Posted on 06 February 2007 by Mihai Moscovici
Start a business in Moldova
I am starting to write a comparative analysis of business cultures in the three different countries: Moldova, Romania and Latvia. I found it very interesting what are the procedures to start a business in Moldova.
Starting a business in Moldova is the cheapest, just $117.39, but it takes the longest, 10 procedures in 30 days. In Romania there are five procedures within 11 days, but you would pay little more, around $168. Latvia is the most expensive, around $237, and you are done in five procedures within 16 days.
Two fast conclusions: (1) Moldova has the most bureaucratic procedures; (2) Moldova just seems to be the cheapest. In fact, comparing prices to the economic data of the three countries, we will observe that the price paid by a Moldovan is quite the same as in Latvia, while Romanians pay the less. Considering Moldovan corruption, final expenses could even double.
| Procedure (2006) | #Proc |
Days | Cost$ |
| 1. File all the documents with the State Registration Chamber for the registration of the company; Obtain IDNO number | 1 | 15 | 107.26 |
| 2. Open a temporary bank account and deposit at least 40% of the registered capital of the company; pay the registration fee | 2 | 1* | 0.00 |
| 3. Obtain the Registration Certificate and Constitutive Act; obtain an official stamp from the Department of Information Technologies | 3 | 1* | 0.00 |
| 4. Register with the local Fiscal Inspectorates of the Ministry of Finance for VAT | 4 | 2 | 0.00 |
| 5. Register the company with the Statistics Department of Republic of Moldova | 5 | 1 | 0.92 |
| 6. A notary certifies the company’s bank account signature cards required for the conversion of bank account | 6 | 1 | 9.21 |
| 7. Convert the company’s temporary bank account to a permanent one | 7 | 1 | 0.00 |
| 8. Obtain the permission from the State Inspectorate of Labor | 8 | 7 | 0.00 |
| 9. Register the company with the Social Security Fund | 9 | 1 | 0.00 |
| 10. Register the company with the National Medical Insurance Company | 10 | 2 | 0.00 |
| Totals: | 10 | 30 | $117.39 |
* Procedures sometimes take place simultaneously.
Source: Doing Business
Photo: self-portrait / marianne
February 6th, 2007 at 2:20 am
Fascinating data. Don’t forget the old truism that time is money. People will either pay extra (bribes) to get their various stamps and documents faster, or they will wait longer. Or if they know the right people, they won’t have to pay money _or_ wait - they’ll just get what they need. Not exactly a hospitable business environment, unless you’re one of those few people who knows people.
February 6th, 2007 at 10:16 am
Some people I’ve talked to say that “Doing business” data was collected in a rush and is not very representative in the case of Moldova (there are blatant errors in the report, according to them, since “experts” employed were not that experty). But the World Bank office in Chisinau is really proud of them (and the WB person who was telling me about it is a very competent one), so I’m not sure what to make of it…
Anyway, doing business is what motivated “Ghiliotina” (the guillotine) under Lupu, so it’s a bot surprising that Moldova slipped 15 places in the rankings from 2005 to 2006.
* Have other reformed faster?
* Is the reform a fiction?
* Is WB data bad?
I don’t know…
I wouldn’t throw around sentences like “considering Moldovan corruption, final expenses could even double” — you can’t back such claims with data. Plus, there is lots of petty corruption in Romania (less than Moldova, according to the Kaufmann indicators, but nevertheless) so any attempts to factor in bribes to compute total prices are doomed to failure.
And I’m not sure what you mean by “comparing prices to the economic data of the three countries”. How did you do that? Using GDP PPP ratios? Or…? You have to be explicit about such things if you want to sound credible when discussing economic topics.
February 6th, 2007 at 12:13 pm
Thank you for the good remarks about the value of WB data.
I said corruption could double the price because I know three concrete cases where some of the people I know tried to start a business and had to pay well over the official price.
I considered the average salary as the prime factor in comparing the economic data of three countries.
I’m not an economist and could miss some important things. My conclusions may lack the scientific approach, therefore could not be considered as official data.
I described the situation in order to let you comment and bring the light over this topic.
Thanks for good comments.
February 6th, 2007 at 2:20 pm
I don’t think average salary as a good way to normalize things. I’d use PPP factors… Or, since foreign investors are some of the more frequent consumers of such information, nominal $ numbers may be sufficient.
“3 concrete” cases is not a good sample (it’s called “the small n problem”), unless you have additional information that proves that these cases are representative… Who knows, maybe you are simply hanging out with people who are more likely to bribe (e.g. low morals or their time is more expensive than average) - this is called “observational bias”.
February 6th, 2007 at 3:00 pm
When comparing the average salaries I wanted to see what would be the cost for an average citizen of the country to start a business. As for international investors, I think the difference between the prices is not very significant. More significant are the procedural steps and and adjacent formalities and paper work.
I do not attempt to make a scientific statement about corruption in Moldova. I just expressed my opinion how corruption may affect somebody’s business pursuit.
I do not consider people I know as bribe-givers. En contraire, I believe the state system and officials in Moldova make people to give bribes, otherwise the process of starting a new business may take months. I am sure you know how corruption considerably affects almost every are of Moldovan society.
June 17th, 2007 at 6:25 pm
Salutare!
As vrea sa intreb daca este posibil ca sa ma ajuti cu mai multe detalii in landsarea afacerii, pentru ca vreau sa deschid o intrebprindere dar inca nu stiu chiar tot ce tine de pasii pentru a crea firma si ce legi ar trebui sa consult.
Multumesc Anticipat, cu respect Cezar
June 18th, 2007 at 1:41 am
Salut Cezar. Ma bucur sa te cunosc ca pe un antreprenor, si mai ales prin intermediul acestui blog.
Nu sunt jurist si nu cunost toate detaliile legislative privind lansarea unei afaceri, dar pot sa iti recomand un jurist profesionist, de altfel si blogger de succes, care ar putea sa te sfatuiasca. Contacteaza-l pe Alexei Ghertescu care de curand si-a deschis propriul Oficiu Juridic. Blogul sau il gasesti la lawinmoldova.blogspot.com
Mult succes in ceea ce faci!