Value Chain Analysis and Market Study in the Fruit and...

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Value Chain Analysis and Market Study in the Fruit and Vegetable Sector in Moldova Final Report: Analysis of HVA Constraints, Opportunities and Requirements 13 March 2009 Contract Number: MCC-06-0045-CON-70 This publication, Value Chain Analysis and Market Study in the Fruit and Vegetable Sector in Moldova (MCC Contract No. MCC-06-0045-CON-70), was prepared by Chemonics International, Inc. The author’s views expressed in this publication do not necessarily reflect the views of the Millennium Challenge Corporation or the United States Government.

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Contents Acronyms and Abbreviations ......................................................................................................... 4 Acknowledgements ......................................................................................................................... 5 Introduction/Executive Summary ................................................................................................... 6 Chapter 1. Value Chain Analysis of the High-Value Fruit and Vegetable Sector .......................... 9

Objectives of the Value Chain Analysis ..................................................................................... 9 Moldova’s High Value Added Agricultural Sector Profile ........................................................ 9 Institutional Support Structure and the Supply Chain .............................................................. 12 Value Chain Analysis of High-Value Agriculture in Moldova ................................................ 14

Value Chain Analysis of Dried Plums .................................................................................. 14 High Cost and Substandard Raw Material ............................................................................ 15 Pitting and Drying ................................................................................................................. 16 Value Chain Analysis of Table Grapes ................................................................................. 19 Labor Shortage ...................................................................................................................... 20 Value Chain Analysis of Tomatoes (Fresh and Processed) .................................................. 21 High Cost of Inputs ............................................................................................................... 22 Access to Seeds ..................................................................................................................... 24 High Cost of Material Inputs ................................................................................................ 25 Poor Relations Between Growers and Processors ................................................................ 26

Transportation and the Value Chain ......................................................................................... 28 Transport by Rail and Truck ................................................................................................. 28 Transport-Related Challenges ............................................................................................... 30

Crosscutting Constraints and Challenges.................................................................................. 33 Limited Access to Reliable and Affordable Inputs ............................................................... 33 Limited Access to Affordable Credit .................................................................................... 35 Standards and Certifications ................................................................................................. 35 Lack of Market Information and Access to Markets ............................................................ 38 Limited Network of Wholesale Markets ............................................................................... 38 Land Fragmentation and Consolidation ................................................................................ 39 Unsustainable Private, On-Farm Extension Services ........................................................... 40

Chapter 2. Analysis of HVA Market Failures or Imperfections .................................................. 42 Inputs......................................................................................................................................... 42

Chapter 3. Analysis of Policy, Legal/Regulatory, Institutional, and Other Constraints to HVA 45 Customs Procedures .................................................................................................................. 48 Licensing Procedures ................................................................................................................ 49 Direct and Indirect Subsidies .................................................................................................... 50 Figure 2. Evolution of Moldovan Agricultural Subsidies ......................................................... 52 Conclusions ............................................................................................................................... 53 Recommendations ..................................................................................................................... 54

Chapter 4. Analysis of Constraints to Trade in HVA .................................................................. 56 Internal Market Conditions ....................................................................................................... 56 External Conditions .................................................................................................................. 58 Import Restrictions and Quotas ................................................................................................ 58 Conclusions ............................................................................................................................... 62 Recommendations ..................................................................................................................... 62

Chapter 5. Analysis of Post-Harvest Infrastructure/Capital Equipment Constraints .................... 63 Introduction ............................................................................................................................... 63 Moldovan Agricultural Producers’ and Exporters’ Perception of Market Demand and Opportunity Costs ..................................................................................................................... 64

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Post-Harvest Handling and Product Quality ............................................................................. 68 Pre-Cooling ............................................................................................................................... 71 Storing, Refrigeration, and Humidity Control .......................................................................... 72 Sorting and Grading .................................................................................................................. 76 Packing and Packaging Material ............................................................................................... 78 Local Supply of Post-Harvest Equipment ................................................................................. 79 Policy, Institutional, and Market Failures that Inhibit Private Investment in Post-Harvest Facilities .................................................................................................................................... 79 Potential Demand for Post-Harvest Infrastructure .................................................................... 81 Recommendations on the Type of Post-Harvest Infrastructure and Equipment/Technology Most Needed/Appropriate for Moldova.................................................................................... 83 Demand Model .......................................................................................................................... 85

Chapter 6. Analysis of Technical Capacity Constraints ............................................................... 92 Planting/Harvesting................................................................................................................... 92 Production and Market Access ................................................................................................. 95 Post Harvest .............................................................................................................................. 99 Recommended Mechanisms for Delivering Technical Assistance Interventions ................... 101 Simple General Produce-Handling Recommendations that Should be Taught to and Followed by Farmers and Processors in Moldova: ................................................................. 101

Conclusions and Recommendations ........................................................................................... 103 Annex 1. Desk Review for the Market Study and Value Chain Analysis of the Fruit and Vegetable Sector in Moldova...................................................................................................... 106 Annex 2. Laws Regulating the Quality and Safety of Food Products in Moldova .................... 121 Annex 3. List of Customs Services and Fees for Customs Procedures ..................................... 122 Annex 4. 2008 Regulations on the Testing of Plant Varieties in Moldova ............................... 123 Annex 5. List of Laboratories in Moldova................................................................................. 140 Annex 6. Methodology .............................................................................................................. 145

Value Chain Analysis ............................................................................................................. 145 Annex 7. List of People Met for Interviews .............................................................................. 147 Annex 8. Documents that must be present to fulfill certification requirements ........................ 148 Annex 9. Business Practices Constraints – quality control area ................................................ 150 Annex 10. National Program of Development of Technical Regulations .................................. 151

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Acronyms and Abbreviations ACSA Agency for Consulting and Training in Agriculture ADP Agribusiness Development Project AMS Aggregate Measurement of Support CA controlled-atmosphere CEED Competitiveness Enhancement and Enterprise Development Project CEFTA Central European Free Trade Agreement CIS Commonwealth of Independent States CNFA Citizens Network for Foreign Affairs DRC Domestic Resource Cost EASC Euro-Asian Council for Standardization, Metrology and Certification EBRD European Bank for Reconstruction and Development EU European Union FDI Foreign Direct Investment FAO Food and Agriculture Organization F&V Fruit and Vegetables FVI Fruit and Vegetable Industry GDP Gross Domestic Product GIP Gross Industrial Product GOST Gosudarstvennyy standart GSP General System of Preferences HACCP Hazard Analysis and Critical Control Points Ha hectare HIC High Income Countries HS Harmonized System HVA High Value Agriculture HVPP High Value Processed Products IFAD International Fund for Agriculture Development IFC International Finance Corporation ISO International Standards Organization MCA Millennium Challenge Account MCC Millennium Challenge Corporation MDL Moldovan Lei (national currency) MFN Most Favored Nation MIEPO Moldovan Investment and Export Promotion Organization NGO Non-governmental Organization NRA National Refrigeration Association OECD Organization for Economic Cooperation and Development PHI post-harvest infrastructure SME Small and Medium Enterprises SPS Sanitary and Phyto-Sanitary USAID US Agency for International Development USD US dollar VAT Value Added Tax WB World Bank WTO World Trade Organization

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Acknowledgements This report was prepared by a team from Chemonics International comprising Kent Ford (Team Leader and Value Chain Specialist), Harvey Schartup (Post Harvest Specialist), Igor Vatamaniuc (Value Chain Specialist), Sorin Revenko (Post Harvest Specialist) and Eugene Hristev (Trade Policy Specialist). The Chemonics Home office team included Chad Ford, Krista Vogt, Sarah Watson and Agnes Tusjak. We are also grateful for the invaluable assistance of our local Chisinau support team including Ruxanda Cheibas and Doug Griffith and our translator, Natalia Vindereu. The Team would like to thank Katherine Farley and Lawrence Camp of MCC, and Felicia Pricop and Valentina Badrajan of MCA for their thoughtful review, comments and guidance throughout the process of researching and writing this report. The Chemonics team would also like to thank Gary Alex of USAID who accompanied the team to a number of meetings and provided invaluable insight and contributions to the team’s understanding on certain issues and provided comments and input to the report. We would also like to thank Sergiu Botezatu and Susan Kutor of USAID for their observations and insights into Moldova’s challenges in the HVA sector. We would like to thank all of those in the private sector, civil society and donor projects who generously gave their time – in many cases, several hours over two or more days – thus supporting us in conducting this detailed analysis of Moldova’s high value agriculture.

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The Impact of Emigration on One Moldovan Village

The mayor of a traditional, highly prosperous village reported that enrollment in the local school system declined from 1,100 children in 1990 to only 250 children for the 2008-2009 school year.

Introduction/Executive Summary Moldovan agriculture is in the midst of dramatic changes that began with the fall of the Soviet Union and continue to this day. The transition to a market economy has presented Moldova with several challenges that require the country to reconstruct many sectoral institutions completely, reorienting them from being supply-focused to demand-focused. Moldova’s agricultural industry has several comparative advantages. First and foremost, Moldova is an agricultural country with an economy traditionally rooted in agriculture and enjoys a reputation as a producer of fine wines, fruits, and vegetables. The country has excellent soil and a temperate climate, which, when supplemented with irrigation, provides an excellent foundation for growing a wide range of high-value crops. Moldova's geographic location as a bridge between the EU and the CIS countries affords it an opportunity unlike any other country in Europe. Moldova's traditional market has been the CIS (primarily Russia, Ukraine, and Belarus), yet some “niche” industries are starting to focus on the EU market. The dried fruit industry, for example, it has established markets in several European countries to the point that 80 percent of its exports are now destined for the EU-27, with the other 20 percent going to CIS countries. Moldova has traditionally had a good human resource base to fill technical and managerial roles in agriculture. Agricultural education and research institutions have been strong in the past in identifying and enhancing opportunities in agricultural production. Unfortunately, after the dissolution of the Soviet Union, agricultural education and research no longer received the same level of resources, and funding these areas became less of a priority for the government, which had other, more critical, issues to address. Reforms that have been put into place are now taking hold, and institutions are once again developing that will set the foundation for a strong agricultural sector in the future. Moldova’s land reform process has led to the emergence of viable farms, land rental markets, consolidation of land, leases and sales of land, all leading to improving the viability of the agriculture sector. Several trade associations have been formed and are beginning to better represent their members’ interests while also promoting Moldovan products abroad. At the same time, Moldova faces serious challenges in its transition to a market economy with a considerable focus on agriculture. In a labor-intensive industry such as agriculture, perhaps the most significant challenge facing Moldova is the migration of young workers from rural communities. Many of these people are moving to the cities. where there are more jobs, or leaving the country altogether in search of jobs. This has created a significant labor shortage in rural areas throughout the country that is seriously affecting agricultural production. Perhaps the lone benefit of this mass emigration is the remittances that the workers send home, which often are invested back into the local economy.

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Moldova's relationship with its neighbors is another challenge. The problematic political relations with Russia resulted in a closure of the Russian market to fruits and vegetables in 2005. Even though the Russian market has since reopened to Moldovan goods, the volume of exports to Russia is lower than it was before the closure. Moreover, Russian authorities have put many restrictions on Moldovan producers, many of which might be considered unduly burdensome. Unfortunately, most Moldova producers did not take advantage of this closure to pursue new markets aggressively. The variability of weather is another significant challenge. The country has limited rainfall, which often results in drought conditions such as those experienced in 2007. Coupled with the lack of irrigation throughout the country, periods of limited rainfall can bring agricultural production in Moldova to a standstill. The global economic crisis is also beginning to have a dramatic impact on Moldovan agricultural producers. Prices for agricultural exports have fallen, despite the excellent harvest in 2008. Many inputs in the production process have increased in price, but the price of energy has been reduced significantly over the last three months. Access to affordable finance is increasingly limited and is becoming a severe constraint to agricultural producers and processors. Although Moldova has significant opportunities to develop a vibrant agriculture sector, the country faces a significant array of barriers to becoming competitive. Many of the primary barriers to Moldova becoming competitive in the HVA sector, as uncovered in the research for this study, are listed below in a table. For each issue, the public sector is responsible (as checked off), the private sector is responsible, or both should shoulder the responsibility to address the issue listed. Barriers to Competitiveness Issues Public Private Market Lack of market information, especially related to what

type and variety of products are in demand in targeted export markets

Heavy reliance on some brands that are no longer highly marketable outside of Moldova

No effective and sustainable program in place to re-invest in replacing mature tree/vine stock

Ineffective and limited network of wholesale markets in the country

Lack of access to current market price information

Cost of inputs for farmers in high relative to world prices

Absence of pre-cooling facilities which results in high pre-shipment losses and poor quality of goods in the market

Heavy reliance on limited export market base – Russia and Belarus

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Issues Public Private Lack of understanding and appreciation regarding phyto-

sanitary standards and requirements, especially among the small farmers and producers

Absence of a country branding strategy

Governance Absence of standards, particularly to meet export market requirements

Absence of an industry-wide strategic vision and a targeted strategy to promote Moldovan HVA goods in the international market

High transaction costs of transiting finished goods through Ukraine to Russia and Belarus.

Poor road infrastructure, particularly in rural areas

Access to parent seeds for key crops is limited because the only major institute with sufficient parent seed stock is in Tiraspol

Institutional Extension services available but long-term funding and lack of apparent sustainability a problem that needs to be dealt with

Absence of growers cooperatives and little desire to band together

Absence of effective industry associations aimed at supporting expanded markets for the industry

Insufficient research and development of high value agriculture varieties that are best suited to Moldova

Absence of an industry-wide strategic vision and a targeted strategy to promote Moldovan HVA goods in the international market

Limited access to soil and other testing facilities

Poor or non-existent irrigation infrastructure

Lack of affordable and accessible credit facilities

Human Resources Shortage of skilled and unskilled labor creates a situation in which farmers are cutting back on amount of acreage farmed and in some instances abandoning farming and leaving the land fallow

No clear, apparent strategy for dealing with the labor shortage and how to support farmers and companies that are dealing with it

Lack of cooperation among groups of producers along the value chain impedes the industry’s ability to grow

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Chapter 1. Value Chain Analysis of the High-Value Fruit and Vegetable Sector Objectives of the Value Chain Analysis The competitiveness of the private sector depends on how well the market is organized and whether it maximizes productivity along the entire chain of activity, from inputs of raw materials to marketing of final goods. To increase competitiveness of the high-value-added fruit and vegetable industry, this project will deepen understanding of the characteristics and inefficiencies of specific fruit and vegetable value chains (dried plums, table grapes, fresh and processed tomatoes) and support the Millennium Challenge Corporation and Millennium Challenge Account-Moldova in designing a program to help growers transition to high-value agriculture (HVA). The Government of Moldova and the private sector will be able to identify measures to minimize impediments and improve the environment for private investment, thus increasing the competitiveness and growth potential of the private sector to allow it to play a role in broadening the base for economic growth in Moldova. Moldova’s High Value Added Agricultural Sector Profile Moldova has traditionally been a major producer of HVA products. In 1985, before the fall of the Soviet Union, Moldova produced, processed, and marketed 3.3 million metric tons of HVA products. This volume is greater than the country’s neighbors Bulgaria and Romania have each produced in recent years. Moldova’s independence in 1991 was followed by a farm restructuring process that transformed state-owned cooperatives into small and medium sized farms, a decline in subsidies, rising prices for inputs, and deteriorating infrastructure, which has reduced the availability of irrigation and increased the time to get goods from farm to market. These factors led to a sharp drop in production, and by 2002, production of HVA products was only at half of 1985 levels.1 In recent years, although agriculture remains one of Moldova’s most important economic sectors, annual agricultural production experienced an average growth of only 3.2 percent from 1999 to 2007, whereas overall GDP growth was 4.7 percent on average for the same period and production of HVA products in 2006 was approximately 1.74 million tons.2 Despite these challenges, the revitalization of the fruits and vegetables sector is seen as a potential driver of broad-based economic growth. A large portion of the Moldovan labor force is engaged in agriculture, so increasing primary fruit and vegetable production will boost the incomes of producers, processors, and marketers. In turn, their increased incomes will lead to greater demand for other goods and services.

1 Moldovan HVA Export Competitiveness Study, USAID/Moldova Agribusiness Development Project (CNFA), 2004: 12. 2 National Bureau of Statistics of the Republic of Moldova, http://www.statistica.md/category.php?l=en&idc=129&.

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Population Engaged in Agriculture (%) 34%3 GDP Contribution of Agriculture 15% (for agriculture as a whole)4 Type of farming % small; % medium; % large 40% of land is comprised of small farms

and 60% is comprised of large farms yet more than 99% of the farms are small (As of January 1, 2008 privately owned agricultural land in Moldova5 was owned or managed by: 1,344 limited liability companies with an area of 625,800 hectares (465 ha average); 259 production cooperatives with an area of 157,400 ha (607 ha avg); 109 joint stock companies with an area of 58,800 ha (539.4 ha avg); 386,208 family farms and households with an area of 562,100 ha (1.45 ha avg).)

Average size of farm 1.9 ha Rainfall (average) 45 – 55 cm per year6 Principal HVA crops Grapes, apples, apricots, plums, cherries,

peaches, tomatoes, peppers, onions, potatoes & dried fruit

Land7 % arable 72% % orchards 5.6% % forests/non-arable 28% Land under cultivation 43.8%8 (approx. 22% of which is for HVA

crops) Irrigation Amount of land under irrigation 34,000 hectares (2007)9,10 Key Export markets CIS and EU (specifically: Russia, Ukraine,

Belarus, Romania, Germany, Greece and France)11

Export volume

3 Sector Analysis Report, MCA Moldova, 2007: 6. 4 Sector Analysis Report, MCA Moldova, 2007: 6. 5 Data Source: National Land Relations and Cadastre Agency (cited on page 4 of Moldova Agribusiness Briefing Book) 6 Moldova Agribusiness Briefing Book, USAID/Moldova Agribusiness Development Project (CNFA) 31 July 2008: 21. Note, rainfall is generally lower in the south than in the north. 7 Moldovan HVA Export Competitiveness Study, USAID/Moldova Agribusiness Development Project (CNFA), 2004: 26 8 Moldova in Figures: Statistical Pocket-book 2007, National Bureau of Statistics: 50. 9 Moldova Agribusiness Briefing Book, USAID-funded Agribusiness Development Project (ADP), CNFA, 31 July 2008: 14. 10 Note, a recent ADP review of government irrigation records indicates that the current national irrigation system has the capacity to irrigate around 150,000 hectares, but the actual area irrigated in 2007 was 34,000 hectares. 11 Source: International Trade Center calculations based on COMTRADE statistics.

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Grapes (fresh) 40,428 tons12 in 2007 Fresh Tomatoes (or chilled) 3,636 tons13 in 2007 Processed Plums 1,508 tons in 2007 for dried prunes14 Because Moldova has an excellent climate and soil for fruits and vegetables, with the proper investment in irrigation, greenhouses, and post-harvest infrastructure, many fruit and vegetable products could be successful. However, in order to study the HVA sector as a whole, the project team identified four value chains to study. They were table grapes, fresh tomatoes, canned tomatoes and dried plums. There were several factors that went into the decision to study these specific value chains. First, all of these products have potential for growth in the near- to medium-term. They are well suited to Moldova’s climate and most have been produced in the country for a long time. Second, there were plenty of data and information available for each of these value chains, which was important in the analytical phase. Third, these four products offered a fair representation of the HVA sector because they each represented a unique product type – fresh vegetable, fresh berry/fruit, processed vegetable and processed fruit. The team considered studying the frozen fruit/vegetable sector, but after spending a significant amount of time researching frozen foods, concluded that there were only two frozen food lines in the county, and only one of these was even operating throughout the year. Therefore, there was not enough data available that would warrant further study. Below is some background on each of the value chains studied. Additional information is available in Annex 1. Table grapes. Moldova has a long tradition of grape growing and wine-making because it has the ideal climate for grape production. After fresh apples, pears and quinces, grapes are the next top exported product from Moldova. In 2007, Moldova exported 40,428 tons of fresh and dried grapes. It is also among the top five products that Moldova exports to the EU. Grapes are considered a berry and Moldovan table grapes are sold ‘fresh’ and were a staple in Russian markets in the Soviet Union. Fresh and Canned Tomatoes. Tomatoes can be a highly profitable vegetable for Moldovan farmers, and Moldova has a history of successfully growing and exporting tomatoes. With the resurgence of irrigation, greenhouses, and new seed varieties, it should once again be possible to again grow high quality tomatoes in Moldova. Tomatoes need not necessarily be geared for export, because it is important that Moldova provide vegetables for import substitution. Tomatoes proved to be an important vegetable to study for this report. Dried Fruit. Moldovan dried fruit has been able to penetrate the EU market and has the potential for expansion. In addition to continuing to provide bulk dried fruit for export, Moldovan producers can invest in their own labels, which are already doing well domestically, and explore organic options, which would likely be desirable on the EU market.15

12 Source: International Trade Center calculations based on COMTRADE statistics. 13 Source: International Trade Center calculations based on COMTRADE statistics. 14 Source: International Trade Center calculations based on COMTRADE statistics. 15 Moldova’s Dried Fruit Sector Assessment. USAID/Moldova Agribusiness Development Project (CNFA), 2008.

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Institutional Support Structure and the Supply Chain The structure of institutional support for the high-value agriculture sector in Moldova is developing, albeit slowly. As the table on the following page shows, there are several technical, research, and professional associations to support any number of products and producer groups. Although this is in an environment in which individuals and groups are not prone to work well together, a structure is being put into place to support the HVA industry’s potential growth. Operationally, however, the country has far to go. Although there are associations to support farmers, producers, processors, and others throughout the industry, these groups have yet to make a significant impact on the operations of the various players within the sector. Many of the institutional arrangements now in place are still tied to those established during Soviet days. For instance, Moldova’s current food safety standards are based on the old GOST16 system. Therefore, much of Moldova's legal, regulatory, and institutional framework for food safety and phytosanitary concerns are closely associated with the standards established by the former Soviet Union.

16 GOST stands for “Gosudarstvennyy standart” which is a set of technical standards maintained by the Euro-Asian Council for Standardization, Metrology, and Certification (EASC), a regional standards organization operating under the auspices of the Commonwealth of Independent States (CIS).

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Technical and Research Assistance Professional Associations

• Research Institute for Soil Science and, AgriculturalChemistry “Nicolae Dimo”

• Research Institute for Field Crops of the andProduction Association “Selectsia”

• Research Institute for Corn and Sorghum of theand Production Association “Porumbeni” JSC

• Branch for Aromatic Plants and Herbs of theResearch Institute for Corn and Sorghum

• National Vine and Wine Institute• Research Institute for Fruit Growing• Research and Technological Construction

Institute for Tobacco and Tobacco Products• Research Institute for Mechanization and of

Agriculture “Mecagro”• and Production Center “Information Technologies

and Systems”• National Institute for Animal Breeding and Veterinary

Medicine “Tevit”• Institute for Research and Technological Design

in Food Industry• Research Institute for Plant Protection• National Institute for Economy and Information• Supreme Council for Science and Technological

Development• Department for Science and Professional Development

of the Ministry of Agriculture and Food Industry of theRepublic of Moldova

• Academy for International Development in Agriculture(AIDA)

• Agrarian University of Moldova• National Viticulture and Winemaking College from

Chisinau• Technical Agricultural College from Svetlyi community• Technical Agricultural College from Soroca• Agroindustrial College from Rashcani• Animal Breeding and Veterinary Medicine College from

Bratusheni• Agricultural College from Tsaul• Agroindustrial College from Grinautsi• National Agency for Rural Development ACSA (functions

as the extension service and operates through anetwork of 35 regional NGOs and 350 local consultants)

• Rural Investments and Services Project (RISP) –by the Government of the Republic of Moldova and WorldBank.

• Consolidated Unit on Implementation of IFAD Programs inMoldova

• Central Agricultural Marketing Information Bureau (CAMIB)

• The Republican Union of Agricultural Producers’Associations “UniAgroProtect” (regional network includes15 Agricultural Producers’ Associations and 20 raionbranches)

• National Farmers’ Federation of Moldova (regional networkincludes 11 and 33 raion branches)

• National Federation of Agricultural Producers“AGROinform” (regional network includes 30organizations)

• Fruit Growers and Exporters’ Association “Moldova-Fruct”• Table Grapes Growers and Exporters’ Association

(TGGEA)• Grapes Growers’ Association• Association of Fruit & Vine Seedlings Producers• National Refrigeration Association• The Union of Oenologists of Moldova• Association of Wine Producers and Exporters of Moldova• Potato Growers’ Association• The Union of Walnut Producers’ Associations• Honey Producers’ Association• Sugar Beet Growers’ Association• Union of Sugar Producers• Meet Importers’ Association• Grain Exporters’ Association “Agrocer”• Public Association “ProRuralInvest”• Moldovan Alliance• National Federation of Savings and Credit Associations• Rural Finance Corporation• National Federation of Trade Unions from Agriculture and

Food Industry “Agroindsind”• The National Federation of Employers in Agriculture and

Food Industry• Chamber of Commerce and Industry of the Republic of

Moldova

Export promotion Quality Control

• Moldova International Export Promotion Organization(MIEPO)

• Chamber of Commerce and Industry of the Republic ofMoldova

• Ministry of Agriculture and Food Industry• Agro-industrial Agency “Moldova-Vin”• International Exhibition Center “MoldExpo”• USAID/Chemonics Competitiveness Enhancement and

Enterprise Development Project (CEE D)• USAID/CN FA Agribusiness Development Project (ADP)• Professional Associations (please refer to the respective

list in this table)

• Standardization and Metrology Service of the Republic ofMoldova (Chisinau, Baltsi, Cahul)

• Center for Standardization and Testing the Quality ofCanned Products

• National and Practical Center for PreventiveMedicine

• Relevant Laboratories

Structure of institutional support relevant to agricultural sector

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Value Chain Analysis of High-Value Agriculture in Moldova Several growers and processors for each product analyzed were interviewed for this analysis, ranging in size from small family farms/processing operations up to larger “corporate” farms/ processing operations. The value chain analyses below were based on averaging the responses received from those interviewed. Any responses that deviated more than 10 percent from the norm were either rejected by the project team or verified through additional interviews. Value Chain Analysis of Dried Plums Dried fruits and vegetables are quickly becoming important components of the overall processing industry in Moldova. Although dried fruit is the smallest product group of the preserved fruits and vegetables market, production and consumption of dried fruit is growing quickly. This study analyzed the value chain of dried plums, which, in this case, is considered a proxy for the dried fruit and vegetable industry as a whole. Dried fruit is destined for two major market segments — the fruit processing markets and the retail market. The fruit processing market represents nearly 80 percent of world dried fruit imports, and they are consumed in breakfast cereals and confectionary items. One of the principal reasons why Moldova’s dried fruit sector is becoming more important is that it has developed important market reach within the EU. Eighty percent of Moldova’s dried fruit exports reach the EU- 27 countries, whereas only 20 percent of its dried fruit exports go to the CIS. Moldova is the sixth largest exporter of dried fruits and vegetables to the EU, behind only the United States, Chile, Argentina, Turkey, and Serbia. This is particularly important, because processors have to produce to the strict European standards of GlobalGAP and HACCP. The picture below shows packages of dried apples, plums and cherries destined for Switzerland and Germany.

The value chain for processed dried plums is divided into five distinct areas of activity, namely:

• Raw Material • Washing and Sorting • Pitting and Drying

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• Packing and Loading • Transport to Distributor

The value chain diagram below shows that raw material input is the highest cost component of the value chain, representing 41.4 percent of the total value of the production of dried plums in Moldova. This is followed by the pitting and drying process, which represents 23.4 percent of the total value. Value Chain for Dried Plums in Moldova

Dried Plum Processing Value Chain MDL 22.55 /kg

MDL/Kg Raw Material

Washing and Sorting

Pitting and Drying

Packing and Loading

Transport to Distributor TOTAL

Unit value 9.23 1.69 5.47 3.43 2.73 22.55 % of Total 40.96% 7.48% 24.24% 15.21% 12.12% 100.00%

High Cost and Substandard Raw Material As with many processed fruits and vegetables, the raw material component is the highest cost and most important component of the value chain. In most cases observed for this study, producers obtained their product on the spot market. This would usually involve the processor calling a number of farmers, both small and large, to obtain a price quote and quantity that can be delivered by a certain date. For most processors, this method of accessing supplies is a significant problem, simply because the variability of quality prevents them from producing a consistently high-quality product. Furthermore, for processors who export to the EU, they do not know what, if any, chemicals that have been used on the product nor how the plums have been handled postharvest. One processor went so far as to say there is a dire need for more medium-sized plum farming operations, because most small farmers cannot deliver the quality and quantities that larger processing operations require. This particular processor said that his drying facility operates only one and a half months per year, whereas, to break even, he needs it to be in operation at least five to six months a year. To address his supply problems, this processor has planted 60 ha of plums, which he expects will

Washing & Sorting

7.6%

Pitting & Drying

23.4%

Packing & Loading

15.4%

Transport to Distributor

12.2%

Raw material

90.9%

Labor

3.2%

Raw Material

41.4%

Electricty (for ops)

4.8%

Labor

24.9%

Gas for Boilers 48.6%

Overhead

5.9%

Overhead

21.7%

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begin producing fruit in 2009, and has recently planted an additional 20 ha. Once these newly planted hectares reach full maturity, he will be producing approximately half of the raw materials required for his processing operation. Of course, this assumes that he does not expand his market base and his processing operation before then. Pitting and Drying The pitting and drying component of the value chain, which represents 23.4 percent of the overall value of dried plums, is a labor- and energy-intensive process. Most of the pitting is done manually, even though several processors have automated pitting machines. Several processors interviewed for this study said that they obtain a better quality and fewer losses when using the manual pitting machines. One processor noted that 30 percent of the product is lost when using an automatic pitting machine, whereas only 15 to 18 percent is lost with the manual machines. Even though manual machines are much less efficient than automated ones, most processors still prefer to use them. Below are pictures of the idle automated pitting machine that was sitting at the end of the room where the women in the accompanying picture were using the manual machines.

Access to New Varieties Another major hurdle for dried plums processors is the variety of plums available in Moldova. Most processors use a combination of varieties such as Stanley, Yubileinaia, Vengerka, Ana Shpaet, Sopernitsa, and Cabardinskaya. Unfortunately, these varieties cannot compete with European varieties for several reasons. For instance, the Stanley variety, which is commonly a fresh market plum, is the largest available in the Moldovan market; when dried, however, this variety has little flesh and a large pit. Other varieties might provide a reasonable balance between size and flesh, but their overall size is too small for major European supermarket chains. A major reason for this problem is that the Government of Moldova maintains control over the testing and marketing of new varieties. Although a new approval process has recently been enacted to streamline the process of introducing new varieties, the government still maintains unjustifiable controls that have little effect other than to stifle innovation and prevent producers from introducing competitive varieties in a timely manner. The process for testing new varieties, according to the “Regulation of Testing of Plant Varieties” approved on September 10, 2008, is

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shown in the diagram on the following page. The “2008 Regulations on Testing of Plant Varieties in Moldova” may be found in Annex 4. Introducing new varieties and providing training will increase productivity, yields, and incomes. Production of new varieties has tended to use more modern technologies, which have increased yields and the ability of farmers to expand their production. Much remains to be done, however, to reform the HVA sector to the point that it can compete aggressively in the global market. For instance, 60 percent of all grapes grown in Moldova are Moldova-specific varieties that cannot be marketed effectively in Europe. These grapes have traditionally been sold in Russia and Belarus, but even these markets are gaining access to and appreciation for newer varieties, leaving the Moldovan varieties virtually unsellable outside of the country. Growers need to plant new varieties that are recognized internationally and have the same taste, color, stability, and ability to hold up to long-distance transport that internationally recognized varieties have. The new registration law for varieties will help improve the ability of growers to grow newer varieties without undergoing an onerous process of variety testing. This is a particularly important occurrence, because much of Moldova’s orchards are aging to the point that their productivity is dropping. To address this, the country began a program of orchard renovation. In 2008, 5,000 hectares of orchards were removed, most of which were 25 to 30 years old, and replaced with newer varieties. Growers also lack knowledge of which varieties of plants will give them the best return on their investment and which might be more marketable in selected markets. Many of Moldova’s grape growers now realize that they cannot forever grow and market the “Moldova” variety of grape, because its market is vanishing rapidly. Many of the growers who are undecided over which varieties to grow in large quantities to gain access to the European market, have planted small plots of many different varieties of grapes, which limits their ability to gain access to large markets.

18

Fruits, Vegetables and Grapes Varieties Testing in the Republic of Moldova According to Regulation of Testing of Plant Varieties Approved on September 10, 2008

State Commission for Testing Plant Varieties (SC)

Conducts testing of plant varieties within specialized testing centers:

1. Agronomical and technological value (ATV) 2. Distinctiveness, uniformity, and stability (DUS)

National Council for Plant Varieties (NC)

Decides upon registration of plant varieties in the Catalogue of Plant Varieties

Agency for Protection of Intellectual Property (AGEPI)

Decides upon copyright registration for plant varieties that require author’s patent

Submits testing results and draft Catalogue of Plant Varieties

Submits reports on technical examination and official description of varieties

Fruits

1. Standard testing period – 3 years

2. For varieties introduced in the EU or neighboring countries’ Catalogues – testing period is 1 year

Vegetables


2. In case of positive results after 1 year – introduction in the “perspective list” of the Catalogue of Plant Varieties

3. For varieties introduces in the EU or neighboring countries catalogues – testing period 1 year

Grapes


2. For varieties introduced in the EU or neighboring countries’ catalogues – testing period is 1 year

For all crops that have 4 or fewer registered varieties in the Catalogue – testing period is 1 year

For crops that are not registered in the Catalogue – the plant is introduced in the Catalogue based on breeder’s data, without testing

19

Value Chain Analysis of Table Grapes Approximately 20,000 hectares of table grapes are planted throughout Moldova, in just about every region of the country. The yields range from as low as 2-3 tons per hectare to as many as 11 to 12 tons per hectare. Although most of the varieties that are planted are the same as those that have been planted for generations in Moldova, most of them are no longer popular, even in the CIS markets. The challenge for Moldovan table grapes producers is to find the right mix of varieties that will satisfy the demand of increasingly sophisticated consumers from Moscow to Hamburg. The value chain for table grapes in Moldova is divided into six distinct areas of activity:

• Plant maintenance • Harvesting • Grading • Washing • Quality Control • Packing and Loading

The diagram below shows the value chain for growing table grapes in Moldova. Plant maintenance accounts for almost 50 percent of the total cost of producing 1 kg of table grapes. Most of these costs revolve around those related to spraying and norming (pruning). Packing and loading is the second most costly item, accounting for 31.2 percent of the value of table grapes. The major cost component for packing and loading was the cost of the raw materials for the packaging, which will be discussed later. Value Chain for Table Grapes in Moldova

Harvesting

13.5%

Grading

1.8%

Washing

3.3%

Quality Control 1.2%

Packing- Loading 28.5%

Labor

100%

Norming

32.1%

Raw Material 75.1%

Labor

24.9%

Spraying

52.7%

Plant Maintenance

51.7%

Raw Material 64.0%

Labor

16.7%

Equipment

19.3%

Overhead

15.2%

MDL 8.75 per 10 kilogram box Adding .875 MLD per kg of grapes

20

Since grapevines take three to five years to reach maturity, this analysis did not include the costs associated with land preparation and planting. The main reason for this is that most vineyards are several years old, and adequate records are not available regarding the cost of planting them, and in most cases, growers do not keep satisfactory records of the cost of planting their vineyards. The increase in the number of vineyards being planted is closely related to the subsidy of as much as 48,000 lei per hectare that growers can receive for planting table grapes. Growers can also receive a subsidy of as much as 25,000 to 30,000 lei per hectare for planting technical (wine) grapes. In 2007, more than 3,200 ha of grapes were planted in Moldova, 80 percent of which were table grapes. The subsidy represents 35 to 40 percent of the cost required to take a vineyard from planting to full maturity in or around the fourth year. This burst of new grape production is in its initial stages and is likely to continue for quite some time. If this is the case, then there will likely be an excess quantity of grapes on the market within the next three to five years, unless new markets can be found for this huge increase in plantings. Labor Shortage Many parts of rural Moldova are experiencing an outward migration of people to the point that many areas are becoming depopulated. Some estimate that 40 percent of the total Moldovan workforce as of 1991 has emigrated from the country. Although this has had some benefits, such as hard-currency remittances and new opportunities for gaining skills and education, the rapid exodus from the rural areas has been disruptive and has reportedly put the viability of some villages into question. Everyone interviewed for this study indicated that the labor shortage was an important or major problem. One company reported losing more than 60 percent of its workforce in the past four years, with little prospect of replacing those who left. Although under normal circumstances, this company could hire additional people, in this case, it had no one left to hire. Another table grape farmer reported that last year he was short as many as 100 people for a critical 10 day period at harvest time. He was forced to leave 500 tons of table grapes on the vines to rot because he did not have enough people to harvest them. The table below shows the opportunity cost of not having the 100 people for the 10 days to harvest those 500 tons of grapes.

Table Grapes Production MDL 5.16 /kg MDL/kg On Farm Post-Harvest Handling

Plant Maintenance Harvesting Grading Washing

Quality Control

Packing & Loading Total

Unit Value 2.67 0.70 0.09 0.17 0.06 1.47 5.16 % of Total 51.68% 13.50% 1.81% 3.29% 1.21% 28.51% 100.00%

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Opportunity Cost of Labor Shortage in the Vineyards Nr. of tons of grapes left on the vine due to a shortage of workers 500 Sales price if grapes were sold (MDL per kg17) MDL 4 Lost revenue due to inability to harvest grapes MDL 2,000,000 Number of workers short 100 Number of days workers needed 10 Average daily salary of workers MDL 175 Total payroll of workers MDL 175,000 Gross Profit lost due to inability to find enough workers to harvest grapes MDL 1,825,000 The labor problem has resulted in changed behavior on the part of many farmers. For instance, some farmers who have access to capital have used an imported Dutch technology of intensive planting. This approach involves planting trees or vines much closer together and keeping the plants well pruned with a defined path between each row. This makes it easier to harvest the crops mechanically, thereby limiting the need for extra manpower at harvest time. Although the cost to plant a hectare of plums or grapes using this technology, for instance, can run close to $200,000 versus $20,000 per hectare using the standard method, the yields of marketable product can run as much as 10 to 15 times higher than under the standard method. Another consequence of the labor shortage could be that farmers might decide to move away from farming high-value agriculture and go back to farming field crops such as wheat and barley. Although these crops yield much lower money per hectare farmed, they require much less labor and are perceived by farmers as being less risky in the long run. Alternatively, if the labor shortage persists, farmers may stop farming their fields altogether, leaving them fallow. Value Chain Analysis of Tomatoes (Fresh and Processed) The value chain for fresh tomatoes in Moldova is divided into eight distinct areas of activity:

• Land Preparation • Planting • Plant maintenance • Harvesting • Grading • Washing and what he • Quality Control • Packing and Loading

17 Sales prices was set at what would be the minimal price a producer should expect to receive for a kilogram of table grapes on the local market.

22

The diagram below shows that planting (37.2 percent) and plant maintenance (32.4 percent) are the two highest cost components of the fresh tomato value chain in Moldova. The primary subcomponent to each of these factors is material input. Value Chain for Fresh Tomatoes in Moldova

Fresh Tomato Production Value Chain MDL1.20 /kg

On Farm Post-Harvest Handling Land Prep Planting

Plant Mainten. Harvesting Grading Washing

Quality Control

Packing & Loading Total

Unit Value 0.05 0.45 0.39 0.18 0.03 0.04 0.03 0.04 1.20 % of Total 4.3% 37.1% 32.4% 14.9% 2.8% 3.1% 2.2% 3.1% 100%

High Cost of Inputs The high cost of tomato seeds and seedlings is the principal cost driver for plantings, accounting for 32.7 percent of the value of producing tomatoes. Seeds are either imported (from France, Holland, Italy, and the Czech Republic) or obtained locally through a few local seed suppliers. Some of the varieties of tomatoes that are planted in Moldova include Mariuska, Onix, Dariinca, Cerazo, D’Oliva, and Amulet. Obtaining seeds locally does not necessarily ensure that the cost will be significantly lower than buying them from abroad. According to a major seed supplier, he must take parent seeds from Tiraspol because he can't obtain them from the Ministry of Agriculture due to the lack of choice. He did note that the government of Moldova is planning to start a seed center, but this will take years to come into force. In the meantime, growers are forced either to import expensive seeds from Europe or to obtain seeds locally in a system that is less than ideal. Plant maintenance is the second highest cost component of the value chain for fresh tomatoes, and this is driven primarily by the high cost of fertilizers and chemicals, all of which are

Harvesting

14.9%

Grading

2.8%

Washing

3.1%

Quality Control 2.2%

Packing- Loading

3.1%

Seedlings

100%

Labor

9.8%

Raw Material 78.6%

Labor

21.4%

Material

70.4%

Plant Maintenance

32.4%

Equipment

5.2%

Planting

37.2%

Land Preparation

4.3%

Fuel

14.6%

23

imported. According to interviews with farmers in the field, some of the chemicals used on one hectare of tomato crop are listed in the table below.

Example of Chemicals Used on the Tomato Crop

Chemical Name MDL/ha Storc 504

Zincor 195 Arasc 336

Marshall 145 Funguran 357 Cauretil 420 Acrobat 442 Totals 2,399

In addition, the same group of farmers used approximately MDL 1,200 worth of fertilizer per hectare, which, according to many people interviewed, is approximately one-third of the amount of fertilizer that should be used to maximize yield. However, most farmers do not know precisely how much fertilizer that they should be using simply because of the lack of soil testing facilities available throughout the country. There are some soil testing facilities, but most of these are in and around Chisinau, not in the farming areas where they would more likely be used. Although Moldova imports approximately 70,000 to 80,000 tons of fertilizer each year, however, the real need is at least 150,000 tons per year, according to major fertilizer distributors. Eighty percent of the fertilizer imported is ammonium nitrate, one of the simplest forms of fertilizer available. The other 20 percent of the fertilizer imported are more complex formulations, most of which are used at the beginning of the planting cycle. Farmers use the simple formulations primarily because they are the least expensive of the fertilizers to purchase. Most of the fertilizers used are dry rather than liquid, which are absorbed into the soil and plants more efficiently than dry fertilizers. The preference for dry fertilizers is primarily due to Moldova’s limited transport and storage facilities for liquid fertilizers. Only 10 to 15 are companies licensed to distribute fertilizer throughout Moldova, whereas there are 30 to 40 companies that regularly distribute chemicals. Obtaining permits to distribute fertilizers and chemicals is somewhat burdensome, and the barriers to entry are rather high. To obtain a permit, a distributor must do the following:

• Build a special storage facility designed specifically for storing fertilizers and chemicals. • Import only fertilizers and chemicals that are registered with the government. • Pay for and obtain a special license specifically for importing fertilizers and chemicals.

Most field tomatoes are not irrigated in Moldova, whereas greenhouse tomatoes are. According to farmers (both those that raise field tomatoes and those that raise greenhouse tomatoes), irrigation would more than double their yields. For instance, if farmers were to irrigate a hectare of tomatoes and apply the proper amount of fertilizer, they would see their yields increase from approximately 30 tons per hectare to as many as 60 tons per hectare or more. One farmer interviewed for this report reported that his yield in 2008 was 82.4 tons per hectare. He used

24

imported seed from France and Holland and tested his soil so that he would apply the proper amount of fertilizer. He used drip irrigation from a nearby river. On the other hand, another farmer, who did not irrigate his crops but applied ammonium nitrate three times during the season, reported obtaining yields of barely 20 tons per hectare in 2008. Access to Seeds One of the biggest challenges the HVA sector has encountered is the problem of accessing seeds for most varieties of vegetables that have been approved and are being grown in Moldova. The parent seeds for most of these varieties are available exclusively from the Tiraspol Institute in Transnistria, which is the only source for such vegetable seeds. The Institute cannot be actively regulated by the Moldovan government, nor can the Moldovan authorities influence it in any way. Although Moldovan private sector producers can access the Institute, to do so, they must cross the “border” between Transnistria and Moldova, which, according to a leading Moldovan seeds producer, often requires payment of informal customs duties to Transnistrian authorities. Although the Moldovan users of seeds have been trying to get the government to address this issue, there has been little progress reported in doing so. Interviews revealed that there are plans for Moldovan authorities to establish a center in Chisinau (as a new section of the “Porumbeni” Institute) and/or in Bălti (near the “Selectia” institute), but interviewees reported skepticism about the capacity of either of these centers to complete with the Tiraspol Institute in the near future. Value Chain for Processed Tomatoes in Moldova The value chain for processed tomatoes in Moldova is divided into six distinct areas of activity:

• Raw Material • Washing and Sorting • Cutting and Cooking • Fill, Seal, and Sterilize • Packing and Loading • Transport to Distributor

The diagram below shows that packing and loading (50.5 percent) accounts for more than half of the value of processed tomatoes in Moldova, while raw materials (24.4 percent) is the second-highest cost component of the value chain. For this value chain, a 720 ml jar of "marinated" stewed tomatoes was analyzed.

25

Value Chain for Processed Tomatoes in Moldova

Tomato Processing Value Chain MDL 7.17 /720 ml jar MDL per 720 ml jar

Raw Material

Washing & Sorting

Cutting & Cooking

Fill, Seal, Sterilize

Packing & Loading

Transport to Distributor TOTAL

Unit value 1.75 0.41 0.71 0.35 3.62 0.33 7.17 % of Total 24.39% 5.77% 9.92% 4.92% 50.47% 4.53% 100.00%

High Cost of Material Inputs Packing and loading accounted for more than half of the value of processed tomatoes in Moldova, and the main subcomponent was material input, namely packaging material. In Moldova cans make up nearly 50 percent of the total cost of processed tomatoes whereas jars make up 35% to 50% of the product cost of processed tomatoes. This analysis used a 720 ml jar as the primary vessel for holding the tomatoes, because everyone interviewed for this analysis used glass jars for packaging instead of cans. The cost of each of the items that make up the packaging for jars of marinated stewed tomatoes is presented in the following table:

Cost of Packaging 720 ml Jar of Processed Tomatoes in Moldova

Material Input MDL % of Total Jars 1.57 46.31% Cap 0.69 20.35%

Label 0.05 1.47% Carton 1.07 31.56%

Plastic wrap 0.01 0.29% Total 3.39 100.00%

Another cost driver is that most glass jars and cans are imported and, according to some processors who were interviewed for this report, the government imposes a duty on glass jars to protect the country’s fledgling glass industry. In most instances, however, Moldova has made substantial progress in processing goods that flow across the borders. The processing map on page 28 demonstrates the process that an importer/processor has to go through to purchase and import glass jars for his operation.

Washing & Sorting

5.8%

Cutting & Cooking

9.9%

Packing & Loading

50.5%

Transport to Distributor

4.5%

Raw Material

24.4%

Material Input 93.7%

Labor

3.1%

Fill, Seal, Sterilize

4.9%

Overhead

3.2%

Material Input 78.2%

Labor

14.9%

Overhead

6.9%

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The raw material component of the value chain, at 24.4 percent of the total cost, is made up primarily of fresh tomatoes and other ingredients such as spices and fillers. Tomatoes accounted for 82 percent of the raw material cost, and sugar, 10 percent, with spices and fillers accounting for the rest. It is interesting to note that although most processors purchase tomatoes from farmers, many are now growing their own tomatoes and rapidly expanding their farming operations. Many of the processors interviewed told stories about missed deliveries, poor quality, and generally bad relations with farmers, regardless of size. Poor Relations Between Growers and Processors Lack of cooperation among producers and processors is common in the Moldovan business community, especially in the agricultural production sector. Although most see the need for cooperation, Moldovan farmers find it difficult to take joint actions (such as acquisition of inputs, sourcing know-how, develop marketing strategies) that would benefit all of them together. According to a survey of apple producers18, two-thirds of the respondents explained this phenomenon as due to lack of trust. Several tomato processors complained to the project team that farmers do not always fulfill their contracts and will renege on their contracts if offered even one ban more from another processor. Farmers, on the other hand, complained about the lack of trust processors show them and that processors regularly pay them fractions of the negotiated prices for their delivered products and farmers noted that they often do not receive payment for weeks or even months after delivery. The situation may be changing, however, due in part to a requirement mandated by the Russian government. One of the conditions for lifting the 2005 Russian ban on fruits and vegetables was a requirement that Moldovans form a single organization or association that Russia could negotiate with instead of having to deal with several individual Moldovan trading and production companies. This resulted in the creation of the Moldova Fruct Exporters Association — a closed club of larger, better equipped apple producers and traders, some of whom handle other fruit as well. The association aims to develop a reputation for volume, consistency, reliability, and quality. Members are mainly apple producers and traders of a substantial size. All have storage facilities, but these facilities vary in quality. The association is in its early stages and has little to show for itself so far. The association is in the process of organizing and developing a marketing cooperative to look for clients, to provide market information, and to promote and market members’ produce.

18 Results of the Survey of Apple Producers, National Agency for Rural Development (ACSA).

27

Economic entity(Buyer)

For other types ofimported commoditiesthe customs servicemay request additionaldocuments, such as:

Customs brokerservices

Customs Service

Transporter

• Trade contract;• Payment order;• Enterprise registration

• Bill of lading(transportation costs);

• Trade contract;• Payment order;• Enterprise registration

• Bill of lading(transportation costs);

• Licenses for ‘special’commodities such aspetrol, chemicals etc.;

• Contracts with thirdparties;

• Payment invoices to thirdparties;

• Invoices for commissionand broker’s services;

• Accounting documents;• License agreements;• Export licenses;• Supply orders;• Producer’s price offers

• List of documents (TIRCarnet, CMR, Invoice) –date and number to beapplied;

• Primary customsdeclaration;

• Calculation of cost ofcustoms procedures(Form PV1);

• Declaration on customsvalue of commodities

Commodity origin division• V of the of origin (if such exists, some

counties are exempted from customs duty);Customs value division• V of customs value (customs fees: customs

procedures, value added tax (VAT));Economic transaction division• Corridor opening (green card, yellow card, red card); (see

the explanatory note bellow)• Customs clearance; (see the explanatory note bellow)• Validation customs declaration (V_number); (see the

explanatory note bellow)Physical control division• V of goods according to the declaration;Optional• Upon request of customs service the control can be carried

out by: risk analysis division, customs fraud division,control for combating economic crimes;

• Compilation of minutes.

• List of documents(International transportletter (CMR); Invoice;TIR Carnet;of origin; Technicalpassport; Internationaldriving license) Customsdeclaration of exportcountry;

1

3

4

5

2

Activity Cost in lei or in %from the invoice value

Filling in the primary customs declaration 180Filling in the complementary customsdeclaration/1 item 50

Filling in the transport letter 50of origin (blank form) 80

Customs broker services 500Customs procedures 0,4 %VAT 20%Excises 0Customs duty 01

Length of Procedure

1 10 min

2 10 min

3 40 min

4 5 min – 1day

5 1 day – 10 days

6 2 – 3 hours1 Although in this case there would be

no excise or customs taxes due, someproducts are subject to such fees andtaxes. For a list of goods subject toexcise taxation, go to: http://www.customs.md/index.php?id=864

NOTE: Usually the customs clearance takes 12 hours.• Corridor opening – upon submission of customs documents, an automated selective customs control is carried out through a

special module of “ASYCUDA World” Integrated Customs Information System insures the streamlining of customs declaration toone of those 3 selection corridors:- red (mandatory document and physical control),- yellow (mandatory document control)- or green (cargo clearance is done without applying document and physical control);

• Customs clearance – each customs has a stamp, which is applied on CMR, invoice, and customs declaration aftercustoms clearance;

• (V_number) – V- explains that the clearing procedure has taken place; number – registration number.• Law No. 1380-XIII of 20.11.1997 (customs tariffs, customs procedures )• Art. 124. of the Tax Code (excises)• Tax Code, title III establishes VAT shares• Law No.1540-XIII (environmental tax)• www.cosmos.md,• www.vama.md• “Natur Bravo” Company

Import Documents Processing Map – Glass Food Jars

28

Transportation and the Value Chain Transporting HVA in Moldova (particularly to Ukraine and Russia) is time consuming, difficult, and often costly. Rail transport is aging, limited, and often falls behind schedule. Truck transport is more plentiful, yet the costs of transporting by road can be costly and time consuming, due to a number of factors discussed below. Most farmers interviewed for this report noted that they usually sell their goods directly from their fields, and the buyer usually brings his own truck to collect and transport the goods to the intermediate or final market. This being the case, it was not possible to calculate the cost of transporting the goods from the field to the final (domestic) market simply because these costs are built into the final cost the buyer pays. The cost of transporting and exporting goods to a final foreign market can be calculated, but these vary greatly, especially when Ukraine is used as a transit point. For transporters, the major problem currently is the lack of transport volume. When interviewed for this report, one major transportation company reported that their volume for the first half of 2008 was only 10 percent of the total volume for the first half of 2007. Transport by Rail and Truck Refrigerated transportation by rail and truck is an important part of the continuous cold chain for Moldova. Rails and roads are bad; track, railcar, and truck repair and maintenance requirements high; equipment is aging; and accidents are frequent. Refrigerated rail transport works less effectively than truck transport, with current use insufficient. In 2007, only 13 wagon-sets were put into use (for only one trip each), and in the first 5 months of 2008, only 3 wagon-sets had been operational (handling one trip each). This is a consequence of several factors, including the absence of grouped lots shipped in one direction, a minimal marketing effort by the Moldovan railroad authority, an aging fleet of rail cars that severely limits the number of cars available for use, the lack of information accessible to owners of cold storages, a lack of access to the rail network and, according to shippers interviewed for this project, poor planning by shippers and buyers who are not used to advance planning. For instance, the railroad authority usually requires at least 20 days advance notice just to book a single railcar. The age of the rail fleet is a critical problem in Moldova as well. The refrigerated railcars that the Moldovan rail authority owns have a useful life of 25 years. Currently more than 30 percent of those Moldovan rail cars are more than 25 years old, and most of the rest were produced between 1985 to 1989 and are coming close to the end of their useful life. In interviews with the railroad administration, no one could recall any refrigerated railcars having been put into service since the fall of the Soviet Union in 1991. The life expectancy of a refrigerated rail car, however, can be extended by 10 to 16 years by refurbishing it, which can cost anywhere from 12 to 14 percent of the cost of a new refrigerated rail car.

Table 1: Data on the fleet of refrigerated transport means registered in Moldova Refrigerated railway wagon-sets 73 Sets of 2 wagons 18 Sets of 3 wagons 2 Sets of 4 wagons 53 Refrigerated trucks 2,524 Year of registration: < 1970 10 Year of registration: 1970-1980 80 Year of registration: 1980-1990 1,181 Year of registration: 1990-2000 1,123 Year of registration: > 2000 130 Source: “A Program to Revitalize the Post-Harvest Handling System for Fresh Fruits, Table Grapes and Vegetables (2008-2015),” Moldovan Ministry of Agriculture and Food Industry, July 2008

29

Refrigerated truck transport works better. According to the Ministry of Information and Development, about 2,500 refrigerated transport units are registered in Moldova, all from private operators. The condition of the fleet is not monitored by the government or any independent body. According to some exporters, there will be an insufficient supply of refrigerated trucks in the future to move an expanded fresh produce volume to export markets, in part due to lack of vehicles and the lack of an appropriate information system to indicate availability and to coordinate use. Such a system could collect information on the condition of the vehicles, routes, space available, and type of cargo could be collected. The new National Agency of Transport would be an appropriate agency to develop and manage such a system.

Rates for Air Transportation from Moldova

Destination Minimal weight (kg) Euro/kg

Moscow 200 – 500 1,31500 – 1000 1,21

London 200 – 500 1,41500 – 1000 1,21

Hamburg 200 – 300 1,76 USD300 – 500 1,66 USD

500 – 1000 1,61 USD

1000 – 2000 1,56 USD

New York 100 – 200 2,31200 – 300 2,36 USD

300 – 1000 2,26 USD1000 – 2000 2,16 USD

NOTE:minimal weight - 200 kg, maximal weight - 2000 kg.The following companies were not available: AERONORDGRUP, AVIOSFERA, GRICSONA.Air Transport Company (source – Natalia) does not provide information without signature and stamp of the exporting company. Air transport is another important piece of the transport segment. Because Moldova is a landlocked country, to meet their potential to develop niche goods for high end stores (smartly packaged dried fruits that could be destined for Tesco’s in London, for instance), Moldovan producers may need to avail themselves of the cargo air transport system and understand the additional costs inherent in taking this route. The table below shows the costs to transport goods via air to key cities in Europe and the United States. If the dried plums producers that have been described in this report were to ship a container of goods to London by air, the final cost of a kilo of dried plums would increase from MDL 22.55 to MDL 42.26, due to the additional MDL 19.71 per kilo as a result of the cost of air transportation. Some markets could not take this additional

The Importance of Following Schedules Commonly reported problem with domestic transportation is that many of the Moldovan truck drivers do not understand the importance of closely following a schedule. For instance, even though trucks need to arrive at the processing plant at defined hours, such as 10:00, 12:00, 2:00 etc., many drivers are unable to keep to the schedule. It was reported that many take “long lunches” or do not drive with the determination required to meet the demanding schedules the market requires.

30

markup, yet for high-end niche products, there is often plenty of room for such costs in the final analysis. Transport-Related Challenges Transportation inefficiencies and customs barriers are also a major problem for Moldovan producers wishing to access foreign markets. According to Alfa Nistru, sufficient numbers of trucks are available, but transit authorizations are needed to cross countries. In some instances, these authorizations are difficult and expensive to acquire, with authorization through Ukraine being the most difficult and time consuming to obtain. Regarding Moldovan customs, if documentation is in order, then shippers can usually make it through without having to pay too many bribes; if documents are not in order, however, most transport companies reported that they could encounter serious delays and difficulties with customs, including the need to pay significant “fees” to clear the goods. Analysis of the number of documents required for carrying out exports shows that several forms are used to record the same information (see the following Export Document Processing Map for Table Grapes for a example of the process required to export a container of grapes). For example, to ship cargo in a single vehicle to the Russian Federation requires more than 15 documents from 12 different agencies (see Chapter 3 for additional details). Reducing the number of forms required to clear perishable products through customs could significantly reduce waiting times at border crossings and improve the quality of the product — at times, refrigeration units do not work properly or are shut down during waiting periods to save costs, which, in turn, lowers the quality of the produce on the trucks. Transporting goods into and out of western and central Europe poses little problem for Moldovan exporters, but transporting goods into and through Ukraine and Russia can create severe problems and is fraught with obstacles. This is ironic, given that Moldova was part of the Soviet Union until 1991.

31

NOTE:• For canned products there is no need for Phytosanitary• Payments are made through bank wire transfer or.cash (in case of small amounts).• Economic entity has transport mean, and if needed, a contract is signed with a transport company. The transporter presents

to customs house: registration for the truck, for semi-trailers, driver’s documents• Optional procedures may take up to several months.• Exports can be done through customs broker or directly by the economic agent (producer)

Export document processing “Table Grapes”

Economic entity Customs brokerservices

Customs Service

Transporter

Import Agent

• Trade Contract;• Payment order;• Hygienic• Shipment phytosanitary

• Company registration

• Waybill (transport costs);• Packaging lists;• of conformity• Request for customs

inspector to be presentupon loading and sealingthe truck

• Fill out a pre-printed TIRCarnet form;

• Fill out CMR form;• Prepare Invoice• Obtain of

origin;• Complete Customs

declaration

Customs value division• V of customs value (customs fees: customs

procedures);Economic transaction division• Corridor opening (green card, yellow card, red card);• Customs clearance;• Validation customs declaration (V_number), indication

of transit time;Physical control division• V of goods according to the declaration;SealingOptional• Upon request of the customs service, the control can by

carried out by: risk analysis division, customs frauddivision, control for combating economic crimes

• International transportletter (CMR);

• TIR Carnet (blank form);• Invoice

Activity Cost, lei

Filling in the primary customs declaration 180

Filling in the complementary customs declaration /1 item 50

Filling in transport notes 50

of origin (blank form) 80

Customs broker services 500 – 700

Customs procedures 700

Seal 60

Length of Procedure

1 10 min

2 10 min

3 40 min

4 0,5 – 1 day

5 1 day – 10 days

6 2 days – 10 days

1

113

4

6

5

2

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Most Moldovan HVA and HVA-related exports got to Ukraine, Russia, and Belarus, and this almost always requires that shipments go through Ukraine. The total cost of shipping a full load of table grapes to Moscow through Ukraine ranges from $5,360 to $6,290. The following table outlines the related costs, which were obtained from several sources, including trucking companies, producers, and exporters. The most impressive cost by far is that of clearing the goods through Ukrainian customs. All of the sources interviewed for this project stated that the costs to clear the goods through Ukraine could double the total cost of shipping goods through the country to Russia. Below is a table listing the major cost components to export a container of table grapes to Moscow via Ukraine.

Export Costs and Duration “Chisinau – Moscow”

“Chisinau – Moscow” USD / % of invoice

Customs formalitiesUkraine (transit): with authorizationwithout authorization

150800 – 1000

Russia 100Clearance fee 5000Broker agent’s fee from Russia 40Bank fee 0,01 %

Export documents: TIRCMR

60 – 1401

TOTAL US$5,360-6,290

Authorization can be purchased from AITA (the International Association of Road Transporters) for €25. Without an authorization issued by AITA, transit costs through Ukraine are significantly higher.

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Crosscutting Constraints and Challenges Limited Access to Reliable and Affordable Inputs Most of the inputs used by producers in Moldova are imported. For instance, farmers import most of their seeds, fertilizers, and chemicals from Europe or the CIS countries. Some seeds and packaging material they use are produced domestically, however. Processors also rely heavily on imported inputs. Other than the raw materials that they either grow themselves or purchase from local farmers, most of the other inputs they use are imported. The problem farmers and processors encounter is that they pay international prices for much of the inputs that go into their production, yet when they sell locally (and often, within the CIS countries) they get lower prices than they would in the international market. The table below lists the primary inputs used by producers and processors and whether they are obtained primarily from imported or domestic sources.

The following chart demonstrates the disparity Moldovan farmers encounter in such a system. The chart shows that producers of tomatoes pay 8 percent more for their inputs that average world prices due largely to the fact that they are imported, yet received 41 percent less revenue for their tomatoes than what the average global market price would fetch, due in part to the fact that Moldova’s reputation as a poor quality producer limits access to higher end, export markets. The situation is similar for table grapes, except that grapes producers pay significantly more for their inputs (22 percent above global market prices) and receive 18 percent less for their production sold in Moldova than they would otherwise receive on the global market.

Producers Processors Packaging Domestic & Imported Machinery and

Equipment Domestic and Imported

Machinery and Equipment

Imported Transportation Domestic

Fertilizers Imported Raw Materials Domestic and Imported Chemicals Imported Packaging Domestic and Imported Seeds Domestic & Imported Irrigation Equipment

Imported

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Wrong Fertilizers, Poor Yields Some of the reasons, tied to fertilizer use, for the poor yields in agricultural production include the following: • Moldova uses less than one-half to one-

third the fertilizer that should be used for the amount of land that is farmed.

• Producers use the simplest and cheapest fertilizer formulations (ammonium nitrate), which produce poorer results than a more complex formula.

• Most fertilizer that is used is dry, because Moldova does not have the right equipment to apply liquid fertilizers. Dry fertilizer has a low absorptive capacity, and liquid fertilizers are absorbed into the soil and plants much quicker and more efficiently.

• Moldova has few, if any, transport or storage facilities for liquid fertilizers.

Chemicals and Fertilizers Moldova imports almost all of the fertilizers and chemicals used in agriculture. According to a leading fertilizer dealer, the country imported approximately 70,000-80,000 tons of fertilizer in 2008. This, however, is only one-third to one-half of the actual amount needed, because the farmers could not afford to procure more fertilizer due to financial constraints and because many of them do not follow best practices in plant maintenance, which results in under-fertilizing. Moldova lacks soil testing laboratories throughout the country, which limits farmers’ ability to test their soils to determine the best and proper mix of fertilizers for their soil and crops. There are some testing labs in the country, but they are not strategically placed to allow the farmer easy access to them. The list of labs available in Moldova is in Annex 5. There are only about 10 to 15 fertilizer dealers and as many as 30 to 40 chemical dealers. To sell fertilizer and chemicals, the government requires the following:

• A special license that must be obtained from the Ministry of Agriculture. • Importers can import only registered fertilizers and chemicals as designated by the

government. • Special storage facilities designated specifically for storing fertilizers and chemicals are

required before a license can be issued. Many fertilizer dealers report that they need to pay VAT, import, and customs taxes when importing fertilizers into Moldova. This money can be held up for three to five months or longer, however, because it can take dealers that long to receive payments from the buyers of the

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fertilizer. Once they have received payment, they can then obtain a refund of the taxes that they paid. Limited Access to Affordable Credit Under normal circumstances, farmers and processors would be facing high capital cost with unfavorable terms. In the current climate, however, having access to capital at all would be a benefit. Many farmers and processors reported being unable to access credit lines that had been established long ago, that they had been accessing regularly until the fourth quarter of 2008. Most banks had reportedly ceased providing any credits to even their most creditworthy clients from October through December of 2008. Against this backdrop, even before the crisis, the situation was difficult for producers and processors. Interest rates for loans in Moldovan Lei ranged from 25 to 30 percent, an increase from the 18 percent that was available for loans at the beginning of 2008. The interest rate for loans in U.S. dollars had been at 16 to 18 percent. On top of this, most banks now require collateral of up to 200 percent and offer few loans that exceed 1 1/2 years in duration. Standards and Certifications Moldovan producers face the challenge of trying to meet the various product and packaging standards of the domestic and export markets that they serve. These standards include Moldovan national standards, regional GOST standards, and the standards of the European markets. The current Moldovan national standards are based on the old GOST system and are not closely harmonized with requirements established by the European Union. Because of this much of Moldova's legal, regulatory, and institutional framework for food safety and phytosanitary concerns are closely associated with the standards established by the former Soviet Union. However, there has been movement toward establishing a modern standards regime in Moldova. SGS, an internationally recognized private company certifying both exports and imports, was the first company in the region to introduce Western quality systems. SGS is the only Moldova-resident organization that can certify for GlobalGAP as well as organic products. 19 Furthermore, they have approximately 60 percent of the market for HACCP and ISO 22001 and 9001 certifications in Moldova. Local auditors are often used to increase local capacity and to be more cost-effective. SGS reports that the biggest problem they encounter is that companies often fail to maintain adequate records. Currently, about 20 companies nationally have ISO and HAACP certifications. In 2006, there was only one company GlobalGAP certified; by 2008, however, five companies had been certified. In addition, SGS is monitoring approximately 3,000 ha of organic production. 19 The Ministry of Agriculture also issues organic certifications but these are not internationally recognized, whereas the certifications issued by SGS are recognized around the world.

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High Value Agriculture Standards Comparison – EU:CIS European Union Commonwealth of

Independent States Fresh fruits and vegetables Mandatory Standards

• EU marketing standards for quality and labeling

• certificate of origin • maximum residue levels • Phyto-sanitary certificate • conformity certificates Optional Standards GlobalGAP, HACCP, ISO9001/2000

Mandatory Standards • GOST standards Optional Standards • EU marketing standards • GlobalGAP

Processed fruits and vegetables

Mandatory Standards • EU regulations on products,

labeling, approved additives, pesticide residues

• HACCP Optional Standards • ISO9001/2000 • BRC

Mandatory Standards • GOST standards Optional Standards • HACCP • ISO9001/2000

Source: BCI reports for 2004 and 2005; and CNFA market studies. Meeting International Standards and Norms With the expansion of large, consolidated supermarket chains in developed countries and an increasingly competitive worldwide supplier network, buyers and their end-user customers are becoming more discriminating about the produce they purchase. Product conformity to stringent norms ensures that losses along integrated distribution chains are kept to a minimum and that first-rate produce reaches store shelves on a consistent basis. Processors also require that harvested or field-collected raw materials meet specific technical characteristics to maximize industrial yields and meet standards for the finished product. Compliance with food safety and sustainable environmental practices is becoming a basic supply chain requirement, fueled by growing consumer awareness and concern in both developed and developing countries. Before 1991, Moldova’s agriculture industry consisted of large-scale collective farms that produced whatever the state decided should be produced. After the land reforms of the 1990s, Moldova’s HVA industry relied extensively on the production of smallholder farmers who contributed a large share of the total export volume. However, due to new GlobalGAP requirements and the increasing number of large corporate farms in Moldova, the share of smallholder participation in exporting has dramatically decreased and will continue to do so unless more of these smallholder farmers can gain certifications.

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Moldova’s small, medium, and large farmers are now under more pressure than ever to adopt production practices that meet the requirements of market standards under GlobalGAP. To ensure effective synergy between corporate and smallholder production and mainstream small farmer certification schemes, it is critical to support groups of small farmers in obtaining certification under GlobalGAP Option 2, which enables large groups of farmers (usually small and medium farmers) to be certified as a single entity, thus significantly reducing the associated audit costs. Option 2 also allows small farmers access to markets they otherwise would not be able to gain access to on their own.

The following tables reveal the costs of obtaining GlobalGAP for small and medium farmers. The first table shows the costs, as a percentage of Annual Profit Margin per Firm, of GlobalGAP compliance – capital and recurring costs – for farmers of various sizes. The second table shows the benefit of small farmers banding together to obtain GlobalGAP Option 2 certification, versus the cost of just one farmer doing so.

Cost of GlobalGAP Compliance Percentage of Annual Profit Margin per Firm

Area in Hectares Capital Costs % Recurring Costs %

0.3‐0.9 58‐160 19‐53 1.0‐1.9 26‐41 9‐14

2.0‐6.0 8‐23 3‐8

Source: Andrew Graffham & Bill Vorley, www.agrifoodstandards.org

Description Scenario 1 (in USD) Scenario 2 (in USD)

One farmer, 25 Ha under management, 2 crops

25 small farmers, total of 25 Ha under management, 2 crops each

Training in EuropGAP 25 625 Train Internal Inspector n/a 300 Fee for Internal Inspections n/a 600 Registration at FoodPlus 30 150 Inspection Fee 550 1750 Certification Fee 200 450 Total 805 3875 Average per farmer 805 155 Source: Leen Klaassen, NAK AGRO

One Example of an Industry-Driven, Industry-Funded Standards Monitoring

Program The Citrus, Fruit, and Vegetable Standardization program in Arizona monitors and enforces the quality standards for all fresh fruit and vegetables produced and marketed in the state. It is entirely industry funded through license fees and carton assessments and uses no general fund monies. They work closely with a Governor-appointed industry advisory council, which meets quarterly and advises the program supervisor on all issues pertaining to Citrus, Fruit and Vegetable Standardization.

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Lack of Market Information and Access to Markets The lack of market information is a major problem for the Moldovan private sector, thereby limiting their ability to profitably access new markets. The situation is particularly acute for farmers who reside in rural areas where information flows much slower and is often not reliable once it reaches the farmer. Most producers and processors lack basic information on which products to grow, which markets and distribution channels to choose, and who their primary competitors might be in external and even domestic markets. Some growers and processors have established relationships with buyers in neighboring countries to whom they sell on a regular basis. These contacts are often reliable people in target countries who can provide market information to the grower (usually this is a middleman or a local “partner,” or other trusted person). One farmer’s lack of market information last summer led to a dramatic loss of hundreds of thousands of lei. This farmer was offered 13 to 14 lei per kilogram to sell his grapes directly to a middleman who was then going to export them. The farmer declined to accept this offer thinking that he would be better off taking his grapes up to Moscow, where, he thought, the price must be much better than what he could receive in Moldova. The farmer rented a truck and spent more than $10,000 transporting his grapes to Moscow. When he arrived in Moscow, the most he was offered for his grapes was four lei per kilogram, after turning down the 13 to 14 lei he was offered from the field. If the farmer had reasonable access to information about the market in Moscow at the time, he would have stayed in Moldova, sold his grapes to the highest bidder, and saved hundreds of thousands of lei. Limited Network of Wholesale Markets Moldova lacks a functioning network of wholesale markets. According to interviews with wholesale traders and representatives of Agroinform Federation who conduct daily monitoring of wholesale prices, wholesale operations for fruits and vegetables are conducted at virtually all agricultural markets in Moldova. Only three of these markets, however, specialize in wholesale operations. Since none of these markets has a formal name, they will be distinguished by their location:

1. Chisinau Albişoara street market; 2. Chisinau Calea Basarabiei street market; 3. Bălti wholesale market

The Albişoara market, successor to the former wholesale section of the Central Agricultural Market in Chisinau, is the best known and largest of these markets. This market and the one in Balţi provide minimal services to traders and farmers, being, in fact, nothing more than marketplace administrators that charge flat fees for renting out selling space on a per-day basis. Unlike Albişoara and Bălti, the market on Calea Basarabiei offers some infrastructure services, including a non-CA cold storage facility available for rental. All three markets have basic food testing laboratories that issue sanitary and phytosanitary documents certifying the safety of traded products. Apparently, these laboratories do not correspond to international standards and, thus, cannot issue food quality certificates for international trade.

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Land Leasing Costs

The cost to lease 1.81 hectares of land in one region of Moldova is the following: • 500 kg of wheat • 500 kg of hay • 125 kg of sunflower seeds • 15 kg of sugar • 200 kg of barley

In terms of availability for farmers, the Albişoara market was mentioned as the most accessible, having the largest diversity of traded products. The Calea Basarabiei market has strict quality rules, which is a major obstacle for many farmers who wish to place their products there. The wholesale market in Bălti does not have such strict quality rules, yet farmers often report having difficulty accessing it because of the so-called resellers — people who rent out spaces permanently, forcing the farmers to sell their products at lower prices. All three markets trade both imported and local fruits and vegetables. Generally, imported products tend to be more competitive than those produced in Moldova, both in quality and price. This is one reason why Moldovan farmers often complain that prices are too low on these markets to sustain them. During the harvesting season, most of the operations at these markets are conducted in the early morning, usually beginning around 2 a.m. Transactions tend to decrease in size and number near sunrise. Among the early morning clients are operators of retail markets around the country, supermarkets and chain stores, and small grocery stores. During the day, the wholesale markets register small transactions, often acting as retail markets. Land Fragmentation and Consolidation Many people interviewed for this report discussed the difficulties caused by land fragmentation in the farming and processing of HVA products. Some larger farmers displayed frustration at the need to devote so much effort to cobbling together tracts of land large enough to farm their crops competitively. The process is time consuming, and the unconventional methods of payment are tedious (see text box for the cost that one farmer paid to gain access to land one share of land (in this case one share equals 1.81 ha). Other farmers said that consolidating land was a challenge, but not an insurmountable one, and that the additional costs are built into the market anyway. Some small farmers, on the other hand, see land consolidation as an opportunity to lease their land or in fact, when strapped for cash, to contract out to these larger farmers for the crops they produce. Some older farmers recognize, as well, that land consolidation is key to their “exit strategy” when they decide to stop farming. Although most small famers hope to pass their land on to one or more sons, in more and more cases, their sons have left the villages, either to go to the cities or to find opportunities abroad. In some areas, the cost of land has increased dramatically. For instance, the cost of land near Sadova, a village about 50 kilometers from Chisinau, was 25,000 Moldovan Lei /0.8 ha, whereas two years ago it was only 5,000 Moldovan Lei for 0.8 ha. In other cases, however, the cost of similar land in another part of the country might only be 3,000 to 10,000 Moldovan Lei per hectare.

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From interviews all along the value chain as well as with the government, it appears that the land consolidation process in Moldova has been working fairly efficiently and effectively, although different experiences have been observed in various regions. The table below reveals that the average farm size in Moldova has increased nearly 30 percent since the mid-1990s. What is more revealing is that the average farm sizes in some of the most productive EU-15 countries are the largest and they are getting larger. This demonstrates that increasing farm sizes in Moldova is the way to move forward in the competitive European business climate.

Average Farm Size in EU Countries and Moldova Countries 1995 2000 2005* Moldova 1.5 1.8 1.9 EU 15 17.4 18.7 20.2 Belgium 19.1 22.6 25.4 Denmark 38.4 45.7 54.7 Germany 30.3 36.3 41.2 Greece 4.5 4.4 4.8 Spain 19.7 20.3 22.1 France 39.8 42 45.3 Ireland 60.9 31.4 32.3 Italy 2.1 6.1 6.7 Luxembourg 17.9 45.3 52.3 Netherlands 28.1 20 23.5 Austria 48.2 17 18.7 Portugal 5.5 9.3 10.4 Finland 30.9 27.3 29.9 Sweden 43.1 37.8 46.1 UK 23.2 67.7 57.4

Sources: Eurostat harmonized national data and the EC surveys of the structure of agricultural holdings * As reported by the European Commission in 2005

Unsustainable Private, On-Farm Extension Services The National Agency for Rural Development (ACSA) small-farmer-oriented extension and advisory service system, established with support from World Bank projects, is a noteworthy attempt to provide support for increasing innovation and productivity on small and medium farms throughout Moldova. The ACSA program reflects a new model for extension services in the country, designed to replace the public extension agency model that has proven to be ineffective and unsustainable in most countries. An indication of ACSA’s effectiveness under its current structure is its demonstration projects program. ACSA has implemented approximately 850 demonstrations of various small farm technologies and management systems through a program of small grants. These demonstrations have introduced new technologies and provided demonstrations and models of viable small farm production systems. The demonstrations complement the broader program of individual advisory services or farmer contacts.

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The ACSA extension system is supposed to be private sector-based, and ACSA itself is an NGO that contracts service delivery from other NGOs for specific geographical regions through a competitive tender process. This model apparently keeps costs low and can easily be scaled up or down, depending on the availability of funding. ACSA’s services respond to broad-based rural development needs, as is reflected in the organization’s name20. Services and activities are seemingly demand driven, responding to requests and proposals from the small farmer clientele. Commendably, ACSA appears to have resolved some of the key problems of how to provide support services to decentralized, contracted extension programs. ACSA delivers extensive and sound programs of support to the regional NGOs in in-service and farmer training, specialized technical assistance, mass media programs (publications, radio, TV), and effective program monitoring and evaluation. Funding of ACSA’s programs and services, however, appears to be highly dependent on Government and World Bank funding, and continuity of the programs funding ACSA is in question. There may be a major scaling back of activities and programs when the World Bank project ends, which is scheduled for 2009. Financial sustainability of ACSA’s extension services still seems to be in question. Given the success of the program to date, another project that would gradually phase financing responsibility from World Bank (or other donor) to the Government of Moldova would seem appropriate.

20 ACSA changed its official name from “Agency for Consulting and Training in Agriculture” to “National Agency for Rural Development”.

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Chapter 2. Analysis of HVA Market Failures or Imperfections Moldova’s low domestic resource costs (DRC)21, give the country a strong competitive advantage in production of fresh fruits and vegetables, especially tomatoes, grapes and apples. However, internal and external market distortions diminish the competitiveness of Moldovan HVA products, and certain governmental policies make the market less efficient.

Inputs On the input side, the chain of causes that lead to these disparities looks like this: Outputs

21 World Bank: Moldova Agricultural Policy Notes, December 2005

Policy Issues Restrictive licensing requirements

Implications • Few seed

producers • Need for

imported seeds and fertilizers

Outcome • Increased cost of seeds and

fertilizers • Limited offer of types of

seeds and fertilizers on the market

• Low quality of seeds and fertilizers offered on the market

Policy Issues Tariff protection of domestic industry (carton production)

Outcome • Increased cost of

packaging material • Diminished end-price

competitiveness of fresh fruits and vegetables

Implications • Lack of

variety of packaging material

• Need for imported packaging materials

• Dominant position of one local producer

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Figure 1. Increasing rate of export growth to EU

0%

5%

10%

15%

20%

25%

30%

35%

2005/2004 2006/2005 2007/2006 2008/2007

EU market Total growth

Table 1: Increased export trends within the GSP system

HS Code Name

Quantity units

2004 2005 GSP GSP

Plus Quantity Thousand USD

Quantity Thousand USD

0806 Grapes fresh tons 151.00 40.60 357.20 87.50 0 0 0808 Apples, pears, etc.,

fresh thousand

tons 2.40 180.00 12.90 1,013.30 2,9 +

4,5 euro/kg

/net

0

0809 Apricots, cherries, peaches, plums, fresh

tons 331.30 108.00 2,649.90 531.70 8.5 0

0810 Other fresh fruits (strawberries, etc.)

tons 0.00 0.00 5.20 0.80 6.1 0

0811 Frozen fruits or cooked by steam

tons 176.10 92.10 58.50 39.70 17.3 0

0812 Canned fruits and nuts

tons 356.40 72.20 447.20 103.90 9.5 0

0813 Dried fruits tons 238.50 342.20 899.50 1,673.20 6.1 0 As Table 1 shows, under the regular GSP system. Moldovan fruit and vegetable exports to EU markets (both fresh and processed – HS codes: 0806-0813) have increased fourfold in monetary terms, with similar increases in quantity. This group of goods showed a much higher growth rate than Moldova’s overall export growth for that period to EU markets (11 percent), which confirms the competitiveness of Moldovan HVA products, such as fresh and dried fruits. Exports to the EU of frozen fruits and fruits cooked by steam actually decreased during this period. Following further tariff reduction under the GSP plus system, which started in 2006, we notice an even higher rate of growth of exports to EU, which demonstrates that tariff barriers played an important role in reducing the competitiveness of Moldovan exports to EU markets. For 2006 and 2007, the exports to the EU grew at an increasing rate, with the maximum so far being 25 percent growth in 2007. With the subsequent tariff reduction triggered by the Autonomous Trade Preferences implemented in 2008, it is expected that such high growth rates will be maintained in the future as well.

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Figure 4: Distribution of the fruits and vegetable exports by main export markets, 2007

CSI 40%

UE43%

Other17%

This is especially interesting, considering that exports to CIS markets increased by only 14 percent in 2008 , despite the free trade regime, common standardization policy, and traditional trade with this region. Another proof of the strong competitive position of Moldovan HVA exports to the EU market is the increasing positive trade balance for such products for the last several years. Among these groups of products, exports of fresh fruits and vegetables are more competitive than processed fruits and vegetables, which could be partly explained by the difficulty in complying with EU standards.

Figure 2: Export of processed fruits and nuts, 2006

Other CIS24%

Russia 39%

EU 32%

CEE 5%

Figure 3: Export of fresh fruits, vegetables, and nuts, 2006

Other CIS, 26%

EU, 52%

CEE, 7%

Other, 10%

Russia, 5%

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Chapter 3. Analysis of Policy, Legal/Regulatory, Institutional, and Other Constraints to HVA One important aspect of the trade in HVA is the ways that these products are regulated within the domestic market and the tariff and technical barriers they may face in the foreign markets. Below, we present an overview of such issues as domestic regulatory policy and its impact on production and distribution costs and the market access limitations, both tariff and non-tariff, that such products face in foreign markets. In brief, we will discuss such issues as standardization, certification and testing, sanitary and phytosanitary regulations, and licensing and customs procedures. The value chain analysis and market study of HVA products highlighted the following issues that are internal cost drivers, which follow from a market-distorting domestic policies.

Input cost drivers Responsible domestic policy High cost of domestically produced inputs (e.g.: tomato seeds)

Licensing and certification requirements for local producers, monopolistic position of few local institutions, seed producers.

Import distortions (imported inputs such as seeding materials, fertilizers, etc. with increased prices)

Lack of competition due to licensing requirements

Few local suppliers (of seeding materials) Licensing requirements Lack of choice on domestic market (due to monopolistic (dominant) market situation of the respective state institutes

Lack of competition due to licensing requirements

High cost of material input — mostly packaging material (often imported)

Customs tariffs on imported packaging materials ranging from 11 to 15 percent for carton packages and 10 percent for glass containers and lids.

Logistical problems (accessing suppliers, orienting suppliers to market demand for fruits and vegetables.

Weak institutional structure —lack of strong logistical centers and market information dissemination among producers

Laboratory testing is another procedure associated with certification. Although the fees required for laboratory tests do not seem high, the fees for certification seem excessive and can go as high as $500, depending on the number of products and employees. Taking into account the number of certifications that various contracts require for the export of various goods, these costs quickly add up and become a competitive factor for the exports of such goods, not to mention the time it takes to comply with all these regulations. According to the WTO obligations that Moldova has committed itself to under Article VIII of the GATT’94, all fees and charges (other than import and export duties) in connection with imports or exports shall be limited to the approximate cost of services rendered and shall not represent an indirect protection of domestic products or a taxation of imports or exports for fiscal

46

purpose. This provision extends to fees, charges, formalities, and requirements for licensing, statistical and customs services, documentation and certification, inspection, and sanitation. A lengthy and complicated appeal process established by the System Procedure of the National Institute of Metrology and Standardization makes difficult to challenge any inconsistencies that might appear. For the domestic market, the following basic legislation and normative documents regulate the standards, certification and testing for HVA goods:

• Law on Products Conformity Assessment, no. 186-XV, April 24, 2003 • Law on Technical Barriers to Trade, NO. 866-XIV, March 10, 2000 • Law on Customer Protection, no. 105-XV, March 13, 2003 • The governmental decision № 996 from 20.08.2003 about the statement of Norms on

marks on foodstuff • SM 45-2 "Principles and methodology of a Conformity Assessment . Certification of

production " • SM 45-3 "Principles and methodology of a Conformity Assessment . Certification of

services • RG 29-01-103 "Principles and methodology of a Conformity Assessment . A periodic

assessment of certificated production • RG 29-01-147 "Principles and methodology of a Conformity Assessment .

Acknowledgement of conformity in the form of the declaration on conformity of the manufacturer”

• SM EN ISO 9001 "Quality Management System Requirements"

In Moldova, the National Institute for Metrology and Standardization is the agency responsible for certifying exported and imported goods. Thus, certification could be an issue for each separate shipment, a series of shipments, or an entire production process.

The law on standardization regulates state control and supervision over compliance with normative documents of standardization. The Law on Technical Barriers to Trade also has provisions regarding state control and supervision in the field of technical regulations. Control and supervision is done during development, launching production, production, delivery, sales, use, depositing, and transportation of products as well as during the execution of processes and rendering services.

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Table 1. Overview of Sanitary and Phytosanitary Regulations, Goods concerned, and the Competent Authorities

Rules Goods/Objects Competent Authority Certificate Issued

Medico-Biological Requirements No.5061-89 Food safety requirements (harmonized with the Codex Alimentarius)

Food products State Sanitary-Epidemiological Service (Ministry of Health)

Hygiene Certificate

Sanitary requirements as part of product standards

Raw materials, machines, and equipment the use of which may constitute a source of danger for human health; goods for children; materials and equipment used in drinking water systems; cosmetics and perfume; soap and detergents; textiles

State Sanitary-Epidemiological Service (Ministry of Health)

Hygiene Certificate

Phytosanitary requirements (harmonized with the European Plant Protection Organization)

Products, materials, or objects that could contribute directly or indirectly to the spreading of pests, diseases, or objects under phytosanitary quarantine

Chief State Inspectorate for the Phytosanitary Quarantine (Ministry of Agriculture)

Import Permit, Phytosanitary Certificate (for export)

Veterinary requirements (harmonized with International Epizootics Organization)

Live animals of all kinds; meat and meat products; milk and milk products; poultry, eggs, and egg products; fish and seafood products and raw materials of animal origin; products of animal origin for animal feeding; goods for veterinary use.

State Veterinary Inspectorate (Ministry of Agriculture)

Sanitary Authorization Veterinary Health Certificate

Testing and certification for SPS purposes is the responsibility of the body indicated in Column 3. For testing, these bodies may engage the services of accredited state or private laboratories.

For product standards that are composed of SPS and non-SPS components, the Moldovan Standardization Service, on the basis of the hygiene certificate (for the SPS components) and additional testing (for the non-SPS components), is responsible for certification for conformity with the relevant product standard (conformity certificate).

Hygienic Certificate of the State Sanitary-Epidemiological Service: Domestic producers are issued a hygiene certificate valid for up to three years, as long as their production method does not change. Exporters and importers receive a certificate valid only for the shipment concerned.

Exported and imported goods are inspected at the customs office of the district where the exporter/importer is registered. Exporters and importers of perishable goods may conclude an agreement by which the production site is issued with a hygiene certificate valid for up to three years, and the goods are stamped with a special stamp indicating that the goods have been

48

produced according to Moldovan SPS requirements. In all cases, the issuance of the hygiene certificate is subject to examination, either of the shipment or of the production facilities (including the products) and subject to the same sanitary requirements.

Phytosanitary Certificate of the Chief State Inspectorate for the Phytosanitary Quarantine: This document is required only for goods to be exported. Exporters must submit the following information: description of the consignment, laboratory analysis (in some cases), indication of possible disinfection or disinfection treatment.

Customs Procedures The formal customs procedures indicated on Moldova’s Customs Department’s official Web site appear to be straightforward. The process has been automated, but to use it, you have to go through officially registered customs brokers, who are responsible for filling in the customs declarations using a unified, online registration system. Below is the logical schema: The entire procedure is divided into three so-called corridors: a. Green corridor b. Yellow corridor (requires document verification) c. Red corridor (physical inspection of goods) Unlike in many OECD countries, however, no system is in place in Moldova to assign exporting companies to a corridor based on its credit history. Which corridor the exporting entity will pass through is left up to the customs officer’s discretion. The two “yellow” steps in the procedure represent the “gray areas” of greater flexibility of customs officers in exercising their mandates. This leads to more extensive time for passing the customs procedures, as is reflected in the World Bank’s 2008 “Doing Business” survey, where Moldova ranked 135th on the indicator “Trading Across Borders,” 10 points lower than the previous year. Indicator Moldova Region OECD Documents for export (number) 6 7.1 4.5Time for export (days) 32 29.7 10.7Cost to export (US$ per container) 1,775 1,649.10 1,069.10Source: World Bank Doing Business 2008 Even in the regional context, Moldova lags behind its neighbors in terms of time and costs associated with the cross border trade, mostly due to the customs procedures that take additional man/days that add up to the final cost.

Completion and receipt of the declaration

Control of the documentation (by case)

Verification of payment for customs procedures

Physical inspection of goods (by case)

Customs Clearance

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This makes even more difficult for exports of HVA products such as fresh fruits and vegetables, where time is of the essence. According to many surveys, about 40 percent of export VAT refund requests are being satisfied on a regular basis, and the average time lag of reimbursement (typically, in the form of offsets) is about six months. Refunds typically come in the form of offsets rather than cash. The World Bank’s exporter survey showed that only 56 percent of exporters actually applied for a refund. Exporters incur high costs related to refund delays. According to the survey, the average reported cost of delays is equivalent to 9.5 percent of export earnings, which is a considerable hurdle for exports22. Licensing Procedures In spite of the limited number of products subject to import and export licensing, a serious problem is that traders lack information on the specific range of goods covered by an import or export license. Due to the lack of introduction of a Harmonized System (HS) classification of goods, the areas covered by licensing procedures are set in rather broad terms, which leads to ambiguities in determining which goods or activities fall under the licensing requirements and additional disputes when the licenses examined by the various authorities (including customs) that require them. Ultimately, this may lead to inconsistent application of the licensing and authorization of foreign transactions. An example of this is the general list of activities requiring a license extracted from the list presented on the Chamber of Licensing of Moldova’s Web site (see below). For instance, each type of product has its own HS code, with varying degrees of detail. Does the 2,500 lei license fee applies to all sorts of multiyear plantations, for example, or does each one have to obtain a separate license? This should be clearer. Nr23

Definition of activities Fee for license (lei)

9 Planning of multiyear plantations, vineyards; production and/or trade with seeds and planting materials

2500

12 Import and/or trade with the phytosanitary products and fertilizers 2500 In addition, for each separate category, the Licensing Guide24 lists general conditions and requirements for issuing such licenses. For example, one requirement for granting a license for production of planting materials and seeds is the minimal land area owned by the applicant. Some licenses require that the applicant own at least 500 hectares, and for vegetables, an applicant must own at least 50 hectares. This requirement is unduly restrictive; some agricultural

22 Economically delayed refunds generate costs via lost opportunity costs of money. For instance, if exporters use credit, the cost will be equivalent to incurred interest. 23 Number and definition of activity from the list of activities subject to licensing from the Chamber of Licensing official website. 24 The Licensing Guide details the list of required documents and items to be presented while applying for a license. There is a Licensing Guide for each type of license.

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land is divided into parcels of less than one hectare each. Moreover, a recent study (Agriculture Policy Notes, Dec.2005, World Bank) shows that smaller farms are more likely to grow HVA products. Although the government of Moldova has recently made some efforts to encourage land consolidation, land used for agricultural production still remains highly fragmented, especially among vegetable producers. Thus, this licensing requirement may be considered a restrictive one, which does not stimulate competition in the area of seed growing and trading. Direct and Indirect Subsidies Subsidies are one of the instruments at government’s disposal for intervention in the agriculture sector, and in particular, for developing HVA production. The World Trade Organization (WTO) however, of which Moldova has been a member since July 26, 2001, restricts the level (or amount of money) that Moldova’s government may use to subsidize agricultural producers. Currently this level stands at 13 million SDR (about 14.59 million euro or about 220 million Moldovan lei). We leave for a separate discussion why Moldova was allotted such a limit, because it is completely outside the scope of this paper, but even this level of subsidies may be quite appropriate for Moldova’s agricultural sector, if administered carefully.

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0

10

20

30

40

50

60

70

80

90

100

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

(%)

debt w rite-off and tax examptions payments to agricultural producers

Figure 1. Structure of Moldova’s Agricultural Subsidies: Debt write-off (blue) and direct payments (red)

Source: Budget laws of the Republic of Moldova and fiscal amnesty program of 2007 Whether this amount is small or large is difficult to assess and must be considered in the light of many factors. First, until 2006 (i.e., five years after Moldova committed itself to the WTO limits), the Moldovan government, due to scarce budgetary revenues, could not afford more and used only fraction of this amount, preferring to stimulate the agricultural sector through tax preferences and debt write-offs (see Figure 1 above). The exception was in 2007, when the parliament adopted a special economic liberalization program and subsequently voted for a large debt write-off. About 7,000 legal entities benefited from the 2.5 billion lei debt write-off, 70 percent of which was accumulated debt of the agricultural producers to the state social fund. Second, under the WTO Agreement on Agriculture’s de minimis provisions, there is no requirement to reduce such trade-distorting domestic support any year in which the aggregate value of the product-specific support does not exceed 5 per cent of the total value of production of the agricultural product in question. In addition, non-product-specific support of less than 5 per cent of the value of total agricultural production is also exempt from reduction. Moreover, during the Doha round of negotiations, together with several other newly acceded countries, Moldova launched a declaration asking WTO members to consider increasing this limit to10 percent of the value of its total agricultural production, as in the case of developing countries. These numbers, in relation to the country’s aggregate measurement of support [AMS], represents a level of subsidies so large that even the current budget cannot afford to leave such a wide space for maneuver in the future. Third, Moldova’s current level of AMS (13 million SDR [14.59 mil. Euro]) is comparable with that of Macedonia (16 million euro) and above that of Georgia, Armenia, Latvia, or Estonia, whose level of AMS is zero. However, the situation of the latter two, like Bulgaria (whose level of AMS is 520 million euro) or Romania (whose level is even higher) is different, because they are currently part of the EU Common Agricultural Policy and benefit from the EU levels of

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Figure 2. Evolution of Moldovan Agricultural Subsidies

0

100

200

300

400

500

600

700

2003 2004 2005 2006 2007 2008 2009

mil.

MLD

Figure 3. State Vineyard Subsidies in Moldova

0

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2005 2006 2007 2008

mil.

MLD

subsidies, which are among the highest. Ukraine’s level of AMS (about $1.1 billion) is comparable with its agricultural output. Finally, one may argue Moldova’s AMS are significantly lower, if one considers that Moldova is surrounded by much larger scale agricultural markets, supported by a higher level of subsidies, which creates a distorting effect on competition for Moldova’s agricultural production. In the case of HVA, however, we must use a product-by-product approach to determine these effects. Agricultural subsidies were introduced more actively starting in the 2005 state budget, which included such elements as direct subsidies for newly planted vineyards and compensation of 60 percent of the agricultural risk insurance premiums for multiyear plantations and 50 for vegetables. Starting with 2007, up to 80 percent of agricultural insurance premiums were government-subsidized.

As the government’s budgetary capacity increased, new subsidies were added such as subsidies on phytosanitary inputs in 2005, funded out of the 11.2 mil MLD financing provided by that year’s budget law. In 2006, 18.4 million MLD in subsidies for sugar beet growers was provided. According to the Ministry of Agriculture, these increases in subsidies led to a growth in agricultural output of 1.7 percent. A special program for stimulating the planting of new vineyards was adopted with funds allocated for that purpose, depending on the available budget resources. In 2003, the Moldovan government paid out only 35 percent of the total volume of the Vine Growing Support Fund to growers who planted at least five hectares of vine. On January 1, 2005, 24 million lei was paid out from the Vine Growing Support Fund to 113 companies that planted vines, although approximately 68 million lei had been allocated for the Fund.

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The Fund’s rules state that the government will pay a 25,000-lei subsidy per hectare of vine planting, as long as farmers plant at least five hectares of vine. The Fund was created from taxes paid for from fees the Government received for use of the 72 state-owned trademarks. The subsidy is paid to growers in three installments. In 2004, vine growers planted 3,500 hectares of vines, 700 hectares more than had been planned. By the end of 2005 vineyards were planted on approximately 147,000 hectares. On the other hand, such measures have to comply with Moldova’s obligations under the Agreement on Agriculture, particularly its commitments on agricultural subsidies. If at the beginning, following Moldova’s accession to the WTO, scarce budgetary resources and the government’s inability to increase financial supports did not raise the question of reaching its negotiated AMS ceiling or so-called “amber box” measures,25 soon, the government of Moldova may have to confront such issue in the WTO. Only a few years ago, the Government of Moldova used only 20 percent of its allowed quota for subsidies despite the fact that demand for such subsidies was much higher. This year and in the future, increased budget revenues may make it possible to satisfy this demand, and the legislature may grant such subsidies without carefully analyzing their volume and whether or not they exceed the negotiated AMS ceiling. In general, we may distinguish two categories of factors that may drag Moldova into trade disputes: a. Internal factors that may involve disputes from the part of Moldova’s trade partners

- Weak coordination of trade policies among the various state institutions while implementing economic programs, which may lead to impairment of concessions26 and benefit some trade partners over others.

- Miscalculations of the volume of agricultural subsidies versus the commitment ceiling. - Lobbying of various trade interests groups within Moldova, which may not correlate with

the framework of commitments within the WTO.

b. External factors that may create some dispute situations for Moldova

- EU enlargement and change in market access for Moldova’s goods on EU market. - Tightening of the non-tariff barriers to Moldova’s exports (including the adoption of new

standards) on the part of its trade partners. The recent restriction of livestock and milk products exports to Romania is evidence of this trend.

Conclusions • Although the basic legislation is in the process of being harmonized with the EU

regulations, there is still a gap, and the list of necessary documents that have to be presented for each shipment seems to be a lengthy one.

• Taking into account the time constraints usually associated with the HVA trade (including foreign one), such lists pose a true burden for the exporters and makes exports less competitive.

25 “Amber box” measures are subsidies subject to reduction, which Moldova negotiated with the WTO. 26 This legal expression used in the WTO agreements means that infringement by any party of its commitments makes the commitments void in trade relations with other countries.

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• The demand for lab tests to be performed on each shipment or type of goods (in addition to certification) may pose serious constraints both on costs and logistics for HVA exports.

• In some cases, exporters have to comply with the GOST standard, which in many cases is not harmonized with the EU (EN) or ISO standards used in EU markets. Thus compliance with the GOST standard may create problems for exporters to EU markets and vice versa.

• As in case of conformity certificates, sanitary, hygienic, and phytosanitary certificates often are issued for each shipment, including the laboratory analyses. This, along with the overhead costs associated with compliance, makes it extremely difficult for small producers and exporters to comply.

• The governmental institutions concerned have weak institutional capacity, as demonstrated by the understaffed units and old equipment and procedures, which cannot cope with the current speed of international trade.

• It is clear that subsidies for agricultural producers are an effective instrument that is being used increasingly by the Moldovan government as governmental revenues have increased over the past several years.

• Taking into account how these subsidies were granted and their amount, there is some doubt whether this policy was carefully coordinated with the general export market potential (e.g., wine exports) for specific agricultural products or Moldova’s AMS commitments within the WTO.

• With exception of the vineyards (and even those were mostly for types of grapes for wine), no HVA products were included in government agricultural subsidy programs.

• Government subsidies may be a real instrument and play an important role in stimulating producers of HVA output, as long as they are carefully crafted.

• While formally clear and straightforward, customs procedures, due to several ambiguous provisions, may become a real bottleneck to effective HVA exports.

• Customs-related administrative procedures increase case processing time and, ultimately, the cost of exported goods.

• Licensing requirements (especially those of minimum land area) can create undue restraints to market competition for seed and plant production, which subsequently may be reflected in the cost for inputs for HVA products.

Recommendations

• The lists need to be carefully reviewed by a combined group of experts with expertise in foreign trade and lawyers to leave [only] those that are essential.

• Another aspect is to verify the logistics of presenting such documents. Sometimes, the various procedures to obtain and present these documents are redundant among various governmental institutions. This is especially a problem for shippers of perishable HVA products, whose trucks have to stay at customs for days waiting for the certificates to be issued. Before they will give permission for a shipment to go through customs, the institutions issuing certificates of conformity require a large number of documents, issued by various agencies. These agencies have a certain number of days to issue these documents (which varies by agency and document).

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• Review Moldova’s certification fees and procedures to adjust them to the actual and real administration and overhead costs. There would be substantial benefit if these procedures were brought into harmony with EU procedures.

• Review the procedure for appealing the decisions of the institutions and laboratories issuing certificates, to streamline the process of obtaining the necessary documentation. Moldovan law requires that this procedure be completed before a case can go to court. The appeal process takes several months to resolve, and, in the case of perishable HVA products that have a defined season, represents a loss for the HVA producer.

• A rather long-term recommendation would be that Moldova should emphasize standards harmonization and work in its respective working groups in CIS and European organizations to promote the interests of local agricultural producers.

• Establish by default a “green corridor” for all HVA exporters, except for those that have accumulated a bad credit history.

• Define a maximum processing time (e.g.: 24 hours) for Moldovan customs clearance or HVA exports.

• Eliminate licensing requirements that do not critically affect the production process for seeds and planting materials.

• Conduct a careful examination of current government agricultural support programs and determine their correlation with Moldova’s WTO AMS commitments.

• Analyze the potential impact of these programs on Moldova’s overall HVA production and assess whether these products are the real targets for subsidies or rather other associated fields such as storage, processing, transportation, and logistics.

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Chapter 4. Analysis of Constraints to Trade in HVA Internal Market Conditions Quality infrastructure plays a crucial role in trade facilitation. It allows buyers and sellers to communicate better, ensures qualitative business development, and enhances competitiveness. The quality infrastructure consists of the following: • Standards that enhance understanding between sellers and buyers. • Conformity assessment (certification), that ensures compliance to certain quality standards. • Technical regulations, which set essential requirements for products, dealing with safety and

health. • Market surveillance, i.e., state supervision of the market to protect consumers. Thus, besides the constraints described above concerning the conformity assessments, a look at Moldova’s national standards (Table 2) gives an overall impression of market distortion that inhibits local producers from being competitive. First, few of the GOST standards have been harmonized with EU standards, and their implementation in Moldova for domestic producers is mandatory, due to the fact that few technical regulations have been clarified so far.27 For example, in general, all ISO standards are voluntary. Under the former Soviet Union’s GOST system, however, all standards were mandatory, because there was no such notion as a “technical regulation.”. Currently, despite the fact that all the standards are declared voluntary in Moldova, in practice, in cases where there is no matching technical regulation or a regulation has not yet been adopted, the standard(s) become mandatory. Second, although domestic producers have to comply with strict, mandatory GOST standards, imported goods are mostly exempted from them, which create a disparity for local competition. Requiring Moldovan producers to follow these standards makes Moldovan exports less competitive in EU markets. Third, the pace of harmonizing Moldovan national standards with those of the EU has been very slow, which raises questions as to whether local producers will be able to benefit from the newly signed trade regime with EU – Autonomous Trade Preferences, which will give virtually all products free market access.

27 Annex 3: List of Technical regulations to be elaborated

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Table 1: Summary of Moldovan National Standards

Standards No. Harmonized with

European and International

Standards

Harmonized with CIS standards

Mandatory Exceptions used for

mandatory

GOST* 18.780 Unknown Majority All ImportsGOST** 2.328 588 – ISO

31 – ENBasically all All Imports

SM 209 3 No All ImportsGOST-R (Russian) 138 51 Unknown All ImportsSTAS & SR (Romanian)

307 106 – ISO56 – EN

Unknown All Imports

Ukrainian 6 Unknown Unknown All ImportsSource: Department of Standardization of Moldova (DSM) * Interstate former USSR standards that existed until 1992 and where adopted by DSM ** Interstate standards that have been adopted since 1992 To give a basis for comparison with its neighbors, Moldova has succeeded in harmonizing about 4 percent of its standards, whereas Ukraine has succeeded in harmonizing 13 percent of its standards, and Ukraine has harmonized a few hundred standards per year, while over the same period, Moldova has harmonized fewer than 10. Bulgaria finished harmonizing its standards in 1998, and Romania did so in 2003, as part of the EU accession process. One way to speed up the process and make it more efficient would be to start with the standards most needed and used standards in the export process (probably no more than a few hundred). If it proceeded in this way, Moldova would have a higher proportion of harmonized products compared to its list of exported goods then other countries with more diversified exports. Another issue is business practices constraints related to the quality control area. If Moldova wants to reduce the burden on business development while complying with European quality standards, it should review its state control approach to be more market surveillance oriented. State inspectors should not be allowed to inspect goods for quality, for instance, but only for compliance to technical regulations or other essential standards related to health and safety.28 In addition to the excessive powers state inspectors have, enterprises are required to create favorable conditions for them, including boarding them, offering them working rooms, means of communication, and other amenities. It is an important additional expense for entrepreneurs. Moreover, the TBT Law provides that the inspected entity is responsible for all expenses related to state control regarding compliance with technical regulations. The law on standardization stipulates that state control and supervision over compliance with normative documents of standardization be carried out by the Standardization Service of 28 Annex 2: Business Practices Constraints – quality control area

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Moldova and other public administration bodies, within the limits of their competence. This statement leaves room for various interpretations and potential abuse. External Conditions One has to look at the current and potential markets for the Moldovan HVA products and the constraints on each of them to define a sustainable trade policy on promoting such products for export and providing domestic support for HVA. Currently Moldova is in a potentially unique situation, not only for itself but for many countries around it, due to the fact that Moldovan exports hypothetically enjoy free (or almost free) access to most of its exporting markets. This situation was established by the following agreements: The European Union (GSP, GSP+ and presently the Autonomous Trade Preferences), Switzerland, Japan, the United States, Turkey, and Norway have all offered Moldova unilateral trade preferences. Moldova has been a member of the WTO since 26 July 2001 and has been a member of the Commonwealth of Independent States (CIS) since 1994. Although the CIS has no supranational powers, it promotes cooperation in various fields. A multilateral CIS Free Trade Agreement between Azerbaijan, Armenia, Belarus, Georgia, Moldova, Kazakhstan, Russia, Ukraine, Uzbekistan, Tajikistan, and Kyrgyzstan was signed on 15 April 1994. Moldova is also a party to the amended and enlarged Central European Free Trade Agreement (CEFTA), which entered into force on 26 July 2007 and, following a period of transition, is scheduled to be fully implemented by 2010. In addition, Moldova has concluded 16 agreements on market access within the CIS and the Pact on Stability in South-Eastern Europe. However nice the situation may be on the paper, in reality, the situation for Moldovan products, and especially for HVA products is quite different. Import Restrictions and Quotas Shortly after acceding to the World Trade Organization (WTO), Moldovan exports had to face a challenge from its trading partners who have restricted Moldova’s agricultural exports. Physical quotas. In all such cases, exports have been restricted based on phytosanitary issues. In Moldova’s western market, Romania, which, when preparing for EU accession, gradually had to adopt EU standards and phytosanitary norms and regulations, subsequently banned agricultural imports from Moldova,, which did not comply with them. This mostly affected imports of agricultural products of animal origin, not the HVA products that we have chosen for our analysis.

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Box 1. Export Prohibitions in the Western Market During the first half of 2002, some prohibitions were introduced on export of several products from Moldova to Romania (livestock, milk products, eggs), and Ukraine (pork and pork products). Moldova exported $6.1 million in “ products of animal origin” in the first half of 2002 and $9.0 million for the same period in 2001. Export decreased by $2.9 million due to the reduction of export of frozen beef by $1.15 million, milk products by $1.71 million, and eggs by $0.51 million from 2001 figures. Moldova did not export any pork or chicken in 2002 (and didn’t export any chicken in 2001 either), but this was not a result of any prohibition. In the eastern markets, few years later, based on the similar phytosanitary issues, Russia banned the import of Moldovan fruits and vegetables. Box 2: Export prohibitions in the eastern markets a. On May 16, 2005, Russia banned fruit and vegetable imports from Moldova because of the Federal Service of Veterinary and Phytosanitary Control of the Russian Federation’s claim that Moldovan fruits contained allegedly high amounts of pesticides and fertilizers. b. In 2006, Russia introduced a ban on imports of Moldovan wine. The effects of the ban have been devastating. Moldova's trade deficit with Russia ballooned to $193 million from January to November 2006, compared to an $86 million surplus during the same period in 2005. The Moldova-Vin export agency estimated that the Moldovan wine industry lost more than $180 million in sales between March 2006 and January 2007. Moldova's wine production dropped dramatically as well. Companies produced about 8.96 deciliters of bottled wine in 2006, a 63-percent decrease from 2005. The indirect effects on the economy have been even larger, because several other industries depend on the wine industry. Moldova's National Statistics Bureau estimates that industrial production dropped by 6.9 percent from 2005 to 2006. This was the first time in six years that Moldova had posted such a loss. Moldova renewed fruit exports to Russia in March 2007 after a two year ban. Since January 1, 2009, Russia will change the procedure of fruit imports from Moldova. Fruit from Moldova can be imported into Russia based only on sanitary certificates signed by laboratories accredited by the Federal Service of Veterinary and Phytosanitary Control of the Russian Federation. Simple quotas restricting the physical volume of goods to be imported into Russia remain in force (e.g., for sugar). Tariff quotas. Article 3 of the EU – Moldova Autonomous Trade Preferences, which were adopted by the Council Regulation (EC) No 55/2008 of 21 January 2008, provides for tariff quotas and price thresholds for certain agricultural products:

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1. Products listed in Table 1 (does not include HVA products) of Annex I shall be admitted for import into the Community with exemption of customs duties within the limits of Community tariff quotas as set out in that table.

This means that such products may enjoy quota-restricted ad valorem duty-free and special duty-free access. 2. Products listed in Table 2 of Annex I shall be admitted for import into the Community with

exemption of the ad- valorem component of the import duty. This means that these products are free of ad valorem duties but are subject to special duty access. 3. Notwithstanding other provisions of this Regulation, in particular Article 10, if imports of

agricultural products cause serious disturbance to the Community markets and their regulatory mechanisms, the Commission may take the appropriate measures in accordance with the procedure laid down in the applicable Community law to the products in question.

Table 2. Products for which the ad valorem component of the import duty is exempted CN Code Description 0702 Tomatoes, fresh or chilled 070320 Garlic, fresh or chilled 0707 Cucumbers and gherkins, fresh or chilled 07099070 Courgettes, fresh or chilled 07099080 Globe artichokes 0806 Grapes, fresh or dried 080810 Apples, fresh 080820 Pears and quinces 080910 Apricots 080920 Cherries 080930 Peaches, including nectarines 080940 Plums and sloes Thus, the residual tariff barriers faced by Moldovan exporters need to be seen against the background of two types of import duties applied by the EU in the agricultural sector: ad valorem duties and special duties. Even if ad valorem duties on certain products are reduced by 100 percent, they may still be subject to various special duties. Seasonal quota restrictions may also be imposed or higher seasonal special duties applied, according to the Common EU Tariff Nomenclature. Table 3. Remaining customs duty on exports to EU markets CN Code Description EU customs duty 080810 Apples, fresh 4.5 euro/kg/net 080820 Pears and quinces, fresh 4.5 euro/kg/net

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Under the current Autonomous trade preferences, the applied specific duty remained. Only the ad valorem (applied customs duty in 2006 was 2.9 percent) from the previous GSP+ trade regime was left, which in itself presents a considerable (or even prohibitive) market access barrier to Moldovan fresh fruit exports. Table 4. Market access for goods - Post Uruguay Round bound rates

Selected Trade Partners Simple Average

EU 19.5

Turkey 63.9

Moldova 6.7

Source: WTO Integrated Database (IDB) In general, Moldova has a more open trade regime negotiated under the WTO then most of its neighbors and trading partners, which makes it more vulnerable to export market conditions. Even its highest tariff bound rate does not offer a complete protection against imports, especially from those benefiting from EU domestic and export subsidies.

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Table 5. Summary of trade barriers to Moldova’s exports on various markets

Free Trade Areas

Most Favored Nation (MFN) (ex: Turkey)

Other trade regimes (ex: EU Autonomous Trade Preferences)

1. Exemptions from free trade

(including various quotas such as for sugar products on Russian market, etc.)

2. Fiscal and administrative barriers (local taxes, customs procedures)

1. High tariff protection 2. Domestic subsidies

1. Anti-dumping and safeguards procedures 2. Residual tariff protection (specific duties) 3. High level of subsidies for domestic production

Conclusions

• In spite of existing free trade agreements with its CIS trade partners, Moldova still faces restrictions for its exports, although allegedly based on standards and phytosanitary grounds. Thus, Moldova’s eastern market remains highly volatile and unpredictable for potential HVA exports.

• On the other side, the EU market presents the challenges of competition against potentially distorted markets of local heavily subsidized HVA products and residual special duties at the moment of importation.

• In addition, the EU reserves the right to ban imports of Moldovan goods, if they cause “serious injury” to their markets.

Recommendations

• Cooperation of all stakeholders in drafting technical regulations has to be introduced as a standard practice for ensuring the quality of regulations and avoiding unnecessary constraints to business. The government institutions involved should have the necessary funding to organize a participatory process for development of technical regulations.

• For the eastern markets, the approach should be to harmonize sanitary and phytosanitary and sanitary norms with trading partners that have more advanced standards to eliminate those technical issues that create trade disturbances for potential HVA exports.

• For the western (mostly EU) markets, new level of agreements will have to be negotiated to ensure free trade between Moldova and the EU. However, in this context, Moldova will have to make additional efforts to ensure that its quality control systems are in place and effective.

• Speed up the harmonization process with the standards most needed and used in the export process (probably no more than a few hundred).

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Chapter 5. Analysis of Post-Harvest Infrastructure/Capital Equipment Constraints Introduction Fruit and vegetable producers, traders, and exporters run businesses. Business considerations determine investment decisions. The type of post-harvest infrastructure, equipment, and techniques used are therefore not only technical considerations but business decisions as well. Businesses’ willingness to provide significant investment capital depends on the perceived market demand for particular varieties, profitability, the risks involved, opportunity costs, and short and long-term strategies. We continue, therefore, with a brief section on perceived market demand. In the Moldovan fruit and vegetables sector, apples play a predominant role in production, storage, and sales. Apple producers and traders have and use the bulk of post-harvest infrastructure. Though apples are not among the three commodities targeted, what happens in the apple industry affects agriculture and post-harvest requirements. In addition to comments from principals in the targeted value chains, comments from apple industry leaders have been incorporated here. The production techniques currently used on vegetables in Moldova result in low quality, low yields, and (apart from tomatoes) limited volumes. Open-field production (and only very limited use of plastic tunnels or greenhouses) of vegetables yields produce that is unsuitable for supermarkets but only for open-air markets and processing. The bulk of tomatoes, the principal vegetable crop, go for processing but yields are relatively low here as well. Almost no vegetables are exported. Traders have little export experience in these commodities. Cold storage and proper handling is limited and packaging is traditional. Tables 1-3 below contain production and trade data for fruits, table grapes, and vegetables, respectively. Table 1. Production of and trade in fruits, 2003-2007 2003 2004 2005 2006 2007 Area (thousands of hectares) 108.0 103.6 103.5 102.1 101.2 Yield per hectare (tons) 5.7 4.2 3.7 3.19 2.6 Production (thousands of tons) 617.2 430.4 386.2 329.2 277.2 Imports (thousands of tons) 15.2 54.8 45.3 41.0 Exports (thousands of tons) 181.5 165.0 121.2 102.6 Sources: Production: National Bureau of Statistics of Moldova, Statistical Yearbook of Moldova, 2007; Trade: UN Comtrade Database, retrieved on 08 February 2009 (shows all edible fruit [HS2002 code 08], excluding grapes [HS2002 code 0806] and melons [HS2002 code 0807])

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Table 3. Production of and trade in vegetables, 2003-2007 2003 2004 2005 2006 2007 Area (thousands of hectares) 41.6 36.4 36.7 42.4 37.7 Yield per hectare (tons) 8.4 8.4 10.4 11.1 5.7 Production (thousands of tons)

360.8 315.2 389.3 475.2 221.8

Imports (thousands of tons) 22.5 28.8 32.8 37.3 Exports (thousands of tons) 10.2 25.6 27.2 8.7 Sources: Production: National Bureau of Statistics of Moldova, Statistical Yearbook of Moldova, 2007 (shows figures for all field vegetables, excluding potatoes and melons); Trade: UN Comtrade Database, retrieved on 08 February 2009 (shows all edible vegetables [HS2002 code 07], excluding potatoes [HS2002 code 0701]) Moldovan Agricultural Producers’ and Exporters’ Perception of Market Demand and Opportunity Costs Although Moldova traditionally sells its agricultural products to CIS countries, these countries have become uncertain markets. Russian buyers do not pay regularly, there are long payment delays in Belarus, and the Moldovan exports to the Ukraine are found at the low end of the market due to its inferior quality and strong competition from local and external sources.. Apple prices fluctuate considerably in these markets. Some producers and traders are concerned by government production subsidies, the resulting large increase in apple orchards (70 percent of new orchards are planted with apples) and its potential impact on supply, market prices, and profitability. Significant increases in Moldovan apple production without new destination markets will drive prices down. Exporters are fearful regarding the future of the Russian and Belarus markets. In the past, 70 percent of Moldova’s apples and processed apple products went to Russia, with the rest going to Belarus and Ukraine. Current competition in Russian and Belarus markets is strong and will become stronger in the future. For example, Poland produces large quantities of good apples, and, although Poland is an EU member, sales of Polish apples to the European market are limited. The excess finds its way into the CIS. The Russian market is already oversupplied with cheap, low-quality apples. Russia is increasing its own fruit production, and 11,000 hectares were recently planted. Purchasing power is deteriorating rapidly in Russia. In 2007, there was an overabundance of orders for Moldovan apples. There have been limited or no orders in 2008. Though reported to us by several of the apple traders interviewed, we are not clear on the reason for the fall in orders and several factors could be at play: increased competition from Moldovan and other European apple producers—it was a very good year for apple production in Moldova;

Table 2. Production of and trade in table grapes, 2003-2007 2003 2004 2005 2006 2007 Area (thousands of hectares) 7.4 7.0 6.6 6.2 5.6 Yield per hectare (tons) 4.3 5.0 3.4 1.5 2.8 Production (thousands of tons)

30.7 33.6 21.8 8.3 13.6

Imports (thousands of tons) 1.0 0.7 0.8 1.0 Exports (thousands of tons) 8.3 10.8 15.2 40.4 Sources: Production: National Bureau of Statistics of Moldova, Statistical Yearbook of Moldova, 2007 (shows figures only for agricultural enterprises); Trade: UN Comtrade Database, retrieved on 08 February 2009 (shows all grapes [HS2002 code 0806]).

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the deteriorating economic situation hitting Russia during the normal marketing period for Moldovan apples; or political maneuverings. One prominent producer-exporter has exported no apples this year and has sold only limited quantities to local supermarkets. Due to low apple export and local canning-juicing prices and the lack of orders, a significant amount of its apples were left unharvested. Other producers did not even harvest due to high labor costs. A major northern producer-exporter harvested less than half of its production. Belarus is also planting apple orchards. The country bought apple juice before 2008 but no longer does. By 2011, Belarus will no longer accept canned imported products. The EU market is viewed as complicated and very competitive, especially for fresh fruits and vegetables, and its higher quality standards are seen as being beyond what Moldovan producers and exporters can currently meet. Moldovan table grapes primarily go to the CIS market (98.5 percent of total export value and 99 percent of total exported volume in 2007). The domestic market is small, and exports of Moldovan table grapes rarely go to the EU market. Table grape producers and exporters do not understand the EU market. They do not have the necessary volumes of the varieties demanded in the EU, nor do they know how to handle these varieties. Buyers in the CIS countries know how to deal with traditional Moldovan thick-skinned, seeded grapes, which can withstand rougher handling and go longer without storage or with less ideal storage — and expectations in Russia are lower, where the grapes are sold at the low end of the market through intermediaries to open-air farmers’ markets. This variety of grapes is not attractive to EU consumers and does not sell. Table 4. Exports of table grapes by region, 2004-2007

2004 2005 2006 2007 Total (thousands of dollars) 2,456 2,454 3,371 12,020 (thousands of tons) 8.3 10.8 15.2 40.4 CIS (thousands of dollars) 2,347 1,597 2,244 11,837 (thousands of tons) 7.9 6.2 10.0 40.0 EU-27 (thousands of dollars) 109 857 1,127 184 (thousands of tons) 0.5 4.6 5.2 0.4 Notes: CIS is represented by Russia, Belarus, and Ukraine; EU-27 countries are primarily Romania and Baltic states. Source: UN Comtrade Database, retrieved on 09 February 2009 (shows fresh grapes [HS2002 code 080610]) According to the newly formed Moldova Table Grapes Association, producers are trying to reestablish early varieties and add additional more marketable varieties to their mix. These varieties, however, are more sensitive to disease and handling than producers are used to. For instance, table grape producers will attempt to enter the early Russian market (June-October) with white seedless grapes, which do not store well and require better handling. For the immediate future, the CIS countries are viewed as the main and more accessible markets: Belarus cannot grow table grapes, Ukraine is open for table grapes, and Russia can produce table grapes only in the south and has relatively high demand at all levels29 — but Moldova faces competition from Central Asian countries at the low end of the market and from better quality Chilean table grapes during the early part of the year. Though the limited volumes of table 29 Comments were based on past experience with Russian and CIS markets before the current economic crisis took hold.

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grapes now available are relatively easy to sell, increased production will require improved marketing and promotion. Currently, Moldovan table grapes are found in the low end of the Russian market, due to problems of variety, quantity, and presentation (packaging and labeling). Improvements in presentation would increase costs, and according to the association, the low grape quality would not warrant the higher costs. A major processing company that buys 60 percent of its juice concentrate requirements from local orchards sees an uncertain future for its lines of juices and canned products. The company planned to buy grapes for juices in 2008, but Russia and Belarus stopped buying juice, because they are now making their own. Exports to Belarus are difficult and require a strong working capital position, because prepayments on food imports are forbidden by Belarusian law, and payments for delivered goods can take up to 6 months. Though the company’s canned products are sold in Moldovan supermarkets, sales volumes are low, and the company thinks it will be too hard to gain entry into foreign supermarkets. About 90 percent of Moldovan processed fruits and vegetables are exported each year. The remainder is sold on the local market, including an estimated 2-3 percent through the supermarket chains. Supermarkets in Moldova sell only limited quantities of fresh and processed fruits and vegetables. The bulk of Moldova’s urban population buy their fruits and vegetables in open-air markets, where the quality is poorer but prices are much better than in supermarkets, and shoppers can individually select each item for the best value. Our visits and conversations with vendors showed that most of the green vegetables sold there were locally grown. Local fruits and vegetables have competition from imports of products that travel well (for example, potatoes, onions, garlic, carrots, and apples) and from produce not grown locally (e.g., oranges). Though local produce appeared consistently to be of much lesser quality than imported items, local produce was also cheaper and sold well. A Moldovan supermarket chain had the following comments on its clients and felt that other chains would hold similar views. The supermarket is beginning to carry more local fresh fruits and vegetables, because shoppers prefer them, but these products are limited in range and season. Eighty percent of the produce sold between November and March is imported, usually from Italy, Holland, and Turkey. Imported produce has better quality and is more expensive. Though local products are improving, and new local firms are selling with better packaging and produce, most local products still need simple improvements in cleaning and packaging. For the most part, the supermarket cleans and repacks. The supermarket chain imports frozen vegetables, but this makes up only a very small percentage of sales. It also stocks various canned, dried, and preserved fruits and vegetables, but volumes are relatively low and the range of competitive products (from Moldovan and foreign companies) large. The Moldova Fruit Export Association — made up of apple producers and exporters, several of whom also deal with a limited range of other fruit crops — believes that fruit production could double to one million tons but that the current poor quality would not improve without significant attention. Interestingly, though produce quality was stated as being poor, industry efforts to improve quality are limited and contradictory. For instance, CODRU ST, one of the few Moldovan organizations that are GlobalGAP certified, does not think that this certification is useful it does not sell to the EU market. The company has allowed its ISO/HACCP certification

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to lapse for the same reason.30 The fruit export association felt that the major issue hindering its industry is the lack of coordinated marketing. Once, association representatives told us, 76 trucks carrying Moldovan apples were in Moscow at the same time, which significantly suppressed the market price. The association sees market diversification as a long-term goal but still views the CIS as the primary market, given the limits on fruit quality and the strong quality considerations and competition in the EU. According to CAMIB, an experienced provider of local and regional agricultural market information and consultant to private sector agricultural marketing departments, there is relatively little local demand for fresh tomatoes, eggplants, and peppers. Export opportunities exist for processed fruits and vegetables, nuts, and dried fruits and vegetables, although the Russian market for processed foods is difficult to enter. Exploiting seasonal price differences in the local and regional market would be profitable, but this would require new varieties and changes in production techniques. Tables 5-7 below show the production and trade figures for tomatoes, eggplants, and peppers. Table 5. Production of and trade in tomatoes, 2003-2007 2003 2004 2005 2006 2007Area (thousands of hectares) 8.0 7.3 6.1 8.0 7.4 Yield per hectare (tons) 13.2 10.2 13.9 13.1 6.6 Production (thousands of tons) 105.6 74.2 84.6 104.4 48.5 Import (thousands of tons) 3.6 6.0 10.6 15.5 10.2 Export (thousands of tons) 2.5 3.9 3.6 5.6 3.6 Sources: Production – FAO STAT, retrieved on 03 February 2009; Trade – UN Comtrade Database, retrieved on 08 February 2009 (shows fresh/chilled tomatoes [HS2002 code 0702]) Table 6. Production of and trade in eggplants, 2003-2007 2003 2004 2005 2006 2007 Area (thousands of hectares) 1,000 567 680 804 700 Yield per hectare (tons) 6.2 8.5 10.7 10.6 5.7 Production (thousands of tons) 6,200 4,808 7,242 8,553 4,000 Import (thousands of tons) 28 55 61 57 76 Export (thousands of tons) 19 22 17 53 0 Sources: Production – FAO STAT, retrieved on 03 February 2009; Trade – UN Comtrade Database, retrieved on 08 February 2009 (shows fresh/chilled eggplants [HS2002 code 070930]) Table 7. Production of and trade in peppers, 2003-2007 2003 2004 2005 2006 2007 Area (thousands of hectares) 2,713 2,728 3,175 3,609 3,300 Yield per hectare (tons) 7.5 7.5 10.1 12.8 6.5 Production (thousands of tons) 20,228 20,485 32,135 46,040 21,500 Import (thousands of tons) 123 190 192 208 252 Export (thousands of tons) 52 75 100 142 0 Sources: Production – FAO STAT, retrieved on 03 February 2009; Trade – UN Comtrade Database, retrieved on 08 February 2009 (shows fresh/chilled peppers [HS2002 code 070960]) 30 Mr. Chilianu, Director of CODRU ST, informed the project team that although they do not sell to the EU market, GlobalGAP certification is a good marketing tool for their sales in Russia. It is more convincing to prospective buyers that ISO or HACCP certification, which is more suitable for processing companies. Hence the reason why they obtained GlobalGAP yet allowed their ISO and HACCP certifications to lapse.

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Conversations with a large tomato producer showed that the tomato industry was concerned with future markets as well. A significant percentage of the tomato crop is sold to canneries, but this is not very profitable. The business also exports fresh tomatoes to Belarus, but this year, there was limited market demand. Exports used to go to Russia, which had no packaging or quality concerns, but this is no longer the case. The company also produces other vegetables and fruits. One local supermarket is a client for the full product range, but the volumes purchased are small. The company is thinking about exploring the dried fruit business because of the potential it sees in dried fruits but it has no experience and limited knowledge of the business. The plum industry produces a range of products: fresh plums, pitted and unpitted prunes, smoked and sun-dried prunes, canned plums, purees, paste, juice, and pulp. On average, 10 to 15 percent of plums are dried, 40 percent processed, and the rest sold fresh to domestic markets, but there have been increases in exports of fresh plums in recent years. See Table 8 for production and trade data on plums. The bulk of prunes are exported, and though prunes have a lower market price in export markets than plums, they also have lower quality requirements. Plum producers are not specialized in plum production — most also produce apples or other crops — but the plum industry is seen as profitable, with established orchards and low production costs. Processing using simple manual techniques—manual pitting, sun and smoke drying—of the fruit is viewed as a profitable activity, and producers are trying to import improved varieties — local varieties are not well suited for pitting, which now must be done manually due to large pits and varying sizes. Table 8. Production of and trade in plums, 2003-2007 2003 2004 2005 2006 2007 Area (thousands of hectares)

21.2 20.3 20.2 20.0 20.5

Yield per hectare (tons)

2.4 2.7 2.0 3.8 3.1

Production (thousands of tons)

50.8 55.6 41.4 75.9 64.0

Import – plums ton 17 51 20 234 1,433 Import – prunes ton 1 1 39 31 110 Export – plums (thousands of tons)

9.6 18.6 7.8 10.5 5.3

Export – prunes (thousands of tons)

0.5 1.7 2.3 1.2 1.5

Sources: Production – FAO STAT, retrieved on 03 February 2009; Trade – UN Comtrade Database, retrieved on 08 February 2009 (shows fresh plums [HS2002 code 080940] and prunes [HS2002 code 081320]) Post-Harvest Handling and Product Quality For a high-value horticultural industry to be successful, significant and reliable volumes of quality products must be sold to target markets in the “right” quantities, at the “right” times, and at the “right” prices. Increased investments in post-harvest infrastructure and operations will not improve Moldova’s market position if product quality and the “right product”— one demanded

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by the market that meets market requirements — is not there from the start. Post-harvest handling is an important stage in the process of producing high quality fresh produce, where quality can be damaged or maintained but not improved, but it is only one component in the process. Producing a quality product starts with technical production, marketing, and business profitability decisions: variety selection, related appropriate production techniques, and cost-profit considerations. Growing practices and environmental considerations determine the quality of produce at harvest. Proper harvesting, handling, and timing determine the quality of produce available at the postharvest stage. Post-harvest handling, storage, packaging, and shipping influence quality, appearance, and shelf-life. Successful post-harvest operations involve knowing the storage and handling requirements for each crop variety; minimizing damage and bruising by careful and limited handling; slowing the deterioration process by correct cooling, humidity control, and proper packing and storage; avoiding contamination by culling and proper sanitation; and careful shipment in appropriate packaging. All various technologies and techniques to carry out these operations involve costs. Ultimately, the methods applied are based on business decisions regarding costs, profits, opportunity costs, and risks. Most Moldovan farmers grow a wide range of crops using outdated varieties and technology. Although a limited number of large-scale producers use modern intensive orchard techniques to grow new fruit varieties, most producers are small farmers who grow older varieties of fruits and vegetables with lower yields well suited for new markets. According to the Moldova Table Grapes Association, the main constraint to increasing market share and moving upmarket is the lack of a reliable supply of good variety grapes31 — including early- and late-season varieties — in larger quantities. Table grape yields are low, with most producers having no irrigation and limited technical expertise or assistance — according to the association, there are few good local table grape agronomists. Though there is a limited supply of specialized controlled-atmosphere storage, the industry has problems filling the available storage with quality table grapes. The supply issue may change in the medium- to long-term. With the help of government subsidies,32 about 3,000 hectares of vineyards are being planted each year (including the uprooting of old stock) with up to 20 percent of this amount going to table grapes. The new vineyards will start coming into production in 2010. Table grape producers will likely remain small, however, with each producer able to handle only 10-20 ha of table grapes. Winter frosts will remain a significant problem, especially with these newer, less hardy varieties. Processors and exporters believe that farmers operating on leased land try to maximum quantity at lower costs at the expense of quality. Larger producers, operating on their own land33 grow

31 Twenty percent of the 150 000 hectares in grape production are for table grapes, with the vast majority being the Moldovan variety. 32 The subsidy constitutes MDL 25,000 (approx. USD 2,500) per hectare of new table grape vineyards, which is made available from the Viticulture Improvement Fund. This represents 20 to 40 percent of the total cost to establish a new vineyard, from planting to fructification. 33 Many rural inhabitants realize that not everyone can be a good farmer and make money. They rent out their land and take jobs as agricultural laborers. Lead farmers lease land and make rent payments, mostly in-kind based, on harvest and profits. Many of the producers have combinations of owned and rented land. Management and control issues pertaining to the initial distribution of land and agricultural assets from the fall of the Soviet bloc still exist; for example, land, buildings and equipment were divided among the local population with dozens or several hundred owning an asset. This makes management and decision making difficult. AgroPomFruct, a large apple producer-trader, leases a significant portion of its orchards and claims to have problems with the landowners.

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better quality commodities and are a preferred source. Given their difficulty in securing adequate supplies, several larger exporters and processors prefer to produce their own to ensure a minimum level of supply. This, however, can induce additional costs. For example, Codru ST produces up to 95 percent of its own apples but must spray neighboring orchards in addition to its own to ensure disease and pest control. Other processors and traders try to attract farmers to produce for them. Although the Alfa Nistru canning company believes that the produce it grows is of higher quality than what it receives from its suppliers, it cannot produce enough on its own. It therefore tries to have permanent relations with larger producers and provides inputs to farmers who repay either in cash or in crops. Contracts with suppliers are set on volume and prices fixed close to the harvest period. Sometimes the local market price is higher, but if the farmer cannot sell all his produce on the market, he will eventually sell at a lower price to the factory. In other cases, however, raw material supply remains a problem, with farmers preferring to sell on the open market and not interested in producing crops for processors due to perceived low prices and high risks or due to problems with production inputs, like appropriate seed varieties. The issue of importing seed varieties is significant and legally available produce varieties are limited: Not all market demanded varieties are included in the Ministry of Agriculture’s registry or available locally, and non-registered seeds have a three-year testing requirement. In spite of the importance of proper harvesting techniques and timing, many Moldovan farmers do not distinguish between a crop’s harvest maturity, consumption maturity, and physiological maturity; nor do they pay special attention to time of day, careful handling, field cooling, packing, or transporting of their produce. Most fruits and vegetables in Moldova are harvested by hand (including apples, table grapes, plums, and tomatoes). Harvesting is the most labor-intensive activity of the growing season and among the most costly, but it is often done improperly. Agricultural labor salaries are relatively low, and labor is a serious harvesting constraint in many areas. Emigration to urban areas and to other countries has left mainly the elderly or handicapped in rural areas. According to one producer-exporter, labor force availability is an increasing problem, with old pensioners not being able to harvest correctly, and the company cannot afford to pay better salaries to attract younger agricultural workers. The owner states that most people his age (40) have gone abroad. Though some Moldovans have returned from other countries due to the economic crisis, they are unlikely to accept local agricultural salaries. Given the labor constraint and cost, most fruits and vegetables are harvested by untrained or semi-trained labor, with quantity and speed at a premium over quality. Some visual inspection may be done in the field to eliminate obviously damaged and unsellable fruit. There is little pre-planning regarding immediate sales, sales destination, or storage. For example, the harvest maturity of plums for fresh consumption is, at most, 3-4 days before their consumption maturity. An earlier harvest will result in inferior taste and color. Plums are often harvested at their consumption maturity, which is acceptable for local markets and processing purposes but too late for long distance shipments. Apples for export and local fresh markets are harvested manually and packed into large crates. All of the visited producers harvest into, and store their apples, in large reinforced crates without padding, resulting in significant damages and loss of quality. Simple sorting takes place in the

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field by eliminating non-standard apples. Fallen apples are collected first and stored separately. Some percentage of the harvest is directly exported. The remaining crated apples are transported to storage — which may or may not be cold storage. Further sorting, grading, and packing takes place only before shipping to markets or intermediaries. Codru ST harvests manually and does no field sorting, thinking it is too time-consuming, especially with the labor shortage. Sorting is done at sales or export time. Its fruit, which is of very low quality fruit, is offered to processors. Plums for export and local fresh markets are harvested manually. Plums are pre-sorted in the field and placed into the designated packages (wooden boxes of 8-10 kg). Table grapes are harvested manually with more care. They are first pre-sorted by removing dried, cracked, and otherwise damaged berries, grape bunches are cleaned, arranged by size, and then placed into wooden (9-10 kg), plastic (6-7 kg), or euro-standard boxes (5-6 kg). Bunches are arranged stems-up. Tomatoes are normally sold in the field. For fresh sales tomatoes are harvested, chilled overnight34 in the field and loaded early morning into trucks. There is no overnight chilling for sales to processors. Pre-Cooling Temperature is the single most important factor in maintaining quality after harvest. Refrigerated storage retards the following elements of deterioration in perishable crops:

• Aging due to ripening, softening, textural. and color changes. • Undesirable metabolic changes and respiratory heat production • Moisture loss and wilting. • Spoilage due to invasion by bacteria, fungi, and yeasts. • Undesirable growth such as sprouting.35

One of the most important functions of refrigeration is to control the crop’s respiration rate which affects food value, flavor, weight, and deterioration. The respiration rate determines its transit and post-harvest life. The higher the storage temperature, the higher the respiration rate. Pre-cooling is the first step in good temperature management. The field heat of a freshly harvested crop is usually high and should be reduced as quickly as possible before shipping, processing, or storage. Refrigerated trucks are not designed to cool fresh commodities; they only maintain the temperature of pre-cooled produce. Most refrigerated storage rooms have neither the refrigeration capacity nor the air movement needed for rapid cooling. Therefore, pre-cooling is generally a separate operation requiring special equipment and/or rooms. Rapid pre-cooling to the product’s lowest safe temperature is most critical for crops with high respiration rates.

34 In this case, the process of chilling tomatoes simply means that they are left outside to be chill by the lower nighttime temperatures. 35 “Postharvest Handling of Fruits and Vegetables,” Janet Backmann and Richard Earles, ATTRA publication #IP116.

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Pre-cooling methods: Room cooling in an insulated room equipped with refrigeration units. This method can be used with most commodities but is slower than other options. A room used only to store previously cooled produce requires a relatively small refrigeration unit. If it is used to cool produce, a larger unit is needed. Containers should be stacked so that cold air can move around them and constructed so that air can move through them. Used refrigerated truck bodies make excellent small cooling rooms. Forced-air cooling: Fans are used in conjunction with a cooling room to pull cool air through packages of produce. Hydro-cooling: Dumping produce into cold water or running cold water over produce. It also reduces water loss and wilting. A disinfectant can be added to the water. It is not appropriate for commodities that cannot tolerate wetting.36 Apples and grapes have low respiration rates. Recommended pre-cooling methods for apples are room cooling, forced-air cooling and hydro-cooling. Forced-air cooling is the preferred method for table grapes. Plums have higher respiration rates than apples, but respiration differs depending on variety; ripe fruits have higher respiration rates than less mature fruits. Forced-air and hydro-cooling are recommended for plums and room cooling or forced-air cooling for tomatoes. Where harvest labor conditions permit, Moldovan farmers try to harvest during the coolest period of the day, keeping the produce shaded in the field or loaded immediately onto trucks in the case of direct sale. Pre-cooling is rarely used. Only three cold storage facilities for apples have pre-cooling possibilities and these use the forced-air cooling method. One of the major apple exporters modified one of its cold storage units to chill the fruit so that it could be kept chilled for a few days before being moved to longer term cold storage. Storing, Refrigeration, and Humidity Control Given Moldova’s temperate continental climate, the production of fruits and vegetables has a seasonal character. For Moldovan producers to provide the national market with fresh fruits and vegetables in the winter and spring, improved growing methods — including greenhouses and tunnels — and appropriate storage techniques and infrastructure are needed. Various methods of storing are used in Moldova from simple facilities — including cellars, warehouses, and storages with natural ventilation (potatoes, carrots, cabbage) — to outdated Soviet-era cold storage to a limited number of more sophisticated methods, used by apple producers and exporters, using modern cold storage facilities with normal or controlled atmosphere systems and forced ventilation. In early 2008, the Ministry of Agriculture and Food Industry, the National Refrigeration Association (NRA) and the Agribusiness Development Project (ADP) completed a study of the 36 Ibid.

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cold storage facilities capable of handling fruit and vegetables,37 which identified 187 cold storage units (operational and non-operational, modern and outdated) with a total capacity of 178,740 tons.38 This figure represents an increase of 14,390 tons (or 9 percent) over 2004, when 161 cold storage facilities with a capacity of 164,350 tons were identified. Despite the modest increase in total capacity, a 23 percent increase (14,330 tons) in operational cold storage capacity was identified largely as a result of the construction of 19 new cold storage facilities with a total capacity of 10,350 tons. In the Central Zone, 76 percent of the identified facilities are classified as operational or partially operational compared to 57 percent in the Southern and Northern zones. Construction of new cold storages is also largest in the Central Zone (2,900 tons), compared with 2,540 tons in the Northern Zone and 1,200 tons in the Southern Zone. Overall, operational cold storage capacity totals 75,780 tons and represents 42 percent of the country’s total storage capacity. In 2007, only 32 percent of the available capacity was used. In this case, available capacity means operational capacity (75,690 tons) plus partially operational (42,700 tons) capacity. Analysis of the data shows that apples are the main product stored in cold storage (63 percent), followed by grapes (22 percent), which are stored for a brief period. Less than 10 percent of cold storage operations handle two or more products, and only 32 percent of available capacity is used. An estimated 27 percent of apple production passes into cold storage. Apples are stored in unpadded steel-framed wooden containers of various sizes (see Figure 1)) (800 x 600 x 1200 mm, 900 x 710 x 1060 mm, and 1000 x 800 x 1200 mm). The average load per crate is 250-300 kg. The crates are stacked in multiple levels. Although a distance of 15-20 cm between stacks of crates is recommended for better ventilation, many of the companies visited do not observe this rule.39 We suspect that this is generally the case. The optimal load of apples is 200-250 kg per cubic meter of useful space, or 1.6 tons per square meter of total area. Moldova is the most common table grape variety grown and is suitable for storing up to 3 to 6 months with minimal care. The optimal load of table grapes is 120-140 kg per cubic meter of useful space, or 1.0-1.2 tons per m2 of total area. Table grapes are stored in plastic or wooden boxes (8-9 kg) or euro-standard boxes (5-6 kg) in a single layer as shown in Figure 1. Boxes are stacked on pallets by leaving 5-10 cm between stacks for proper ventilation. Approximately 55 percent of exported table grapes pass through cold storage for a brief period. Figure 1Error! Reference source not found. shows examples of crates that are used for storing both apples and table grapes.

37 A Program to Revitalize the Post-Harvest Handling System for Fresh Fruits, Table Grapes, and Vegetables (2008-2015), Ministry of Agriculture and Food Industry, July 2008. 38 Apple equivalent based on 0.4 tons per cubic meter of chamber’s used volume.

39 Given the operating cost of cold storage and estimated future market price in available markets, this may be a rational business decision.

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Figure 1. Crates used for table grapes

Plums are very perishable and can be stored for up to 2 to 3 months, depending on the variety. However, in Moldova, plums are not usually stored. Most are sold as fresh fruit (the long harvesting period (from July to October) also reduces the need for storing) or sent directly to processors to be made into prunes, jams, and juices.

Tomatoes are rarely stored; they are either sold directly from the field to processors or sold to traders after a brief field cooling period for fresh produce. Operational cold storage capacity is underused for several reasons: lack of information on available storage or the cost of storage, cold storage management issues, and labor problems — most workers are seasonal and not permanent, which results in lower productivity, ownership problems with older units.40 Some producers have no need to store, because they either have available immediate sales opportunities or need to sell immediately because of liquidity and debt constraints. Some facilities, though operational, are not suitable for producers’ needs. Some producers, out of cost/profit calculations regarding the cost of storage and operating facilities versus the likely future market price or the uncertainty of future markets decide not to use cold storage. Some varieties (such as golden apples) are less suitable for storage; others (Moldova 40 After the fall of the USSR, Moldovan farmers and rural dwellers received partial ownership of existing agricultural and industrial infrastructure, including cold storage units, regardless of experience with the infrastructure. For example, a 6300 ton unit owned by 100 people or a 1000 ton unit owned by 4 makes for difficulties in management and investment decisions.

Figure 2. Crates used for apples and table grapes

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table grapes) require little storage. Some producers do not use cold storage because there are no such facilities nearby. According to Aleksandr Zubatii of the Association of Enterprises for the Development of Quick Frozen Products Production, older cold storage units were not specialized and not designed for long-term storage, because there was no need when the Soviet Union accepted all production, regardless of quality. Zubati cited several problems with the existing units: many are energy inefficient, consume too much energy, and are thus very expensive to operate; units use an outdated coolant (Freon) which will be prohibited by the EU in 2010 and by 2025 in Moldova; and local expertise in cold storage facility maintenance, repair, and operations is limited because so many technicians have emigrated or retired. Although temperature is the primary concern in the storage of fruits and vegetables, relative humidity is also important,41directly influencing water loss in produce which can severely degrade quality — grapes may shatter loose from clusters if their stems dry out. Water loss means wilting and salable weight loss. Most fruit and vegetable crops retain better quality at high relative humidity (80 to 95 percent), but disease growth is encouraged. The cool temperature in storage rooms help to reduce disease growth, but sanitation and other preventative methods are required. Humidification devices may be used. Even buckets of water will increase humidity as the fans blow air across the water’s surface and increase evaporation. Keeping the floor wet is helpful but frequent cleansing with a weak chlorine solution will be needed. Crops that can tolerate direct contact with water may be sprinkled to promote high relative humidity. Operational cold storage facilities often are not up to standard. For example, a large number of cold storage facilities lack suitable access roads and continuous water supply and sewage systems — essential elements for complying with international food safety requirements and hampering humidity and moisture control measures. Currently in Moldova, only five cold storages have certified food safety management systems (HACCP or ISO 22001) and only five companies have GlobalGAP certificates. According to Janet Backmann and Richard Earles, “For refrigeration to be effective in postponing deterioration, it is important that the temperature in cold storage rooms be kept as constant as possible. Exposure to alternating cold and warm temperatures may result in moisture accumulation on the surface of the product (sweating) which may hasten decay. Storage rooms should be well insulated and adequately refrigerated and should allow for air circulation to prevent temperature variation.”42 In Moldova, some cold storage units, though operational, are outdated, too costly, and run only intermittently. According to AgroPomFruct, very few of the large apple producers have cold storage. Four cold storage units operate in the north, the main apple growing area: two with old equipment and two newer units with a capacity of 600 tons and 1500 tons. AgroPomFruct’s 1000-ton facility dates from 1966, costs 24,000 L/month for energy,43 and is turned on and off depending on the weather.

41 Postharvest Handling of Fruits and Vegetables, Janet Backmann and Richard Earles, ATTRA publication #IP116. 42 Ibid. 43 Compared with a newer 2,000 ton unit like Codru ST’s costing only 7,000 Leu to run.

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According to Backmann and Earles, “Ethylene, produced by some fruits as they ripen, promotes additional ripening of produce exposed to it. Damaged or diseased apples produce high levels of ethylene and stimulate other apples to ripen too quickly. As the fruits ripen, they become more susceptible to diseases. Ethylene producers include apples, plums, and tomatoes”. All of the interviewed apple producers could improve their postharvest cooling practices. Significant numbers of blemished fruit wind up in storage. Additional damage is done through current storage packing practices that overstuff the wooden packing crates employed throughout the industry. Only three cold storages have controlled-atmosphere (CA) systems (Codru-ST in Bucovat, Basfruct in Romanesti, and Alfa-Nistru in Soroca, with approximately 2,000 tons each). Another two are under construction. A CA cold storage makes it possible to store the produce better and for a longer period of time. Generally, CA-stored produce is more expensive in late winter and spring (out of season) and results in additional value generation. CA storing is risky, however, because later prices may be lower than the prices from the field at harvest time. In addition, having the produce stored for a longer time increases the need for working capital. Sorting and Grading Sanitary and Pytosanitary Services (SPS) is a department within the Ministry of Agriculture charged with inspecting and certifying agricultural produce for export. Fresh products are tested based on importing-country requirements and importer contracts. Though the number of inspection agents is not large, the system is regulated, because fruit and vegetables can be exported only through a limited number of border posts, and field inspections are made during the growing season as well. Inspectors are university graduates, mostly from the plant protection department. Internal and international training is offered. Processed products are not inspected. Only the packaging materials are examined for origin and cleanliness. Products for the domestic market are not inspected or certified, but the Ministry of Health does inspect for adherence to hygiene and sanitation standards. The SPS said that it is simpler to work with the EU than with Russia. Large Moldovan companies have a department or staff assigned to their export operations. In the past, Moldovans were allowed to set up importing companies in Russia to ease import and logistical arrangements. Since the 2005 embargo, this is no longer allowed. Russia now mandates that its inspectors visit every 1 to 2 years in addition to requiring tests, inspections, contracts, import permits, certificates of origin, inspection statements (for orchards, warehouses, and fields), evaluation of residual pesticide levels, certifications of non-genetic modified products, seed inspections, hygiene certifications, and sometimes, additional documents. Additional complications arise from the need for original documents with each shipment. This is especially the case for exporters who bulk produce from a range of small growers. Belarus’ import requirements are less complicated, but it has more stringent laws to try to protect its market: Belarus no longer permits apple imports, only table grapes. The SPS indicated that there were practically no fruit and vegetable exports to Ukraine, because that country’s agricultural sector is

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very productive and competitive and produces fruit that is generally equal to or better in quality than that produced and marketed in Moldova.44 Recently the SPS was merged with the center for plant protection, the seed service, and the bakery inspectorate, in a move to increase efficiency and coordination. Improvements in the service require addressing the low salary levels, small budgets, limited equipment, literature, and transport, and the poorly equipped laboratory. Apples. National quality requirements for fresh apples are set by GOST 21122-75 Fresh Apples of winter varieties, an old standard from the 1970s that is still used by the CIS countries. Most apple traders sort manually, based on the level of maturity, variety, and general condition immediately before shipping. If grading is needed, apples are divided (also manually in most cases) into different classes based on size, shape, weight, and color. Because most Moldovan apples are exported in bulk to lower value CIS markets, the importers do not require proper grading and packing. To meet the requirements of the higher quality CIS wholesale and retail markets and the EU market, Moldovan exporters would need to first consolidate the produce into large, homogeneous quality lots. The EU quality standards are defined in UNECE FFV 50. Plums. National quality requirements for fresh plums are set by GOST 21920-76 Fresh plums. Fresh plums are divided into two quality classes. Sorting and grading is done manually. Table grapes. National quality requirements for table grapes are set by SM 153 Table grapes.45 Before packing and shipping, dehydrated, cracked, or moldy grapes are removed by hand. Table grapes are sorted into three quality classes: extra, first, and second. The same classification takes place under the EU standards (UNECE FFV 19). Grading is done based on weight. The Romanian STAS R 9127/1485 standard is very similar to the Moldovan standard, whereas the Russian GOST 25896-83 Fresh table grapes divides the produce into two classes (first and second), with quality standards lower than Moldova’s. In most fruit and vegetable operations in Moldova, basic sorting and grading are manually done before shipping to intermediaries. Only three produce sorting lines were identified46 (AgroPomFruct in Tirnova, Codru-ST in Bucovat, and Ecoplantera in Chisinau). Due to their high running capacity of 3-5 tons of produce per hour, compared with the rather low volumes per customer, these sorting lines are seldom used. Codru ST has a used sorting line with a capacity of 30 tons per 8 hours shift, bought in 2002, for its apples. The equipment sorts on the basis of weight, though the apples are sold by size. According to Codru ST, its potential market is becoming more demanding and it needs larger capacity and more appropriate equipment. The company would like to have a 100 ton per day

44 According to sources from SPS, exports to Ukraine were reduced primarily because the Ukrainian agricultural sector is very productive and competitive and is able to service their own local market without the need for imports. 45 SM-series of standards stand for “Standardul Moldovei” and apply only to Moldova. SM 153 was introduced in 1996. Before SM 153 was implemented, Moldova used GOST 25896-83, which was introduced in 1983, an old Soviet standard that Russia and much of the CIS still use. 46 Other lines may exist but were not visited or identified.

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capacity unit. (Question: what would the equipment do for the majority of the year?) Codru ST’s grapes are sorted by hand. There is no sorting by size or weight, because its market does not require this. One of the largest apple traders, VICAM, sizes apples in the field when purchasing from producers. Final sorting is manually done before sales. The company would like to automate the sorting process. Ecoplantera has second-hand high-capacity equipment that is rarely used, given its volume of sortable fruit. Packing and Packaging Material In recent years progress has been made in Moldova in the production of fresh fruit and vegetable packaging materials. Moldcarton and the Chisinau Cardboard Factory, corrugated cardboard packaging companies founded during Soviet times, have upgraded their technology, and a new company (SimcoEuro) was recently founded. These firms cover the sector’s needs for telescope-type traditional boxes (18-20 kg), but do not yet produce open-type high-quality cardboard packaging materials. According to the Moldova Fruit Exporters Association, this is a serious constraint, because the local carton factory uses poor-quality recycled materials. The carton factory has lobbied government to put a 15 percent tax on imported packaging materials, hurting many fruit and vegetable traders. The plastic crate industry has developed strongly since the 1990s. Currently, more than 10 companies offer crates of different sizes adapted to the particularities of different horticultural products. However, no company offers the type of plastic foldable crates so popular in the EU because they reduce space needed for transportation. There are also no domestic producers of clamshells (either plastic or cellulose) for packaging spherical products, such as apples and tomatoes. Apples. After being sorted and sometimes graded, apples are packed in carton boxes of about 20 kg. All the visited apple producers and traders complained about the poor quality of locally produced cartons. Used carton boxes from imported bananas are sometimes used as a better alternative to locally produced boxes. Exporters claim that they cannot afford to use imported packaging due to its higher price and the added 15 percent tax. A rather small volume of apples is sold to local supermarket chains packed in plastic bags of approximately 1 kg (Codru-ST). Plums are packed into wooden boxes of 8-10 kg or plastic bags of 0.5-1.0 kg. For exports, additional packing requirements exist, such as using euro-standard boxes, labeling, and marking. Table grapes. Packing is done simultaneously with sorting and grading. New clean boxes are used, the grapes are arranged in a single layer, with their stems up and packed as densely as possible. In case of export, additional packing requirements exist, such as lining the boxes with a thin paper, labeling, and marking.

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Local Supply of Post-Harvest Equipment There are currently no producers of cold storage equipment or of post-harvest handling and sorting equipment in Moldova following the reorganization of Holodmash Company from Straseni. Knowledge of packing-house design and construction is limited, because this activity was practically ignored and not needed during the Soviet period. With support of the National Refrigeration Association, a number of specialized industrial cold storage construction and equipment installation companies have appeared in the past few years. In the absence of domestic equipment production companies, these new companies rely completely on imported equipment, but provide basic maintenance and repair services on the equipment they sell. Several producers of insulation panels with polystyrene filling have surfaced as well. Policy, Institutional, and Market Failures that Inhibit Private Investment in Post-Harvest Facilities The primary constraints to expansion and modernization of the HVA sector in Moldova seem to be a supply side focus and lack of market orientation. According to several of the firms and local experts interviewed, many in government and the private sector still retain the “old mentality” command economy and supply side focus of the Soviet period. Investment credit and inconsistency in the application of existing laws and policies were also brought up by respondents as serious constraints. Lack of a national marketing strategy. The Moldovan market for fruits and vegetables and associated products is small. Given the agricultural structure of the national economy and the current and potential product volumes, the need for a comprehensive national agricultural policy incorporating a clear marketing strategy is evident. However, the government has a supply-side focus, inherited from Soviet days, which looks at infrastructure needs based on a policy of increasing agricultural production volumes, even applying political pressure on processors to purchase farm production when there are limited profitable markets for the finished product. There is no national market program or export policy for promoting the sales of Moldovan fruits and vegetables. Little is done to improve the image of Moldovan agriculture or to consolidate the efforts of small and large companies into a national marketing strategy. Lack of understanding of the market economy and agribusiness. Most farmers do not see the need to find and understand their markets first and then make the appropriate business decisions accordingly: type of produce, season, variety, quality, production cost, and potential profit. Producers pay more attention to the production side. This is further stimulated by the government’s policy of subsidizing the expansion of orchards and vineyards without a clear understanding of where this increased production will be sold. The planting of fruits and table grapes is clearly increasing but the farmers have only a vague idea about their future sales and markets and whether this will be a profitable business venture. Interestingly, according to one prominent apple producer, growers are beginning to offer their orchards for sale.

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Lack of secure markets is a critical factor. The CIS markets (Russia, Belarus, Ukraine, Kazakhstan, etc.) have been easier than the EU in terms of quality requirements, import duties and business culture but unpredictable in terms of national policies and associated direct and indirect barriers (for example, the Russian ban of 2005 or the Belarusian policy of extremely unfavorable conditions for imported fruits and vegetables). These markets are continuing to change. The EU markets are more straightforward but more complex and require a more professional approach with significant investment, including high-quality production, proper post-harvest infrastructure, attractive packaging, and modern business methods with active professional marketing. Companies find it too risky to invest in a costly sophisticated post-harvest infrastructure. However, they are quite interested in securing heavily subsidized or donor- funded investments, as been done in the past. Many newly constructed units were built with help from donors. For example, one major producer-exporter’s cold storage was built in 2002, with donor financial help, by a Romanian company, with cooling equipment supplied by German and Italian manufacturers. Another major fruit trader received financial help from a Japanese private sector project. These organizations, along with most others interviewed, are looking for donor assistance to refurbish existing cold storage and pack house infrastructure or to construct new facilities. The recently approved Moldovan government Program to Revitalize the Post-Harvest Handling System for Fresh Fruits, Table Grapes, and Vegetables seeks millions of dollars in donor funding for postharvest infrastructure. The Central Bank’s policy of maintaining the Lei at a high exchange rate with the Euro also negatively affects export sales, with buyers indicating that the Moldovan produce price is too high and not competitive. For instance, one processor says that in the past, it sold approximately 1,500 tons of products to the EU each year, but this year, it has sold 400 tons, and volumes are continuing to go down. Another processor says that it is concentrating on the small domestic market and no longer on exports, because the buying price in export markets is less than the cost of processing. Lack of quality raw material at reasonable prices is mentioned by many exporting and processing companies as a primary constraint to further investment. On the other hand, fruit and vegetable producers state that the buyers do not offer attractive prices. Some blame for low volumes is also attributed to outdated, low-yielding varieties and the lack of proper irrigation. Other producers state that the risks of producing these fruits and vegetables outweigh the benefits and that they would rather produce a less risky crop like rape. Being limited by the available volume of acceptable raw material, the largest trading and processing companies try to integrate vertically by launching their own raw material production activities, redirecting resources into the supply side and postponing expansion into post-harvest infrastructure. Lack of financial resources is a serious barrier for Moldovan farmers and traders. Only the most successful companies can afford some expansion without borrowing money. Access to credit is expensive and difficult. Many companies cannot afford credit due to high interest rates (currently 27 percent for credits in MDL and about 15 percent for loans in USD and EUR). Long-term loans for agriculture are scarce. Land, which is often the only valuable asset, is not accepted as collateral, and collateral that is accepted is usually significantly undervalued. One producer-exporter had a MDL 2 million asset valued as collateral at 600,000 MDL by the bank. Smaller producers and traders are at a disadvantage. Exporters earn hard currency credits. Larger grower-

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exporters can receive credit in hard currency at lower interest rates. For smaller growers that do not export, the only credit they can get will be in local currency at higher interest rates (22-24 percent). Working capital liquidity problems for seasonal costs, such as hiring labor and raw materials, are exacerbated as markets and market prices tumble and become more uncertain. AgroPomFruct reported that short-term loans are becoming increasingly difficult to obtain and attributed this to declining foreign remittances and the resulting tightening of bank liquidity. Delayed repayment of retained VAT on imported inputs, the late payments on exports to Belarus, and the uncertainty of payments on exports to Russia further complicates companies financial management and adds to their perception of long-term risk. According to AgroPomFruct, renovation of its existing cold storage would cost approximately $800 000. This amount of credit would be extremely difficult to find and make profitable at an interest rate of 18 percent or higher. Lack of cooperation is another particularity of the Moldovan business environment. The agricultural sector is a good example. Although seeing the need for cooperation, Moldovan farmers find it difficult to coordinate their actions (such as acquisition of inputs, sourcing know-how, developing marketing strategies). According to a survey of apple producers,47 two-thirds of the respondents explained the lack of coordination as a lack of trust. Even existing cooperative efforts like the Table Grapes Association and Exporters and the Moldova Fruit Exporters Association have to date proven to be less effective than expected. Lack of enforcement of government laws and policies is an issue according to some. Several of the firms interviewed felt that government legislation was fine but that enforcement was deficient or inconsistent. For example, buyers paying in cash and not deducting VAT or buyers not paying the VAT are offering prices which those companies, purchasing officially and paying all required taxes, cannot match. Potential Demand for Post-Harvest Infrastructure There are several estimates of post-harvest infrastructure needs from local sources, all of which are based on current and projected supply-side considerations. For the past 10 to 15 years, the main cold storage activity in the Republic of Moldova was storing fresh produce for a 3-4 month period to benefit from higher out-of-season prices. Most produce was sold to lower-value CIS markets, using inadequate packaging, and having been negligently sorted by hand. Given the current establishment rate of fruit tree orchards (700 ha in 2001, 1,100 ha in 2004, and over 5,000 in 2007), fruit production is expected to reach the level of 1 million tons, double the current volume, by 2015, with the bulk of production coming from apple orchards. The increase in irrigated area from 15,000 in 2002 to over 34,000 hectares in 2007, and to an expected 90,000 hectares in 2015 will significantly contribute to the overall increase in the production of

47 Eugen Chiabur, Results of the Survey of Apple Producers, National Agency for Rural Development (ACSA).

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Moldovan crops. Based on these production estimates, the Government of Moldova plans to focus on the following laudable objectives:48

• Implementation of continuous cold chain principles. • Creation of a packing-house network in all fruit and vegetable growing areas. • Increased association and cooperation of producers, exporters, and other stakeholders.

Two more are suggested:

• Production based on market demand. • Improved produce handling.

The Moldova Fruit Exporters Association has come up with values based on its estimates of 60,000 tons of fruit and vegetables presently stored in the country with 15,000 tons in controlled atmosphere storage. Looking at supply potential, the association estimates storage requirements at 100,000 tons with 50 percent in controlled atmosphere storage — an increase of 35,000 tons in controlled atmosphere storage. The association thinks that several large units, strategically located in key production areas, of 5,000- to 10,000-ton capacity each, are required with accompanying sorting, grading, and post-harvest handling tools and equipment. Larger producers and traders would be able to contribute financially to investment costs, but smaller producers would find it difficult. Though the association thinks it would be better to build new cold storage facilities, renovation of existing units (most of which are small) is possible, but would not be as efficient or profitable. The Moldova Table Grape Association believes that packing house facilities, short-term (2 to 3 months) controlled atmosphere cold storage, and improved produce handling and packaging are needed to accommodate the projected increased supplies of table grapes. If the current table grape producers have any cold storage, they will not have a controlled atmosphere system — only five controlled atmosphere cold storage facilities exist, and they are owned by apple producers or traders. The association suggests that one packing house should handle several table grape producers (for example, Italy has small packing houses serving a radius of 80 km), and that the facilities must be used for other fruits and vegetables as well. Some are already being build or planned in the following locations: southeast (two packing houses), south (two packing houses), one (built by Segron) in the capital area, and another in the south (built by Agrostock).

48 A Program to Revitalize the Post-Harvest Handling System fro Fresh Fruits, Table Grapes and Vegetables (2008-2015), Ministry of Agriculture and Food Industry, July 2008.

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Figure 3. Cold Storage Capacity Utilization in 2007

Source: “Current Status of Cold Storages for Fruits and Vegetables” report (http://www.cnfa.md/report/847/ro.html) Moldova’s National Refrigeration Association gives an indication of the value of investment needed: the cost of a new cold storage unit is estimated at $600 per ton. The association also estimates that a peach-table grape facility would cost $ 0.5 million and provide cold storage capacity of 400 tons, including a pre-cooling system, sorting equipment, and a packing hall handling 900 tons of peaches, 500 tons of early table grapes, and 400 tons of late-season table grapes annually. An apple-pear facility with cold storage of 3,000 tons, sorting equipment, and a packing hall for 4,100 tons of apples and pears per year would cost $ 1.7 million, according to their figures. A recent study by CNFA49 showed that only about 32% of all existing operational and partially operational cold storage capacity is being used in Moldova (see Figure 2). The main explanations were the focus on a single product and scarcity of raw material in the nearby area. The study concluded that the current cold storage capacity utilization has to double (to more than 60 percent) to meet the potential increased fruit and vegetable supply. The study did not look at market demand aspects. This is particularly pertinent, because more than 60 percent of the cold storage is for apples and more than 70 percent of the new orchards are apple orchards. Given the uncertain market for apples, it is not clear that storage of increased volumes of apples will be a profitable undertaking. Recommendations on the Type of Post-Harvest Infrastructure and Equipment/Technology Most Needed/Appropriate for Moldova It is recommended that the project in its early stages improve existing harvest and post-harvest methods and management and make simple fixes to existing facilities. It is also recommended that the project cost share the purchase and or development of more appropriate large plastic storage containers. Local industry might be motivated to develop this product line. Donor-financed post-harvest infrastructure, particularly if the investment required by the private sector is at a minimum level, would be well received by whoever has access to the facilities. 49 Viorel Leahu, Alexandr Zubatii, “Current State of Moldovan Cold Storages for Fruits and Vegetables,” CNFA/ADP, February 2008.

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Whether the facilities could be run on a sustainable basis and without continued external support is not currently answerable. In the early project stages, emphasis should be placed on analyzing market demand and developing business feasibility studies on various realistic scenarios. Project should have the flexibility to cost-share in investments but should evaluate requests for post-harvest infrastructure funding on a case-by-case basis, bearing in mind business profitability, operational sustainability, and the availability of other donor project resources and objectives. Any investment in post-harvest infrastructure should be accompanied by adequate training in operations and management. Coupled with improvements in product handling and packaging, investment in simple semi-automated equipment that could facilitate operations such as washing, inspection, and calibration would be more appropriate for Moldova if market demand showed that doing so would create a business advantage: for example, increased profits, increased market share, reduced risk, etc. Project analysis should ascertain the business and systematic technical logic of an investment. For example, until recently, a major apple producer and trader manually sorted its fruit before selling it. According to the managing director, the company’s main Russian market wanted a better quality product. The company thought that a more high-tech sorting process would be the solution. A sophisticated foreign sorting line was purchased and a packing house build at high cost with borrowed funds (equipment cost 120,000 Euros at 18 percent interest and the packing house cost 350,000 Euros at 18 percent). The managing director now regrets his decision: The company does not adequately cull its apples after harvest, stores the produce in unsuitable crates, and has old costly cold storage that operates only sporadically. As a result, the new, expensive piece of equipment in its spacious new pack house is sorting low-quality fruit. The additional cost burden from interest and running the facility and the negative cash drain on working capital have made the company’s operations unprofitable. Growers and researchers have created a number of designs for low-cost field coolers. The State Agricultural University of Moldova and its former partner, North Carolina State University, would be good sources of information. Here as well, the business logic of this investment should be reviewed, as well as the potential demand among small-scale producers. Assistance to the Moldovan railroad agency in repairing and/or obtaining new or used good condition rail cars and efficiently operating them is a potentially valuable project activity that should be analyzed further.

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Demand Model To quantify the potential demand for post-harvest infrastructure (PHI), a model has been developed to estimate the quantity of fruits and vegetables that would need PHI, quantify the number of packing houses and cold storage capacity needed for the previously estimated flows of produce, and approximate the amount of additional investment required. Each step involved making a series of assumptions regarding future development of a particular parameter (productivity, output, potential growth of local and export markets, etc.), packing houses, and cost of a packing house/cold storage. We considered two scenarios, pessimistic and optimistic, to arrive at the lower and upper bounds for the inquired demand for PHI. The assumptions we made to estimate the quantity of produce that would need PHI are summarized in Table 9, Table 10, and Table 11 for fruits, table grapes, and vegetables, respectively. For each of these three groups, the level of production in 2010 and 2015 is first quantified by approximating the decrease/increase of old/new plantations/fields and the potential yield per hectare. On the other hand, the model looks at the development of the local processing industry, growth of local consumption of fresh fruits and vegetables, and potential increase in exports from the demand standpoint. Since there is a mismatch between the estimated supply and demand, the difference is shown as a separate line.

Table 9. Assumptions made to estimate the flow of fruits (excluding table grapes) that would eventually need PHI Base 2010 2015 (pessimistic) 2015 (optimistic) Area Three-year average

(2005-07) based on the National Bureau of Statistics’ data.

It is assumed that the old orchards will be gradually (7,300 hectares per year till 2010 and 5,500 hectares afterwards) taken out of production. The new plantations (4,600 hectares per year) will partially replace the old ones. The pace is based on projections of the given in the State Program for Development of Fruit Production.

Productivity, old Three-year average (2005-07) based on the National Bureau of Statistics’ data.

The overall productivity of the old orchards is assumed to be 3.5 tons per hectare over the projected period.

Productivity, new

The productivity of the new orchards will assumedly grow from the current 10 tons to 18 tons per hectare in 2015. The increase is primarily due to the fact that it takes a few years for the new plantations to reach their highest productivity rates.

With proper varieties and technology, the productivity of new orchards can reach 25 tons per hectare.

Processing About 40% of the total production of fruits is used by the processors.

It is assumed that the processing industry will grow by 2% per year (a world-wide trend for this sector).

Local market, fresh

Set as total production less amounts exported and processed.

Assumed increase of 20%.


Set to double.

Export, fresh Three-year average (2005-07) based on UN Comtrade Database (fresh fruits [HS2002 code 08], excluding grapes).


Set to double. Set to triple.

Balance This is the amount left after deducting assumed quantities for the processing industry, local consumption and exports from the total production (i.e. the difference between the estimated supply and demand).

Via packing house

It is assumed that the local market will not demand/require additional investments in post-harvest infrastructure, i.e. it will continue consuming fruits without sorting, grading and packaging. A certain percentage of the exported amounts will assumedly need services of a packing house. These are 20% in 2010, 50% in 2015 (pessimistic) and 75% in 2015 (optimistic).

Via cold storage A certain percentage of local sales (assumed 5%) and exported amounts (from current 25% to 50% in 2015 (pessimistic) or 75% in 2015 (optimistic) will be done out of season from the cold storages.

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We further assume that the local market will continue consuming fresh fruits and vegetables without any special sorting, grading, and/or packaging requirements. We assume that only produce for export will need packing-house facilities. At the same time, a certain percentage of local sales and exports will be made from fruits and vegetables held in cold storage. Given these assumptions, the total cold storage capacity needs are quantified. Again, the percentages of exported and locally consumed produce that would need PHI are set differently for the pessimistic and optimistic scenarios. The tables below show the results for estimated flows of produce in 2015 versus current (averaged) situation. More detailed information is given in the annexed tables. There are two types of packing houses, designed by the experts of Ceproserving Institute and the National Refrigeration Association. The first is designed for hard fruits such as apples and pears, production of which is concentrated in the northern part of the country. The packing house includes a cold storage facility with a capacity of 3,000 tons and a sorting/ grading/ packing hall. It can process 4,100 tons of apples/pears annually, including 1,100 tons sold during the harvest period and 3,000 tons kept in the cold storage50.

50 More details can be found in A Program to Revitalize the Post-Harvest Handling System for Fresh Fruits, Table Grapes, and Vegetables (2008-2015), Ministry of Agriculture and Food Industry, July 2008.

Table 10. Assumptions made to estimate the flow of table grapes that would eventually need PHI Base 2010 2015 (pessimistic) 2015 (optimistic) Area, old Three-year average

(2005-07) based on the National Vine & Wine Institute’s data

It is assumed that the old vineyards will be gradually taken out of production. The pace is based on projections of the National Vine & Wine Institute.

Area, new The new vineyards will replace the old ones and it is assumed that the pace of establishing new plantations will be sufficient to keep the total area constant.

Area, total The total area is fixed at 20 hectares over the entire period. This will include both old vineyards and new plantations.

Productivity, old The productivity of the old vineyards constituted on average about 4.8 tons per hectare over the last few years.

With the oldest low-yield plantations taken out of production, the overall productivity of the old vineyards will slightly increase over the projected period.

Productivity, new

The productivity of the new vineyards will assumedly grow from the current 5 tons to 10 tons per hectare in 2015. The increase is primarily due to the fact that it takes a few years for the new plantations to reach their highest productivity rates.

With proper varieties and technology, the productivity of new vineyards can reach 16 tons per hectare.

Processing No processing is assumed for table grapes. Local market, fresh

Set as total production less exports.



Set to double.

Export, fresh Three-year average (2005-07) based on UN Comtrade Database (fresh grapes [HS2002 code 080610]).




Via packing house

It is assumed that the local market will not demand/require additional investments in post-harvest infrastructure, i.e. it will continue consuming table grapes without sorting, grading and packaging. A certain percentage of the exported amounts will assumedly need services of a packing house. These are 20% in 2010, 50% in 2015 (pessimistic) and 75% in 2015 (optimistic).

Vi ld A i f l l l ( d %) d d

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The second type of packing house allows running peaches, apricots, and table grapes in a single unit. This becomes possible because these fruits are all grown in the southern part of Moldova, their growing seasons are consecutive, and the technological operations involved in storing them

(e.g. forced cooling) are similar. The packing house includes a cold storage facility with a capacity of 400 tons and a sorting/grading/packaging hall. It can process 900 tons of peaches, 500 tons of early table grapes, and 400 tons of late table grapes (suitable for long storage) annually. Although vegetables need slightly different packing houses and sometimes even special harvesting equipment for post-harvest operations directly in the field, the investment cost is estimated to be similar to the cost of a packing house for table grapes. We therefore assume, for the purpose of this quantification model, that vegetables will require the second type of packing houses. Because Moldova already has about 75-80,000 tons of operational cold storage capacity in Moldova and packing houses will have their own cold storages, we have calculated only the need

Table 11. Assumptions made to estimate the flow of vegetables (excluding potatoes and melons) that would eventually need PHI Base 2010 2015 (pessimistic) 2015 (optimistic) Area Three-year average

(2005-07) based on the National Bureau of Statistics’ data.

It is assumed that the area under vegetables will gradually increase (by 50%) over the projected period.

Productivity Three-year average (2005-07) based on the National Bureau of Statistics’ data.

The overall productivity of the vegetable fields is assumed to grow by 0.5 tons per hectare per year over the projected period (pessimistic scenario) or twice as fast (optimistic scenario).

Productivity, new

The productivity of the new orchards will assumedly grow from the current 10 tons to 18 tons per hectare in 2015. The increase is primarily due to the fact that it takes a few years for the new plantations to reach their highest productivity rates.

With proper varieties and technology, the productivity of new orchards can reach 25 tons per hectare.

Processing About 30% of the total production of vegetables is used by processors.

It is assumed that the processing industry will grow by 2% per year (a world-wide trend for this sector).

Local market, fresh

Set as total production less amounts exported and processed.



Set to double.

Export, fresh Three-year average (2005-07) based on UN Comtrade Database (fresh vegetables [HS2002 code 07], excluding potatoes).




Via packing house

It is assumed that the local market will not demand/require additional investments in post-harvest infrastructure, i.e. it will continue consuming fruits without sorting, grading and packaging. A certain percentage of the exported amounts will assumedly need services of a packing house. These are 20% in 2010, 50% in 2015 (pessimistic) and 75% in 2015 (optimistic).

Via cold storage A certain percentage of local sales (assumed 5%) and exported amounts (from current 20% to 40% in 2015 (pessimistic) or 60% in 2015 (optimistic) will be done out of season from the cold storages.

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Table 12. Estimated flows of produce, 2015 versus current (‘000 tons) Current 2015

(pess.) 2015

(optim.) Production Fruits 330.9 832.9 1,076.1 Table Grapes 96.9 160.0 226.6 Vegetables 362.1 776.7 1,010.2 TOTAL 789.9 1,769.6 2,312.9

Export, fresh Fruits 129.6 259.2 388.8 Table Grapes 22.1 44.3 66.4 Vegetables 20.5 41.0 61.5 TOTAL 172.2 344.4 516.6

Via packing houses Fruits 129.6 291.6 Table Grapes 22.1 49.8 Vegetables 20.5 46.1 TOTAL 172.2 387.5

Via cold storages Fruits 35.7 134.6 298.2 Table Grapes 8.4 27.7 57.3 Vegetables 4.1 33.3 59.5 TOTAL 48.2 195.6 415.0

for extra cold storage capacity. The model also takes into consideration that approximately 5,000 tons of partially operational storages will be renovated annually. The main findings of the model are summarized in the following tables. By 2015, the Moldovan HVA sector will need an estimated investment in post-harvest infrastructure of $70 to 200 million. The final amount is sensitive to various assumptions made in the model. For example, if we leave the needs of the processors and local consumptions untouched but increase exports to include the difference between the estimated supply and demand, the total investments in PHI will range between $175 and 365 million. Altering any other assumption (e.g. yields, output, growth of local market, export expansion potential, treatment of the difference between supply and demand, percentages of flows via packing houses, specifications of the concept packing houses, estimated cost of PHI, etc.) or a combination of them will inevitably lead to a change in the final estimate. Table 13. Quantification of demand for PHI by 2015 Handling

capacity, tons

Cold storage

capacity, tons

Unit cost, USD mln

Quantity Value, USD mln2015

(pess.) 2015

(optim.) 2015

(pess.) 2015

(optim.)

Packing houses (fruits) 4,100 3,000 1.7 31.6 71.1 53.7 120.9 Packing houses (table grapes) 900 400 0.5 24.6 55.3 12.3 27.7 Packing houses (vegetables) 1,800 400 0.5 11.4 25.6 5.7 12.8 Sub-total 71.7 161.4Extra cold storage capacity 53.5 32.1 TOTAL 71.7 193.5

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Pessim. Optim.

Base 2010 2015 2015

Area, old '000 Ha 97.6 88.6 59.3 59.3 Area, new '000 Ha 4.7 11.2 34.8 34.8 Area, total '000 Ha 102.3 99.8 94.0 94.0

Productivity, old tons / Ha 2.9 3.5 3.5 3.5 Productivity, new tons / Ha 10.0 18.0 18.0 25.0

Production '000 tons 330.9 511.7 832.9 1,076.1 % 41% 28% 19% 15%'000 tons 135.1 143.4 158.3 158.3 % 20% 16% 12% 12%'000 tons 66.2 79.4 99.3 132.4 % 39% 33% 31% 36%'000 tons 129.6 168.5 259.2 388.8 % 0% 24% 38% 37%'000 tons - 120.4 316.1 396.6

% of exp. 0% 20% 50% 75%'000 tons - 33.7 129.6 291.6

Unit handling capacity '000 tons 4.1 4.1 4.1 4.1 Unit cold storage capacity '000 tons 3.0 3.0 3.0 3.0 Number of houses - 8.2 31.6 71.1 Unit cost USD mln / $ 1.7 $ 1.7 $ 1.7 $ 1.7 Total cost USD mln $ - $ 14.0 $ 53.7 $ 120.9

% of local 5% 5% 5% 5%'000 tons 3.3 4.0 5.0 6.6 % of exp. 25% 35% 50% 75%'000 tons 32.4 59.0 129.6 291.6 % of fresh 18% 17% 20% 32%'000 tons 35.7 62.9 134.6 298.2

Processing

Via cold storage, local

Balance

Via cold storage, total

Via packing house

Via cold storage, export

Fruits (65-70% apples)

Local market, fresh

Export, fresh

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Pessim. Optim.Base 2010 2015 2015

Area, old '000 Ha 15.6 13.4 8.9 8.9 Area, new '000 Ha 4.4 6.6 11.1 11.1 Area, total '000 Ha 20.0 20.0 20.0 20.0

Productivity, old tons / Ha 4.8 5.3 5.5 5.5 Productivity, new tons / Ha 5.0 8.0 10.0 16.0

Production '000 tons 96.9 123.8 160.0 226.6 % 0% 0% 0% 0%'000 tons - - - - % 77% 72% 70% 66%'000 tons 74.8 89.7 112.1 149.5 % 23% 24% 28% 29%'000 tons 22.1 29.9 44.3 66.4 % 0% 3% 2% 5%'000 tons - 4.2 3.6 10.6

% of exp. 0% 20% 50% 75%'000 tons - 6.0 22.1 49.8


% of local 0% 5% 5% 5%'000 tons - 4.5 5.6 7.5 % of exp. 38% 45% 50% 75%'000 tons 8.4 13.4 22.1 49.8 % of fresh 9% 14% 17% 25%'000 tons 8.4 17.9 27.7 57.3

Processing

Table Grapes




Local market, fresh

Export, fresh

Via packing house

Balance

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Pessim. Optim.Base 2010 2015 2015

(excl. potatoes)

Area, old '000 HaArea, new '000 Ha 38.9 46.7 58.4 58.4 Area, total '000 Ha 38.9 46.7 58.4 58.4

Productivity, old tons / HaProductivity, new tons / Ha 9.3 10.8 13.3 17.3

Production '000 tons 362.1 504.5 776.7 1,010.2 % 32% 24% 17% 13%'000 tons 115.9 123.0 135.8 135.8 % 62% 54% 44% 45%'000 tons 225.7 270.9 338.6 451.5 % 6% 5% 5% 6%'000 tons 20.5 26.7 41.0 61.5 % 0% 17% 34% 36%'000 tons - 84.0 261.3 361.5

% of exp. 0% 20% 50% 75%'000 tons - 5.3 20.5 46.1


% of local 0% 5% 5% 5%'000 tons - 13.5 16.9 22.6 % of exp. 20% 30% 40% 60%'000 tons 4.1 8.0 16.4 36.9 % of fresh 2% 6% 5% 7%'000 tons 4.1 21.5 33.3 59.5

Processing

Balance

Vegetables (20% tomatoes)

Local market, fresh

Export, fresh




Via packing house

Cold storage capacity in '07 '000 tons 75.7 75.7 75.7 75.7 Renovated storage capacity '000 tons - 15.0 40.0 40.0 Capacity needed, total '000 tons 48.2 102.4 195.6 415.0 Cold capacity of houses '000 tons - 28.5 109.2 245.7 Extra cold capacity needed '000 tons - - - 53.5 Unit cost USD / ton $ 600 $ 600 $ 600 $ 600 Total cost USD mln $ - $ - $ - $ 32.1

TOTAL COLD STORAGE + PACKING HOUSES USD mln $ - $ 18.8 $ 71.7 $ 193.5

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Chapter 6. Analysis of Technical Capacity Constraints

No development project — whether sponsored by the government, a donor, or a nongovernmental organization — can take the place of market incentives. Ultimately, for businesses to increase and multiply and for technology and knowledge to be transferred effectively to those most in need of them, you need the entrepreneurial “glue” that connects the demand of final markets with small local suppliers and brings dynamism and cohesiveness to the entire value chain. In such situations, development projects often look for “star products,” when they should be looking for “star connector firms.” This chapter highlights several potential interventions and activities designed to help the Moldovan high-value agriculture (HVA) sector grow and develop into a market force that can complete within the region and ultimately on the global stage. Although the approaches listed here are generally designed for an incremental approach to development, several activities can be implemented that will show quick results within the first year of execution. This chapter is divided into four sections: Planting/Harvesting, Production and Market Access, Post Harvest, and Recommended Mechanisms for Technical Assistance Delivery. Although the activities discussed below are indicative of those that could be undertaken, Phase 2 of this project — the Design Phase — will elaborate further on these and additional activities. Planting/Harvesting Building trust along the value chain. Building trust among the players along the value chain is as important as providing technical assistance. Any project activity will need to help identify new buyers, bring in modern technology, and improve management of the companies, but for strong marketing links to be forged along the value chain, the parties to a deal have to trust one another. Given the degree of distrust and outright hostility that has existed at various points along the value chain, a new approach is needed to help bridge challenges between the parties and foster harmonious relationships between suppliers and producers, sellers and buyers. Creating trust is fundamental to effective communication and lasting, productive relationships. It is also crucial for the development of effective associations and marketing cooperatives that will allow producers and processors to leverage the resources of the entire industry and access new markets well beyond the traditional CIS market base. The project should act as a liaison between seller and buyer for as long as it takes for trust to return to the marketplace. One way to do this would be to act as an honest broker to ensure that buyers and sellers comply with the terms of their contracts. Such a gesture would help melt away the long history of mutual deception between buyer and seller that has left an attitude of mutual distrust that has been so difficult to overcome in similar situations throughout the CIS. (Constraint(s) addressed: Poor Relations between Growers and Processors) Using Technology to Upgrade Production. Production processes in Moldova, whether on the farm or in the processing factory, are antiquated and, for the most part, have not been adapted to modern business practices. This lack of vision has left Moldova in a situation in which most HVA products are not competitive in the international market, and they are becoming less competitive in some regional markets, as well. Employing new and suitable technologies (hybrid seed/seedlings, modern production techniques, GIS monitoring of cropping) can increase

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production quality and capacity. Similarly, processing upgrades are often required to meet market demand, to strengthen the communication systems that facilitate engagement with the market and to evaluate the effectiveness of changes to the farm-to-fork processes. Examples of activities that could support these goals include the following: working closely with government and private research institutes to ensure modern agricultural technologies (improved seeds and other appropriate inputs) are available in Moldova, supporting the rapid development of an institute that can develop and propagate “parent seeds” that can address the deficiencies inherent in having just the Tiraspol Institute as the source of parent seeds, instituting GIS mapping of all HVA production and processing facilities, and implementing SMS-based market information systems to improve farmers’ access to the latest information about market price and delivery options. (Constraint(s) addressed: Standards and Certifications; Meeting International Norms) Develop and strengthen the supply chain to help small farmers gain access to cheaper inputs, larger producers and an expanded market base. Encouraging processors and traders — particularly mid- to large-sized processing firms — to contract with small suppliers can have a sizeable impact on the growth of the HVA sector. The degree of a large or medium-sized firm’s commitment to its suppliers has much to do with the success of technology transfer to small producers and micro-enterprises. Many poorer producers lack the technical know-how to produce competitively what the market demands. Experience demonstrates that the best incentive for small producers to adopt new technological practices is the existence of a buyer with a specific requirement and a commitment to the supply side of the equation — to transfer technology to suppliers to produce goods that the market demands. There are numerous examples of development projects successfully facilitating knowledge and technology transfer to smaller producers with the ultimate aim of strengthening the supply chain, from the farmer’s field all the way to the shipment of goods to the port or final destination. For example, larger buyers could commit to buy domestically produced inputs at a minimum price. To ensure that they will receive a quality product, buyers would collaborate in the transfer of an appropriate technological package, supervise the quality of the product being grown or produced, assign one of its best technicians to advise the producers, and co-invest with the producers in inputs and equipment. (Constraint(s) addressed: Limited Access to Affordable Inputs, Access to Seeds, Chemicals and Fertilizers, Access to New Markets) Observing and obtaining new technology. Antiquated and inappropriate technology hinders Moldova’s HVA producers from producing marketable goods at competitive prices. For example, the project team encountered several examples, already noted earlier in this report, where processors obtained technologically advanced equipment only to have it remain idle in their factories because it was not appropriate for the tasks at hand. To overcome this problem, farmers and processors need access to reliable, warranted equipment that will be used to improve quality and efficiencies. The project should invite foreign equipment wholesaler representatives for each target industry to participate in a “New Technology Exposition” to give Moldovan entrepreneurs the opportunity to learn about new technologies and test their industry’s latest equipment firsthand. Also, Moldovan producers should regularly participate in the annual Resale Trade Fair in Germany, which is the largest trade fair of used, certified farming and manufacturing equipment in the world. Experience has shown that farmers and manufacturers

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from Eastern Europe have greatly benefited from active participation at this event. (Constraint(s) addressed: Standards and Certifications, Meeting International Standards and Norms)

Facilitating workforce development linkages and communication. The shortage of skilled and semi-skilled labor is a critical problem in Moldova. The country has suffered through one of the worst periods of peacetime emigration in the last 20 years and continues to experience high rates of emigration. Some villages are being depopulated of young and even middle-aged people capable of providing the necessary labor to plant, harvest, and process crops from the fields. Some areas of the country have not experienced such shortages yet, and in fact, still have an excess of workers. This is coupled with the uncertainty as to the impact the financial crisis might have on émigrés returning home to Moldova as a result of lost jobs in their adopted countries. The labor problem is further exacerbated by the fact that where there is labor, it often lacks the skills most needed in the marketplace. To address this problem, the project should work with local employment agencies, relevant government ministries, and NGOs to promote linkages between job seekers, enterprises seeking labor, and technical/vocational training providers. A formal approach to reconciling the number of workers needed in a particular region is needed to ensure that local producers and processors have the skilled labor they need. Workforce development systems operate most smoothly when government actors coordinate communications effectively between technical/vocational training providers and the private sector. Suggested activities include the following:

• Working with local employment offices, business associations, and chambers of

commerce to create and circulate a simple guide or roadmap explaining how enterprises can access services and identify skilled graduates from the region’s technical/vocational training providers.

• Expanding local, regional, and national employment centers to house industry-specific career information and training services available at training providers and employment offices. We will work with training centers to gather curricula, summarize it by trade, and make it available through various formal and informal venues.

• Facilitating regular dialogue between public and private employment agencies and career counselors in vocational training centers to exchange information on job vacancies in the market and promote each other’s services to job seekers and employers.

• Sponsoring job fairs and new social networking outlets to link job seekers to training providers and enterprises.

• Coordinating mentor or apprenticeship programs for youth or career clubs. For example, the project could help training organizations develop advisory boards made up of employers; set up job shadowing, internship, and worksite visitation programs; manage curriculum reviews by the private sector, or develop exchange programs. (Constraint(s) addressed: Labor Shortage, Poor Relations between Prowers and Processors)

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Production and Market Access Moldovan firms’ lack of awareness and preparation for accessing new markets can be explained by their lack of experience in competing internationally. There are many reasons why companies in Moldova do not and cannot compete internationally, including poor product quality, limited awareness of market demands and requirements, and little perceived incentive to sell beyond their borders. To “jump start” these companies, an integrated51 Market Access Program (MAP) needs to be designed and put into action as soon as is practical. The MAP should be designed and managed to facilitate the reformation of the relatively uncompetitive HVA sector by exposing producers to buyers who will provide feedback on price, quality, style, and other information, while taking the opportunity to purchase product that can be competitively marketed, either in Moldova or abroad. This market contact and access will allow Moldovan businesses to reorient their production to increase competitiveness and thereby access markets in which they would otherwise have limited, if any, success. The project should establish a platform that will facilitate the introduction of standards and certifications and development of internal and external markets, including fostering forward and backward linkages with buyers and suppliers, establishing market representation in external markets, participating in selected industry trade exhibitions, facilitating product testing and product development, and assisting in analyzing and improving packaging, pricing, and costing. An important aspect in developing a successful market access approach is to first understand your local market, produce what is wanted and needed in that market and take advantage of the opportunities available therein. Many companies in developing and emerging markets believe they can export before they sell to local buyers because they produce “the best quality.” Although this is occasionally possible, it is rare for a local producer to succeed internationally before succeeding locally and even regionally. Therefore, to support the growth and maturity of local enterprises, we recommend that the project complement its export market access initiative with one designed to address deficiencies in accessing the local market, while also looking outward into Eastern and Western Europe. It can typically take two years or more for market activities to help producers in emerging economies adjust their production and operations to meet market requirements. There is pressure, however, to short-circuit this time period and move ahead more quickly. Given these demands, it is essential to develop a series of activities that will expose producers to new markets and facilitate the process of reforming to the requirements of the market on an accelerated schedule. Market access activities that could be implemented include the following: Enhancing Standards in Production and Marketing. As discussed throughout this report and as noted in most other reports of this nature, Moldova’s standards regime is in need of serious repair and support. To improve access to new and expanded markets, Moldovan producers need to improve their standards of production while striving to attain the market demanded 51 “Integrated” means that the program should target both export opportunities as well that those that exist within Moldova designed to substitute imports. “Integrated” also refers to the program being one that incorporates several approaches all of which are designed to work together to form the same outcome.

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certifications such as GlobalGAP, Fair Trade, ISO 22001, organic certifications and others. This is one of the most critical needs for any project to address in the future. Although the initial efforts may be in incremental improvements to quality for domestic or regional markets, the ultimate goal is to inform and instruct local producers toward EU requirements and prepare Moldovan producers for open trade. Suggested activities should consider the following: compiling EU standards for fresh and processed HVA and preparing informational materials (including information on certifications such as GlobalGAP (and GlobalGAP Option 2), HACCP, Fair Trade, and others; training producers and traders on management of the trade process, including critical areas that require considerable attention to detail (packaging, labeling, preparation for shipping, etc.); making sure that certifications can be attained in Moldova — either that sufficient infrastructure exists within Moldova to support certifications and other requirements or third-country bodies can be used in the country; and building the internal management capacity of HVA producers. (Constraint(s) addressed: Standards and Certification, Meeting International Standards and Norms) Reverse Trade Fair. Connecting with international buyers through a “Reverse Trade Fair” would give Moldovan producers the opportunity to display and sell their products and services to foreign and domestic buyers, who, in turn, will provide important feedback to producers on how to improve their products to satisfy market conditions. Project representatives would be available to facilitate first-hand networking and capacity building opportunities between buyers and producers. The project should deliberately target the Moldovan diaspora to attend these events, given their financial resources, business experience, and expanded purchasing power. This activity will allow buyers to 1) display the range of product lines they carry and sell in their target markets, 2) meet with representatives of local producers and suppliers to discuss their rationale and approach to product and supplier selection, 3) explain how they select products and what they look for when determining pricing and evaluating packaging, 4) review sample products brought to their attention by various producers attending the fair and provide feedback on quality, pricing, packaging, and appropriateness of these products, and 5) visit selected factories to get firsthand introduction on production capacities and identify potential for other products that might be produced based on these capacities. A Reverse Trade Fair is a combination of a trade exhibit, a marketing seminar and hands-on consulting. (Constraint(s) addressed: Lack of Market Information and Access to Markets, Meeting International Standards and Norms) Food Industry Day. To strengthen Moldova’s food industry (and particularly the HVA sector) and target import substitution opportunities, the project could hold a national Food Industries Day. This event would bring together key government officials, producers, retailers, wholesalers, buyers for schools and hospitals, and others throughout the food industry. This event would initially be a one-day forum for the specific purpose of expanding the marketed production of locally produced products in the domestic Moldovan market. This program would be designed to do the following:

• Facilitate a dialogue between the private and public sectors on regulatory and licensing issues that constrain local market expansion.

• Consummate immediate and future purchases of products made in Moldova. • Help Moldovan producers integrate their marketing through the joint distribution of

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complementary products. To facilitate local market development of the food industry, the project team should work with other donor projects and NGOs to plan and implement the first Moldova Food Day. As an adjunct to this activity, we recommend that the project team undertake a survey of schools, universities, government offices, and retail shops to learn what they buy from Moldovan food companies and more important, what they don’t buy and why, and how we can break through this market barrier. (Constraint(s) addressed: Lack of Market Information and Access to Markets, Poor Relations between Growers and Processors) Preparation for and participation in international trade fairs. Attending international trade fairs is rarely an effective way to support the business community in developing and emerging markets. In most instances, if left to their own devices without donor support, local businesses usually view such activities as nothing more than a junket, and the results support this. However, if the right companies are chosen to participate actively and a program of targeted assistance is delivered to those firms before they participate in the fair, participation in such fairs can be extremely worthwhile (see text box below). Moldovan producers already attend international trade fairs, and some are returning with deals in hand. To increase the number of producers who actually close deals at these fairs, the project should work with relevant industry associations and producers to ensure that the right exhibitors are chosen to participate, that they are well prepared beforehand with a program of targeted assistance, that they maintain relationships with buyers after the fair ends, and that high levels of interaction between all participants are accompanied by concurrent training activities and other capacity building techniques. To support this effort, the project should organize group-based and individual capacity-building exercises to prepare fair attendees to price products based on production costs and market price; select market-appropriate samples and synch them to catalogues and price sheets; develop new packaging, labeling, salesmanship techniques and marketing and promotional material; and develop a professional, distinctive exhibition display for its goods. Once prepared, project personnel should help participating firms attend the right trade fairs. (Constraint(s) addressed: Lack of Market Information and Access to Markets, Meeting International Standards and Norms) Improving Marketing Know-How. The lack of a market-based focus has been instrumental to Moldova’s inability to penetrate new and growing markets. This creates the opportunity to teach marketing managers how to conduct analyses of export markets and products by providing them with tools for gathering relevant information, sources of data, along with questions to ask agents and buyer representatives. As part of this approach, they can learn how to work with the numerous online exchanges and marketplaces, such as www.FoodMarketExchange.com, which are well-maintained and can help firms bid on contracts or conduct price discovery. The creation of a Moldovan market information hub for food exporters could be developed and linked in with global exchanges which would provide further information for domestic producers aiming to enter new markets or enhance their position in markets where they already operate, while providing potential buyers a window on opportunities available in Moldova. (Constraint(s) addressed: Lack of Market Information and Access to Markets, Meeting International Standards and Norms)

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Encourage and Support Development of Associations and Cooperatives. Lack of cooperation among producers and processors is common throughout the Moldovan business community, particularly in the agricultural production sector. Although Moldovan farmers often see the need to cooperate, many find it difficult to “trust” their neighbors and competitors. There are examples of associations beginning to work in Moldova, but the range of these associations is limited. A concerted effort should be made to support the development of industry-level market-based associations aimed at increasing the market share and knowledge of the members.

The key to supporting the sustainable development of associations is to provide the right amount of resources and the necessary strategic support and guidance for the association to establish a solid foundation. This is no easy task in an environment where delegation of authority, corporate governance, professional services, and membership organizations have had limited experience and success. However, there are examples of where this specific approach has worked in the past, including Albania, Kosovo, and Palestine. The associations’ principal objectives would be to contribute to Moldova’s economic development by emphasizing expanded trade and market opportunities. They would achieve this objective by:

• Facilitating and guiding private and public activities related to accessing new

markets, primarily those focused on export and export-oriented investment. • Prepare an export roadmap of every step, procedure, exception, and obstacle involved

in exporting and/or transporting for sale goods produced in Moldova into neighboring countries and Western Europe. This activity will also examine issues concerning the importation of raw materials and other inputs.

• Preparing and implementing short- and long-term strategies for the development of export potential of key products and product groups.

• Participating fully in the worldwide network of trade and export promotion centers. • Providing information on producers and trading companies in Moldova. • Helping organize trade fairs and trade missions. • Serving as a source of information for import and export activities. • Facilitating compliance with local regulations and trade procedures.

One of the more significant outcomes of these Associations would be that they would act as early examples of a new model of organizing business that will have a broad impact beyond the organization itself. The new approach to organizing business support organizations will have a multiplier effect in the private sector. Leaders in business and industry will actively participate in the formation of the Association and will take leadership roles that will have long-term impact on the private sector in Moldova. (Constraint(s) addressed: Poor Relations between Growers and Processors; Lack of Market Information and Access to Markets)

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Post Harvest Given market conditions and future uncertainty, heavy investment in post-harvest infrastructure may not be warranted, especially in the early project stages. The project should initially emphasize market analysis, agricultural business management training, the need to honor contracts, how to take advantage of market opportunities, the risks and benefits involved, and short and long-term planning. The project needs to analyze not only the market but also how post-harvest infrastructure investments would be made profitable and sustainable as part of an ongoing business. For example, market analysis may determine that there is a seasonal opportunity for table grapes, which technically would require appropriate cold storage. Building and maintaining expensive facilities for one product for a brief season, however, would not be a sensible business decision.52 Seasonal opportunities may not require cold storage or heavy investment in infrastructure but only a reorientation of production techniques, better production timing, and more suitable varieties. A key question to ask is what other products can profitably be run through the facilities to increase capacity utilization, reduce costs, and increase profits. The project should be market focused and market driven — and should look at both the domestic (import substitution) and export markets. In a successful ongoing business, commodities, varieties, quality, timing, quantity, profitability, and risk are heavily influenced by market factors. Marketing assistance,53 useable market information, and training should be provided to producers, traders and processors, and to the government, and a realistic, honest assessment made regarding the ability and time needed to take advantage of market opportunities. For instance, the project should ask questions such as “Why continue to subsidize the development of new orchards when there are no markets for the increased fruit production or the wrong varieties are being subsidized?” Examples of required post-harvest assistance include the following: Training in pack house technical and business operations. Such training is required for existing facilities, and financial assistance in the construction of pack houses may be required in the future. Most of the larger fruit and vegetable growers and traders have storage and packing facilities, but these facilities vary widely in technical and management qualities. Involvement of smaller farmers and traders would necessitate assistance in securing packing houses and storage. Options may include rental, buying post-harvest and storage services, or constructing appropriate-sized units. Pack houses should be strategically located to serve groups of producers and fitted with appropriate equipment that can have a positive return on investment. The project should not create “white elephants” and should avoid excessive, over-sophisticated equipment and buildings. (Constraint(s) addressed: Meeting International Standards and Norms) Significantly improve product quality and presentation. Significant improvements to product quality, product presentation, and reduction of loss and waste can be made through (1) simple training and attention to proper produce handling in harvesting, post-harvest, transport, and

52 For example, specially trained management and labor cannot be expected to be available if only employed for a brief period during the year. 53 For example, foreign supermarkets operating in Moldova should be amenable to stocking Moldovan processed products in supermarkets in their other countries of operation.

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storage activities to reduce bruising and damage; (2) assistance with packaging and labeling; and (3) production changes. Culling bruised produce for immediate sale, processing, or disposal before storage will reduce storage loss, collateral damage during storage, and eliminate the storage cost of lower valued, and potentially unsellable, produce. (Constraint(s) addressed: Meeting International Standards and Norms)

Assistance in the development of cooperatives. Provide assistance in the development of cooperative and collaborative partnerships even though Moldovans are often uncomfortable with cooperative efforts. Existing industry associations are still in the rudimentary stage and need help in developing. Making pack house operations profitable may require the collaborative involvement of several producer-traders. Even the larger operations in the apple sector are exploring cooperative marketing and the rental of cold storage space to other producers. Processing companies voice concern over raw material supply; reaching agreement on how producers can share in the profits of successful operations may be one solution. (Constraint(s) addressed: Poor Relations between Growers and Proecssors)) Catalyze the establishment of pre-cooling centers. Temperature is the single most important consideration in maintaining quality of produce after harvesting. Promptly refrigerating harvested product helps retard pre-mature ripening, softening, and textural changes. Moldovan producers have very few pre-cooling options, and most of those that exist are not specifically designed for pre-cooling. To address this challenge, the project should help catalyze the expansion of the pre-cooling stock in Moldova. One approach might be to model a network of pre-cooling facilities around those used to establish chilling tanks for milk in communities where there is dairy production. The project could support (with soft loans, technical assistance, and design and logistical support) the placement of pre-cooling centers in or near several communities throughout the country. Growers could bring their recently harvested crops to the center, pre-cool them, and then take them to a longer-term cold storage facility or onward to the final market. (Constraint(s) addressed: Limited Access to Affordable Credit, Meeting International Standards and Norms) Improving storage containers. Improved storage materials and avoiding over-stuffing containers will also reduce storage losses and degradation of quality. According to one large producer-exporter, 20 percent of its apples are damaged in storage due to compression and poorly designed containers. This producer-exporter calculates that he would need 4,500 plastic storage crates (at 110 Euros each) to replace its unpadded wooden and steel containers, which are similar to those commonly used in Moldova. Proper packaging —sturdy, capable of maintaining quality, and presentable — goes a long way in improving a product’s image. According to AgroPomFruct, Polish advisors have said that the Moldovan apples have a good taste, sometimes better than Polish apples, but that Moldovan packaging is very poor and presents a bad initial impression, which significantly limits the market value of Moldovan apples in foreign markets. (Constraint(s) addressed: Meeting International Standards and Norms, Standards and Certifications)

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Recommended Mechanisms for Delivering Technical Assistance Interventions Several excellent local organizations and donor projects have ongoing agriculture-related activities in Moldova, including government ministries and universities. Collaborating with them and leveraging their efforts will provide additional resources for the project while, at the same time, strengthening national capacity. Successful local agribusinesses should serve as models and could provide short-term technical experts. Regional experts should be brought in, from Poland, for example, which already has a small agricultural development program operating within the country, to work with local experts. Assistance should also be provided beyond the agricultural production and trading firms to include support services, packing house design firms, the financial sector, and others in the value chain. Examples of potential collaborative partners include the following:

• SGS is an internationally recognized private company that certifies both exports and imports. It was the first in the region to introduce Western quality systems. It is the country’s only local certifying organization for GlobalGAP and organic products and

Simple General Produce-Handling Recommendations that Should be Taught to and Followed by Farmers and Processors in Moldova:1 The most important key to quality maintenance of fresh fruits and vegetables is careful handling. Symptoms of injuries incurred during harvesting, handling, grading, and packaging usually are not evident until the products reach retail or consumer levels. Bruises and other mechanical damage not only detract from the appearance of the product but are good avenues of entrance for decay organisms. Post-harvest rots are more prevalent in fruits and vegetables that are bruised or otherwise damaged than in undamaged products. For instance, decay has been shown to be greater in bruised areas of apples than in unbruised areas. Severely bruised prunes developed 25 percent decay, whereas unbruised prunes decayed only 1.3 percent during storage. Mechanical damage also allows increased moisture loss. The rate of moisture loss may be increased by as much as 400 percent by a single bad bruise on an apple. Skinned potatoes may lose three to four times as much weight as non-skinned potatoes. Post-harvest disease management starts in the field and continues throughout harvesting, handling, and marketing. Sanitation is critical, because decayed debris is an excellent source of inoculation.

• Train harvest labor to handle products gently. • Harvest at the proper stage of maturity; harvest dry, if possible. • Handle each fruit or vegetable no more than necessary; field pack if possible. • Trim fingernails and/or wear cotton gloves. • Use padding in the bottoms of picking containers. • Install padding materials on the sides and bottoms of bulk bins. • Do not overfill bulk bins. • Minimize drop heights when transferring products from picking containers or bulk bins. • Harvesting buckets, packing lines, and storage areas should be frequently cleaned up and sanitized. • Food safety also begins in the field, because several outbreaks of food-borne illnesses have been

traced to contamination of produce in the field. • Palletize containers. • Load containers carefully into transport vehicles to minimize handling of individual units. • Use strong, standard-sized packages that will adequately protect contents. • Packing line operations:

o Use water dump system to float products out of bins, if possible. o Keep lines as level as possible. o Minimize drop heights. o Use decelerator strips to control the velocity of products

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uses Moldovan auditors to increase local capacity and cost effectiveness. SGS monitors approximately 3,000 hectares of organic production. The Ministry of Agriculture also issues organic certifications, but these are not internationally recognized. SGS has considerable local experience, with approximately 60 percent of the market for HACCP, ISO 22001, and ISO 9001 work in the country. Currently, about 20 companies have ISO and HAACP certifications. In 2006, Moldova had only one GlobalGAP certified company, whereas by the end of 2008, five had been certified. SGS also provides training and activities promoting certification or recertification in cooperation with donor or industry funding.

According to SGS, the biggest problem it has encountered in Moldova is inadequate record keeping by companies. SGS reasons that it is difficult for most Moldovan agricultural concerns to focus on both production and marketing. Companies considering certification need to understand that having GlobalGAP certification does not ensure a quality product if the harvest and post-harvest functions are faulty. They also need to question whether or not they even need to bear the expense of certification if their market does not require it.

• Two local universities have post-harvest courses in their curricula. The Department of

Horticulture of the State Agricultural University of Moldova54 has a Chair in Wine Technology and Storage and Processing of Agricultural Products. Following a restructuring of the educational and research-development system, the responsibility for carrying out horticultural research and disseminating the results has been assigned to the State Agricultural University of Moldova. In recent years, staff members of this department have published a series of papers on horticultural product handling and storing, but research and publications on post-harvest techniques (forced air and water cooling, controlled and modified atmosphere, etc.) have not been undertaken.

The Technical University of Moldova also has several relevant chairs, including the Chair of Industrial Technological Equipment in the Mechanical Engineering Department, the Chair of Design and Manufacturing of Agricultural Machines in the Machine Building Engineering Department, and the Chair of Preserving Technology in the Food Industry Department.

• The National Agency for Rural Development (ACSA; www.acsa.md ) is a well respected

local NGO with 15 years of experience and donor support and a network of 35 regional centers and 110 regional and 350 local consultants throughout the country. It provides information, consultancies, and training for agricultural producers and rural entrepreneurs. The organization is serving as and implementing a national agriculture

54 From 2003 to 2006 North Carolina State University had a partnership for postharvest programs with the State Agricultural University of Moldova. Grants enabled the State Agricultural University to establish a Master’s degree program in postharvest technologies that was adapted from and made compatible with the educational system for the European Community (ECTS). Undergraduate courses were modified to insert components for post-harvest procedures. The Agricultural University built an up-to-date postharvest laboratory that served the training of students, research for faculty, and extension services for Moldovan farmers submitting fruits and vegetables for analysis.

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extension service. The NGO has published more than 100 informative and training materials with a total of 300,000 copies. It holds training of trainers and direct training to farmer sessions. It has conducted specific trainings on post harvest handling and incorporates these topics within its general trainings, particularly for grapes and apples. ACSA’s training program includes a module titled “Post-Harvesting Technologies and Exploring Agricultural Products.” The NGO uses its own staff and short-term experts from the universities, particularly the Research Institute for Pomiculture. In interviews, ACSA noted that there are very few national post harvest specialists in Moldova, but it stated that Codru ST was the best private sector agricultural firm and serves as the local model for controlled atmosphere operations.

• The Central Agricultural Marketing Information Bureau (CAMIB NGO), is an offshoot of

the 1996 TACIS Project and provides marketing services and information to the private sector. Until recently, CAMIB collected regional and national agriculture market information; due to funding constraints, however, it now collects only national data. Information is found on its Web site, its monthly publications, and on the daily early morning radio national farmers’ program. The organization also provides B2B information and facilitates contacts between buyers and sellers.

• Several donor programs are of interest as well. Most offer financial resources for farmers

and the private sector who want to invest in agriculture and agribusiness, including post-harvest infrastructure. Several cold storages have been financed through these credit lines. These programs include IFAD II and III and the forthcoming IFAD IV program (www.en.ifad.md), the World Bank’s RISP-II project (www.capmu.md/?a=1&id=30), rural investment and services project phase II 2006-09; the Japanese 2KR Program for agricultural machinery (2kr.moldnet.md/en.html), the Japanese small and medium enterprise support program (www.jnpga.md/en/), and the Dutch Government’s private sector investment program (www.evd.nl/psi). In the past, the CNFA/USAID project (www.cnfa.md) supported investment and currently supplies technical information, but this program is scheduled to end in June 2009. Future USAID programs most likely will involve private sector and agricultural sector assistance.

Conclusions and Recommendations Although some of the issues identified throughout the analysis as discussed and identified throughout the report require policy or public sector action, many challenges faced by the sector can be addressed directly by the private sector and/or in partnership with the Government. The actions required to address the issues raised throughout the analysis and therefore mitigate or reduce their negative impact on the competitiveness of the sector are summarized in the action matrix provided on the next page

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Short-, Medium- and Long Term Interventions Required to Strengthen the Competitiveness of the High Value Agriculture Sector in Moldova Actions Required Responsible Entity Short Term Interventions (<6 months) Gov't Private Joint 1 Initiate public-private dialogue to articulate a medium and long-

term strategic vision and plan for the HVA sector with a focus on expanding the current market base

2 Initiate a public-private dialogue to establish a road map aimed at

building trust among the various players along the value chain 3 Establish (or strengthen) organizations (associations and

cooperatives) that represent the interests of farmers and processors

4 Establish a plan to contend with the ongoing labor shortage

Medium Term Interventions (6-18 months) 1 Conduct widespread soil analysis to identify fertilizer

requirements and establish a plan for expanding access to testing laboratories

2 Develop strategically located, centralized pre-cooling centers in key farming areas

3 Initiate public-private dialogue to develop and implement a tree and vine replanting program with varieties that are in demand in targeted markets

4 Improve access to short and medium term finance

5 Improve farmer and producer access to the latest information on international standards and types of certifications required for targeted markets

6 Develop and strengthen the supply chain to help small farmers

gain access to larger producers and expanded markets

7 Reduce the high cost to transit through Ukraine

8 Develop an industry-wide organization to represent all stakeholders along the farm-to-table value chain

9 Implement a Market Access Program complete with a series of trade fairs, reverse trade fairs, industry days, new approaches to accessing market information, etc.

10 Implement a program to address the problems in the post harvest areas including training programs in proper handling techniques and pack house operations.

11 Implement a plan to contend with disparities in the labor market

12 Plan and fund a network of transparent wholesale markets throughout the country

Long Term Interventions (>18 months) 1 Strengthen the sustainable capacity and access to private, on-farm

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extension services 2 Strengthen R&D capacity to develop new varieties

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Table 1: Growth in Value of Fruit & Vegetable Imports

Importer 2003-2004

2004-2005

2005-2006

2006-2007

European Union (EU 27) 13% 9% 8.5% 17.5%

Source: International Trade Center calculations based on COMTRADE statistics.

Annex 1. Desk Review for the Market Study and Value Chain Analysis of the Fruit and Vegetable Sector in Moldova The Millennium Challenge Corporation (MCC) is considering funding a project, Transition to High Value Agriculture, to alleviate rural poverty in Moldova by stimulating agricultural sector growth. With an excellent climate, location, and soil coupled with a relatively inexpensive and educated labor force, Moldova is considered ripe for the revitalization of high-value agriculture (HVA).55 MCC is studying the market and value chain of fruits and vegetables, which are HVA products, to inform and shape the project. A. Background Moldova has traditionally been a major producer of HVA products. For illustrative purposes, it is significant to note that in 1985, before the fall of the Soviet Union, Moldova produced, processed, and marketed 3.3 million metric tons of HVA products. This volume is greater than neighbors Bulgaria and Romania have each produced in recent years. Moldova’s independence in 1991 was followed by a farm restructuring process that transformed state-owned cooperatives into small and medium-sized farms, a decline in subsidies, rising prices for inputs, and deteriorating infrastructure, which has reduced the availability of irrigation and increased the time to get goods from farm to market. These factors led to a sharp drop in production, and by 2002, production of HVA products was only at half of 1985 levels.56 In recent years, although agriculture remains one of Moldova’s most important economic sectors, annual agricultural production experienced an average growth of only 3.2 percent from 1999 to 2007, while overall GDP growth was 4.7 percent on average for the same period and production of HVA products in 2006 was approximately 1.74 million tons.57 Despite these challenges, the revitalization of the fruits and vegetables sector is seen as a potential driver of broad-based economic growth. A large portion of the Moldovan labor force is engaged in agriculture, so increasing primary fruit and vegetable production will boost the incomes of producers, processors, and marketers. In turn, their increased incomes will lead to greater demand for other goods and services. A1. The Worldwide Fruit and Vegetable Market The international demand for fruits and vegetables, both fresh and processed, is considered to be highly favorable, due to increased tendencies worldwide toward healthy

55 High-value agricultural (HVA) products generally produce higher revenues per hectare, higher net income per unit of production when sold in fresh or processed form, and higher added value when processed than other crops or their processed derivatives. Fruits and vegetables have consistently shown higher revenues and profits per hectare than other crops, such as cereals or sunflower seeds. 56 Moldovan HVA Export Competitiveness Study, USAID/Moldova Agribusiness Development Project (CNFA), 2004: 12. 57 National Bureau of Statistics of the Republic of Moldova, http://www.statistica.md/category.php?l=en&idc=129&.

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lifestyles and diets, which are strongly associated with fruit and vegetable consumption.58 The annual growth rate of European Union (EU) fruit and vegetable imports over the past five years is shown in Table 1. There are similar trends in the Commonwealth of Independent States (CIS). Although the increase in worldwide demand for fruits and vegetables is promising, it is also important to note that increased production of fruits and vegetables in Moldova provides an opportunity for import substitution. Globally most fruits and vegetables are produced for domestic consumption, with only 4.4 percent of global vegetable production and 8.9 percent of fruit production traded internationally.59 However, increased demand for fruits and vegetables and the challenge to supply seasonal, perishable products year-round has begun to favor international trade in the fresh fruit and vegetable sector. A2. Moldova’s Position in Regional and International Fruit and Vegetable Markets Moldova has several competitive advantages for developing its fruit and vegetable sector – rich soil, a good climate, land suitable for irrigation, access to water resources, a good location close to major foreign markets, an inexpensive labor force, and many small farms, which are considered essential for fruit and vegetable production.

Table 2: Countries Importing Moldovan Vegetables60

The relative growth of Moldovan fruit and vegetable exports compared to world imports of fruits and vegetables is high and ranks Moldova in the top 10 countries specializing in fruit and vegetable exports, but Moldova has yet to capitalize on this advantage.61 Table 2 (above) and Table 3 (next page) show the top 10 countries that have imported Moldovan vegetables and fruits in the past five years. Moldova exports considerably more fruits than vegetables. 58 Sector Analysis Report, MCA Moldova, 2007: 31. 59 Cook, Roberta. “International Trends in the Fresh Fruit and Vegetable Sector,” International Society for Horticulture Science Acta Horiculture, 1999, 495:143-156 60 Source: International Trade Center calculations based on COMTRADE statistics. 61 Moldovan HVA Export Competitiveness Study, USAID/Moldova Agribusiness Development Project (CNFA), 2004: 13.

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Table 4: CIS Vegetable Exporters (exported value in USD thousands by year)

Exporter 2003 2004 2005 2006 2007

Uzbekistan 59,070 80,319 115,610 122,126 145,936

Ukraine 13,107 33,809 39,331 86,661 87,696

Russian 37,504 51,303 54,412 68,478 63,867

Kazakhstan 15,927 53,569 33,694 47,483 60,800

Kyrgyzstan 7,735 15,597 13,624 23,913 47,910

Belarus 23,361 28,644 19,978 22,508 41,165

Azerbaijan 5,657 12,204 26,224 33,284 39,097

Tajikistan 8,944 9,313 9,805 11,550 36,228

Moldova 1,618 2,934 4,834 5,712 2,705

Turkmenistan 923 2,020 2,723 1,884 918


Table 3: Countries Importing Moldovan Fruits62

Moldova’s competitiveness can also be measured by comparing farm production costs to international market prices, after accounting for handling, transport, and other distribution costs. This measure is the Domestic Resource Cost (DRC); values below 1.0 indicate that the economic cost of domestic land, labor, and capital resources used in the production of a commodity is less than the value they add. Value added is evaluated using international prices for outputs and inputs, adjusted for transport and similar costs. This measure was applied to Moldovan apples, table grapes, and tomatoes, three of Moldova’s most popular products. All three products have low DRCs, indicating the strong potential international competiveness in fruits and vegetables.63 62 Source: International Trade Center calculations based on COMTRADE statistics.

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Table 5: CIS Fruit Exporters (exported value in USD thousands by year)

Exporter 2003 2004 2005 2006 2007

Uzbekistan 67,032 151,305 219,464 377,045 277,380

Ukraine 44,136 58,951 102,166 151,545 148,053

Azerbaijan 43,323 33,789 146,432 98,705 124,520

Moldova 54,547 64,688 60,977 64,587 92,851

Russia 65,197 89,107 66,027 103,984 83,846

Georgia 15,946 21,284 76,937 61,669 72,181

Tajikistan 17,323 23,696 30,946 49,268 62,004

Kazakhstan 11,580 36,650 23,633 27,529 53,952

Belarus 11,040 13,968 12,953 37,842 44,414

Kyrgyzstan 4,785 4,327 4,015 10,535 30,103Source: International Trade Center calculations based on COMTRADE statistics.

Moldova’s fruits and vegetable exports have traditionally gone to the countries of the CIS and Romania (which is now part of the European Union). Russia, Belarus, Romania, France, and Ukraine are the most important markets in terms of volume and value for Moldovan producers. Table 4 lists countries in the CIS by value of exported vegetables and Table 5 lists countries in the CIS by value of exported fruits. Moldova is a much greater exporter of fruits than vegetables to other CIS countries. To have a complete picture of the Moldovan fruit and vegetable market, it is also essential to consider the source of Moldova’s imports of its fruits and vegetables. As Tables 6 and 7 show,64 Moldova is mainly importing vegetables from Turkey and Poland, and fruits from Turkey, Ecuador, France, Greece, and Ukraine. Moldova is a signatory to several trade agreements, including bilateral free trade agreements with Albania, Armenia, Kyrgyzstan, Bosnia-Herzegovina, Croatia, Bulgaria, Romania, Macedonia, Serbia, and Montenegro. Moldova is also a member of the Central European Free Trade Agreement (CEFTA), the Georgia, Ukraine, Azerbaijan and Moldova (GUAM) trade agreement, and the Eurasian Economic Community (EAEC). Despite these trade agreements, Russia has periodically placed bans on Moldovan products. This is troublesome due to the large volume of fruit and vegetable exports that go to Russia. For example, in May 2005, Russia banned fruits and vegetables and more recently banned wine. The stated reason for the bans was that Moldovan products were “unsafe,” but Moldovan authorizes

63 Moldova Agricultural Policy Notes: Agricultural Markets, Report No. 42141, World Bank, 2005: 1. 64 Source for Tables 6 and 7 is International Trade Center calculations based on COMTRADE statistics.

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Table 8: Moldova's Top Fruit Exports to the EU (in thousands of USD)

Product Label 2005 2006 2007 Nuts nes 26,577 31,248 41,286 Dried fruit 2,986 2,323 3,344

Apples, pears and quinces, fresh 2,426 2,238 1,942

Grapes, fresh or dried 858 1,126 183 Provisionally

preserved fruits & nuts (unfit for

immediate consumption

136 290 139

Frozen fruits & nuts 82 60 90 Apricots, cherries,

peaches, nectarines, plums & sloes, fresh

546 661 12

Source: ITC calculations based on COMTRADE statistics.

Table 9: Gross Harvest and Yield Per Hectare of Fruits, Berries and Grapes

2003 2004 2005 2006 Gross harvest, in thousands of tons

Fruits and berries 617.2 430.4 386.2 329.2 Grapes 677.2 685.6 518.5 466.1

Yield per hectare, centners Fruits and berries 57.1 41.5 36.7 30.9

Grapes 47.4 49.5 36.2 31.9

Source: National Bureau of Statistics of the Republic of Moldova

believe that the bans were based on political grounds.65 Still, increased safety and quality standards on the part of Moldovan producers will make it less likely for these bans to occur in the future. Ukraine periodically violates the free transit provision in the Moldova-Ukraine free trade agreement, which is a concern, because Moldovan exports to CIS countries often have to pass through Ukraine. Despite this, Moldova has favorable name recognition for fruits and vegetables in the CIS. In 2005, Moldova signed an Action Plan with the European Union. Through this plan, Moldova is harmonizing legislation to EU trade requirements and product standards. With Romania’s accession to the EU on 2007, Moldova became an immediate neighbor of the EU. Given the EU’s strong safety and quality requirements, Moldovan producers have made only limited progress in penetrating the European market. Moldova does benefit from autonomous trade preferences for imports into the EU, which provide for duty- and quota-free access to EU markets for most products originating in Moldova. However, a specific rate of duty is applied to 16 crops, including apples, table grapes, cherries, peaches, nectarines, plums, and tomatoes. Table 8 shows Moldova’s top fruit exports to the EU. Nuts, especially walnuts, are the main product being exported to the EU from Moldova. The next largest export to the EU is dried fruit.

For a more complete picture of fruit and vegetable production in Moldova, see Tables 9 and 10. For additional data on products exported from and imported into Moldova, see Tables 11 and 12 on the following pages.

65 Moldova Agricultural Policy Notes: Agricultural Markets, Report No. 42141, World Bank, 2005: 29.

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Table 10: Production of Main Plan Products in Moldova(in thousands of tons)

Product 2003 2004 2005 2006 Cereals and leguminous crops – total 1612.7 2993.7 2837.9 2290.2 winter wheat 100.6 853.9 1047.1 677.9 barley (winter and

spring) 57 268.3 212 200.1 grain maize 1413,6 1794,5 1492 1322,2 leguminous crops 29.6 50.1 64.5 67.5

Sunflower 390 335.2 331.1 379.9 Soy 19,4 40,2 65,6 79,8 Sugar beet (industrial) 656.8 91.3 991.2 1177.3 Tobacco 6.9 7.9 6.7 4.8 Potatoes 302.8 317.7 378.2 376.9 Vegetables 360.8 315.2 389.3 475.2 Melons and gourds 71.6 56.9 48.3 92 Source: National Bureau of Statistics of the Republic of Moldova

As shown in Tables 11 and 12, Moldova is importing a significant amount of tomatoes. In 2007, Moldova spent approximately $5,649,000 importing tomatoes. Given Moldova’s history of tomato production and the apparent demand for tomatoes, as indicated in the import data, tomatoes present an opportunity to increase production for import substitution.

Table 11: Value of Vegetables and Fruits Exported and Imported by Moldova from 2003 to 2007 Vegetables by Product Label Exported value (in USD thousands) Imported value (in USD thousands)

2003 2004 2005 2006 2007 2003 2004 2005 2006 2007

Tomatoes 693 966 890 1425 951 1646 2078 3398 4721 5649

Dried vegetables, shelled 407 1000 2145 2308 836 853 1488 1296 698 1836

Frozen vegetables 378 749 1133 849 467 20 33 100 149 180

Onions, garlic and leeks, fresh or chilled 51 31 208 270 126 1650 928 448 490 1726

Carrots, turnips and salad beetroot, fresh or chilled

32 34 33 136 118 375 91 128 337 1104

Cucumbers and gherkins, fresh or chilled 12 13 39 159 91 457 718 1272 1418 2532

Vegetables, provisionally preserved (unfit for immediate consumption)

0 0 0 14 48 152 56 85 78 35

Cabbages and cauliflowers, fresh or chilled

4 108 242 202 36 176 38 365 268 585

Potatoes 0 2 57 172 20 4525 2317 1011 1671 3622

Leguminous vegetables, shelled or unshelled, fresh or chilled

14 0 56 114 12 2 2 1 0 25

Vegetables, fresh or chilled 18 32 30 58 1 110 169 211 309 1152

Lettuce and chicory, fresh or chilled 0 0 0 0 0 23 27 41 40 53

Dried vegetables 8 0 0 5 0 282 294 368 290 617

Manioc, arrowroot salem (yams) etc 2 0 0 0 0 0 0 0 0 5

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Fruits by Product Label Exported Value (in USD thousands) Imported Value (in USD thousands)

2003 2004 2005 2006 2007 2003 2004 2005 2006 2007

Nuts nes 23071 27892 30741 37479 48067 1919 3695 4799 6538 8084

Apples, pears and quinces, fresh 22344 24748 20425 13883 22460 1933 104 5683 1860 671

Grapes, fresh or dried 3414 2456 2454 3375 12020 311 486 465 608 897

Apricots, cherries, peaches, nectarines, plums & sloes, fresh

4059 7434 3094 5842 5024 114 168 344 3095 3857

Dried fruit 800 1792 3761 2869 4427 26 85 155 214 441

Fruits nes, fresh 136 102 241 728 483 389 426 544 1216 1905

Frozen fruits & nuts 451 148 125 80 153 35 1 20 61 61

Provisionally preserved fruits & nuts (unfit for immediate consumption

86 93 136 290 144 581 658 67 0 0

Citrus fruit, fresh or dried 135 23 0 5 69 2713 2737 3165 4049 6807

Melons (including watermelons) & papayas, fresh

6 0 0 36 4 32 85 75 87 219

Brazil nuts, cashew nuts & coconuts 0 0 0 1 0 35 61 109 105 143

Bananas and plantains, fresh or dried 47 0 0 0 0 1089 1563 2158 2477 5182

Dates, figs, pineapples, mangoes, avocadoes, guavas

0 0 0 0 0 12 62 102 172 385

Source : International Trade Center calculations based on United Nations Commodity Trade Statistics Database (COMTRADE) statistics.

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Table 12: Quantity of Vegetables and Fruits Exported and Imported by Moldova from 2003 to 2007

Vegetables by Product Label Exported Quantity (in Tons) Imported Quantity (in Tons)

2003 2004 2005 2006 2007 2003 2004 2005 2006 2007

Tomatoes 2491 3926 3596 5596 3636 3620 6034 10645 15459 10184

Dried vegetables, shelled 1637 3356 16839 15219 2267 1679 3815 1820 1613 3245

Frozen vegetables 1073 1650 1806 1533 808 19 36 79 122 143

Onions, garlic and leeks, fresh or chilled 351 133 846 1602 668 14260 8587 5042 3717 7640

Carrots, turnips and salad beetroot, fresh or chilled 238 133 247 788 597 4112 1006 1500 3927 7519

Cabbages and cauliflowers, fresh or chilled 32 846 1528 1124 228 2415 417 5394 3290 2783

Cucumbers and gherkins, fresh or chilled 47 93 147 639 218 1264 2069 3670 3957 4425

Vegetables, provisionally preserved (unfit for immediate consumption) 0 0 0 57 150 320 106 162 119 67

Potatoes 0 18 466 742 88 57577 27271 11506 13228 19474

Leguminous vegetables, shelled or unshelled, fresh or chilled 38 0 521 381 15 9 1 6 0 54

Vegetables nes, fresh or chilled 72 99 118 196 1 225 367 380 588 1098

Lettuce and chicory, fresh or chilled 0 0 0 0 0 7 9 27 18 26

Dried vegetables 3 0 0 20 0 121 92 47 39 53

Manioc, arrowroot salem (yams) etc 1 0 0 0 0 0 0 0 0 21

Fruits by Product Label Exported Quantity (in Tons) Imported Quantity (in Tons)

2003 2004 2005 2006 2007 2003 2004 2005 2006 2007

Apples, pears and quinces, fresh 124128 136402 136476 87201 78511 7266 596 30172 9620 1037

Grapes, fresh or dried 11260 8337 10797 15239 40428 707 1047 709 774 993

Apricots, cherries, peaches, nectarines, plums & sloes, fresh 15341 29000 13991 20944 10782 266 569 1432 7391 5835

Nuts nes 9563 13017 10486 9442 9825 2785 4574 5374 5957 6038

Dried fruit 717 2146 2844 1623 2297 32 38 101 114 215

Fruits nes, fresh 299 221 511 1176 615 675 932 1336 2273 2109

Provisionally preserved fruits & nuts (unfit for immediate consumption 252 316 519 720 239 2220 2343 31 0 0

Frozen fruits & nuts 947 312 212 117 206 51 1 21 79 26

Citrus fruit, fresh or dried 332 57 0 20 113 7057 7882 9068 11875 14183

Melons (including watermelons) & papayas, fresh 60 0 0 276 21 197 733 344 392 357

Brazil nuts, cashew nuts & coconuts 0 0 0 0 0 38 50 85 73 84

Bananas and plantains, fresh or dried 115 0 0 0 0 3181 4907 6988 7686 11222

Dates, figs, pineapples, mangoes, avocadoes, guavas 0 0 0 0 0 15 106 152 218 252

Source : International Trade Center calculations based on United Nations Commodity Trade Statistics Database (COMTRADE) statistics.

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Table 13: Irrigated vs. Non-irrigated Vegetable Yields (with fertilizers)

Vegetable Non-irrigated Yield (tons per hectare)

Irrigated Yield (tons per hectare)

Tomatoes 56.8 126.3Sweet Pepper 13.7 36.2

Eggplant 11.8 32.1Cucumber 8.6 22.5

Peas 8.4 14.2Cabbage 59.7 121.2

Source: P. Patron “Joint Action of Agriculture intakes in Vegetable Production” from page 38 of the Sector Analysis Report, MCA Moldova, 2007

A3. Moldovan Food Security Transforming Moldova’s fruit and vegetable sector, which includes upgrading the country’s irrigation infrastructure, is also important because of the risk of food insecurity. The most widely used definition of food security is: “Access by all people at all times to enough food for an active, healthy life.” 66 Household income is a core component of food security. Because the poor spend a greater proportion of their income on basic subsistence goods, such as food and housing, they are most significantly affected by higher food prices. The lack of adequate irrigation infrastructure in Moldova makes crop yields unpredictable and compromises the food security of Moldova’s poorest citizens. The proposed project will lead to sustainable livelihoods in both rural and urban areas, which will be essential to mitigating the impact of future food crises. As recently as this past spring, the International Federation of Red Cross and Red Crescent Societies (IFRC) carried out a food relief project in Moldova. Extremely high temperatures and minimal rainfall during the summer of 2007 led to widespread drought conditions in Moldova. Over 200,000 people were affected by the weak harvests. IFRC provided food assistance to 7,750 vulnerable families in isolated rural farms and villages.67 That said, however, it is important to note that the vegetable sector suffered much more than the fruit sector due to the 2007 drought. According to Ilie Donica, scientific manager of the Institute of Fruit Culture, the fruit harvest was not devastated because apricot and cherry trees are resistant to high temperatures. Also, the Department of Agricultural Sciences within the Academy of Sciences made recommendations to fruit growers on what measures to take to ensure as successful a harvest as possible considering the weather conditions.68 Irrigation infrastructure has deteriorated dramatically since Moldovan independence. Countrywide irrigation is now unavailable, and recent statistical data shows that only 5 to 10 percent of previously irrigated land is irrigated now.69 This is particularly worrisome because Moldova is prone to dry summers. Table 13 shows the dramatic difference in vegetable production with and without irrigation. Thus, the link between food security and irrigation makes it all the more critical to rehabilitate Moldova’s irrigation system.

66 USDA’s website addressing Food Security ERS/USDA Briefing Room - Food Security in the States. 67 Moldova: Food Insecurity, DREF Operation Final Report, International Federation of Red Cross and Red Crescent Societies, 2008. 68 “The drought will cut down this year bread crop by almost one third,” All Moldova, June, 11, 2007: http://www.allmoldova.com/index.php?action=newsblock&id=1181545047&lng=eng. 69 Sector Analysis Report, MCA Moldova, 2007: 38.

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B. Moldovan Perspective on Regional and Global Fruit and Vegetable Market Trends As was previously mentioned, the international demand for fruits and vegetables, both fresh and processed, is growing due to the global trend toward healthy lifestyles and diets, which are strongly associated with fruit and vegetable consumption.70 The retail food sector is also seeing significant changes. There is a movement away from kiosks and outdoor wholesale markets toward modern supermarkets. For example, in Poland, the supermarkets’ share of the whole food market went from 18 percent in 1998 to 32 percent in 2002. It is estimated that in 2010, the share of large retail networks in Poland will reach 75 to 80 percent of retail trade, as it is now in West European economies.71 Moreover, it is believed that, in general, in Europe, supermarkets will continue to grow in those markets in which they hold less than 75 percent of the retail food business.72 However, due to the poor quality and packing of most Moldovan fresh fruits and vegetables, they cannot be sold in supermarkets and are instead sold at much lower prices in the wholesale markets and kiosks. To an even greater extent than in the CIS, supermarkets dominate the EU fruits and vegetables market. Over the next decade, supermarkets are expected to dominate the fruits and vegetables market, which will lead to more direct linkages between suppliers and customers, gradually reducing the role of traditional wholesalers.73 B1. Fresh Fruits and Vegetables Growing global demand for year-round availability of a broader line of high-quality fresh produce is increasing the trade of fresh fruits and vegetables. Advances in post-harvest handling technology have improved the cold chain, a necessary condition for long-distance shipping of perishable goods that has led to the increase in the trade of fresh fruits and vegetables. Fresh fruits and vegetables represent the highest value potential to agriculture producers. That said, Moldovan fresh produce is on the low-price segment when compared to world exports. Moldovan fresh fruit production is highly export oriented, but the number of Moldovan export products is limited. Main export products include apples, table grapes, plums, and a small volume of peaches, apricots, and both sweet and sour cherries. Moldova is a net exporter of fresh fruits but a net importer of fresh vegetables, because of the failure of local producers to supply early and off-season vegetables for the growing consumer market. This is caused by a lack of irrigation, greenhouses, and seed varieties (i.e., early or late-harvest varieties). Most Moldovan fresh produce is traded by smaller wholesalers in open markets rather than in high-end supermarkets due to the low quality and consistency and poor packaging. 70 Sector Analysis Report, MCA Moldova, 2007: 31. 71 Jerzy Wilkin, Małgorzta Juchniewicz and Dominika Milczarek, “Regoverning agrifood markets in CEEC” in How Effective is the Invisible Hand? Agricultural and Food Markets in Central and Eastern Europe, 2005: 24. 72 Prodromos Kalaitzis, Gert van Dijk, and George Baourakis, “Euro-Mediterranean supply chain developments and trends in trade structures, in the fresh fruit and vegetable sector,” presented at the Mediterranean Conference of Agro-Food Social Scientists, 2007: 3-5 73 Cook, Roberta. “The Evolving Global Marketplace for Fruits and Vegetables.” California Agriculture Journal, April-June 2004.

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Table 14: Structure of Fruit and Vegetable Exports in 2005 (Moldova vs. World)

Type Moldova World Fresh 52.1% 51.8%

Frozen 1.1% 7.1% Dried 5.3% 6.3%

Canned 21.0% 22.8% Juices 20.4% 12.0%

Source: NBS for Moldova Data and ITC for world data.

Table 15: Countries Importing Moldovan Dried Fruit


B2. Frozen Fruits and Vegetables Frozen fruits and vegetables represent a medium- to high-value return for agricultural producers. The frozen fruit and vegetable business in Moldova is considered to be underdeveloped (see Table 14). Although the current frozen business is very small, in a recent survey, most Moldovan canneries reported that the freezing business is seen as an investment opportunity that offers higher margins and has excellent market perspectives. Most of those surveyed indicated a serious intention to get involved in quick-freeze production.74 B3. Processed and Canned Fruits and Vegetables Canned fruits and vegetables provide a relatively low return for agriculture producers. Moldova’s canning and processing industries are considered to be more advanced than the country’s fresh fruit and vegetable sector.75 Foreign distributors and supermarket chains are the main clients of Moldovan canneries, and canned fruits have done better than canned vegetables in penetrating the EU market. Moldovan canned produce is currently positioned in the lower- to middle-price segment. In the low-price segment, Moldova’s main competitors are Asian countries, including China. At the medium-price point, Hungary and Bulgaria are Moldova’s biggest competitors. According to the EU Center for the Promotion of Imports from Developing Countries, canned fruits and vegetables are the largest and fastest growing segment of the fruits and vegetables product group. B4. Dried Fruits and Vegetables Moldovan dried fruit has successfully competed in the higher quality EU market over the past few years. The sector is still operating under capacity, but Moldova is a net exporter of dried fruits. Eighty percent of Moldovan dried fruit exports go to the EU, and 20 percent go to the CIS. Table 15 shows the top 12 importers of Moldovan dried fruit. Moldovan products are currently sold at the middle price point, but may be able to move up to a higher price point

74 Sector Analysis Report, MCA Moldova, 2007: 31. 75 Sector Analysis Report, MCA Moldova, 2007: 8.

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if quality increases or organic production begins. 76 Compared to world exports, there is almost no price gap between Moldovan dried fruits and other international dried fruits. Dried fruits are primarily sold in bulk to EU markets or to local large dryers who consolidate large volumes that are sold to importers in the EU. The food processing industry is the largest market segment for dried fruits, both in the EU and CIS markets. Dried fruits are used in breakfast cereals, bakery products, desserts, and confectionery products. Moldovan brands are only sold locally but are completive in local supermarkets. C. Constraints to Moldovan Producers Many of the constraints inhibiting Moldovan producers from becoming more competitive in the fruit and vegetable sector have already been discussed. This section will take a closer look at how low product standards, lack of necessary infrastructure, and limited seed varieties prevent Moldova from being more competitive. C1. Product Standards The relatively poor standards followed by Moldovan producers reduce the ability of Moldovan products to penetrate high-end markets such as the EU. Food standard and safety management systems are becoming increasingly important. Although standards are higher in the EU, high-end CIS markets are now showing a preference for high-quality produce that meets certain safety requirements as well. The Government of Moldova, however, still bases their standards for food inspection and safety on the GOST system dating back to the time of the Soviet Union.77 To compete on the EU market and high-end CIS markets, it is essential that Moldovan fruit and vegetable products be certified. Therefore, Moldova should move toward Global Good Agricultural Practices (GlobalGAP, formerly EurepGAP) standards for fresh produce and Hazard Analysis and Critical Control Points (HACCP) for processed produce. Moreover, a recent World Bank Action Plan78 recommended restructuring institutions involving management of sanitary and phytosanitary measures (SPS), strengthening risk assessment and analysis, reforming the certification system, instituting better inspection procedures, and educating farmers and food handlers about new food safety regulations. Although not yet an obligatory standard for producers of fresh fruit and vegetables, exporters must be aware that in the field of processed fruit and vegetables, HACCP compliance is strongly increasing in importance all over Europe. The system applies to all companies in the food value chain, including companies that process, treat, pack, transport, distribute or trade food products. Current EU legislation requires HACCP compliance from food processors within the EU. EU importers, in turn, require it from their non-EU partners. Recently, a new regulation was passed that enforces similar safety requirements for both food produced within the EU and food imported into EU. The new regulation means that HACCP systems are mandatory for food

76 Moldova’s Dried Fruit Sector Assessment. USAID/Moldova Agribusiness Development Project (CNFA), 2008: 4. 77 Sector Analysis Report, MCA Moldova, 2007: 48. 78 Managing Food Safety and Agricultural Health: An Action Plan, World Bank, 2008.

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processors that trade with EU member states.79 The Parliament of Moldova approved a law that requires food handling and processing companies to implement HACCP-compliant systems, but implementation of this new law is unknown. The National Agency for Rural Development (ACSA) and the USAID-funded Agribusiness Development Project have created a market information system, Export Moldova,80 which provides comprehensive information to producers and processors. Export Moldova provides detailed information on the HACCP and GlobalGAP processes including consultants who can help producers implement GlobalGAP. In addition to HACCP and GlobalGAP, Export Moldova provides information about EU marketing standards. C2. Infrastructure An improved irrigation system, greenhouses, and post-harvest infrastructure such as cold storage and packing houses are greatly needed to improve the yield and quality of Moldovan fruits and vegetables. Irrigation is absolutely necessary for vegetable production and highly recommended for orchards and vineyards. Inadequate irrigation pumping plants and distribution systems mean that there is no water supplied for on-farm irrigation. Thus, the critical investment need is in the national irrigation infrastructure, because the private sector currently has little incentive to invest in on-farm irrigation equipment. The EU Food Security Project is assisting with irrigation pumping plant renovation, so some of the irrigation problems are beginning to be addressed. Similarly, 19 new cold storage facilities were constructed between 2005 and 2007, but only five of the facilities have certified food safety management systems (HACCP or ISO 22001) and only two are GlobalGAP certified. 81 To increase value add and quality, fruits and vegetables must have access to reasonably priced post-harvest treatment, grading, packing, cooling, and storage services. C3. Product Variety The variety of seeds and seedlings is another constraint facing Moldovan fruit and vegetable producers. Imported plant varieties, which are not yet registered in Moldova, cannot be sold on the market and must go through a mandatory testing and registration procedure that currently takes two years for seeds and six years for seedlings.82 This process allows state research institutions that produce seeds and seedlings to maintain their share of the market but is counterproductive. The government should simplify the seed certification process and allow seed importers to present evidence of verification and approval of new seed varieties from the EU, the United States, and certain other countries and obtain expedited certification in Moldova.83 The current process means that, for example, vegetable varieties that are sold in EU markets for only a few years are no longer in demand or available by the time the variety is approved.

79 Export Moldova - http://export.acsa.md/cgi/index.cgi?fpage=ABOUT_HACCP_&lang=eng 80 The Export Moldova website is http://export.acsa.md. 81 Current State of Moldovan Cold Storages for Fruits and Vegetables. USAID/Moldova Agribusiness Development Project (CNFA), 2008: 2. 82 Sector Analysis Report, MCA Moldova, 2007: 51. 83 Moldova Agricultural Policy Notes: Agricultural Markets, Report No. 42141, World Bank, 2005: 31.

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Improvements to the current seed variety approval process would allow Moldova to grow high-yielding, disease-, pest- and drought-resistant varieties. D. Promising Products Because Moldova has an excellent climate and soil for fruits and vegetables, with the proper investment in irrigation, greenhouses, and post-harvest infrastructure, many fruit and vegetable products could be successful. Below is a discussion of a few promising products. Fresh Apples. Historically, fresh apples were a major Moldovan export to the CIS, and consumers there still have positive impressions of Moldovan apples. The difficulty in accessing the Russian market in the early 1990s coupled with the deterioration of orchards and cold storage facilities led to the decline of the sector. However, with new cold chains, seed varieties, well-maintained orchards, and adequate attention to the attributes increasingly demanded by the market, including regularity, size, appearance, and packaging, Moldovan apples could begin to recapture this market. Fresh or Canned Tomatoes. Tomatoes are a highly profitable vegetable, and Moldova has a history of successfully growing tomatoes. With the resurgence of irrigation, greenhouses, and new seed varieties, it should once again be possible to again grow quality tomatoes in Moldova. Tomatoes need not necessarily be geared for export, because it is critical that Moldova provide vegetables for import substitution. Walnuts. Moldova has ideal climatic and soil conditions for walnut production. The walnut sector has seen dramatic growth in recent years due to three factors: the comparative advantage in production, a low-cost labor force that can extract walnuts manually with a much higher extraction rate of unbroken kernels than with mechanized methods, and preferential access to the EU market with no tariff duties.84 Moldova can compete in the EU walnut market based on the quality (size and protein content) of its domestic supplies and its low labor costs. The World Bank’s 2003 Trade Diagnostic Study highlighted the great potential of the walnut industry as follows: “There would appear to be scope for development of the domestic walnut sector, with the establishment of formal plantations, which could substantially increase the yield per tree and the quality of the nut. In addition there is the potential for development of pharmaceutical products derived from the shells, of which there are currently large stocks.” There is also potential for the development processing of shelled walnuts into higher valued products such as glazed walnuts or other products. Dried Fruit. Moldovan dried fruit has been able to penetrate the EU market and has the potential for expansion, because facilities are not operating at capacity. In addition to continuing to provide bulk dried fruit for export, Moldovan producers can invest in their own labels, which are already doing well domestically, and explore organic options, which would likely be desirable on the EU market.85

84 Moldova Trade Diagnostic Study, Fruit and Vegetable Sector Case Study, World Bank, 2003: 9. 85 Moldova’s Dried Fruit Sector Assessment. USAID/Moldova Agribusiness Development Project (CNFA), 2008.

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Grapes. Moldova has a long tradition of grape growing and wine-making because it has the ideal climate for grape production. After fresh apples, pears and quinces, grapes are the next top exported product from Moldova. In 2007, Moldova exported 40,428 tons of fresh and dried grapes. It is also among the top 5 products that Moldova exports to the EU.

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Laws of the Republic of Moldova regulating the quality and safety of food products

“Law on Food Products” No.78-XVof 18 March 2004

This law sets the legal framework for production, processing, and distribution offood products, regulating the basic conditions for the movement of such products,including their safety for the purpose of protecting the people ’s health and consumers ’rights regarding food products, and promoting fair practices in trading of foodproducts. Pursuant to article 21 of this la w, the hazard analysis and control system ofthe food circuit in the critical control points was to come into e ffect starting 1 January2007.

“Law on Consumers Protection”No.105-XV of 13.03.2003

This law establishes the legal basis for protection of consumers by the state.

“Law on Product ConformityEvaluation” No.186-XV of24.04.2003

This law establishes the legal framework for evaluating the conformity of products,equipment, processes, technologies, production system and potentially dangerousworks, software, quality systems, services, and supervision of the market of productsintroduced on the market and/or used in the Republic of Moldova for the purposeof insuring national securit y, preventing frauds, protecting the rights, life, heredit y,health, and property of consume r, as well as for environment protection

“Law on Technical Barriers to Trade”No.866-XIV of 10.03.2000.

This law establishes the legal basis for eliminating the technical barriers to trade inthe process of developing, approving, and applying technical regulations, standardsand procedures for conformity evaluation

Law on Status of HazardousProducts and Substances” No.1236-XIII of 03.07.97.

This law sets up the legal framework for production, storage, transportation and useof hazardous products and substances, their import and export for the purpose ofexcluding, reducing or preventing the impact of such products and substances onpeople and environment

“Law on Standardization” No. 590 of22.09.95

This law establishes the legal, social and economic, and organization bases forstandardization activity in the Republic of Moldova. Standardization, as an important

y, protection of human life and health,and environment protection is designed to eliminate the technical barriers to ourcountry’s integration in the world trade constitutes a government prerogative

“Law on Metrology” No.647-XIII of17.11.95

This law establishes the legal metrology basis, being aimed at insuring smooth andexact measures, protection of legal and physical entities, regardless of ownership andlegal form, against dangerous e ffects of incorrect measures

“Law on Sanitary andEpidemiological Insurance ofthe Population” No. 1513-XII of16.06.1993

This law establishes the framework for ensuring the sanitary and epidemiologicalwell being of people, their environment, with no hazardous and dangerous impact ofvarious factors on people, thus insuring favorable living conditions.

Government Resolutions of the Republic of Moldovaa) “Government Resolution on Norms for Labeling of Food Products and Norms for Labeling of household chemical products”

No. 996 of 20.08.2003b) “Government Resolution on Intensifying the Consumer Protection Activity” No. 1297 of 27. 11.2001c) Government Resolution on Approving the National Program for “ Supplying Food Sta ffs for Children”, No.1236 of

22.12.1998d) Government Resolution on Approving the Regulations for Retail Marketing of Some Types of Food Sta ffs and Non-food

Goods, No.65 of 26.01.2001e) “ Government Resolution On National Concept of Organic Agriculture, Production and Marketing of Organic and

f) “Government Resolution on Approving the Regulation on Discontinuation of Production and Marketing of Non-standardLow Quality Products, Withdrawal of Counterfeited Products from Circulation, and Destroying Products ThreateningConsumers ’ Life and Health and Environment” No.1300 of 31.12.98

g) Government Resolution on Approving the Regulation of the Codex Alimentarius National Committee, No.419 of 3.05.2000

Other normative documents (developed at ministry or department level)

a) “Medical and biological requirements and sanitary norms for raw materials and food products”, No.5061-89b)c) “On approving the sanitary veterinary norms, conditions and procedure for sanitary and veterinary authorization of

operations subject to sanitary and veterinary control, and of export activity with animal products and products subject tosanitary and veterinary control”, No.83 of 13.04.2000

d) “On approving the sanitary and veterinary norms, conditions and procedure for authorizing the import, export, and transit

animals and public health”, No.84 of 13.04.2000e) “Sanitary rules and norms on food additives” No.06.10.3.46 of 17.12.2001f) “Hygienic norms for migration of toxic elements from wearing apparel contacting with food sta ffs and methods for their

detection”, No.06.3.3.51 of 21.08.2003g) SanPin 2.3.5.021-94 “Sanitary rules for commercial enterprises trade marketing food products”h) SanPin 2.1.4.027-95 “Sanitary protection zones of potable water supply sources and water pipes for such destination”i) SanPin 2.3.2.560-96 “Hygienic requirements for quality and safety of raw material and food sta ffs supply”j) SanPin 2.2.4.548-96 “Hygienic requirements for microclimate of premises”k) SanPin 2.1.4.559 “Potable wate r. Hygienic requirements for the quality of water from centralized potable water supply

sources. Quality control”l) SanPin 2.1.43.544-96 “Requirements for the quality of water from non-centralized supply sources. Sanitary protection of

water sources”m) SP 2.3.5.669-97 “Sanitary rules for wholesale food sta ffs markets”n) MUK 4.2.671-97 “Methods of drinking water analysis”

Annex 2. Laws Regulating the Quality and Safety of Food Products in Moldova

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Annex: List of customs services and quantum fee for customs procedures

No.crt. Customs Services Ratio Fee, Euro

1 2 31. Clearing of goods placed in import status, passive processing (except for those mentioned under item.5), for

transforming under customs control, in duty free stores, at customs value:- from 100 to 1,000 Euro 4- over 1,000 Euro 0,4% of the customs value,

but no more than 1,800Euro

2. Clearing of goods placed in temporary admission or temporary export status, and respectively, their re-ex-porting or reintroduction: for up to 2 months, goods presented in fairs and exhibitions, for customs activities,cultural and sports events – for over 2 months, of all goods at customs value:

0,05% of customs value ofgoods, but no more than

400 Euro-from 100 to 1000 Euro 4

- over 1,000 Euro 0,4% of customs value ofgoods, but no more than

1,800 Euro3. Clearing of goods placed for export or re-export, except for those mentioned under item 6 0,1% of customs value of

goods, but no more than500 Euro

4. Clearing of goods placed in active processing status, at customs value:

- form 100 to 1,000 Euro 4

- over 1,000 Euro 0,1% of customs value ofgoods, but no more than

100 Euro5. Clearing of goods placed in passive processing status in case of their withdrawal for repairs, with the obliga-

tion to reintroduce them upon completion of such repair works0,1% of customs value, but

no more than 500 Euro6. Clearing of goods placed for export, re-export, and re-introduction in case when such goods were previously

placed in active processing customs status, transfer under customs control or passive processing0,15% of the amount of ser-vices provided, but no morethan 100 Euro; if there are

no services – 10 Euro7. Clearing of goods placed in customs warehouse, free economic zone or subject to destroying 0,1% of customs value of

goods, but no more than400 Euro

8. -tory of the country (even temporarily), subject to registration with the structural subdivision subordinated tothe Ministry of Information Development

7

9. Storage of goods in warehouses belonging to customs authorities, including in those received in their admin-istration, per each kg. and for each day of storage:

0,01

- for the following 30 calendar days 0,02

-for the following calendar days 0,05

10. Application of customs seal (including the cost of seal) 4 Euro per seal

11. Submission upon request of statistic information about foreign trade with commodities of the respective eco-nomic entity for a period of up to one year, except for public authorities

5

12. Authorization issuance (for each contract) for:

- active processing, except for the one mentioned under item 15 10

- passive processing 40

- transfer under customs control 100

13. Issuance of customs warehouse authorization 400

14. Authorization for temporary admission, except for goods presented in fairs and exhibitions, for cultural andsports activities

40

15. Issuance of the authorization for active processing of goods introduced on the territory of the Republic ofMoldova from free economic zones of the Republic of Moldova, separately for each customs declaration

200

16. Issuance of the authorization for customs broker activity, for a 2 year period 200

17. 100

18. Issuance of the authorization for customs transporter activity, for a 2 year period 200

19. Processing of the information from the primary customs declaration 420. Processing the information from each complementary customs declaration 121.

broker and customs transporter activities5

22. 6

Annex 3. List of Customs Services and Fees for Customs Procedures

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Annex 4. 2008 Regulations on the Testing of Plant Varieties in Moldova APPROVED BY: Deputy Minister of Agriculture and Food Industry, Chairman of the National Council for Plant Varieties ________________ A. Spivacenco “_____”______________ 2008

R E G U L ATION

On Testing of Plant Varieties I. General Provisions

The National Council for Plant Varieties (hereinafter referred to as National Council), State Commission for Testing Plant Varieties (hereinafter State Commission) and State Agency for Protection of Intellectual Property of the Republic of Moldova (hereinafter AGEPI) shall constitute based on the Law on Protection of Plant Varieties No. 39 of 29 February 2008 the bodies promoting the state policy in plant protection and use of plant varieties in the Republic of Moldova. Pursuant to current international methodologies and standards, the State Commission shall test plant varieties within specialized testing centers (hereinafter referred to as CTPV), institutions, and laboratories for their agronomical and technological value (ATV), distinctiveness, uniformity, and stability (DUS). The National Council shall examine the results obtained by the State Commission and decide upon registration of plant varieties in the Catalogue of Plant Varieties of the Republic of Moldova (hereinafter referred to as Catalogue of Plant Varieties). The National Council decisions shall constitute grounds for authorizing the use of varieties registered in the Republic of Moldova. For plant varieties that require author’s patent in addition to registration in the Catalogue of Plant Varieties the State Commission, as an expertise body, shall submit reports on technical examination and official description of varieties for which such author’s patent is being issued to AGEPI.

II. Organization of Plant Variety Testing

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1. The State Commission shall test local and imported varieties requested for entering in the Catalogue of Plant Varieties and/or for issuing the author’s patent for a plant variety.

2. When submitting the varieties for official testing, the latter shall be

accompanied by a set of documents, including: - Plant Variety Testing Contract (Attachment No.1), - Technical Questionnaire (Attachment No.2), in compliance with the

Guidelines of the International Union for Protection of New Plant Varieties (UPOV),

- a description of DUS Properties (Attachment No.3), - Description of ATV properties (Attachment No.4). 3. Plant varieties shall be tested within the Centers for Testing Plant Varieties

located in various agricultural and climate zones of the Republic of Moldova, which shall form the official plant variety testing network.

4. The Centers for Testing Plant Varieties shall test any kind and variety of

plants that can be grown in the Republic of Moldova. 5. The State Commission shall carry out the following tests: a) Agronomical and Technical Value Test (ATV); b) Distinctiveness, Uniformity, and Stability test (DUS); c) Tests on the behavior of plant varieties registered or in process of registration

in production conditions; d) Collection Test and Environmental Test. 6. The testing plan shall cover the entire range of varieties under examination in

the official network for testing plant varieties, and shall be prepared: a) for winter crops - by 20 August; b) for spring crops, pomicultural crops, and vines - by 20 February.

III. Agronomical and Technological Value Test (ATV) 1. The key properties for examining the agronomical and technological value

shall be: a) production; b) resistance to falling, breaking (polignire?), shaking, etc; c) behavior towards environmental factors; d) quality properties; e) resistance to diseases and pests.

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2. ATV test for cereals, oleaginous plants, root plants and fodder plants shall

be carried out at 4-6 CTPV, for pomicultural crops, vines, and vegetable crops – at 3 CTPV, taking into account the pedological and climate conditions, as well as the economic importance of respective varieties.

3. New local varieties and those from abroad shall be tested for agronomical

and technological value according to the Testing Methodology for each crop, and the testing shall last for 1 – 3 effective production cycles. If after 1 – 2 years of testing the varieties demonstrate top results in the majority of testing localities from the country as compared to the witness variety, respective varieties shall be acknowledged as perspective ones. Such varieties shall be entered in the List of Perspective Varieties of the Catalogue of Plant Varieties and shall be allowed for use in the republic, along with the registered varieties. If during the 2nd – 3rd year of testing the varieties do not confirm the performance, such varieties shall be excluded from the List of Perspective Varieties, while the stocks of produced seeds can be certified and marketed within the following 2 years. The testing timeframe for new vegetable varieties shall be 2 years for registration, and 1 year – for acknowledging as perspective varieties. The testing period for crops that are poorly represented in the Catalogue of Plant Varieties (including up to 4 varieties) shall be 1 year.

New varieties that are not represented in the Catalogue of Plant Varieties but

highly needed for cultivation in the Republic of Moldova can be registered through National Council Decision, based on a report on appreciation of the variety value in the breeder’s collection by an Expert Commission.

The testing period for pomicultural crops and vine shall be 3 years of effective

production. The testing period for varieties registered in the EU Catalogue and in the

catalogues of neighboring countries with similar climate conditions as Moldova’s shall be 1 year for annual crops, and 4 years of vegetation for perennial crops.

For new varieties originating from the European Union and neighboring

countries, the testing period shall be the same as for the new varieties created in the Republic of Moldova.

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All the results of tests on agronomical and technological value shall be entered in the field (laboratory) books, being statistically processed and passed over to the client every year.

IV. Distinctiveness, Uniformity and Stability Test (DUS)

1. The Distinctiveness, Uniformity, and Stability Test (DUS) shall be carried

out on basis of morphological, physiological, and biochemical properties provided for in the Methodology for Testing the distinctiveness, uniformity, and stability, developed by the Union for Protection of New Plant Varieties (UPOV).

A variety shall be considered distinctive if it clearly differs by at least one or

more relevant properties originating from a certain genotype or combination of genotypes from any other variety known at the moment of filing the request for issuance of an author’s patent with AGEPI or, as the case may be, on the date of claimed priority. The distinctiveness of a variety shall be defined through properties that can be recognized and described with precision.

2. A variety shall be considered uniform if, when taking into consideration the

variations resulting from its reproduction properties, the plants remain sufficiently uniform in expressing the properties included in the examination of variety distinctiveness, as well as of other properties used for describing respective variety.

3. A variety shall be considered stable if after repeated propagation or at the

end of each propagation cycle the relevant characters (properties) for establishing distinctiveness and any other characters used to describe the variety remain invariable.

Both varieties and hybrids (parental forms) submitted for DUS testing shall be

accompanied with a description of characters according to recommended methodology. The DUS test shall be mandatory for hybrids, as well as for all the components, including consanguineous lines.

4. The seeds submitted to the State Commission for DUS testing shall be of

high quality, untreated with any other substances than the requested one. If the client insists on submitting treated seeds for testing, the latter shall be treated only with preparations registered in the Republic of Moldova and included in the State Registry of Phytosanitary Products and Fertilizers.

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5. In the event some varieties (hybrids) are impossible to examine within the Center for Testing Plant Varieties, the State Commission shall have the right to carry out the DUS testing in specialized institutions from the republic or recommend a center eligible for such testing outside the country to the client.

6. The result of DUS testing of a variety shall be brought to the knowledge of the client upon completion of the examination.

V. Registration, Maintenance, and Erasing of Plant Varieties from the Catalogue of Plant Varieties.

1. Plant varieties shall be registered based on the results of official examination –

field testing in comparison with the witness varieties registered and growing in the Republic of Moldova.

2. Based on official tests, the State Commission shall sum up the results obtained, formulate and submit proposals, while the National Council shall approve decisions on registration and use of plant varieties in the Republic of Moldova, as well as decisions on additions and publication of the Catalogue of Plant Varieties.

3. Registration documents of a plant variety shall be made available for personal and exclusive use of any person pursuing a lawful interest, except for cases when the information is declared confidential by the author (client). 4. Registration of a plant variety in the Catalogue of Plant Varieties shall be rejected if:

a) upon examination it turns out that the variety is no longer distinctive, stable

and sufficiently uniform by properties that were taken into consideration upon its registration;

b) upon request of the person(s) responsible for the variety, except for cases

when the maintenance of such variety is ensured. 5. If registration of a plant variety is rejected or revoked, the examination results shall be brought to the knowledge of the person affected by such decision. 6. Registration of a plant variety can be renewed after a certain period of time if:

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- it is cultivated (implemented) and showing positive production results; - it is still distinctive, stable, and sufficiently uniform; - it requires maintenance for the purpose of ensuring conservation of genetic

resources of plants. 7. Retesting of plant varieties before their reentering in the catalogue shall be mandatory for the purpose of determining the DUS properties to see if the latter have been preserved at the same level as they were at the moment of registration. In such case, the registration validity term shall be temporarily extended up to the approval of a new decision on reentering the respective varieties in the Catalogue of Plant Varieties. 8. The State Commission shall have the right to make sure there are no doubts regarding the distinctiveness or name of the variety established during the testing after its registration. 9. Registration of a variety shall be valid and respective variety shall be officially kept in the Catalogue of Plant Varieties until approval of a decision on revocation by the National Council. 10. Plant varieties shall be erased from the Catalogue of Plant Varieties if:

a) the relevant current legislation and normative acts regulating the testing and registration of plant varieties in the Republic of Moldova are not observed;

b) the data submitted upon filing the registration request of during the

examination based on which respective variety was registered proves false or fraudulent. 11. Plant varieties registered in the Catalogue of Plant Varieties that no longer corresponds to the current legislation of the Republic of Moldova and this Regulation shall be erased from the Catalogue of Plant Varieties. 12. When testing plant varieties for author’s patent, including in cases of presenting the results of previous official testing, testing of agronomical value, issuance of plant variety certificates, registration and maintenance of varieties in the Catalogue of Plant Varieties, the certificate holders and/or clients shall pay the fees provided for in Government Resolution No. 774 of 13 August 1997 „On Fees for Services of Legal Significance in the Area of Intellectual Property”, amended, added, and approved through Government Resolution No.878 of 18 July 2008 (Official Gazette No. 134 – 137 of 25 July 2008).

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13. This Regulation was approved in meeting No. 25 of the National Council for Plant Varieties of 10 September 2008.

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Anexa nr.1 la Regulamentul privind testarea soiurilor de plante

CONTRACT DE TESTARE A SOIURILOR DE PLANTE №_____

„____” _____________ 20____ mun. Chişinău

Comisia de Stat pentru Testarea Soiurilor de Plante a Ministerului Agriculturii şi Industriei Alimentare al Republicii Moldova, denumită în continuare “Executor”, în persoana preşedintelui Vasile Pojoga, pe de o parte şi ______________________ ______________________________________________________________denumită în continuare "Beneficiar", pe de altă parte, au încheiat prezentul contract, cu privire la:

I. OBIECTUL CONTRACTULUI

1.1 "Beneficiarul” solicită, iar „Executorul” îşi asumă efectuarea testării de stat a soiurilor de plante conform Metodologiei în vigoare.

1.2 Testarea soiurilor de plante se efectuează în termenele stabilite de către ambele părţi, conform prezentului contract

II. CONDIŢIILE DE TESTARE

2.1 Testarea se va efectua în perioada a.a. 20___ - 20___ 2.2 Pentru efectuarea testărilor "Beneficiarul" va prezenta, pînă la 01.02 al

fiecărui an “Comanda de testare a soiurilor pentru anul 20___” (anexa 1) şi cererea de includere a acestor soiuri în testările oficiale, completată cu documentaţia indicată în ea (anexa 3).

2.3 "Beneficiarul" va pune la dispoziţia "Executorului", fără plată, cantitatea de seminţe a soiurilor respective în termenele indicate în anexa 2 pe adresa:

Comisia de Stat pentru Testarea Soiurilor de Plante, MD-2004, or. Chişinău, bul.Ştefan cel Mare, 162. 2.4 "Executorul" se obligă să nu transmită seminţele soiurilor

"Beneficiarului" persoanelor terţe fără acordul lui, precum şi utilizarea lor în scopuri comerciale.

2.5 Părţile anual fac schimb de delegaţii (2 persoane) pe un termen de 7 zile, pentru aprecierea soiurilor la Centrele de testare şi familiarizarea metodele de experimentare a soiurilor a „Executorului”, cît şi delegaţiile de răspuns la baza experimentală a „Beneficiarului”.

131

2.6 „Executorul” anual întocmeşte şi prezintă „Beneficiarului” darea de seamă privind rezultatele testării soiurilor, conform formei aprobate de ambele părţi (anexa 4): pînă la 1 septembrie – pentru culturile de toamnă şi pînă la 1 decembrie – pentru culturile de primăvară şi multianuale.

2.7 „Beneficiarul” va achita "Executorului" taxele pentru testările prevăzute, în conformitate cu anexa 5 a prezentului contract

2.8 Plata se va efectua în termen de 14 zile bancare din ziua primirii dării de seamă anuale, sau în termenul indicat în factura – cont.

2.9 Pentru neachitarea plăţii în termenele stabilite se va calcula penalitatea în mărime de 0,5% din valoarea contului pentru fiecare zi de întîrziere, dar nu mai mult de 5%.

2.10 Dacă soiurile „Beneficiarului” vor demonstra performanţe în testările oficiale, „Executorul” le va propune spre înregistrare şi publicare în Registrul soiurilor de plante al Republicii Moldova.

2.11 Contractul se consideră finalizat după executarea deplină a obligaţiunilor de către „Executor” şi achitărilor de către „Beneficiar”. În caz de încălcare a prevederilor prezentului contract sau executare necorespunzătoare a obligaţiunilor, se va face un demers în scris părţii opuse.

III. FORŢA MAJORĂ

3.1 Forţa majoră aşa cum este definită de lege, exponează de răspundere partea care o invocă de la apariţia evenimentului, dacă a fost notificată în scris, în maximum 48 ore de la data producerii.

3.2 Încetarea situaţiei de forţă majoră va fi notificată deasemenea în scris celelaltei părţi.

3.3 După această perioadă fiecare parte are dreptul să rezelieze contractul, iar în această situaţie nici una dintre părţi nu are dreptul să solicite compensări

pentru eventuale pierderi.

IV. LEGISLAŢIE ŞI FORURI 4.1 Contractul se va afla sub incidenţa şi va fi interpretat în conformitate cu legile

în vigoare a Republicii Moldova.

4.2 Părţile vor încerca să rezolve pe cale amiabilă litigiile, contraversele sau reclamaţiile rezultate, sau legate de acest Contract. Dacă părţile ajung într-un impas în rezolvarea litigiilor, inclusiv referitor la validitatea, interpretarea, executarea sau disfiinţarea lui, va fi soluţionat de către instanţele competente, conform legislaţiei în vigoare a Republicii Moldova.

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V. DISPOZIŢII FINALE 5.1 Prezentul contract intră în vigoare după semnarea lui de ambele părţi şi este

valabil pe o perioadă iniţială conform p. 2.1. În cazul ne prezentării de una dintre părţi a intenţiei de reziliere, termenul de valabilitate a contractului se prelungeşte automat pe o perioadă nedeterminată.

5.2 Contractul nu poate fi reziliat unilateral, cu excepţia încălcării clauzelor de către una dintre părţi, situaţie în care partea vătămată are dreptul să solicite despăgubiri şi/sau penalităţi în vederea acoperirii pagubelor. Rezilierea, precum şi prelungirea contractului se poate realiza numai cu acordul scris al părţilor.

5.3 Părţile îşi asumă responsabilitatea şi se angajează ca toate informaţiile şi datele care decurg în prezentul contract să fie confidenţiale.

5.4 Modificările în prezentul contract pot fi făcute numai cu acordul scris al părţilor, sub formă de Acord adiţional ale prezentului contract.

5.5 Prezentul contract este încheiat în limba de stat în 2 (două) exemplare. Prezentul contract conţine 3 pagini şi 5 anexe, ce sînt parţi componente a contractului.

Adresele juridice ale părţilor: "Executorul" “Beneficiar”

_______________Vasile POJOGA _________________

Comisia de Stat pentru Testarea Soiurilor de Plante a Republicii Moldova MD-2004, or. Chişinău bd. Ştefan cel Mare, 162 tel: 373 22 22- 03-00 fax: 373 22 21-15- 37 cod fiscal cont curent

133

Anexa nr 1 la Contractul de

testare a soiurilor de plante

Comanda de tetsare a soiurilor pentru anul 20____ Prin prezenta solicităm Comisiei de Stat pentru Testarea Soiurilor de Plante testarea următoarelor soiuri:

Nr. d/o

Specia Soiul (denumirea, cifrul)

Grupa de maturitate

Sistemul de cultură

Tipul testului

Notă

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Plata tarifelor de testare se va efectua conform contractului de testare ce va fi încheeat. Solicitant ______________________________________________________ (denumirea institutului, firmei, persoanei fizice sau juridice etc.) L.Ş. Data „____” ___________________20____

Anexa nr.2 la Contractul de

testare a soiurilor de plante

Cantitatea şi termenele de livrare a seminţelor necesare pentru testarea soiurilor/hibrizilor

Nr. d/o

Cultura Termenele limită

Cantitatea (kg)

1 2 3 4 Culturi de cîmp

1. Tutun 15.02 0.02 (2x0.01) 2. Sfeclă de zahăr/furajeră 01.03 3 unităţi (3x1) 3. Grîu de primăvară 01.03 60 (5x12) 4. Orz de primăvară 01.03 4(2x2) 5. Rapiţă primăvară 01.03 6(2x3) 6. Lucerna 01.03 15 (3x5) 7. Hrişcă 01.03 24 (2x12) 8. Ovăz 01.03 60 (5x12) 9. Mazărea 01.03 50 (5x10) 10. Viţa de vie 01.03 600 (200x3) 11. Sparceta 01.03 16 unităţi (2x8) 12. Măzăriche de primăvară 01.03 20 unităţi (2x10) 13. Mei 01.03 15 (3x5) 14. Năut 01.04 16 (2x8) 15. Latir 01.04 24 (3x8) 16. Bob 01.04 40 (2x20) 17. Soia 01.04 24 (3x8) 18. Sorg 01.04 8 (4x2) 19. Fasole 01.04 32 (4x8) 20 Floarea soarelui 01.04 15kg (5 x3kg) 21. Porumb 01.04 18 (6x3)

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22. Grîu de toamnă 15.08 72 (6x12) 23. Orz de toamnă 15.08 48 (4x12) 24. Secară de toamnă 15.08 24 (2x12) 25. Triticale 15.08 24 (2x12) 26. Rapiţă de toamnă 01.09 8 (4x2)

Culturi legumicole 27. Pătlăgele vinete 01.02 0,09 28. Varză albă 01.02 0,09 29. Varză roşie 01.02 0,09 30. Conopidă 01.02 0,045 31. Varză de Savoy 01.02 0,045 32. Varză de Bruxeles 01.02 0,045 33. Varză Colirabi 01.02 0,045 34. Varză Brokkoli 01.02 0,045 35. Varză albă (pentru semănatul

direct în cîmp) 01.02 0,3

36. Ardei gras 01.02 0,09 37. Tomate (pentru răsad) 01.02 0,09 38. Tomate (pentru semănatul

direct în cîmp) 01.02 0,3

39. Mazăre verde 01.03 6,0 40. Ceapă 01.03 0,6 41. Morcov 01.03 0,6 42. Pătrunjel 01.03 0,12 43. Ridiche de lună şi

ridiche de iarnă 01.03 0,6

44. Salată 01.03 0,09 45. Ţelină 01.03 0,075 46. Sfeclă roşie 01.03 1,5 47. Mărar 01.03 0,09 48. Spanac 01.03 0,09 49. Stevie 01.03 0,09 50. Cartof 01.03 250 51. Pepene verde 01.04 0,6 52. Pepene galben 01.04 0,4 53. Dovlecel 01.04 0,6 54. Porumb zaharat 01.04 9,0 55. Castraveţi 01.04 0,6 56. Patison 01.04 0,6 57. Dovleac comestibil 01.04 0,6 58. Fasole de grădină 01.04 6,0 59. Usturoi 01.10 16,0

136

Culturi multianuale 60. Pomi fructiferi şi arbuşti 01.03 102 (34x3) 61. Ciumaria 01.03 16 unităţi (2x8)

137

Model

Anexa nr.4 la Contractul de

testare a soiurilor de plante Rezultatele încercării soiurilor/hibrizilor firmei _______________________ pentru anul 20_____ în Republica Moldova

Cultura, soiul

Perioada de vegetaţie,

zile

Roada marfa,

q/ha

Producţia marfă,

%

Greutatea medie a

fructului, g

138

Anexa nr.5

la Contractul de testare a soiurilor de plante

T A R I F E L E

pentru executarea serviciilor de testare şi înregistrare a soiurilor/hibrizilor în Republica Moldova

Nr. d/o

Denumirea acţiunii Tariful (Euro)

1 Depunerea cererii de brevet pentru un soi de plantă, inclusiv examinarea prelimenară şi publicarea datelor privind cererea de brevet

200

2 Testarea soiului la condiţiile de brevetabilitate (pentru fiecare an) 500 3 Testarea soiului la condiţiile de brevetabilitate în cazul prezentării

rezultatelor testării oficiale anterioare 200

4 Eliberarea brevetului 125 5 Menţinerea în vigoare a brevetului (pentru fiecare an de valabilitate):

pentru anii 1 – 5 inclusiv pentru anii 6 – 10 inclusiv pentru anii 11 – 15 inclusiv pentru anii 16 – 20 inclusiv pentru anii 21 – 25 inclusiv pentru anii 26 – 30 inclusiv

100 200 300 500 700 900

6 Prelungirea valabilităţii brevetului (pentru fiecare an), anii 31 – 35 1000 7 Depunerea cererii de înregistrare a denumirii soiului de plantă 50 8 Consultarea documentelor cererii de brevet 25 9 Retragerea cererii de brevet sau renunţarea la brevet 25 10 Testarea soiului de către Comisia de Stat pentru Testarea Soiurilor de

Plante, la valoarea agronomică

1) testarea de concurs: a) depunerea cererii şi examinarea preventivă b) testarea soiului (pentru un an)

100 400

2) Testarea ecologică: a) depunerea cererii şi examinarea preventivă b) testarea soiului (pentru un an)

100 250

3) Testarea de colecţie: a) depunerea cererii şi examinarea preventivă b) testarea soiului (pentru un an)

100 200

4) Testarea de producţie (pentru o testare) 150

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11 Eliberarea adeverinţei pentru soiul de plante 50 12 Înregistrarea soiului în Registrul soiurilor de plante 250 13 Menţinerea soiului în Registrul soiurilor de plante (pentru fiecare an de

cultivare): pentru anii 1 – 4 inclusiv pentru anii 5 – 9 inclusiv pentru anul 10 şi fiecare an următor

60 120 200

14 Testarea complimentară a soiului la condiţiile de brevetabilitate (pentru un an)

300

140

Annex 5. List of Laboratories in Moldova

Accredited Testing Laboratories in the Republic of Moldova according to ISO/CEI 17025, EN 45001

as of April 1, 2007

Name, Address, Manager’s Name , Phone #

State Registry Number, Term of Certificates

Validity

Field of Accreditation

1. Laboratory of Atomic Spectrographic Testing by the

Center of Metrology and Scientific Research of the

Academy of Science of Moldova „ILAS”

MD 2028, mun. Chişinău

3/2, Academiei Str. Marcoci Ludmila

tel. (+373 22) 73-99-77; 73-74-11

SNC RM MD CNOO 41 0006

Initial accreditation 11.07.1994

09.11.2002 – 09.11.2005 Extended till 10.04.2006

Technical competence and independence

EN 45001

Food products, metals, alloys, mineral waters, residual waters

2. Monitoring Center of Water Quality of the Environment

Quality Monitoring Division of the State Hydrometeorological

Service MD 2043, mun. Chişinău

193, Grenoble Str. Gavril Gîlcă

tel. (+373 22) 76-68-55; fax. 77-36-36

SA MD CAECP LÎ 01 016


21.09.2005 – 21.09.2008 Technical competence and

independence ISO/CEI 17025

surface waters, soil

3. Monitoring Center of Soil Quality of the Environment Quality

Monitoring Division of the State Hydrometeorological Service

MD 2043, mun. Chisinau 193, Grenoble Str.

Gavriil Gîlca tel. (+373 22) 76-68-55 fax. 77-

36-36




independence SM SR EN ISO/CEI

17025:2002

soil and alluvial residues, oils used in electro-energetic transformers and

condensers

4. Testing Laboratory „Agrochim” of the Republican Center of

Applied Soil Science MD 2005, mun. Chişinău

6, Cosmonauţilor Str. Nedealcov Semion

tel. (+373 22) 24-32-18, 24-34-09,

fax. (+373 22) 22-10-47

SA MD CAECP LÎ 01 034 Initial accreditation 15.12.1995



soil, pesticides, mineral fertilizers,

agricultural products

5. Testing Base of the Scientific and Technical Center of

“Hidrotehnica” JSC MD 2047, mun. Chişinău



Pumping equipment, water pumps, oil pumps, electrical

engines, immersive

141

Name, Address, Manager’s Name , Phone #

State Registry Number, Term of Certificates

Validity

Field of Accreditation

3, Decebal Boulevard Diubin Serghei

tel. (+373 22) 55-33-74, fax. 55-33-21

02.10.2006 – 02.10.2009 Technical competence

ISO/CEI 17025

electrical pumps

142

6. Testing Center of the National

Center of Scientific and Applied Preventive Medicine

MD 2028, mun. Chişinău 67a, Gh. Asachi Str. Calmîc Vorfolomei

tel. (+373 22) 574-620, fax. 574-680

SNC MD CN00 41 0078




Agricultural and food products, industrial goods, agricultural equipment, drinking

water, research objects, workplace

certification, medical and biological

chemicals, pharmacy/ hospital

medications, medicinal herbs

7. Testing Laboratory of the Sewage Disposal Plant JSC

“Apa-Canal Chişinău” MD 2002, or. Chişinău

100, Calea Basarabiei Str. Tătaru Iulia

tel. (+373 22) 47-27-42; fax: 22-23-49; 47-39-14

SNC RM MD CNOO 42 0091 Initial accreditation 06.07.2000

12.12.2003-12.12.2006 Technical competence

EN 45001

Used waters (household and

industrial)

8. Laboratorul Central de control a calităţii apei potabile al SA

“Apă-Canal Chişinău”

MD 2045, mun. Chişinău str. Studenţilor, 14

Ceban Tamara tel. (+373 22) 48-98-32, fax. 22-

23-49


01.04.2005 – 01.04.2008 Technical competence

ISO/CEI 17025

Drinking and terrestrial waters

9. Center of Ecological Investigations of the Ecological

Agency Center MD 2028, mun. Chişinău

str. Gh. Tudor, 3 Copacinschi Gheorghe

tel./fax. (+373 22) 28-15-77



independence

ISO/CEI 17025

Used and terrestrial water, soil,

atmospheric air, atmospheric emissions


Agency North

MD 3101, mun. Bălţi 5, B.Glavan Str. Elizaveta Scurtu

tel. (+373 31) 333 87, fax. (+373 31) 333 86


Acr. iniţ. 03.09.2001 30.12.2005 – 30.12.2008

Technical competence and independence ISO/CEI 17025

Used and terrestrial water, soil,

atmospheric emissions


Agency South

MD 3901, mun. Cahul 26, Griviţei Road,



Used water, soil

143

Nuraeva Dina tel. (+373 99) 2-08-31, fax. 2-29-

50


144

12. Central Laboratory of Used

Water of the JSC „Apă-Canal Chişinău”

MD 2005, mun. Chişinău 38, Albişoara Str.

Ghirghiligiinic Nelly tel. (+373 22) 25-68-80, 25-67-

16 fax. (+373 22) 22-23-49, 25-68-

71

SNC MD CNOO 42 0171


02.06.2003 – 02.06.2006 Extended until 15.11.2006

Technical competence EN 45001

Used water

13. Testing Laboratory „GEOLAB” of the Institute of Geophysics

and Geology of the Academy of Science of Moldova

MD 2028, mun. Chişinău 3, Academiei Str. Bogdevici Oleg

tel. (+373 22) 73-96-36, 72-36-08,

fax. 73-96-63

SNC MD CNOO 41 0184


06.01.2004 - 06.01.2007 Technical competence and


Drinking and mineral water, raw material and food products, soil, metals, metal

alloys

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Annex 6. Methodology

Chemonics used a channel mapping methodology which is a process of tracing a product flow through an entire channel from the point of product conception to the point of delivery/consumption86. This process highlights the underlying patterns of inputs, constraints and competitive advantage that a producer has. It also traces the path of all value-adding and non-value adding activities associated with the production of a good and approximates costs involved at each stage. Whereas more traditional methods of product and market analysis isolate operational costs along various stages of production, the methodology employed here is a much more comprehensive tool, particularly as it takes into account an entire spectrum of activities and inputs associated with a product. Although the value chain analysis is usually employed at a product level, output from the analysis provides useful indicative data on production and operational costs associated with a specific market. Value Chain Analysis The objective of a value chain analysis is to take a “snapshot” of a value structure representative of a particular product or industry. The methodology used is a model where variables within a value chain can be adjusted to reflect changes in the market. To ensure that the analysis is adjusted for any data uncharacteristic of the market, emphasis is placed on cross checking all firm level data against other similar enterprises to help ensure that data used for the value chain analysis mirrors realities facing local enterprises. The model is a two-phased process involving 1) the fieldwork, and 2) the data analysis and report writing. Data Collection. A principal challenge for developing credible industry and product level market analysis in any country is the acute absence of reliable baseline data. As a result, much of the raw data required to analyze industries and markets must be compiled through rigorous local research and individual in-depth firm level interviews. Experience shows that intensive personal interviews tend to yield the detailed data and information required to develop a representative value chain analysis. The methodology does not rely on a survey mechanism since surveys do not yield the types and level of detail required to conduct an effective value chain analysis. The fieldwork involves undertaking interviews at every point along the value chain. It is important to develop an approach to interviewing in which selected interviewees are forthcoming with the required information and data. The method of interviewing plus the robust analytical tools ensures that the data collected is accurate and real. The interviewer does not follow a prescribed number of interviews to collect the necessary data, but stops only when a pattern in

86 The point where the value chain analysis stops depends on a number of factors including the availability of data, the degree to which the components at the end of the chain are critical in telling the story about constraints of the value chain and the story being told. For this report, the authors did not take the value chain all the way to through transport because for farmed goods, most products are sold to buyers who pick up the goods directly from the farm/field with their own trucks. In this case, it was not possible to establish a true of this activity. As for processed plums and tomatoes, obtaining the total transport costs to the final market proved elusive and the data obtained was not deemed to be representative of what the actual costs are across the industry.

146

the data develops and deviation between figures along various stages of production is within an acceptable range. This difference reflects variation in management and administrative practices, variances in growing or production conditions, and other operational factors, which are generally accepted as a normal deviation among players in a given sector. The sequence of the interview tends to be a function of the sector being investigated. To ensure that the value chain reflects the actual flow of resources across an entire value chain, interviews are conducted along a chain which is currently operational. Specifically, interviews are conducted with players along the entire supply chain that actually sell goods or services to each other. This helps to ensure that the “delivered price of a good” traces each activity that takes place along various stage of value addition. Additional consideration relates to the size of companies and farms within a sector, which generally tends to vary widely, as is the case in Moldova. For example, small companies or farms tend to be labor intensive, whereas larger operations tend to exercise more capital intensive production practices. In this context, the interviewer collects data from both small and large operations to analyze the difference in the ‘delivered price of a good’ and the resource allocations along the value chain for the two types of operations. The Analysis. Whether it is an agricultural commodity or an automotive component, the ultimate objective of the value chain analysis is to estimate the “delivered price of a good” reflective of a particular sector, and to breakdown this figure into various stages of production to identify critical bottlenecks and constraints. Generally, enterprises and farmers keep general production data according to inputs, such as labor, electricity, water, material, and the corresponding unit output or yield rates. To estimate the “delivered price of a good,” the methodology disaggregates the value of these inputs along various stages of the process so that it becomes possible to define the composition of value adding activities. The term “delivered price of a good” differs somewhat from product-to-product and from country-to-country. For example, in the case of an agricultural commodity in Moldova, the term “delivered price of a good” is generally defined as the farm gate price. Depending on the nature of the industry and commonly recognized practice, transport and market intermediary costs such as broker or buying agent fees are paid for by the farmer or the downstream buyer along the supply chain. For an exportable good, the “delivered price of a good” can refer to either the FOB or CIF price. Once again, the choice between applying the FOB or CIF price reflects the practice generally recognized in the sector and in the country under investigation.

147

Annex 7. List of People Met for Interviews Anatolie Spivacenco, MAFI Anatolie Terzi, Natur Bravo Andrei Spinu, SEMAS (Chisinau) Arsenii Alexandru, Original Product (Popeasca) Conrad Fritsch, CNFA/ABD Project Constantin Ojog, ACSA Constantin Putrigai, Glia Ltd (Pleseni) Dr. Ion Perju, Deputy Minister of Agriculture and Food Industry Dumitru Vicol, General Director Monicol (Ialoveni) Eugen Revenco, ACSA George Arpentin, Union of Oenologists of the Republic of Moldova Gheorghe Agapi, Truck SRL Ghorghe Muravschi and Valeriu Muravschi, Dacia Agrochim Ltd (Chisinau) Grigano Velerstria, demonstration project (Delacau, Anenii-Noi) Igor Tagadiuc, Agrostoc Ion Balan, Podgonreni Ltd (Linura, CT) Ion Russo, IFAD/Moldova Iurie Hurmuzachi, Agro-Informe John F. Beaufette, MHW, Ltd Liviu Gumovschi, WB Agricultural Projects Implementation Unit Mihail Paciu (Braviceni, OR) Muzzakov Tatiana, demonstration project (Codreanca, Stasheny) Natalia Vrabie, Moldova Agroindbank Octavian Calmac, Ministry of Economy & Trade Oleg Lescenco, LAPMOL Executive Director Susan Kutur, Sergio Botezatu, and Rodica Miron, USAID Svetlana Ojog and Andrei Bat, Abt Assoc Agricultural Policy Project Tudor Ciobanu, General Director Sauron (Chisinau) Tulei Iurie Ion, Nistru Olanesti (Olanesti) Valerie Gherciu, ProRuralInvest Valerii Reschitor, Transfer-SV (Chisinau) Valeriu Bulgari, Republican Uniton of Agricultural Producers Assocoiations Vasile Mirzenco, National Farmers Federation Vasile Pojogo, MAFI Viorel Chivriga, Viitorul Yurii Salamaha, Alexandr Bobarichin, and Svetlana Polisciuc, FinCom Bank

148

Annex 8. Documents that must be present to fulfill certification requirements

Certification of a party (Scheme 7):

1. The filled application form SB (certification body ) 2. The appendix to the application with division of declared production on groups, according to codes of the Commodity nomenclature of Republic Moldova, and indicate a type, a kind and quantity for each position. 3. The certificate of registration of the economic agent (copy). 4. The customs declaration (The original + a copy ) 5. The Invoice (The original + a copy ) . 6. The certificate of quality from the manufacturer. 7. The certificate of conformity (The certified copy or The original , at presence). 8. Copy of test reports on which the reference in the certificate of conformity with an original press is given. 9. The hygienic certificate. 10. The instruction (management) on operation (application). 11. The information for consumers in a state language according to the current legislation of Republic Moldova; SM 196, the Governmental order ¹ 996 from 20.08.2003 (for food production) 12. The information for consumers in a state language according to the current legislation of Republic Moldova; SM 197, the Governmental order ¹ 996 from 20.08.2003. (for an industrial output). 13. The license for the spheres of activity established by the legislation of Republic Moldova.

Certification of production under the long-term contract (the Scheme 2):

1. The filled application form SB (certification body ) 2. The appendix to the application with division of declared production on groups, according to codes of the Commodity nomenclature of Republic Moldova, and indicate a type, a kind and quantity for each position. 3. The certificate of registration of the economic agent (copy). 4. The long-term contract with the manufacturer / the distributor (copy). 5. The customs declaration (the original + a copy). 6. The invoice (the original + a copy). 7. The certificate of quality from the manufacturer. 8. The certificate of conformity (The certified copy or The original , at presence). 9. Copy of test reports on which the reference in the certificate of conformity with an original press is given. 10. The hygienic certificate. 11. The certificate of system of quality of manufacturer ISO 9000 (at presence). 12. The instruction (management) on operation (application). 13. The information for consumers in a state language according to the current legislation of Republic Moldova; SM 196, the Governmental order ¹ 996 from 20.08.2003 (for food production). 14. The information for consumers in a state language according to the current legislation of

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Republic Moldova; SM 197, the Governmental order ¹ 996 from 20.08.2003. (for an industrial output). 15. The license for the spheres of activity established by the legislation of Republic Moldova. 16. Other documents (if necessary).

Certification of serially let out production (scheme 3,3А, 4A):

1. The filled application form SB (certification body ) 2. The questionnaire-questionnaire, filled on the form of CB: 3. for food and from production for an industrial output 4. the Copy of the normative document on production, in case if production is manufacturing on PTMD or imported production. 5. A copy of a catalogue leaf 6. the Technological instruction in a state language (for food production) 7. the Maintenance instruction in a state language (for an industrial output). 8. The hygienic certificate for production which is a subject hygienic certification. 9. The certificate of registration of the economic agent (copy). 10. A copy of the certificate on system of quality (ISO 9000)., if there is 11. a Sanitary sanction (for food production) 12. the Sanitary-veterinary sanction (for food production of an animal origin). 13. The information for consumers in a state language according to the current legislation of Republic Moldova; SM 196, the Governmental order ¹ 996 from 20.08.2003 (for food production). 14. The information for consumers in a state language according to operating zakonodatelstom Republics Moldova; SM 197, the Governmental order ¹ 996 from 20.08.2003 (for an industrial output). 15. The contract with test laboratory for carrying out of periodic tests, in case of absence of own laboratory. 16. The list of the measuring equipment and the information on their checking. 17. The documents confirming statement of production on manufacture, (for an industrial output, sertifitsiruemoj for the first time) according to GOST 15.000 (GOST 15.001, GOST 15.007, GOST 15.009 and others). 18. A copy of the report of last periodic tests of the industrial output, made long time. 19. A copy of last inspection report which has been given out by bodies of the state supervision if is available. 20. The license for areas of activity, established by the legislation Republics Moldova (copy). 21. Other documents confirming the information, presented to the questionnaire-questionnaire.

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Annex 9. Business Practices Constraints – quality control area Right of state inspectors: (1) to free access to business and production premises of economic entities where normative

documents are elaborated; carried out products’ pre-production procedure, production, storage, reparation, processes execution or rendering of services ;

(2) to obtain data and documents, necessary for the execution of state control and supervision of economic entities;

(3) to use of experts and of technical means of economic entities during the execution of state control and supervision;

(4) to take probes and samples of products as well as processes and services in order to control conformity with normative documents on standardization requirements; costs of probes samples, testing (analyses and metrology) is charged to economic entities’ expenses of production;

(5) to draw up the report on breach of the normative documents on standardization provisions; (6) to issue orders on elimination of founded violations of normative documents on

standardization requirements at stages of product (processes, services) development, pre-production, production, supply, selling, utilization (operation), storage and transportation;

(7) to issue orders on prohibition or suspension of selling, utilization (operation), storage and transportation of the controlled consignment including of those imported, execution of processes and rendering of services in cases of products, processes, services unconformity with normative documents of standardization requirements applied in the territory of the Republic of Moldova;

(8) to make request to police in order to render assistance for execution of control and supervision and in case of necessity to be followed by policeman during execution of duties of service.

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Annex 10. National Program of Development of Technical Regulations No. Technical Regulation EU legal acts, international

normative documents that are basis for development

Authority responsible for development of technical regulations

1. Food Industry

1 Juices, nectars and beverages Codex Stan 48-81

Codex Stan 82-81 Codex Stan 120-81 Codex Stan 164-89

Ministry of Agriculture and Food Industry

2 Vegetables and vegetables products. Production and sales


3 Fruits and fruits products. Production and sales


4 Meat and meat products. Production and sales


5 Milk and diary products. Production and sales


6 Fish and fish products. Production and sales


7 Bread and bakery products. Production and sales


8 Sugar and sugar products. Production and sales


9 Produse de cofetarie. Production and sales


10 Natural honey. Production and sales


11 Ethylic spirits 1576/89 CEE 1014/90 CEE 3199/93 CEE


12 Law on vineyards and wine* 822/87/CEE 823/87/CEE


* Revision and harmonization

2. Veterinary Medicine 13 Veterinary norm for

production and placement of meat on the market

64/433/CEE 91/497/CEE


14 Sanitary veterinary norm on health conditions for production and sales of

71/118/CEE 92/116/CEE


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poultry 15 Sanitary veterinary norm on

health conditions for production and sales of fresh milk, thermally processed milk and diary products

92/46/CEE Ministry of Agriculture and Food Industry

16 Sanitary veterinary norm on general hygiene conditions regarding milk producing animals


17 Sanitary veterinary norm on development of some testing methods of milk – raw material and those thermally treated


18 Sanitary veterinary norm on development of certain testing methods of milk thermally treated and designated for direct human consumption

UE 92/608/CEE Ministry of Agriculture and Food Industry

19 Sanitary veterinary norm regarding protection and health of animals during transportation

91/628/CEE Regulations of EU Council 411/98/CEE and 1255/97/CEE


20 Sanitary veterinary norm regarding measures to fight New-Castle disease


21 Sanitary veterinary norm on health conditions for production and sales of domestic and wild rabbit meat


22 Sanitary veterinary norm on protection of animals during scarification and kill


3. Tobacco and Processed Tobacco Substitutes

23 Brute tobacco Ministry of Agriculture

and Food Industry 24 Tobacco and tobacco

substitutes Ministry of Agriculture

and Food Industry 25 Tobacco products Ministry of Agriculture

and Food Industry

4. Transportation

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26 Auto vehicles 70/156/CEE 92/61/CEE

Ministry of Transport and Communications

27 Tractors 74/150/CEE Ministry of Transport and Communications

28 Emissions 88/77/CE 91/542/CE


29 Smoke 72/306/CE Ministry of Transport and Communications

30 Noise level 70/157/CE 84/424/CE 92/97/CE


31 Break system 71/320/CE 88/194/CE 91/422/CE 98/12/CE


32 Tires 92/23/CE Ministry of Transport and Communications

33 Ambarcatii recreationale 94/25/CE Ministry of Transport and Communications

34 Instalatii cu cablu destinate transportului de persoane

2000/9/CE Ministry of Transport and Communications

35 Illumination and signalization installations

76/756/CE 91/663/CE 97/28/CE


5. Protection of life and health of people

36 Drinking water. Hygiene

requirements and quality control

98/83 CE, WHO Guidelines for drinking water quality 1993

Ministry of Health

37 Graphic presentation of medical components

GMP Rules WHO Ministry of Health

38 Quality standards of drags. General notions

GCP, GLP, GMP Rules Ministry of Health

39 Authorization of placing on the market of medical products

65/65/CEE Ministry of Health

40 Standards and analytical, pharmaceutical and clinical protocols regarding testing medical products


41 Manufacturing practice for medical products for humans


42 Classification of medical products for placing on the market


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43 Labeling and advertising of medical products

92/27/CEE 92/28/CEE

Ministry of Health

44 Transparency of prices of drugs

89/105/CEE Commercial Department, Ministry of Health

45 Testing, authorization, control and supervision of veterinary products and forage additives

81/851/CEE 81/852/CEE


46 Rules on manufacturing practices of drugs

91/412/CEE 2377/90/CEE

Ministry of Health

47 Law on cosmetic products 76/768/CEE 96/335/CE 95/17/CE 97/18/CE

Ministry of Health, Ministry of Agriculture and Food Industry

48 Textiles 96/73/CEE Ministry of Industry 49 Footwear 94/11/CE Ministry of Industry

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