy Valeriu Triboi is facing allegations of abuse of power and causing large financial damages to the state (Crime Moldova, Aug. 2017). He is accused of embezzling money meant for the repair of a building, while ordering the lessee to pay for the repairs instead (Crime Moldova, Aug. 2017). In addition, Triboi has allegedly been involved in various other corrupt schemes involving real estate (Crime Moldova, Aug. 2017).
Tax administration Very high risk
The tax administration in Moldova carries high risks of corruption. Businesses indicate irregular payments and bribes are common when making annual tax payments (GCR 2015-2016). Companies indicate tax regulations are among the biggest impediments to doing business in Moldova (TI 2017). Nearly half of businesses report that tax officials are likely to ask for an 'additional payment' when a tax violation is detected (TI 2017). More than half of businesses strongly agree that most companies prefer to make irregular payments to tax inspectors in order to avoid full tax payments (TI 2017). In one case, a foreign investor, seeking redress, voluntarily reported underpaying taxes, yet found himself being extorted by the tax official assigned to the case (ICS 2017). The government has introduced a new online tax filing platform (ICS 2017). Companies pay taxes ten times a year, which is far below the regional average; the total time required to make these payments is also significantly below the regional average (DB 2017).
Moldindconbank, a bank based in Moldova, has been accused of laundering USD 20.8 billion dollars, including for the purpose of tax evasion, through its accounts (OCCRP, Mar. 2017).
Customs administration Very high risk
There is a high risk of corruption in Moldova's customs administration. Burdensome import procedures and tariffs are the main impediments to international trade across Moldovan borders, and corruption at the border and non-transparent customs processes significantly interfere with companies' business operations (GETR 2016). Irregular payments and bribes to customs officials are perceived as commonplace (GETR 2016). The judicial branch is said to often shield corrupt customs officials from prosecution (Carnegie Endowment, Jun. 2016). The time predictability of procedures is rated as inadequate (GETR 2016). On the other hand, the costs and time required to comply with import procedures are far below the regional average (DB 2017).
Five customs brokers and a customs officer were arrested on suspicion of passive corruption in May 2017 (Crime Moldova, May 2017). The accused accepted facilitation payments in order to speed up customs procedures; additionally, they threatened to classify goods in higher categories which would impose onerous tax tariffs on the importers (Crime Moldova, May 2017).
Public procurement Very high risk
There is a high risk of corruption in Moldova's public procurement sector. Companies report that favoritism in decisions of government officials is very common and there is a high degree of perceived wastefulness in the government's spending (GCR 2016-2017). Irregular payments and bribes are commonly offered in the process of awarding public contracts (GCR 2015-2016). One in ten companies believes bribes and gifts must be given to government officials to be able to secure a public contract in Moldova (ES 2013). The public procurement sector lacks effective regulations (ICS 2017). Opaque tenders involving political influence remain a problem (BTI 2016). The Public Procurement Agency lacks control mechanisms to detect corruption, its members frequently have conflicts of interests, and law enforcement involvement in the sector is insufficient (UNDP 2016). Corruption in public procurement is embedded in a wider societal system of corruption in Moldova (UNDP 2016). Foreign companies do not have to involve with domestic parties in order to win a procurement contract (ICS 2017). By law, private businesses compete with state-owned enterprises (SOEs) on a level playing field; but there are reports that SOEs are often in a better position to exert influence on decision-makers (ICS 2017).
In April 2017, Transport Minister Iurie Chirinciuc and two executives with private companies were arrested on corruption charges (Crime Moldova, Apr. 2017). It is alleged that the suspects exercised pressure on a company that won tenders in a project financed by the European Investment Bank (EIB) to delegate some of the business involved to the companies affiliated with the suspects; the pressure included threats of contract termination and being blacklisted (Crime Moldova, Apr. 2017). Chirinciuc was sentenced to a year and four months of imprisonment in addition to a MDL 35,000 fine (Crime Moldova, Aug. 2017). The two executives were also found guilty of influence peddling (Crime Moldova, Aug. 2017).
Companies can access the webpage for the Moldovan Public Procurement Agency for information on public procurement regulations, awarded contracts, tender notices and a list of companies guilty of major violations. Foreign companies are recommended to use a public procurement due diligence tool to mitigate corruption risks related to public procurement in Moldova.
The Criminal Code of Moldova criminalizes active and passive bribery, attempted corruption, extortion, money laundering and abuse of office. Penalties for attempted corruption include prison terms of 5 to 12 years and fines of up to USD 4,500. Sanctions for a public official accepting a bribe include prison terms of up to 15 years and a ban from re-entering the public service for up to 10 years. Moldova's legislation does not provide an exception for facilitation payments. Gifts of symbolic amounts that do not exceed MDL 1000 may not be considered as bribes (UNODC 2016). Legal entities are criminally liable for corruption charges. The Law on Preventing and Combating of Corruption outlines a set of anti-corruption measures and addresses the protection of human rights and civil society participation in combating corruption. The Law also prohibits bribery of foreign public officials, trading in influence and protectionism. The Law on Public Procurement applies to all contracts of goods exceeding MDL 0.8 million and all services exceeding MDL 0.1 million. Additional procedures apply for contracts involving goods exceeding MDL 2.3 million and services exceeding MDL 90 million (Turcan Cazaz Law Firm, May 2016). Public enterprises and private-public partnerships are not subject to the procurement law (UNDP 2016). Public officials such as judges, prosecutors, and managers in state-owned companies are required to declare their income and assets under the Law on Declaration and Control of Income and Ownership. The anti-corruption legal framework is backed by other relevant laws including the Law on Civil Service, the Law on Preventing and Combating Money Laundering and the Law on Combating Corruption and Protectionism. Whistleblowers are not legally protected against recrimination. The implementation of anti-corruption legislation is hampered by the lack of a professional staff and resources (ICS 2017). Political loyalty determines the selection of civil servants at the higher levels of government, but a class of well-trained bureaucrats has started to form at middle-management levels (BTI 2016).
Moldova is party to the Regional Anti-Corruption Initiative for SEE (RAI-SEE) and the Council of Europe Group of States against Corruption (GRECO).
Moldova's Constitution provides for freedom of the press and expression, but authorities do not always respect these rights in practice (HRR 2016). Individuals are generally free to criticize the government publicly without repercussions (HRR 2016). Trust in the media has been dropping recently; only two out of every five Moldovans has high trust in the media now, compared to three out of every five in 2013 (NiT 2017). The concentration of media outlets in the hands of oligarchs is a problem (NiT 2017; HRR 2016), and self-censorship among their media outlets is increasing (BTI 2016). Online news media generally provide more diverse coverage (FotP 2016). Defamation has been decriminalized, but corrupt judges continue to rule on defamation cases against critical media outlets (FotP 2016). Moldova's press is classified as 'partly free' (FotP 2016).
Moldova's civil society has developed considerably in the last decade and their participation in decision-making is increasing, although civil society's role remains limited (BTI 2016; FitW 2016). Funding for CSOs is problematic since the vast majority of their funding comes from foreign sources (BTI 2016).
- World Bank: Doing Business 2017.
- US Department of State: Investment Climate Statement 2017.
- Freedom House: Nations in Transit 2017.
- Transparency International: Corruption and Quality of Governance: The Case of Moldova 2017.
- Carnegie Endowment: "The Structure of Corruption in Moldova", 2017.
- Crime Moldova: "Vlad Filat Sues Moldova to the European Court of Human Rights for Violating His Rights in the Trial", 11 August 2017.
- Crime Moldova: "Former Transport Minister to Serve 1 Year and 4 Months of Imprisonment", 10 August 2017.
- Crime Moldova: "Former Deputy Minister of Economy to be Sued. Triboi Risks a Six-Year-Prison Term", 3 August 2017.
- Crime Moldova: "Five Customs Brokers and a Customs Officer are Suspected of Passive Corruption", 2 May 2017.
- Crome Moldova: "Iurie Chirinciuc, Transport Minister, and 2 Executives Arrested for Exercising Pressure on a Company", 27 April 2017.
- OCCRP: "The Russian Laundromat Exposed", 20 March 2017.
- Bertelsmann Foundation: Transformation Index 2016.
- US Department of State: Human Rights Report 2016.
- World Economic Forum: Global Competitiveness Report 2016-2017.
- World Economic Forum: Global Enabling Trade Report 2016.
- UNDP: Assessment Report of Corruption Risks in Public Procurement in the Republic of Moldova 2016.
- UNODC: Country Review Report of the Republic of Moldova 2016.
- Center for Insights in Survey Research: Public Opinion Survey Residents of Moldova 2016.
- Freedom House: Freedom of the Press 2016.
- Freedom House: Freedom in the World 2016.
- Legal Resources Centre from Moldova: "Position Note", 19 December 2016.
- OCCRP: "Moldova: Former PM Sentenced in Billion-Dollar Bank Fraud Case", 30 June 2016.
- RadioFreeEurope: "Former Moldovan PM Jailed for Nine Years", 27 June 2016.
- Turcan Cazac Law Firm: "New Law on Public Procurement to Enter into Force on 1 May 2016", 1 May 2016.
- World Economic Forum: Global Competitiveness Report 2015-2016.
- euobserver: "Rabobank Subsidiary Accused of Leasing Romanian Land to Criminals", 10 November 2015.
- Transparency International: Global Corruption Barometer 2013.
- World Bank: Enterprise Surveys 2013 - Moldova.
- Moldova.org: 'Tax evasion- a problem in Moldova, admits Minister of Economy', January 2013.