Invest in ICTInformation Package

May 2014

ICT Sector-overview

Competitive ICT services in Moldova• Software development• specialized outsourcing activities• Support activities (call-centers)• Mobile telephony

Success Stories

Moldova is expected to remain one of the favorite offshoring locations in the near future due to its advantages in terms of costs, geographic position and availability of human resources – all factors that will continue to give Moldova a direct competitive advantage over its direct competitors in the region.

Competitiveness Assessment of the Moldovan IT Market, IDC 2011

…and many more to come

Important role of ICT in Moldovan economyICT sector as an agent of change of the Moldovan economy

• Since 2000, the Moldovan ICT sector has grown faster than the economy as a whole and has exerted a positive impact on labor productivity in different sectors

• IT sector in Moldova has a GDP share of 8.9% (2012) and employs 3.2% of the Moldovan labor force*

• The growth until 2015 is estimated at 6.6% per year **

• High ICT spending in Moldova

ICT spend as % of GDP 2x Bulgaria, Croatia, SloveniaICT spend as % of GDP 3x Romania

• Today, there are about 900 registered ICT companies operating in Moldova. Most of the companies are based in Chisinau.

* Source ATIC White book**Source IDC report : Competitiveness Assessment of the Moldovan IT Market, 2011 (http://mtic.gov.md/img/d2011/promovarea/CEMA17850_Final.pdf)

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IT Spending in Moldova

Moldova as a nearshoring destination

Key reasons to use Moldova as a nearshoring destination for services provided to companies based in the EU and the CIS

• Highly competitive cost of labor and low operating costs salary offered to fresh graduates - starting from €300-400 euros per month

salary offered to a skilled IT employee – around 700 euros (net) and 1,000 euros (gross).

• Increasing number of IT graduates per yearalmost 2.000 students graduate Moldovan universities yearly with degrees in computing and related fields. Another 8,500 have math or engineering degrees.

• Well-educated and talented workforce with technical skills and proficiency in different languages (Romanian, Russian, English/French)

• Sustainable and continuous growth of the IT sector;

• Legal framework in line with European Directives and openness to reform

• Solid government support of the sector and commitment to improve the investment climate

Business opportunities in ICT

In terms of IT services, Moldova is well positioned for:

• Software development: specialized outsourcing activities around high value services such as analysis and design, software development and testing;

• Support activities (call-centers): competitive workforce with high levels of language proficiency.

• In the telecommunication sector, the main opportunities are: Mobile telephony: penetration still well below potential (70% for fixed and 120% for mobile); Moldtelecom, among the most important state-owned companies to be privatised in the near future.

Incentives in the ICT Sector

Special incentives for Moldovan IT companies for the 2012- 2016 period include:

• Employee income tax exemption - Law 1164/24.04.97 (article 24 (21) + annex 1 and 2)Company’s activity should be listed in annex 1 of the law*

Employees positions should be listed in annex 2 of the law**

More than 50% of the company revenue should come from software developmentThe company must have no debts to the public budget

• Limitation of monthly social security contributions for employers (Law 250/08.11.2012 (Annex 3, art. 1.3)

The company only pays the 23% social contribution from a maximum of 2 average salaries estimated by the government for the year in course. Example: this year – the estimated average salary is MDL 3950. Two salaries would be MDL 7900. 23% of that is MDL 1817 which today is about EUR 105. That is the upper limit to be paid as social contribution per employee, by the company.

*Activities related to the analysis, design and programming of information systems ready for use**Analyst, developer, design of systems, engineer,database administrator, network administrator, software engineer, information project manager.

Committed Government to support ICT sector

Two strategies are being designed: “Digital Moldova 2020” and “ICT Competitiveness”. The current ICT Strategy 2011-2014 aims to:

• Increase Moldova’s ICT sector position within the global value chain : exports of ICT products and services to increase from EUR 100 million to EUR 180 million over the 2011-2014 period;

• Upgrade the ICT infrastructure through greater private involvement• Strengthen IT skills through education to ensure adequate resources for the ICT sector

development.• Creation of technological parks and incubators in the ICT field and attraction of international

companies; • Sector stimulation through public procurement; e-Government Centre initiative, aiming at

improving access to public information

Market size and dynamicsNumber of software specialist on IT market

• In 2012, more than 20.000 individuals were employed in the ICT sector. Around 83% were technical specialists, such as software engineers, analysts, developers, and project managers

• Approximately 6.000 worked in the software sector alone. IDC’s examination of the combination of available skills, suggest that Moldova is particularly well positioned for high-value activities like analysis and design and software development, and testing. *

*IDC Report, Competitiveness Assessment of the Moldovan IT Market, 2011, http://www.mtic.gov.md/img/d2011/promovarea/CEMA17850_Final.pdf

Exports of software products

• The export volume of software products has increased almost four times between 2007 -2012. This increase was due to the development of information technology and the related services but also due to the low baseline of the export volume

• According to the estimations of European experts (www.oDesk.com), IT exports provided by freelancers which are not reflected in the balance of payments, was in 2011 of 15 mln USD. The main export destination it local IT companies are UK, USA, France, Germany and Romania.

* Ministry of Information Technology and Communications

2009 2010 2011 2012Total Export 2000,03 2290,75 3158,53 3164,30

Export of ICT services 134,96 159,47 182,8 195,88

Communication services 105,21 126,05 134,96 140,04

Computing and Information services 29,75 33,42 47,84 55,84

Share of the ICT sector (%) 6,74 6,96 5,78 6,19

Total Imports 3988,6 4573,78 6030,56 6109,56

Import of ICT services 63,13 61,76 65,45 77,3

Communication services 39,15 38,13 42,46 40,16

Computing and Information services 23,98 23,63 22,99 37,14

Share of the ICT sector (%) 1,58 1,35 1,08 1,26

Education in ICT sector

The Moldovan labor market is supplied with skilled workforce thanks to the learning mechanisms in universities and training methods applied by the private companies in cooperation with the universities.

• During the 2011-2012 academic year, almost 2.000 students graduated in an IT related specializations (from an overall figure of 28.000 graduates yearly), a number which registers a constant grow

• The Government has shown its support to these specializations by increasing the number of scholarships (from 618 to 762 in 2012)

• The graduates are ready to be trained and join IT firms looking for hardworking, mid- and high-end developers. Many are trilingual, speaking Romanian, Russian, and French or English.

Universities/ Technical University (UTM)

Technical University from Chisinau (UTM) www.utm.md ; Some sections at UTM with special groups where all the subjects are taught in a foreign language. Within the Faculty of Computers, Informatics and Microelectronics there is the Francophone Department "Informatics" and the Anglophone Department "Computer Sciences and Electronics".

• Faculty of Computers, Informatics and Microelectronics; - Automatics and Informatics; - Microelectronics; - Computers; - Informational Technologies; - Informatics.

• Faculty of Engineering and Management in Electronics and Telecommunications; concentrated on training in Electronics and Communications profile. - Department of “Electronics and communications”; - Department of “Engineering and industrial technologies”; specialties:

o 525.1 „Electronics”; o 525.2 „Optoelectronic systems”; o 525.3 „Tele-radio-communications”; o 521.8 „Engineering and management in Telecommunications”.

Universities/ USM/ ASEM/ULIM

State University of Moldova from Chisinau (USM): • Faculty of Mathematics and Computer Science; http://usm.md/?page_id=2080&lang=en

- Department of Applied Mathematics Informatics; - Bachelor degree: Applied Mathematics; Computer Science; Applied Informatics; Information

Management. - Number of students: Cycle I – 916; Cycle II - 120

• Faculty of Physics and Engineering; http://usm.md/?page_id=1176&lang=en- Department of Applied Physics and Informatics; - Master’s Degree in Semiconductor Physics and Engineering; - Number of students : Cycle I – 678, Cycle II – 45

Academy of Economic Studies of Moldova from Chisinau (ASEM)• Faculty of Cybernetics and Economic Informatics ; http://cie.ase.md/en/

⁻ Bachelor degree: Informatics; Information management; Computer science ⁻ Master’s Degree: Economic cybernetics; IT in Economy; Information management

Free and international university of Moldova from Chisinau (ULIM)• Faculty of Informatics and Engineering ; http://inginerie.ulim.md/en/

⁻ Bachelor degree: Informatics; Computer science; Programming⁻ Master’s Degree: Computer science; Applied informatics

Intellectual property rights protection

The STATE AGENCY ON INTELLECTUAL PROPERTY OF THE REPUBLIC OF MOLDOVA (AGEPI) is the governmental body, having the aim to promote policies in the field of intellectual property and to increase the efficiency of the protection system of intellectual property rights.

Although Moldova is still in the process of fully ensuring the IPR protection (i.e. the software piracy rate is still high), many efforts have been done in order to harmonize the legal framework with the EU directives and thus, ensuring a better quality of IPR enforcement.

With the entering into force of the DCFTA, the intellectual property rights will be among the list of requirements to be adapted to the EU norms.

International rankings (1)- IDI

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Sweden Moldova Romania Ukraine Turkey Georgia

Moldova is ranked 62 out of 155 countries, according to the ICT Development Index both in 2010 and in 2011, and ranked the 4th country in the CIS region (ranked after Russian Federation, Belarus and Kazakhstan)*

*Measuring the information technology 2012

International rankings (2) - NRI

The NRI reveals that Moldova has registered an important growth, moving from the 97th position, on the 77th one on 2013. This was due to a substantial improvement of the ICT infrastructure. The chart also reveals that Moldova is getting closer to the ranks of its neighbors (Romania, Ukraine), which are considered to have a better infrastructure. Moreover, Moldova is ranked ahead Armenia (82), which is considered a developed country in terms if IT services.** Measuring the information technology 2012

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International rankings (3) - EGRI

According to the United Nations’ (UN) Global E-Government Survey (2012), Moldova moved up 11 places in the world ranking for e-government development, ranked the 69th. According to the document, the Republic of Moldova shows the growth of the Index e-GRI from 0.4611 (in 2010) to 0.5626 (in 2011) exceeding the world average.

E-GRI index reflects the state of technological infrastructure and the level of educational training in the country in Information Communication Technologies (ICT) sphere and indicates the extent to which the government uses ICT capacity for economic and social development of the country and citizens.

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Country Level E-Government Data.

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Top players in the Moldovan ICT sector

• Endava (www.endava.com) : IT Services company, with over 600 staff operating from headquarters in London and offices in US, Romania and Moldova (Chisinau). The company designs, implements and manages business-critical systems and digital services for the world’s leading organizations.

• Cedacri International (http://www.cedacrinternational.md/?lang=en) : provides software and business process outsourcing services to banking sector clients.

• Deeplace (www.deeplace.md) : has a vast experience in software and applications development, online banking technologies, website development, information security applications. The company is also an outsourcing center.

• Pentalog (www.pentalog.md): an international software and computing services company, specialized in offshore outsourcing. The global business administration and marketing activities are based in Orleans, France and Eschborn, Germany.

• Q systems (www.qsystems.md): develops On-Line technologies based on Internet/Intranet solutions. The company is specialized in the production of information systems for management and accounting in financial organizations; direction of electronic payments; business management via Internet.

• Tacit knowledge (http://www.tacitknowledge.com): digital commerce consultancy that delivers Silicon Valley innovation to retail organizations around the world. The company implements packaged applications and builds custom software for multichannel organizations

Top players in the Moldovan ICT sector (II)• Alfa Soft SRL (www.alfa-xp.com): a software development company, with offices in Ashburn, VA

(USA) and in Moldova (Eastern Europe). The company works as a software development outsourcing center. Alfa XP is specialized exclusively in the latest Microsoft .NET technologies and has developed its own set of tools, methods and templates.

• ALLIED TESTING (www.alliedtesting.com): specialized in QA and testing. The company works mainly with the capital markets, trading and finance industry. Allied Testing has offices in USA, UK and Cyprus, with its test labs based in Moldova, Belarus, Russia and Argentine

• NetInfo (www.netinfo.md): has a vast experience in implementation of medical information systems, development of financial and accounting software. The company is also an outsourcing center.

• Orange Moldova: mobile network operator, part of the Group France Telecom. Orange has started its activity in Moldova in 1998. Orange has over 2 mln clients in Moldova

• Moldcell: second mobile network operator in Moldova, part of the Telia Sonera Group. Moldcell started its operations in Moldova in 2000

Thank you!

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