The internationalization of SMEs in the Republic of Moldova is the solution for increasing sales and access to foreign markets. Due to the low level of Foreign Direct Investment (FDI) and the limited links between local companies (mostly SMEs) and international investment corporations in the RM, the integration of SMEs into international value chains is very low. It is the finding made by the economist, Ion Tornea, in the show "15 minutes of economic realism".
The largest micro barriers that prevent foreign investment companies from making more purchases from local firms are the low level of technical training of local firms, the low quality of inputs provided, insufficient local business management capacities, and the inability of local companies to deliver large volumes. At the macro level, the biggest impediments are a complex and burdensome tax system, difficult access to finance, and high compliance costs.
"Current effects of the spread of FDI technologies and practices on local businesses in Moldova are rather modest and do not contribute to technological upgrading and increased the competitiveness of local SMEs. Because the most important investors are part of international value chains and import all or most of their inputs, they have limited links with local companies. In large part, local firms deliver non-productive services to foreign companies investing in Moldova, such as public transport and catering, office equipment, etc. With such a "partnership" model, the propagation effects on SMEs do not materialize", Ion Tornea explained.
A solution identified by other countries, such as Ireland, the Czech Republic, and Serbia, to boost links between foreign investment companies and local SMEs, is the implementation of SME internationalization programs. Benefits are mutually beneficial: local procurement can generate significant savings for foreign companies, while rooting FDI in the local economy by stimulating links with it creates strong retention incentives - foreign companies that have developed supply relationships with local SMEs are less inclined to -and re-locate investments, as often the costs of creating a new network of suppliers are higher than the cost of building a new plant.
In conclusion, Ion Tornea said that effective SME support should be primarily based on a capacity building in SMEs, increasing local supplier standards, encouraging partnerships between local SMEs and transnational corporations, and making corporate information available to local suppliers from different sectors.
The show is made by IDIS "Viitorul" in partnership with Radio Free Europe.
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