5. Advancing bilateral trade between the Republic of Moldova and the Czech Republic
5.5. Identifying potential niches for further trade development
In February 2005 Moldova has singed an Action Plan with the European Union. Through this Plan Moldova is harmonizing its legislation to EU trade requirements and product standards. With the accession of Romania and Bulgaria to the EU on January 1, 2007, Moldova became immediate neighbor of the EU. This provides further opportunities for increasing bilateral Moldovan-Czech trade.
Paradoxically enough, Moldovan exports to the Czech Republic are quite modest by regional standards and are growing slower than in other countries of the region. Value of exports to Hungary and Austria exceeds that to the Czech Republic almost thrice, while value of exports to Slovakia, more than four-fold (Table 18). This huge difference might indicate that Moldovan companies do not use sufficiently their export potential to the Czech Republic.
54 Table 18: Value of Moldovan exports to the Czech Republic, Slovakia, Hungary and Austria (USD thousand)
2003 2004 2005 2006
Czech Republic 1,523.6 1,867.0 4,431.9 5,601.4
Slovakia 1,555.2 1,704.7 15,061.1 22,718.5
Hungary 8,007.6 14,460.9 14,743.9 14,625.5
Austria 11,320.8 10,033.1 11,684.6 13,145.2
Source: NBS
As much as major exports (over USD 1 million) are taken into account, there is only one exported good that can be found among Moldovan exports to all four countries, and it is cast iron, iron and steel.
Besides this, however, exports to Hungary, Slovakia and Austria are much more diversified than to the Czech Republic, including cereals, oily seeds and fruits, other seeds and fruits, industrial and medical plants, animal or vegetal fats, processed food fats, animal or vegetal wax (all Hungary); tobacco and its processed substitutes, textiles, shoes and socks, various merchandise (Slovakia); fruits and nuts, processed vegetables and fruits, aluminum and aluminum products (Austria). This means these goods may find their niches on the Czech market too.
Another category of exports to which Moldovan exporters should pay close attention is the group of exports to the Czech Republic, which are growing at the fastest rates. Although their value may not be that impressive, the dynamics of these exports points out that these niches should be explored and amplified. This category includes: dried fruits (apples and prunes), fresh fruits, juices, sparkling wines and brandies. All these goods experienced a spectacular growth in 2006. Exports of honey can also turn out to be attractive niche, as restrictions imposed on the honey imports from Moldova were lifted by the EU in the beginning of 2007.
Main internal barriers impeding higher trade with the Czech Republic are in the area of influence of the companies themselves. These are the moderate quality and narrow range of the products proposed to the foreign markets. There is no immediate solution to this problem but rather consistent and overall revision of the management and marketing practices dominant in Moldova. The Moldovan companies have to possess management and product quality certificates for the entire technological process and their products to meet the EU health and safety requirements.
The main external trade barrier is the customs tariffs imposed by the EU against imports from tertiary countries. Wine, which is in short term the most competitive Moldovan product, is not treated preferentially by the EU in the GSP+. The Moldovan government has to deploy all its efforts to obtain wine to be encompassed by the future Autonomous Trade Preferences that the EU will grant in 2007-2008. Some support, advocacy and know-how can be received, among others, from the Czech government as well.
To summarize, there exist a number of barriers to mutual trade as well as opportunities. There is rather low probability that the Czech Republic could in significant manner influence customs policy of the EU.
Therefore, it is necessary to search for some potential for improvement in other areas.
As was already identified above, awareness about Moldova in the Czech Republic is relatively low. This study should contribute to its promotion. Anyway, it would be worth continuing in this line and providing Czech institutions with regular reports or promoting material about current situation in Moldova, which could be further distributed to the Czech companies to make Moldova existence a general knowledge.
This could be partly achieved through closer cooperation of the Moldovan MIEPO and the Czech organizations such as CzechTrade or CzechInvest.
Furthermore, the issue of promotion is closely related with the fact that huge amount of information about Moldova on Moldovan websites is not available in English. Since Russian was an obligatory language taught at school, major part of Czech population can speak Russian and is all right for them if websites are translated into Russian as a second language on websites. On the other side and importantly, younger population is familiar rather with English and other world languages than Russian and this trend will be naturally strengthening.
55 The chapter on international trade support in the Czech Republic lists several trade fairs and trade exhibitions, which can be utilized by the Moldovan companies (with the support of Moldovan export-supporting institutions) for presentation and promotion of their products. The same chapter includes available sources where Moldovan side can actively search for potential partners.
When setting a partnership Czech partners are (as described in chapter 4.5.2) a bit punctual, they prefer setting of clear rules of relationship, adherence to all necessary formal procedures, on-time arrivals, payments in advance etc. This feature of the Czech business culture should be taken into account by the Moldovan partners and reflected in their approach to cooperation with their Czech counterparts.
A typical Czech consumer bases his/her choice of products mainly on the price and quality and their relation. There is not any strong preference of assortment coming from whatever country. Hence we do not see any problem in acceptance of Moldovan products amid Czech consumers’ community. This can be illustrated on growing popularity of Moldovan wines. Although the share of Moldovan wines on total wines imports is low, the trend has been clearly positive - their import to the Czech Republic increased from 2003 to 2006 by 157%. This example will be hopefully followed by other products listed in previous paragraphs.
56 6.