feasability study ip tracom english
TRANSCRIPT
Feasibility Study
for
Establishing the Industrial Park
on the territory of former Production Complex „Tractor Plant in Chisinau”
FinAsist Consulting SRL
Tel: +37322 270035 e-mail: [email protected]
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CONTENTS
1 Industrial Park concept ............................................................................................................................................... 7
1.1 Aims and objectives of the feasibility study .............................................................................................. 9
1.2 Methodology of the study ................................................................................................................................. 9
1.3 Types of resident enterprises of the industrial park .................................................................. 11010
1.4 Legal expertise on the Law provisions regarding the establishment of Industrial Parks ... 14
1.4.1 Incentives provided upon the creation and functioning of industrial parks .................. 16
1.4.2 Legal compliance of the industrial park management company ......................................... 16
2 Establishment of the Industrial Park on the territory of former Production Complex „Uzina de
tractoare din Chisinau” ....................................................................................................................................................... 18
2.1 Defining the problem ....................................................................................................................................... 18
2.1.1 Net foregin investment flow ................................................................................................................ 21
2.2 Diagnostic analysis of the enterprises within the former Production Complex "Uzina de
tractoare din Chisinau", territory set for the establishment of an industrial park ............................... 26
2.2.1 Historical evolution of the Production Complex “Uzina de tractoare din Chisinau” ... 26
2.2.2 Diagnostic analysis of JSC "Tractor Plant Tracom” .................................................................... 29
2.3 Description of the economic activites performed in the region and possibility to attract
residents in the industrial park .................................................................................................................................. 39
2.3.1 Industry........................................................................................................................................................ 41
2.3.2 Investment actvity ................................................................................................................................... 43
2.4 Human potential of the region necessary for the park activity ...................................................... 46
2.5 Regional infrastructure (zonal) required in the industrial park activity ................................... 51
2.5.1 Transport infrastructure ...................................................................................................................... 52
2.5.2 Drinking-water supply network ........................................................................................................ 53
2.5.3 Drainage network .................................................................................................................................... 54
2.5.4 Heating energy supply ........................................................................................................................... 55
2.5.5 Natural gas supply ................................................................................................................................... 55
2.5.6 Power energy ............................................................................................................................................. 55
2.5.7 MIneral resources .................................................................................................................................... 55
2.5.8 Waste management ................................................................................................................................ 55
2.6 Technical and production infrastructure to be connected to the industrial park .................. 57
3 The strategy for the establishment of an industrial park within the former „Production
Complex Uzina de Tractoare din Chisinau” ................................................................................................................ 63
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3.1 Establishment of the industrial park through the fiduciary management of the 10 joint
stock companies created on the territory of former Production Complex Tractor Plant in
Chisinau, following the privatization program in 1995 and 1999 ............................................................. 64
3.1.1 Public capital company .......................................................................................................................... 66
3.1.2 Public-private capital company ......................................................................................................... 67
3.1.3 Transfer of public goods destined for the creation of an industrial park to a company
selected on a competitive basis compliant with Public Private Partnership Law............................ 67
3.2 The establishment of the industrial park through merger (merger and acquisition) of the
10 joint stock companies created on the territory of former Production Complex "Uzina de
tractoare din Chisinau", following the privatizations in 1995 and 1999 .................................................. 69
3.2.1 Procedure for merger through absorption ................................................................................... 71
3.2.2 Opinions ....................................................................................................................................................... 77
3.3 The establishment of the industrial park through the lease of assets of the ten joint stock
companies created on the territory of former "Production Complex Tractor Plant in Chisinau",
following the privatization program in 1995 and 1999 .................................................................................. 78
3.3.1 Lease of the assets of the joint stock companies......................................................................... 78
3.3.2 The effects of changing the owner of the leased estate............................................................ 81
3.3.3 The legal consquences of improvement of the leased assets ................................................ 82
3.3.4 The lease of assets where they are qualified as unused assets of the enterprises ....... 83
3.3.5 Opinions ....................................................................................................................................................... 84
3.4 The establishment of an industrial park by setting up a new joint stock company whose
registered capital shall be formed by the contributions of the 10 joint stock companies created on
the territory of former "Production Complex Tractor Plant in Chisinau", following the
privatization program in 1995 and 1999 .............................................................................................................. 84
3.4.1 Opinions ....................................................................................................................................................... 88
3.5 The establishment of the industrial park by selling the share blocks to private investors,
stat- owned stakes in the 10 joint stock companies created on the territory of former "Production
Complex Tractor Plant in Chisinau", following the privatization program in 1995 and 1999 ....... 89
3.6 Steps in the establishment of the industrial park on the platform of former Production
Complex „Tractor Plant in Chisinau” ...................................................................................................................... 91
4 The estimated value of the investment required for the establishment of the industrial park . 97
4.1 Elements of the investment plan for the renovation of technical and production
infrastructure to be connected to the industrial park. ..................................................................................... 97
5 The economic and financial forecast of the activity performed by the management company
100
5.1 Operational activity of the management company of the industrial park ............................... 100
6 Social and economic impacts of the industrial park on the regional development ....................... 105
6.1 Impact assessment .......................................................................................................................................... 105
6.2 Indirect Impact forecast (multiplicative economic effect) ............................................................. 108
6.3 Investment appraisal ..................................................................................................................................... 108
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6.3.1 Opinions ..................................................................................................................................................... 109
7 Environmental impact assessment upon the creation of an industrial park ................................... 110
7.1 Polluting indicators ........................................................................................................................................ 111
LIST OF TABLES
Table 1: Comparative macroeconomic evolution of the Republic of Moldova, in relation to Europe
and Central Asia region ...................................................................................................................................................... 21
Table 2: Distribution of net FI flow by areas of activity (area, share), 2009-2006 ................................... 22
Table 3: Scoreboard of the foreign investment stocks in equities, granted loans and credits (by
value of investments), end of 2009 ............................................................................................................................... 23
Table 4: Performance indicators of the companies in former „Production Complex Tractor Plant in
Chisinau” ................................................................................................................................................................................... 28
Table 5: Debts to the state budget except JSC „Tracom” ...................................................................................... 28
Table 6: Debts to the Social Insurance Fund except JSC „Tracom” ................................................................... 28
Table 7: Personnel debts except JSC „Tracom” ......................................................................................................... 28
Table 8: Sales structure of JSC „Tracom” ...................................................................................................................... 31
Table 9: Financial outcome of JSC „Tracom”, 2007-2009 ..................................................................................... 32
Table 10: Employed personnel of JSC „Tracom” by age ....................................................................................... 33
Table 11: Personnel employed at JSC „Tracom” by education degree ............................................................ 33
Table 12: Credit debts of JSC „Tracom”........................................................................................................................ 33
Table 13: Asset structure of JSC „Tracom”, change in absolute values .......................................................... 34
Table 14: Asset weight in JSC „Tracom” capital ....................................................................................................... 35
Table 15: Liquidity coefficients of JSC „Tracom” ..................................................................................................... 37
Table 16: Profitability indicators JSC „Tracom” ...................................................................................................... 37
Table 17: Rentability indicators of JSC „Tracom” .................................................................................................... 37
Table 18: Financial balance indicators of JSC „Tracom” ....................................................................................... 38
Table 19: Solvency coefficients of JSC „Tracom” ...................................................................................................... 38
Table 20: Bankruptcy probability index of JSC „Tracom” .................................................................................... 39
Table 21: Territorial density and distribution of enterprises in Moldova, year 2008 ............................. 42
Table 22: Enterprises in the municipality of Chisianu, NBS data ..................................................................... 43
Table 23: Evolution of the investment activity in the municipality of Chisianu, 2010 ............................ 43
Table 24 Evolution of private investments per capita, lei ................................................................................... 44
Table 25: Structure of fixed investments, mun. of Chisinau ............................................................................... 45
Table 26: The territorial distribution of the population in the municipality of Chisinau, thousand . 47
Table 27: Municipality population by age, 01.01.2010 ......................................................................................... 48
Table 28: Employees distribution by type of activity, mun. Chisinau, thousand people ........................ 48
Table 29: All level education, mun. of Chisinau, 2009 ........................................................................................... 50
Table 30: Drainage network of Chisinau Municipality .......................................................................................... 54
Table 31: „Production Complex Uzina de Tractoare din Chisinau”. Structure and surface area of the
properties................................................................................................................................................................................. 57
Table 32: Structure and area of JSC „Tracom” buildings ..................................................................................... 58
Table 33: Equity structure of the 10 jsc created on the territory of former „Production Complex
Tractor Plant in Chisinau”, following the privatization programs in 1995 and 1999 ............................. 66
Table 34. Estimating the benefits and disadvantages of placing the patrimony of the ten joint stock
companies under the fiduciary management ........................................................................................................... 68
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Table 35 Stages of the merger process and the implementation term .............................................................. 76
Table 36 Assessment of the benefits and disadvantages in the creation of the industrial park
through merger (absorption) .......................................................................................................................................... 77
Table 37: Estimating the benefits and disadvantages in creating the industrial park by renting the
assets of the joint stock companies ............................................................................................................................... 84
Tabel 38: Analysis of benefits and drawbacks of establishing a new joint stock company whose
regitered capital shall be formed by the contributions of the 10 joint stock companies ....................... 88
Table 39: Estimating the level of deetatization of the companies on the territory of Tractor Plant in
Chisinau .................................................................................................................................................................................... 89
Table 40: The analysis of benefits and drawbacks on the establishment of the industrial park by
selling the the state's share block to private investors. ........................................................................................ 90
Table 41: Investment plan elements: electrical energy network...................................................................... 97
Table 42: Investment plan elements: water/sewage network .......................................................................... 97
Table 43 Investment plan elements: road/railroad network ............................................................................ 97
Table 44: Investment plan elements: telecommunications ................................................................................ 98
Table 45: Consolidated investment plan: renovation of the technical and production infrastructure
to be connected to the industrial park ......................................................................................................................... 98
Table 46: Investments in production infrastructure by the future residents of the industrial park . 99
Table 47: Price-setting for the rent of the administrative spaces of the IP, Euro .................................... 100
Table 48 Estimated rent calculation ........................................................................................................................... 101
Table 49 Estimated calculation of revenues generated by provision of services .................................... 101
Table 50: Projected financial result of the IP managing company (a) .......................................................... 102
Table 51 Projected financial result of the IP managing company (a) ........................................................... 102
Table 52: Projected cash flow of the IP management company (a) ............................................................... 103
Table 53 Projected cash flow of the IP management company (b) ................................................................ 103
Table 54: Projected financial indexes of the IP management company (a) ............................................... 104
Table 55: Projected financial indexes of the IP management company (b) ............................................... 104
Table 56: Direct economic impact of the establishment of the industrial park (a) ................................. 107
Table 57: Direct economic impact of the establishment of the industrial park (b) ................................ 107
Table 58 Indirect impact forecast (multiplicative economic effect) ............................................................. 108
Table 59 Estimate of investment amount (€) ......................................................................................................... 108
Table 60 Estimate on several financial basic projections .................................................................................. 109
Tabel 61 Estimated acceptable emission levels ..................................................................................................... 111
Table 62 Estimation of acceptable levels for environmental pollution indicators .................................. 112
LIST OF FIGURES
Figure 1: Conventional delimitation of the territory of former „Production Complex Uzina de
Tractoare din Chisinau” into two separate zones (1 and 2) ............................................................................... 13
Figure 2: Industrial sector share in GDP, % ............................................................................................................... 19
Figure 3: Dynamics of Industrial Production Growth, % compared to previous year ............................. 19
Figure 4: Growth dynamic of fixed investments in industry, % year-over-year ........................................ 20
Figure 5: Scoreboard of foreign investment stocks by areas of activity 2009, % ...................................... 23
Figure 6: Estimate on changes in business environment ..................................................................................... 24
Figure 7: Typology of difficulties encountered by companies (5- highly difficult, 1- not difficult) .... 25
Figure 8: Organization chart of the main assembly conveyor division: ......................................................... 30
Figure 9: JSC „Tracom” sales structure ........................................................................................................................ 31
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Figure 10: Goods and materials stocks of JSC „Tracom” ....................................................................................... 36
Figure 11: JSC „Tracom” Property structure ............................................................................................................. 36
Figure 12: Mun. of Chisinau, Key performance indicators of the production of goods and services
(in % compared to the same period of the previous year ) ................................................................................. 41
Figure 13: Mun. of Chisinau. Structure of the industrial production by type of ownership .................. 41
Figure 14: Economic agents by type of activity, mun. of Chisinau 2008-2009, % ..................................... 45
Figure 15: Average monthly salary by type of activity, mun. of Chisinau, 2009, lei ................................. 49
Figure 16 Zonal&territorial delimitation of Chisinau Municipality infrastructure ................................... 51
Figure 17: Space representation of the territory adjacent to the Tractor Plant in Chisinau ................. 57
Figure 18: Construction of the 1930-1940 period on the territory of Uzina de Tractoare din
Chisinau .................................................................................................................................................................................... 59
Figure 19: Construction built during 1970-1980 on the territory of Uzina de Tractoare din Chisinau
...................................................................................................................................................................................................... 60
Figure 20: Gas supply network ....................................................................................................................................... 60
Figure 21: Electricity supply networks on the territory of Uzina de Tractoare din Chisinau............... 61
Figure 22 The railway on the territory of the Tractor Plant in Chisinau ....................................................... 62
Figure 23: The schematic representation of the fiduciary management option of the ten joint stock
companies and their assets ............................................................................................................................................... 68
Figure 24: Graphic representation (consolidation/absorbtion) of the existing ten joint stock
companies ................................................................................................................................................................................ 71
Figure 25: Graphical representation of the lease transaction of the assets upon the establishment of
the industrial park ................................................................................................................................................................ 79
Figure 26: Establishment of a new joint stock company whose registered capital shall be formed
through the contributions of the 10 joint stock companies on the territory of former "Production
Complex „Tractor Plant in Chisinau" ............................................................................................................................ 86
Figure 27: Estimate on the topology of the companies to contribute to the establishment of the
industrial park on the platform of former "Production Complex Tractor Plant in Chisinau" ............... 91
Figure 28: Estimation of the territorial distribution of the companies to contribute at the
establishment of the industrial park on the platform of former "Production Complex Tractor Plant
in Chisinau" ............................................................................................................................................................................. 93
1 INDUSTRIAL PARK CONCEPT The phenomenon of globalization accounts for the change in the economic status of the
developed countries and is an important and prominent feature of the current economic
development. The existing pressures on the structural adaptations in the area of
production, investment and business is a common feature of the world economic
development. The experience and know-how of most developed european countries show
that the creation of capital resources and their uses represent one of the most crucial and
important questions to ensure the sustainability of the economic progress, whose
fundament dwells in capital tapping and the development of industrial parks. For the
Republic of Moldova, industrial parks represent an opportunity to attract investment
inflows, including foreign, and is a direct factor to lower unemployment.
Various definitions of Industrial Parks (hereinafter IP) have been made. But the definition
made by the United Nations Industrial Development Organization is considered to be the
broadest. According to UNIDO’s definition, “An industrial park can be defined as a tract of
land developed and subdivided into plots according to a comprehensive plan with or
without built-up (advance) factories, sometimes with common facilities and sometimes
without them, for the use of a group of industrialists” (UNIDO, 1997, p.10). Two points in
the definition above need amplification. The comprehensive plan refers not only to the
physical planning of the park, but also to its immediate economic and social environment,
and its role assigned in the regional or urban development plan.
UNIDO have also described some of the characteristic features of industrial parks, as
follows:
A defined geographical area which contains enterprises of an industrial nature. The
essential element is that the park is administered or managed by a single authority
that has defined jurisdiction with respect to tenant companies;
Industrial Parks cover up a relatively large surface area of 40-80 ha;
There are some restrictions on companies residing in the park;
A plan concerning the type of construction and the size of individual objects is
required, which would set out the overall use of the infrastructure. Finally, the IPs
development complies with the set-out plan, covering the physical layout of the park
and its economic and social environment, depending on the role within the regional
or urban development plan.
The national legislation uses the term „industrial park”, which is, in fact, very similar to the
term "industrial district", “production area” or “production cluster”. Nonetheless, English
economic literature uses terms such as industrial estate, commercial estate, factory estate,
or employment areas.
According to the legal provisions in force of the Republic of Moldova – particularly the Law
no. 182 of 15.07.2010 on Industrial Parks, an Industrial park is defined as a “a delimited
area accommodating technical and production infrastructure, intended for carrying out
economic activities, mainly industrial production, services, exploiting scientific research
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and/or technological development in a specific range of facilities to exploit human and
material potential of a region”.
The „industrial agglomeration” term can also be added to theoretically define IP
peculiarities. In recent decades, there existed an increased interest for the theory of
industrial agglomerations, based on Marshall’s economic studies, location theory of Weber
and others, and later the additions by the contemporary specialists in industrial economies,
regional economies and international trade, etc. who discussed the factors, formation
mechanism and functioning of the industrial agglomeration1.
Industrial agglomeration refers to the spatial accumulation of enterprises, belonging to the
same branch/industry or immediate braches/industries.2 Whether on vertical division or
horizontal cooperation, such enterprises make up an organic whole that brings about
„agglomerate” profits and an overall increase. To sum up, the main peculiarities of the
industrial agglomerations are the regional concentration and industrial symbiosis.
The agglomeration of enterprises of a certain industrial chain can raise the production in a
great degree, then lower the average costs and realize the industrial economy of scale. The
infrastructure facilities and labour pool greatly raise enterprises’ abilities of competition
and innovation (synergic effect). Industrial agglomerations lead to a decrease in
transaction costs. Near-by location of enterprises can greatly decrease the transport costs
and give a rise to the industrial climate, attracting more external suppliers and consumers,
thus strengthening the negotiation ability3.
Industrial parks underwent several steps of development and we can talk about few
generations of industrial parks. Typically, the first generation of industrial parks, which
were built in the 1970s, can be distinguished from the other generations by assembly halls
and storages and a rather simplistic architecture. The area of administrative buildings took
about only 10 to 15 per cent of the total area of the park. In the period between 1975 and
1985, the industrial parks included offices, used by companies dealing with science,
technologies and business. Characteristic of this second generation of industrial parks was
a challenging and more complicated architecture. Since the second half of the 1980s, the
third generation industrial parks was built; these were typical by elastic use of the area and
a wide portfolio of services, as well as by an increase in the number of administrative staff
and furthermore, more space was offered to offices focusing on IT. Administrative
buildings and a wide portfolio of services was characteristic for fourth generation
industrial parks which begun to arise from the mid-1990s. Storage houses were usually
located outside the park itself and there was an increase in the importance of recreational
areas connected to the park that were used by people working in them. Since the second
half of the 1990s, industrial parks have been a part of an international network of
cooperating parks.
1 Economics of agglomeration cities, industrial location, and regional growth. Masahisa Fujita 2002. Cambridge University, UK. 2 Territorial agglomeration as a local innovation environment: The case of a digital media agglomeration in Tampere, Finland.
Jari Kolehmainen 2003. MIT IPC-LIS Working Paper, Cambridge, US. 3 McCann, P., Arita.T. & Gordon, I.R. (2002). Industrial clusters, transactions costs and the institutional determinants of MNE
location behavior. International Business Review.
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This study will analyse the feasibility of creating an Industrial Park on the territory of the
former Production Complex „Tractor Plant in Chisinau” („Uzina de Tractoare din
Chisinau”).
1.1 AIMS AND OBJECTIVES OF THE FEASIBILITY STUDY The objective of the feasibility study on the creation of an industrial park on the territory
of former Production Complex „Tractor Plant in Chisinau” comprises a detailed analysis of
legal, economic, financial, social and technical circumstances, aiming to demonstrate the
viability of creating the industrial park:
Economic and social impact analysis, performed to demonstrate the rationale for the
creation and support of an industrial park;
Analysis of economic profile and legal compliance of the existing enterprises and
enterprises in need of restructuration, that will be assigned administrative/resident
status within the concerned industrial park;
Upon the provision of positive argumentation concerning the creation of the
industrial park, there will be developed the strategic plan on the creation of the IP,
the implementation of the strategy and the further development of the IP.
The objectives for the creation of industrial parks have been set out in the Law no. 182 of
15.07.2010 on Industrial Parks, as well as by the characteristics of the industrial parks
referred to in the chapter on industrial park concept:
Attraction of domestic and foreign investments;
Formation of competitive industry sectors based on modern and innovative
technologies;
Deployment of economic activities consistent with the specific development
opportunities of the area, including more efficient use of public assets;
Development of small and medium enterprises;
Job creation;
Creation of specific conditions for the industrial agglomeration of enterprises
belonging to the same industry/industry or branches of industry/immediate
industry;
Increasing productivity at a significant level and cost optimization by facilitating
enterprise agglomerations of a specific industrial chain;
Creation of an optimal industrial climate to attract more suppliers and external
customers in order to strengthen the negotiating capacity with them.
1.2 METHODOLOGY OF THE STUDY The methodology applied in the preparation of the feasibility study was based on the
following research and analysis tools:
1. Considering the current reality regarding the existing IPs in Moldova, as well as the
analysis of sector strategies or existing program documents, lessons learned from
the past and barriers identified.
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2. Using primary research methods, quantitative and qualitative methods that ensure
the effective collection of analytical data for the proposed deployment.
3. Policy formulation and provision of real solutions to be implemented in a way that
government can become a trusted partner, providing quality services and protecting
both public and private interests, development of innovative partnerships and
business development within the IP, ensuring the best financial and investment
practices in the area, and finally, establishment of development levers and
implementation of IPs. This included, but was not limited to structured and
unstructured interviews with people in positions of responsibility in the field, group
interviews and focus groups, using best international practices in reasoning the
creation of IP (UNIDO methodology).
4. Resorting to and applying the experience in the development of IPs in different
countries, including those in South East Europe, involving the legal and economic
circumstances of the internal situation. There have been carried out SWOT analyses
of various scenarios for the involvement of private partners in the creation and
development of IPs. As a result a series of recommendations will be made, the
opportunities and risks shall be listed, that could be considered upon the
development of IPs.
5. Use of techniques for the identification and analysis of regional characteristics.
Using these criteria as a research guide will help present the locations of the future
IP. In collecting the data, a variety of research methods will be used, including the
examination of the local, regional and technical documentation for planning,
geographic data layers, and interviews with staff members from public and private
agencies.
6. Use of appropriate methodologies for the analysis of the IP management company
and of the economic activities deployed by its future residents, such as business
efficiency trough business and dividend forecasting, as assessment methods,
financial results forecasting, analysis of existing financial situations (balance sheet
and profit account), cash flow forecasting and liquidity of enterprises, current
industrial and investment risk analysis, etc.
1.3 TYPES OF RESIDENT ENTERPRISES OF THE INDUSTRIAL PARK Despite the abundance of information and studies on the location of the enterprises and its
determinants, little attention has been paid to the attractiveness of the locations depending
on the type of enterprise. Industrial parks fall into a category with "special attributes"
which could be enhanced to attract certain types of companies.
Industrial parks possess peculiar characteristics that affect their attractivity as compared
to other companies.
Applying the economic and fundamental marketing theories, we can generate a set of
hypotheses concerning the location of enterprises within the industrial parks:
More likely the small enterprises will be the future residents of the park, to the
detriment of their larger counterparts;
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There is a high probability that light industry, rather than heavy industry, will be
located in the park;
The point of optimal transportation includes long distance transportation costs - the
ratio between the weight of the raw material and the finished product. Industrial
parks are more attractive to the industries that accumulate raw material and
produce heavy finished goods4;
The larger the outlet of an undertaking, from geographical point of view, the more
attractive the option to perform its activities in an industrial park;
It is improbable that high consuming energy companies will locate in the industrial
park.
Micro-enterprises may encounter difficulties related to the resident payment of the
industrial park, while large companies generally operate more efficiently performing on
their own industrial land. Therefore, the main residents of the industrial park are expected
to be small and medium enterprises.
The number of residents employed in the industrial park may vary, but on average, given
the characteristics of small and medium enterprises, it may indicate an area of about 5000
sq. m. occupation.
The "point of optimal transportation": weight-gaining industries are usually placed at a
greater distance from their raw material sources, compared with industries using heavy
and bulky raw materials (weight loss industries), which are normally located nearby their
raw material sources.
The industrial park provides a preset territory with a previously established infrastructure.
Therefore, performing an activity in the industrial park may not constitute an attractive
location for a company with special energy needs, that would rather consider the
development of its own production area.
The situation of the territorial area and the location of production assets of former
Production Complex "Tractor Plant in Chisinau" may be considered an exception since it
offers the possibility of combining types of enterprises, subject to becoming residents of
the industrial park.
Presently, the territory of former Production Complex "Tractor Plant in Chisinau" can be
conventionally separated into two separate areas, as shown in Fig. 1.
This division focuses on the concept of industrial types already mentioned, which may be
engaged as future residents of the park - mainly small and medium enterprises of an
average territory of 5000 sq.m.
On the other hand, it should not be overruled the possibility of attracting a strategic
investor, able to develop the territory the industrial park under his own production needs.
The type of the strategic investor considered in this analysis involves types of large
4 Wilhelm Launhardt, Alfred Weber “Least cost theory of industrial location”. Theory of the Location of Industries, according to their type.
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production enterprises with special needs organization and allocation of production
activities with substantive energy consumption, and for this reason, will need to develop
the territory under its specific production necessities, such as enterprises engaged in
machine building industry.
Another important factor which determined the conventional delimitation of the territory
of the future industrial park in two separate areas, is the state of the production assets,
including the existing buildings.
Zone no. 25 will be intended for a strategic investor - a large production company, which
will develop the territory under its own production needs.
5 In-depth chapter on: Industrial park stages of development on the former territory of Production Complex "Uzina de Tractoare din Chisinau"
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Figure 1: Conventional delimitation of the territory of former Production Complex „Tractor Plant in Chisinau”” into two separate zones (1 and 2)
1.4 LEGAL EXPERTISE ON THE LAW PROVISIONS REGARDING THE ESTABLISHMENT OF
INDUSTRIAL PARKS The process of creating and functioning of industrial parks in the Republic of Moldova is
regulated by Law Nr. 182 of 15.07.2010 on Industrial Parks.
The legislator defines the park as “a delimited territory with technical and production
infrastructure, where economic activities are being carried out, mainly industrial production, service
provision, implementation of the scientific researches and/or technological development, under a
specific facilities regime, for the purpose of capitalizing human and material potential of the
respective region”.
Therefore, in order to be granted legal status of an industrial park, a certain territory has to
to meet the following conditions:
Delimited territory of at least 5 ha area;
Existing technical and manufacturing infrastructure within the territory;
Performing an economic activity, including entrepreneurship, mainly of industrial
nature.
The conditions are rather simple, though the legislator did not apply an exhaustive notion,
leaving the opportunity to create an industrial park to the current economic environment.
In this respect, Law nr. 182 established the technical and production infrastructure as a
mandatory element of an industrial park, as “buildings and facilities, electricity supply
systems, telecommunications networks, gas and water supplies, sewage and pluvial systems,
transportation, public lighting etc.” Formally, it is important that the land destined for the
industrial park accommodated at least one infrastructure connection, e.g. public lighting, in
order to be regarded as a subject for the creation of an industrial park.
Moreover, the law allows the pursuit of non-production activities within the industrial park
territory, provided they would be "mainly of industrial nature".
Industrial parks can be created both by public entities (central agencies or local
administrative authorities), as well as private economic agents (commercial
companies or state enterprises).
As promoters for the creation of industrial parks, public entities are entitled to two
opportunities, provided by law:
Establishment of a public or public-private commercial company;
Selection of a commercial company in accordance with the Law on public-private
partnership, that will be transferred the publicly owned property for the
establishment of the industrial park.
Article 106, par.2 of the Civil Code of the Republic of Moldova, enacted by law Nr. 1107
of 06.06.2002, provides an exhaustive list of the companies entitled with the commercial
company status: “A commercial company can only be established as a collective society, in
limited partnership, limited liability company and joint stock company.”
Therefore, public entities can establish limited liability companies or joint stock
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companies in order to create industrial parks. The public capital of these companies
delimits only the commercial companies whose registered capital is formed entirely from
state’s contribution or from that of the administrative-territorial unit (Law Nr. 121 of
04.05.2007 on administration and deetatization of public property). State’s contribution to
the registred capital of the companies can only be submitted either through the assets
under the state-owned public property or the administrative-territorial units, as the public
property assets make the exclusive object of the public property and their civil circuit is
prohibited.
The legal notion of a public-private commercial company is exposed in the Law on
administration and deetatization of public property, that approaches state and private
capital commercial companies. The correct perception of the notions of public commercial
company and that of commercial company with public controlling interest is of great
importance, since they belong to separate groups of commercial companies.
Therefore, compliant with the Law on industrial parks, the authorized public entities are
entitled to establish industrial parks by means of commercial companies with public-
private capital, that is, commercial companies whose registered capital is not formed
entirely from state’s contribution neither from state’s controlling contribution (50%+). In
this context, the legislator has provided the state with all the possible opportunities for the
establishment of industrial parks.
The second modality for the establishment of industrial parks, with the participation of
public entities, can be carried out through the private-public partnership. In this case,
unlike the private-public companies, there will be supplementarily added the legal
provision of Law Nr. 179 of 10.07.2008, on public-private partnership. Compliant with this
law, the public-private partnership can be accomplished via the association of the private
and public partners, through the establishment of a commercial company (limited liability
company or joint stock company), based on joint capital (public-private).
The Ministry of Economy of Republic of Moldova represents the body empowered by law to
examine the applications for registration of the industrial parks. In case a positive opinion
is issued, the industrial park will be established through a government decision.
In addition to the registration procedure for the industrial parks, the legislator provides a
"consultative" procedure, where local public administrations are involved. Under this
procedure, the developer of the industrial park has the right to file the application with the
local council, who has jurisdiction over the land plot destined for the park. It should be
retained that the law provides the initiator with the right and not the obligation to submit
the said application for the establishment of an industrial park with the local council.
Formally this procedure is not mandatory, thus it cannot be a legal impediment for the
creation of an industrial park. The involvement of the Local Council, from legal point of
view, consists in „support in obtaining the necessary documents for the creation and
development of the industrial park and to prevent the occurrence and/or remove of any
possible impediment in solving the eventual problems related to the establishment and
development of the industrial park. (art. 7, par. 11, Law on Industrial Parks)”.
16
1.4.1 INCENTIVES PROVIDED UPON THE CREATION AND FUNCTIONING OF INDUSTRIAL PARKS
The incentives are stipulated by article 12 of Law no. 182 of 15.07.2010 on industrial
parks:
a) exemption from compensation of losses caused by the exclusion of land from
agricultural land category according to the Law on Normative price and procedure
for sale of land;
b) free alienation or in commodatum of the public property goods to the management
company for the creation and development of the industrial park through owner's
decision under the Law on administration and deetatization of public property;
c) the right to privatize the publicly owned territory, adjacent to the constructions, at
the normative price of the land, set at the time of giving it into use to the
management company or into lease to the residents of the industrial park, only after
the purchase and/or putting into service of the constructions and industrial and
related facilities under the Law on Normative Price and procedure for purchase
and sale of land. The incentive is granted for the investments in buildings and
facilities covered by the project, based on which the resident or the management
company was selected. Its value is higher the amount of three normative prices of
the land, set at the time of its release to the management company or leased to the
residents. Additionally, the compensation payment for losses is performed, caused
by the exclusion of land from agricultural land category, whose amount has been
settled upon the change of the land-use, whether it took place;
d) providing fiscal incentives according to the Fiscal Code;
e) the management company applies the decrease coefficient down to 0.3 on the
tariff for the annual fee for public land rental according to the Law on the
Normative Price and the procedure for sale/purchase of land, or the base rate for
the annual rental of the publicly-owned goods, established by the Law on State
Budget for the year.
f) optimization of state controls over the activity of residents by carrying out
scheduled checks according to annually approved schedules by government
decision or unannounced checks carried out in agreement with the Ministry of
Economy under the laws in force;
g) allocation of financial resources, where appropriate, for the creation of technical and
production infrastructure.
1.4.2 LEGAL COMPLIANCE OF THE INDUSTRIAL PARK MANAGEMENT COMPANY Anticipating the analysis and solutions identified in regard to the establishment of the
industrial park, that will recommend the creation of new companies, based on the existing
patrimony of former Production Complex "Tractor Plant in Chisinau", we can enunciate the
company's full compliance with the law:
It is a commercial public-private company;
Has a delimited territory;
17
The land is state-owned property and shall be undertaken into use by the
management company for a period of 30 years, is free of any encumbrances and is
not subject to pending litigations and/or settlements in court or arbitration;
The area of the projected industrial park is of 32,5 ha, compliant with the legal
provisions on the minimum area surface required for an industrial park (5 ha).
Has transport access ways;
Has all the preconditions necessary for connecting the technical and production
infrastructure to public utilities.
2 ESTABLISHMENT OF THE INDUSTRIAL PARK ON THE
TERRITORY OF FORMER PRODUCTION COMPLEX „ TRACTOR
PLANT IN CHISINAU”
2.1 DEFINING THE PROBLEM The Ministry of Economy in Moldova, as a centralized body empowered by law to set out
industrialization policies, has laid down a range of barrier hypotheses, which now
vehemently tell against the industry revitalization, as follows:
Limited access to the industrial land for launching and carrying out an industrial
activity.
High costs and risks posed by the bureaucratic procedures upon the initiation and
deployment of industrial activities.
High costs and risks related to government control over the entrepreneurial activity.
High expenses on import equipment, raw materials and other launching-related
goods.
Major expenses and risks related to import-export procedures.
High expenses on utility connections. Other expenses met by the industrial investors related to taxes in Moldova.
The identified causes work out as barriers to be overcome through appropriate solutions.
Over the years several industry recovery programs and strategies have been undertaken
Among them:
Government of the Republic of Moldova, Program of activity „European Integration:
Freedom, Democracy and Welfare” 2009-2013, which provides for the creation of a
network of industrial parks under the aegis of local public administration,
particularly in adjacent border areas to encourage integration of enterprises in
international technological networks.
Economic Stabilization and Recovery program of the Republic of Moldova 2009-
2011, where the component "Improving the investment climate" establishes further
development of industrial parks concept by setting up new units and examining the
option of expanding the incentives for residents of such parks.
The National Development Strategy for 2008-2011, which focuses, in the chapter of
"Attracting investments, in particular foreign direct investments" on promoting
investment opportunities by providing investors with access to free economic
zones, industrial and innovation parks, etc. In the chapter on "Promoting effective
tools to facilitate the convergence of the development and economic growth of
cities, as well as the network consolidation of small towns "refers to the
development of economic infrastructure (free economic zones, industrial parks,
logistics centers).
Action Plan for the implementation of the National Development Strategy for 2008-
2011: Creation of three industrial parks in the regional growth area until 2011.
19
The Strategy for attracting investments and Promoting Exports 2006-2015.
Industrial Development Strategy until 2015, approved by Government Decision no.
1149 of 05.10.2006, refers to the creation of industrial parks and monitoring their
activities.
These adopted policies and strategies are called upon to improve the situation in the
industrial sector in Moldova, which currently shows a negative trend. Even though 2010
has seen an approx. 7% rise in the industrial production, this increase recorded a negative
value in the development figures of the previous years.
The indicators in the chapter on investments in industry show a low investment situation
in the industrial sector and a decreasing trend over the last decade, confirmed by the
Figures 2 and 4:
Figure 2: Industrial sector share in GDP, %
Source: National Bureau of Statistics
As evidenced, the share of industry in GDP presents low figures and shows a decreasing
trend in the last decade, accounting for only 13% in 2009.
The low share of industry in GDP is confirmed by the negative evolutions of the industrial
production volume after 2006:
Figure 3: Dynamics of Industrial Production Growth, % compared to previous year
Source: National Bureau of Statistics
20
The growth dynamic of fixed investments in the industrial sector registered a positive
trend over the recent years, but still insufficient for the recovery and development of this
sector.
The gross fixed capital formation decreased as a result of the economic crisis in 2009
(Figure 4). Up to the economic crisis in 2009, Moldova has registered improvements both
in fixed investments in industry and in foreign direct investments. Nonetheless, the amount
of FDI per capita was much lower than in Central and Eastern Europe.
Figure 4: Growth dynamic of fixed investments in industry, % year-over-year
Source: National Bureau of Statistics
The national economy currently experiences an overheating of the structure indicators.
Moldova performs poorly in promoting a sustainable economic model. The economic
processes during 1999-2009 depict a striding progress towards a veritable market
economy. These processes varied generally between periods of economic growth and
overall enhancements of macroeconomic vulnerabilities.
The hallmark of this post-soviet scenario has translated into Moldova's economic
competitiveness fundamental feature: comparative regression. As per the World Economic
Forum data, throughout 2005-2009, Moldova has constantly dropped positions: from the
89th out of 125 down to the 95th out of 134 analysed states. According to statistics, the
most precarious areas in 2009 have been: the level of business sophistication (ranked
131st out of 134 states), innovation (rank 116) and infrastructure (ranked 113th). Among
the most problematic factors for doing business have been: access to finance, corruption,
inflation and precarious infrastructure availability. The highlight area of the Moldovan
economic competitiveness refers to the labour market efficiency (ranked 55 out of 134)6.
Overall, the national economy is defined by a disproportionate aspect of the final
consumption in relation to GDP (117,5%) which is the highest among 3 of the 57 countries
6 Global Competitiveness Index, World Economic Forum
21
in Europe and Central Asia (ECA)7. This accounts mainly to imports (72,4% of GDP) and has
been achieved due to the significant volume of remittances (22,4% of GDP).
Table 1: Comparative macroeconomic evolution of the Republic of Moldova, in relation to Europe and
Central Asia region
# 1999 2009
% of GDP Pos. ECA % of GDP Pos. ECA
Gross final consumption 115,3 5 150,5 2
Remittances 9,5 4 22,4 2
Imports 67,4 9 72,4 3
Exports 52 13 40,7 30
Source: World data Bank, NBS, NBM
Among the major misbalances in the national economy are the formation and use of
resources. The added value in agriculture accounted for slightly over 10% of GDP last year
(28% in 1999), similar to the added value in industry (19% in 1999) and, at the same time,
much lower compared to the services sector – 79% (53% in 1999). The existing situation
requires measures that would increase the share of other 'laggard' sectors in GDP,
especially of industry.
One of the solutions submitted within the programs is the creation of industrial parks, in
support of which the Parliament of the Republic of Moldova adopted the new law (nr. 182)
of 15.07.2010, which repealed the existing law from 13.07.2007 on industrial parks.
2.1.1 NET FOREIGN INVESTMENT FLOW
The period 2004-2009 recorded a divergent performance in terms of the net FI flows
evolution. Determined as the input and output balance on each of the relevant positions (FI
in registered capital, credits & loans etc.), net FI flow revealed an implicit synchronization
reflex with the world economic crisis in 2008: the net trend described a sharp change
towards a negative dynamic. In 2009, the net FI flow was 1,7 times higher than the level
reported in 2004.
7 Europe and Central Asia – reference region in the World Bank statistics, comprising 58 countries, including Europe and former USSR states
22
Figure 4: Evolution of the annual net flow of foreign investments in Moldova (direct, portfolio etc.), 2004-2009
As compared to the previous year, 2009 recorded a sharper decrease of FI. At the 2008
year-end, the net flow of FI was particularly noticeable by its fragile structure. The severe
contraction of FDI net balance in the registered capital and the crunch of credits and loans
granted by the foreign founders to the resident enterprises show an obvious kickback of
the foreign investments from the national economy.
The shifts in the net flow value and structure of FI are visible in both their origin and
sectorial destination (Table 2).
Real estate transactions accounted for cca 2/3 of the net FI flow in 2009. Electrical and
thermal energies, gas and water sectors recorded a negative net flow, equivalent to more
than half of the net FI flow volume.
Table 2: Distribution of net FI flow by areas of activity (area, share), 2009-2006
# 2009 2008 2007 2006
Area % Area % Area % Area %
1 Real estate transactions
73,1 Financial activities
36,5
Financial activities
37,1 Transports & Communications
26,9
2 Trade 23,5 Trade 27,8
Real estate transactions
29,4 Trade 24,2
3 Construction 22,5 Real estate transactions
13,5
Trade 15,7 Real estate transactions
15,5
4 Manufacturing Ind.
14,2 Manufacturing Ind.
9,5 Manufacturing Ind.
5,8 Manufacturing Ind.
15,2
5 Transports & Communications
13,3 Transports & Communications
5,9 Constructions 5,1 Financial activities
15,0
6 Other 7,6 Agriculture 2,6 Transports & Communications
4,1 Constructions 2,0
23
# 2009 2008 2007 2006
Area % Area % Area % Area %
7 Health 6,9 Constructions 2,5 Hotels & Restaurants
2,8 Agriculture 1,0
8 Hotels & Restaurants
4,6 Other 2,3 Other 0,8 Other 0,6
9 Agriculture 2,1 Hotels & Restaurants
0,2 Agriculture 0,7 Hotels & Restaurants
0,3
10 Financial activities
-14,6 Health 0,0 Energy, gas, water
-1,5 Health 0,1
11 Energy, gas, water
-53,3 Energy, gas, water -0,8 Education 0,0 Energy, gas, water
-0,9
Author’s calculations based on statistical data
According to estimates, foreign investments aim most often at financial activities, trade,
manufacturing industry and real estate transactions:
Figure 5: Scoreboard of foreign investment stocks by areas of activity 2009, %
The most indebted areas are those of financial activities, manufacturing and trade
industries. Most direct investments in the registered capital go for the real estate
transactions, financial investments and trade areas (Table 3).
Table 3: Scoreboard of the foreign investment stocks in equities, granted loans and credits (by value of investments), end of 2009
# Direct investments in
registered capital Credits and loans
1 Real estate transactions 26,3 Financial activities 25,1
2 Financial activities 20,4 Manufacturing Industry 22,6
3 Trade 18,8 Trade 20,5
4 Transport&communications 13,1 Energy, gas, water 12,6
5 Manufacturing Industry 10,2 Real estate transactions 8,0
6 Constructions 4,7 Transports&communications 4,8
7 Energy, gas, water 4,1 Hotels&Restaurants 2,1
8 Agriculture 0,9 other 4,3
9 other 1,5
Source: NBM data, NBS publications
24
According to the legal provisions of Law no. 182 of 15.07.2010 on industrial parks, the list
of incentives in article 12 offered for industrial parks mentions a key issue for investors
and private producers, particularly to facilitate optimization of state controls over the
activity of industrial park residents by carrying out planned checks according to the annually
approved schedule by Government decisions or unannounced controls carried out in
agreement with the Ministry of Economy under the laws in force.
The importance of the facilities referred to upon the creation of industrial parks is
confirmed by the results of the study on perceptions of the national investment climate
state and dynamics, carried out on an analysis of 621 companies selected from resident
companies in the Republic. This study has identified that the general indicator of time,
which is a general estimate of state's involvement in the activity of businesses, had a
downward trend in 2010 observed during the last six years, decreasing from 11.2% to
9,9%. Managers' view on the business environment became more positive compared to the
previous year (Figure 6). Over the past year the percentage of respondents who stated that
the business situation worsened fell from 42% to 26%. In addition, the share of those who
have noticed improvements increased significantly from 5 to 22%. Taking into account
these results and the mentioned facility, the creation of industrial parks turns out as an
important precondition for revitalizing the business sector in general and the industrial
profiled in particular:
Figure 6: Estimate on changes in business environment
The most specific characteristic of the industrial park is the concentrations of businesses
on a determined territory and the tight relationships among the IP residents with third
parties, with the possibility of establishing a single one stop shop for the entire park.
Such specific feature of the industrial park, i.e. of the industrial agglomeration of
enterprises within a given territory, will lead to the improvements in bureaucratic
procedures related to the deployment of own businesses. According to the same study, the
most difficult matters in 2010 arose in licensing procedures, taxation system, the process of
obtaining permits and frequent inspections, difficulties that could be overcome through the
25
establishment of a single one stop shop in the industrial park. The situation did not change
significantly over the last year, as shown in the Figure 7:
Figure 7: Typology of difficulties encountered by companies (5- highly difficult, 1- not difficult)
Moldova's industrial policy is focused on strengthening and encouraging factors
determining the creation of a technologically advanced industrial sector of the economy,
efficient and competitive - compliant with the European standards. This objective can also
be achieved through the establishment of industrial parks.
In this context, the Government adopted the Strategy for industrial development for the
period until 2015 by Government Decision no.1149 of 5 October 2006. The strategy refers
to a number of tools and mechanisms to implement industrial policies of the country which
will influence positively the fulfilment of industrial policy's strategic objective. In this
respect, the main instruments are:
Formation of professionally qualified staff
Deepening the structural reforms in the industrial sector – IP contribution;
Development of innovation process and technology transfer – IP contribution;
Stimulating entrepreneurship and ensuring fair competition – IP contribution;
Support of investment activity – IP contribution;
Increasing product quality. Improving the product standardization and certification
– IP contribution;
Promotion of industrial products exports – IP contribution concurrently with free
economic zones;
Optimizing the regional location of the industry – IP contribution;
The implementation of the concerned instruments and creation of a network of industrial
parks across the territory of the Republic of Moldova will help and ensure in the projected
perspective:
1. An annual growth rate of industrial products of cca 8-10%;
26
2. Increase of industry share in GDP to 20-22% by 2015;
3. Achieve the 2% share of the production in science-intensive and advanced
technology branches in the overall industrial output;
4. Increase the share of employees in the industrial sector to 20% of the total number
of employees in national economy by 2015.
2.2 DIAGNOSTIC ANALYSIS OF THE ENTERPRISES WITHIN THE FORMER PRODUCTION
COMPLEX " TRACTOR PLANT IN CHISINAU ", TERRITORY SET FOR THE
ESTABLISHMENT OF AN INDUSTRIAL PARK
2.2.1 HISTORICAL EVOLUTION OF THE PRODUCTION COMPLEX “TRACTOR PLANT IN
CHISINAU” The history of the tractor plant started in 1945 with the creation of an engine repair plant,
originally a craft production workshop with a few employees.
In 1948 the engine repair plant was reorganized into a repair plant of cars, machinery,
stationary engines, production of repair equipment and foundry. In 1958 it has specialized
in manufacturing spare parts for cars named «Автодеталь». The plant renovation project
was developed by «Гидротракторсельмаш» Institute from Harikov, Ukraine.
In 1961 within the «Автодеталь» plant was established the tractor assembly plant and on
September 22, 1962 the first tractor was produced – T50V.
On 25.03.1986 the Production Complex „Uzina de tractoare din Chişinău” was founded.
In 1995 and subsequently, in 1999, compliant with the privatization and restructuring
Program of the former "TRACTOR PLANT IN CHIŞINĂU” Production Complex, based on its
assets and production divisions, the following independent enterprises have been
established:
1. JSC Tractor Plant "TRACOM” (hereinafter „TRACOM”) - tractor and tractor parts
production, founded on November 23, 1995, through the reorganization of the state
enterprise „Tractor Plant in Chisinau” Production Complex, becoming the successor
of all its rights and obligations.
2. JSC „Aralit” – former parts casting division.
3. JSC „Reupes” – former mechanic repair division.
4. JSC „Radiator” – former consumer goods production division.
5. JSC „Zidarul-SV” – former repair and construction division.
6. JSC „Bicotra” – former contruction and technical testing bureau СКБ-2Т.
7. JSC „Presudor”- former pressing and welding division.
8. JSC „Dotarcom”- former parts and tools division.
9. JSC „Forjacom” – former iron-processing division.
10. JSC „Mapasauto” – former transportation division.
During the privatization processes, the aforementioned joint stock companies have been
assigned assets according to their field of activity. Nevertheless, the distribution of the
27
infrastructure has not been carried out, which is now considered a positive state of affairs
in terms of the industrial park establishment. Up to the present, the infrastructure -
spanning railroad and wagons for transportation, equipment and gas supply networks,
electricity, water and sewage system, fixed telephone network, anti-incendiary system,
access roads and green objects - is attributed to the statutory fund of JSC TRACOM, which
also administers the networks of the companies residing within the territory.
There has been identified the lack of any specific contractual relationships between the
legal administrator of JSC "Tracom” and the enterprises established on the territory of
former Production Complex „Tractor Plant in Chisinau” regarding the location of the
infrastructure objects. The tenant relationships refer solely to the location of the land
adjacent to the state-owned production buildings, offered for an indefinite term of use by
JSC "Tracom”.
2.2.1.1 Diagnostic analysis of the enterprises except JSC "Tracom”
A short preview will be introduced hereinafter, to further illustrate the diagnosis of the
nine joint stock companies, following the privatization and restructuring Program of
former Production Complex „Tractor Plant in Chisinau” in 1995 and in 1999, except for JSC
„Tracom".
These companies pose no particular interest in that they own a very small share in the
economical and financial structure of the zone. Therefore in the next chapter a greater
emphasis will be placed on the economical and financial analysis of JSC "Tracom", that has
been defined as the legal successor of the entire rights and obligations of former
Production Complex „Tractor Plant in Chisinau”, whose territory is proposed for the
establishment of an industrial park.
Currently, only four out of the nine joint stock companies continue their operational
activity: JSC „Aralit”, JSC „Reupes”, JSC „Dotarcom”, JSC „Mapasauto”.
The companies record currently a seasonal evolution, with insignificant fluctuating
financial results, using an average of only 15% of its production. In this regard, the use of
production facilities and related infrastructure, submitted following the privatization and
restructuring program, proves extremely inefficient.
All nine companies operate below the breaking point, posting modest and negative results
in the whole group of economic and financial indicators.
Considering the results in 2009 and the rentability of the long-term tangible assets, all
companies recorded negative values, with JSC „Zidarul-SV (-82%), JSC „Aralit” (-32%), JSC
„Radiator” (-26%), JSC „Bicotra” (-28%) and JSC „Dotarcom” (-25%) scoring the lowest
levels.
As stated in the financial reports, throughout 2006-2009, no investments have been made
in the fixed assets of the companies, leading to an average total assets decapitalization of
13% or 12,3mln. lei in absolute values.
The overall activity of the companies was heavily affected by their highly unprofitable
performance, as shown in the table 4:
28
Table 4: Performance indicators of the companies in former „Production Complex Tractor Plant in Chisinau”
Indicators Dotarcom MaPasAuto Bicotra Forjacom Presudor Zidarul Reupes Aralit Radiator
2009 2009 2009 2009 2010 2009 2009 2009 2010 2009 2010 2009 2010
Total long-term assets, thousand
lei 2661,9 1730,4 338,8 15437,6 x 16576,4 494,5 2683,5 x 1967,7 x 1694,0 x
Long-term asset decapitalization 2006-2009, thousand lei
267,7 26,8 76,7 2415,5 x 1204,7 373,5 449,4 x 327,5 x 180,0 x
Asset decapitalization coefficient %
9 2 18 14 x 7 43 14 x 14 x 10 x
Total asset rentability
-9% -10% -9% -4% -3% -7% -40% -32% 5% -17% 2% -16% -2%
Long-term material asset rentability
-25% -13% -28% -4% -4% -7% -82% -6% 11% -32% 5% -26% -4%
Total liquidity ratio (N=2.0-2.5)
7,40 1,49 1,09 0,83 0,86 1,55 0,97 1,75 2,12 1,76 1,85 1,35 1,25
Operational activity result: profit (loss) per employee, lei
-6911 -14797 -4771 -47373 -
47603
-141719 -63470 -22264 2981 -8532 1186 -15415 -2009
Sales revenue per employer, lei
39437 20803 5795 0 4158 518 1043 31249 18313 74245 35061 43976 34272
Bankruptcy risk (Altman's score N>2.675)
1,68 0,63 0,68 0,79 x 0,89 -2,23 0,48 x 1,99 x 0,93 x
The calculated indicators of the companies’ activity performance justify the inevitable
accumulation of credit indebtedness, as shown below.
The total debt amount to the state of the companies reached LEI 201,8 thousand as of
01.10.2010, as presented in Table 5:
Table 5: Debts to the state budget except JSC „Tracom”
Company State budget debts, thousand lei JSC „Forjacom” 90,8
JSC „Zidarul-SV” 41,8 JSC „MaPasAuto” 38,2
JSC „Presudor” 31,0 Total 201,8
Debts to the Social Insurance Fund recorded an amount of 243,1 thousand lei.
Table 6: Debts to the Social Insurance Fund except JSC „Tracom”
Company Debts to the Social Insurance
Fund, thousand lei JSC „Forjacom” 54,2 JSC „Zidarul-SV” 116,3 JSC „MaPasAuto” 72,6 Total 243,1
Salaries payable during the same operating time amounted to 1203,1 thousand lei.
Table 7: Personnel debts except JSC „Tracom”
Company Personnel debts, thousand lei JSC „Radiator” 515,0 JSC „Zidarul-SV” 395,9
29
JSC „Bicotra” 391,2 Total 1302,1
In conclusion, it should be retained that:
An in-depth analysis of the companies revealed their unsuccessful attempt to
separate operational&technological activity from tractor manufacturing. The
reorganization of the companies did not bring about investments in new
technologies and types of production which subsequently led to a technological
dependence on the only product of the plant - the tractor. The de facto halting of the
basic production of JSC "Tracom" led to an inevitable „freeze” of the operational
activity of the remaining companies. The company literally failed to benefit from the
reorganization and the very idea of reorganization has faded away. The existing
production equipment has reached a 80% obsolescence rate while the unused
equipment awaits disposal or writing-off. The constructions and infrastructure still
preserve value yet it cannot be exploited by these companies.
The factors of production, such as the equipments, buildings, infrastructure and
labour force are used 15% of their actual capacities, which makes their assignment
to the registered capital absolutely irrational.
As mentioned, only four of the nine reorganized companies are carrying out their
operational activity, though on the breaking point (a high share of fixed costs),
which in the long run can lead to their bankruptcy.
Under these conditions, the analyzed companies are doomed to an indefinite
accumulation of their credit debts to the state, personnel and other creditors.
The reorganization of these companies is imperative, thereby the factors of
production, mainly constructions and the engaged territory, shall be assigned to the
future residents of the industrial park, who could harness their true potential.
2.2.2 DIAGNOSTIC ANALYSIS OF JSC "TRACTOR PLANT TRACOM” The Joint Stock Company „ Tractor Plant Tracom” (hereinafter JSC „Tracom”) is situated on
170 Columna street, MD-2004, Municipality of Chisinau, Buiucani sector, nearby the
municipality centre. The surface area of the land adjacent to the factors of production is
20,5 ha.
The property buildings owned by the company measure a total area of 80,836 sq.m.,
including:
45357 sq.m. - manufacturing (the mechanical assembly unit; mechanization buildings, rolling and delivery divisions; ventilation and facilities sector);
2104 sq.m. – administrative;
33375 sq.m. – auxiliary, of which 16535 sq.m. – warehouse.
2.2.2.1 Operational activity
According to the type of production, JSC „Tracom” falls into the „large” category, endowed
with specialized equipment (machine tools, devices), set up in flow lines. The basic
production was organized into a closed loop production system.
30
JSC "Tracom" specializes in the production of caterpillar hoeing tractors and is the only CIS
manufacturer which produced T-70SM tractors with a 2t draw-bar pull.
Currently the company specializes in:
Production of row-crop crawler tractors of 2t traction class;
Tractor parts manufacturing;
Rental of plant premises as warehouses and offices.
The machines and equipment of the company are destined for the production of caterpillar
tractors, whose purpose cannot be modified, with only a few divisions holding the
capacity of producing custom parts. The manufacturing process is organized by sectors:
Assembly and processing mechanical sector has a total surface area of 36000 m2 and consists of 4 sectors for mechanical processing and assembly of conveyor belts for Т-70СМ and Т-70В. This sector comprises more than 500 machines, over 30% of which are specialized machines that cannot be used in the manufacture of other parts, with many of them completely worn out.
Assembly and testing division – comprises 5 conveyors, 36 test stands Galvanic division Welding division Division of plastic detail production Thermal processing division
Figure 8: Organization chart of the main assembly conveyor division:
As stated in the balance sheet, the equipment and production lines of the company have
reached a 80% obsolescence degree and do not meet modern technology exigencies to
ensure the production to an extent where it could satisfy the local consumer and export
demands.
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31
In addition, the tractor production technology has not been updated/adapted from the 80s,
which explains the uncompetitiveness of the product, resulting in a dramatic decline of the
sales over time.
It should be noted that in December 2007, the company has implemented the quality
management system ISO 9001:2000, obtaining the quality certificate ISO no. HU07/2921.
This fact did not have a positive impact on sales in subsequent periods (the validity term of
the ISO certificate expired on December 17, 2010).
Currently JSC "Tracom" does not deploy any production activity, its only source of income
derives from the rental of its production facilities.
2.2.2.2 The financial outcome
Over the recent years the company saw an exponential drop in sales. Consequently, the
sales revenue fell 6.5 times in 2009 compared to 2007, and the company halted the
production.
The sales of the company consisted in:
Stock sales;
Premises rental.
Being utterly uncompetitive, the production failed to meet the market demands and
eventually the company ceased its activity (Figure 9, Table 8).
Figure 9: JSC „Tracom” sales structure
Towards 01.10.2010:
Table 8: Sales structure of JSC „Tracom”
Indicators Total 2010 Last quarter total Total sales revenue 3 887 689 427 474 Sales of finished products 3 027 006 196 871 Sales of goods 44 761 10 841
32
Servicing 442 113 111 563 Rental revenue 373 809 108 199
The costs jumped significantly in 2009, as a result of the austerity measures implemented
to subsequently reduce the costs on operational activity. 2009 constitutes a landmark year
in that the company incurred expenses in the staff reduction and disposal of unusable
goods categories, becoming aware of the shortcomings in the inventory process, etc.
2009 – expenses optimization measures:
- Personnel reduction expenses - 2 939 thousand lei;
- Disposal of unusable material goods - 261,1 thousand lei;
- Reflection of the shortcomings identified in the inventory process - 306,6 thousand lei;
- Calculation of VAT on goods established as shortcomings or disposed to scrap - 113,5 thousand lei;
- Transferring from company's balance to the balance of Private Homeowners Associations 55/30 of the apartment house situated on 5/2 Cornului street posing a balance sheet value of 5 194 thousand lei (as compensation, APHO (Associations of Privatized Houses Owners) has transferred the state stakes to 6 companies).
The result of the financial-economic activity of JSC "Tracom" in 2009 registered a negative
figure, recording a loss in the amount of 13 034 thousand lei. According to the
management's arguments, the situation occurred as a result of the cost optimization
measures mentioned previously. At the same time, the major registered losses entailed a
decrease of the home capital and triggered overall financial instability of the company:
Table 9: Financial outcome of JSC „Tracom”, 2007-2009
Financial results 2007-2009
(All sums in Moldovan Lei (MDL) unless otherwise indicated)
2007 2008 2009 2009 versus 2007, +/-
Sales revenue 40,683,832 8,224,827 6,098,898 -34,584,934 -85.0%
Cost of sales 33,598,053 6,962,025 5,310,766 -28,287,287 -84.2%
Gross profit (global loss) 7,085,779 1,262,802 788,132 -6,297,647 -88.9%
Other operating revenue 5,388,406 2,201,102 1,838,299 -3,550,107 -65.9%
Commercial expenses 565,344 267,501 615,127 49,783 8.8%
General and administrative expenses 6,596,456 5,871,811 8,223,217 1,626,761 24.7%
Other operational expenses 5,112,195 2,869,595 2,437,920 -2,674,275 -52.3%
Results of operating activity: profit (loss) 200,190 (5,545,003) (8,649,833) -8,850,023 -4,420.8%
Result of investment activity: profit (loss) 45,821 5,260,942 -4,961,223 -5,007,044 -10,927.4%
Result of financial activity: profit (loss) 29,318 56,231 576,771 547,453 1,867.3%
Result of financia&economic activity: profit (loss)
275,329 (227,830) (13,034,285) -13,309,614 -4,834.1%
Exceptional result: profit (loss) 0 0 0
Profit (loss) of reporting period before taxation – EBT
275,329 (227,830) (13,034,285) -13,309,614 -4,834.1%
Income tax expenses (savings) 116,872 -1,269,388 0 -116,872 -100.0%
Net profit (loss) 158,457 1,041,558 (13,034,285) -13,192,742 -8,325.8%
33
As on 01.10.2010:
Expenditure category 01.10.2010 Last quarter
Total consumption and expenses 6 542 298 1 948 697
Material consumption and expenses 1 242 385 208 979
Amortization 132 725 41 949
Salary expenditure (incl. state and medicine insurance)
3 703 082 1 222 907
Other operational expenditure 1 464 106 474 862
Net profit 1 061 916 x
As evidenced, as a result of the restructuring measures undertaken in 2009, the company
will record a positive financial result by the end of 2010 amounting to 1 061 916 lei.
2.2.2.3 Human resources and staff register
The decrease in the production activity required a strong staff reduction from 409 people to 136 in 2009. The company currently employs 105 people.
Age indicators reveal that approx. 80% of the employed staff are over 45 years of age.
Table 10: Employed personnel of JSC „Tracom” by age
Age group No. of people Share in total staff Up to 35 y.o. 12 11,0% between 35-45 y.o. 11 10,1% between 45-55 y.o. 39 35,8% over 55 years 47 43,7% Total 109 100%
According to the education indicators, approx. 45% of total employees are unskilled workers, a situation justified by the conservation of the production activity that is occurring when the company only proceeds with its administration activity and preserving its assets.
Table 11: Personnel employed at JSC „Tracom” by education degree
Skill level No. of people Share in total employed
staff University degree 22 20,2% Secondary education 38 34,9% Unskilled workers 49 44,9% Total 109 100%
2.2.2.4 Credit indebtedness
Up to 05.01.2011, the accounts receivables of JSC „Tracom” amounted to 4 594 710 lei, of
which:
Table 12: Credit debts of JSC „Tracom”
Salary payments for December 2010 292 717
Compensation claims 33 597
34
Credit amount and interest payments 387 956
Debts to the state budget 2 500 321
Debts to the Social Insurance Fund 492 731
Debts to the Medical Insurance Fund 149 804
Other creditors 737 584
Total 4 594 710
In terms of the debts to the state budget, the Tax Inspectorate Buiucani, Chisinau,
addressed a request to the State Inspectorate for a debt restructuring.
2.2.2.5 Economic and financial analysis
The total value of assets of the company at the end of year 2009 was 58 727 573 lei.
Compared to the previous year (2008) the value of the assets has diminished by -9 830 536
lei (-14.34%), and by -13 387161 lei in 2007 (-18.6%). The drop was due to the
pronounced decreases of long-term assets as a result of asset commercial and reduction of
short-term assets, resulting from the company production activity preservation (Table 13).
Table 13: Asset structure of JSC „Tracom”, change in absolute values
2007 2008 2009 ASSETS
I. Long-term assets
Non-tangible assets 5 444 -2 320 -2 205
Fixed assets 43 164 378 -1 356 632 -5 371 610
Long-term financial assets 1 204 526 0 592 090
Other long-term assets 446 331 -83 988 -20 261
TOTAL CHAPTER 1 44 820 679 -1 442 940 -4 801 986
II. Current assets
Goods and material stocks 22 994 946 859 849 -5 009 807
- materials 8 286 478 -1 347 331 -824 208
- short-term objects of small value 7 276 126 -1 475 253 -1 476 406
- products 5 285 976 3 699 353 -2 695 644
- goods 355 744 -11 925 10 054
- other 1 790 622 -4 995 -23 603
Short-term receivables 4 243 509 -3 082 915 -113 148
Monetary means 28 236 86 931 -18 694
Other current assets 27 364 22 450 113 099
TOTAL CHAPTER II 27 294 055 -2 113 685 -5 028 550
TOTAL GENERAL ASSETS 72 114 734 -3 556 625 -9 830 536
The structure of the JSC „Tracom” assets, determined by its specific activity, is dominated
by the long-term assets. The values of the assets reached MDL 38.57 mln in 2009 or about
65.7% of total assets and short-term assets 34.3% respectively. The share of the long-term
assets has increased by 3.5%, which indicates a decreased mobilization of the assets and of
financial stability (Table 14).
35
Table 14: Asset weight in JSC „Tracom” capital
ASSETS
I. Long-term assets
Intangible assets 0,0% 0,0% 0,0%
Fixed assets 59,9% 61,0% 62,0%
Long-time financial assets 1,7% 1,8% 3,1%
Other long-term assets 0,6% 0,5% 0,6%
TOTAL CHAPTER 1 62,2% 63,3% 65,7%
II. Current assets
Goods and materials stocks 31,9% 34,8% 32,1%
- materials 11,5% 10,1% 10,4%
- short-term objects of small value 10,1% 8,5% 7,4%
- products 7,3% 13,1% 10,7%
- goods 0,5% 0,5% 0,6%
- other 2,5% 2,6% 3,0%
Short-term receivables 5,9% 1,7% 1,8%
Monetary means 0,0% 0,2% 0,2%
Other current assets 0,0% 0,1% 0,3%
TOTAL CHAPTER 2 37,8% 36,7% 34,3%
TOTAL GENERAL ASSETS 100,0% 100,0% 100,0%
The long-term assets at year-end 2009 constituted 38 575 753 lei. As compared to 2008,
the value of the assets has decreased by 4 801 986 Lei (-11.07%), and by 6,244,926 lei (-
13.96%) in 2007. The decrease was largely due to the high depreciation of long-term
tangible asset value. Long-term assets are dominated by fixed assets in particular areas of
production, territory infrastructure systems and manufacturing machines.
Short-term assets, as compared to 2008, recorded a decrease of -5 028 thousand lei
(19.97%) in value. The decrease was due to the reduction in the company's receivables and
earnings volume as a result of marketed production’s volume decrease. The dominant
positions within the short-term assets are being held by: goods and material stocks -93.5%,
short-term receivables - 5.2%, followed by monetary means –0.5%. Although the company
ceased its activity in 2009, the stocks kept holding records of raw materials and finished
products, that is illiquid assets.
36
Figure 10: Goods and materials stocks of JSC „Tracom”
Within the structure of the company's liabilities significant share are being held by the
owner's equity, with a rate dropping from 90.9% in 2008 to 83.4% in 2009 mainly on the
account of losses in 2009.
The equities share diminished to 48 954 156 lei (83.4%) in 2009 following the uncovered
losses upturn of 100% from -12 862 448 lei in 2008 to -25 310 832 lei in 2009. The high
decline was due to the losses resulted from the current activity in 2009, worth 13 034 285
lei.
Figure 11: JSC „Tracom” Property structure
The short term debt value increased by 3,5 mn. lei - from 6 261 282 MDL in 2008 to 9
773 417 MDL in 2009 (57%) on the account of a short-term loan contracted at Banca de
37
Economii to pay the salary dismissal compensations. As of January 5, 2011, the total
amount of the company's debt recorded 4 594 710 lei.
2.2.2.6 JSC „Tracom” liquidity
Total Liquidity reflects the amount of the total current assets of the company, to be bought
or sold in the market in a short amount of time, thus generating the necessary liquidity to
meet the financial obligations. In 2009 this indicator registered a 2.06 value, within the
recommended period, with a twofold decrease on the lower limit compared to 2008.
The situation of the most important indicator in this category, the interim liquidity ratio,
which is below the required level, also true for the last 3 years, reflects an inefficient
management of the current assets and difficulties in meeting its financial obligations (table
15).
Table 15: Liquidity coefficients of JSC „Tracom”
Liquidity coefficients
2007 2008 2009 2009 compared to 2007,
+/-
Absolute liquidity ratio (0.20-0.25) 0.00 0.02 0.01 0.01 231.6%
Interim liquidity ratio (0.7-1.0) 0.45 0.21 0.13 -0.32 -70.5%
Total liquidity ratio (2.0-2.5) 2.88 4.02 2.06 -0.82 -28.3%
2.2.2.7 Rentability and profitability of JSC „Tracom”
The analysis of the profitability indicators reflects the company's current business
efficiency. Therefore, the results of the calculated indicators show that the company has
performed an absolutely unprofitable activity over the past three years, thus justifying the
need for an utter restructuring (tab. 16).
Table 16: Profitability indicators JSC „Tracom”
Profitability indicators
2007 2008 2009 2009 versus
2007, +/-
Gross profit margin 17.4% 15.4% 12.9% -4.5%
Profit margin from operating activities
0.5% -67.4% -141.8% -142.3%
Net profit margin 0.4% 12.7% -213.7% -214.1%
Sales cost margin 82.6% 84.6% 87.1% 4.5%
Over the last 3 years company’s rentability indicators recorded zero or negative values (in
2009). The return on equity (ROE) during the past three years increased from 0.3% in
2007 to +26.6% in 2009. This represents one of the most important indicators of
company's efficiency, guiding the owners or potential donors in making investment
decisions. This situation denotes that the company's capital is hardly developed and does
not generate profits. Therefrom, the ongoing costs will further diminish its value, up to the
equity's value total exhaustion (table 17).
Table 17: Rentability indicators of JSC „Tracom”
Rentability indicatos
38
2007 2008 2009 2009 versus
2007, +/-
Return on home equity (ROE) 0.3% 1.7% -26.6% -26.9%
Return on total assets (ROA) 0.4% -0.3% -22.2% -22.6%
Return on shared equity (ROI) 0.3% 2.0% -24.9% -25.2%
2.2.2.8 Solvency of JSC „Tracom”
Financial stability reflects the company's dependence on external funding sources and the
company's capacity to maintain the ability to fulfil current and future obligations. Financial
stability is determined by the ratio of own financial resources and debts as well as their
structure.
The financial balance is the set of correlations arising between the financial resources
necessary in achieving certain goals and actions, on the one hand, and the possibility of
attracting these resources, on the other side.
The situation of the representative indicators that reflect the state of the financial balance
regarding JSC „Tracom” denotes a temporary financial balance. Nevertheless, this fact
reduces the value of the company. Thus, the owners’ equity was reduced by 13 million in
the last year only, which inevitably diminishes the value of the company. Given the said
„freeze” of the work production, this is considered a foreseeable prognosis (table 18).
Table 18: Financial balance indicators of JSC „Tracom”
Financial balance indicators, MDL
2007 2008 2009 2009 versus 2007, +/-
Net asset accounts (NAA) 61 296 018 62 296 827 48 954 156 (12 341 862) -20.1%
Working capital (WC) 17 807 537 18 919 088 10 378 403 ( 7 429 134) -41.7%
Need for working capital (NWC)
17 751 937 18 754 107 10 119 017 ( 7 632 920) -43.0%
Net treasury (NT) 55 600 164 981 259 386 203 786 366.5%
The halt of the operational activities of the company excluded the need to attract external
resources. Only in 2009, the contracted credit amounting 4.5 mln lei increased the debt
ratio to 0.17. Also, this confirms that the assets are not being developed, leading to a
devaluation of the company over time.
Table 19: Solvency coefficients of JSC „Tracom”
Solvency coefficients
2007 2008 2009 2009 versus 2007, +/-
Debt rate (<1) 0.15 0.09 0.17 0.02 10.9%
Indebtedness ratio (<=2) 0.18 0.10 0.20 0.02 13.1%
Solvency ratio (financial risk) (<=1) 0.02 0.00 0.00 (0.02) -100.0%
2.2.2.9 Degree of bankruptcy risk
The assessment of the bankruptcy probability shows that the company is going bankrupt
since 2007. In the following three years the company has only consumed its capital by
reducing the company's value.
39
Table 20: Bankruptcy probability index of JSC „Tracom”
Bankruptcy probability index 2007 2008 2009
Altman’s "Z" score x - 0.99 0.54
Assets mobilization degree x 0.38 0.37 0.34
Assets return x - -0.07 -0.13
Self-financing ratio x 0.12 0.15 -0.06
Equity ratio in sources x 0.73 0.76 0.89
The rotation speed of assets x 0.56 0.12 0.10
“Z”-indicator or “Z-score” indicates the likelihood of a company to go bankrupt within two
years. The acceptable value is over 3.0. Values below 1.8 imply a high degree of risk,
predicting that the company analyzed might go bankrupt. Considering the calculations in
the table, the "Z-score" of "Tracom" confirms the value of 0.54 in 2009, which shows that
probability of bankruptcy is imminent.
2.2.2.10 Conclusions
The overall conclusions is identical to the analysis on the nine companies created after the
reorganization of Production Complex "TRACTOR PLANT IN CHISINAU" - which indicates
the imperative need of company's reorganization.
The reorganization entails the establishment of an industrial park, where JSC „Tracom” will
contribute with its patrimony, via investment attraction, within the reorganized complex
territory. The income sources of the industrial park management company will cover the
existing debts and improve the financial situation of JSC "Tracom".
The existing production factors, including buildings and the engaged territory are to be
transferred to the new industrial enterprises, the future residents of the park, which will
hopefully be able to exploit their potential production.
2.3 DESCRIPTION OF THE ECONOMIC ACTIVITES PERFORMED IN THE REGION AND
POSSIBILITY TO ATTRACT RESIDENTS IN THE INDUSTRIAL PARK An industrial park is proposed to be established on the territory of former Production
Complex „Uzina de Tractoare din Chişinău”, located on Columna street 170, MD-2004,
municipality of Chisinau, Buiucani sector.
The Municipality of Chisinau is the capital which traditionally holds the economic, political
and administrativ decisive role for the whole country.
Compared with the developed countries in Europe, Moldova features a very pronounced
economic polarization, with half of its gross domestic product developed in the capital. The
situation of the pronounced polarization of the economy occurs primarily on the account of
40
the slow development in the urbanization processes and the share of the urban population
of cca 60% (highest ruralisation rate in Europe).
Hereby, the positive aspect concerning the creation of an industrial park in Chisinau is the
basic feature of the economic polarization, which confirms the concentration of economic
activities, the best human resources and performance infrastructure.
The main indicators of the economic activities deployed in Chisinau appear as follows
(according to the preliminary statistical data issued by the National Bureau of Statistics):
The volume of the industrial production for January-December 2010 reached
12345,8 million lei in current prices. The industrial enterprises marked an increase
of 7.3% for the industrial output in the reported period.
The production activity of the enterprises, measured in average prices of the
previous year was mainly determined by the activity of manufacturing enterprises,
which have accounted for 76.5% of the total output.
Investment expenses of all financing sources conducted during 2010 totaled 5835.5
million lei, decreasing by 1.0% from January to December 2009.
Construction and assembly works amounted 2747.8 million lei, less by 16.3%
compared to the same period of the previous year, primarily by reason of the global
financial and economic crisis.
The main investment financing sources (57.9% of the total) originated from the
own means of the local economic agents, which indicates a high potential for
investment opportunities, such as an industrial park.
The fixed assets put into service in January-December 2010 were estimated at
4467.3 million lei.
The turnover of goods by transport companies in January-December 2010
amounted to 1314.4 million tons-km, up by 18.1% than in same period last year.
The volume of goods transported by auto transportation by transport companies
added up to 2.1608 million tons, increasing by 19.0% compared with January-
December 2009.
The average monthly salary of a worker in the economy of Chisinau in January-
December 2010 was 3717.6 lei, increasing by 6.3% over the same period the
previous year and surpassing the national average by 25.1%. The average salary in
December 2010 was 4520.3 lei.
The number of officially registered unemployed, according to the National Agency
for Employment (including those registered at 01.01.2010), equalled 18,713 people,
increasing by 30.5% compared with January-December 2009. The number of the
unemployed officially registered at the end of December amounted to 5527.
41
Figure 12: Mun. of Chisinau, Key performance indicators of the production of goods and services (in % compared to the same period of the previous year )
2.3.1 INDUSTRY In January-December 2010 the industrial enterprises in Chisinau Municipality of all forms
of ownership have produced goods amounting to 12,345.8 million lei in current prices,
which represents 57.0% per total country (fig.10). The volume index of industrial output in
January compared with December 2009 increased by 7.3% (in comparable prices).
The share of the undertakings in the overall production output in January-December 2010
was 35,2% of private equity companies, 21,6% of joint capital companies, public capital
companies - 19,6%, joint ventures - 15,1%, foreign capital companies - 8,5%.
Figure 13: Chisinau. Structure of the industrial production by type of ownership
The increase in the industrial output, compared with January-December 2009 was
determined by a rise in manufacturing production volume by 8.0% in the quarrying - by
5.6%, in the energy sector - by 1.0%, which resulted in a growth in the total production,
respectively, by 6.8%, 0.1% and 0.1%.
Substantial increases were recorded in the following business sectors: sugar production -
2.5 times (accounting for 3.3% share in the total industry growth by 2.1%), clothing - 8.9 %
(9.9% share accounting for a 0.9% improvement); tobacco production - by 30.1% (holding
a 2.6% share, accounting for a rise of 0.6%), wine production - by 6.0% (7.5% share,
42
accounting for a 0.5% increase), dairy products manufacturing - by 9.1% (4.9% share,
accounting for a 0.4% growth); distilled alcoholic drinks - by 11.0% (2.7% share,
motivating a 0.3% increase), footwear - by 16.8% (2.0% share, accounting for a 0,3%
increase), production, processing and preserving of meat and meat products - by 4.7%
(5.2% share, accounting for a 0.2% growth); manufacture of paints and varnishes - 17.3%
(1.2% share, accounting for a 1.2% increase), manufacture of travel and leather goods - by
22.2% (0.8% share, accounting for a 0.2% share), manufacture of pumps, compressors and
hydraulic systems - 1.9 times (0.4% share, accounting for a 0.2% increase), manufacture of
medicines and pharmaceutical products – by 12.0% (0.6% share, accounting for a 0.1%
increase), etc.
Increases in production volume were recorded in businesses undertaking activities such
as: manufacture of household appliances (38.5%), metallurgy (19.5%), manufacture of
prepared feeds for animals (19.3 %), production of medical equipment, medical and
precision instruments, optics (13.1%), publishing, printing and reproduction of materials
(10.4%), furniture (3.4%), bread-making and pastry products (3.0%) etc.
At the same time, decreases in production volume have been registered in businesses
performing the following activities: manufacture of vegetable and animal oils and fats - by
13.9% (causing a reduction of 0.6% in the total industry), manufacture of fabricated metal
products, except manufacture of machinery and equipment - by 19.0% (accounting for a
decrease of 0.3%), manufacture of rubber and plastic products - by 6.7% (accounting for a
reduction of 0.2%); glass and glass products - by 4.1% (accounting for a 0.1% fall),
manufacture of machinery and electrical appliances - by 3.3% (accounting for a decrease of
0.1%), wood processing and manufacture of wood articles - by 21.1% (accounting for a
0.1% decrease), manufacture of paper and paperboard - by 4.3% (accounting for a 0.1%
decrease) etc.
The statistical data submitted above show a positive dynamic of the industrial production
indicators.
The most significant aspect of the data presented, applicable to the industrial park, lies in
the density indicator (agglomeration) of the industrial businesses. Up to the economic
crisis in 2008, 65.7% of the enterprises in the republic were performing in the municipality
of Chisinau, including 66.7% of all large enterprises, 50% of the medium sized companies,
61.2% of small and 67 6% of the micro-enterprises.
This fact reveals the density index of industrial enterprises in the municipality of Chisinau -
47 units per 1000 people of working age (fig.11):
Table 21: Territorial density and distribution of enterprises in Moldova, year 2008
micro small medium large total Total/1000 people of working age Total 31095 8329 1685 1012 42121 17,7 Mun. Chişinău 21034 5104 880 675 27693 47,0 Northern distr. 3668 1252 327 138 5385 8,5 Central distr. 4182 1185 262 109 5738 8,2 Southern distr. 1450 538 144 63 2195 6,2 ATU Gagauzia 761 250 72 27 1110 10,5
43
The high density of enterprises in Chisinau is a significant prerequisite for identifying and
attracting potential future residents of the industrial park.
Containing only 25% of the country’s population, most of the work resources in Chisinau
are concentrated in formal activities.
According to the NBS data contained in the monthly statistical survey, the situation in the
industrial sector of Chisinau is mainly determined by the activity of manufacturing
enterprises, which in January-December 2010 accounted for 76.5% of the total production
obtained from businesses deploying primary industrial activities.
Decreases in volumes were recorded in the manufacture of agricultural machinery
(26.2%), processing and preserving of fruit and vegetables (18.1%). Some products have
registered increases: the manufacture of tobacco products (28.1%), chemical industry
15.5%.
The volume of industrial energy services rose by 0.5% from January to December of 2009.
The industrial complex of Chisinau municipality currently consists of 19 industrial
formations, which comprise more than a thousand businesses in different areas of
economic activity (production, transport, energy and communal spheres). The total area
occupied by the industrial formations is about 2800.7 ha, including: area occupied by
businesses - 1790.3 ha; area of reserve territories - 528.5 ha. Most of the economic and
industrial potential is concentrated in the north-east of Chisinau municipality, where 11
industrial formations are located.
Table 22: Enterprises in the Chisinau municipality, NBS data
2007 2008 2009 Number of enterprises 26 327 27 693 29 376 Average number of employers 317 192 322 515 305 150 Sales revenues, mn. lei 111 664,66 129 377,74 108 718,95 Financial result before taxation. Profit (+) Loss (-), mn lei
9 100,00 11 784,14 3 105,76
2.3.2 INVESTMENT ACTVITY
According to the NBS data, in January-December 2010, 5835,5 million lei (current prices)
have been funded for the conduct of the investment activity in the economy of Chisinau
mun., from all funding sources. This is 1,0% less compared to the investment volumes in
the same period of the previous year.
Table 23: Evolution of the investment activity in the Chisinau municipality, 2010
In 2010, % versus 2009
Total public private joint (public and private) foreign of joint ventures
Fixed investments 99 119,8 89 82,9 79,8 109,6
44
The investment attractiveness of the capital enhanced over time, as confirmed by the
volume index of private investments per capita allocated in Chisinau municipality, placing
itself well ahead of the other regions of the country (tab. 26):
Table 24 Evolution of private investments per capita, lei
2003 2004 2005 2006 2007 2008 2009 National average
948,4 1305,1 1958,4 2672,3 3689,1 4239,6 2707,0
Mun. of Chişinău
2294,8 3350 5115,8 7122,8 10611,4 12877,8 5585,1
North distr.
684,6 782 1071 1666,8 1935,3 2102,2 1412,9
Central distri.
391,1 576,5 891,6 1221,4 1785,5 1661,3 1065
South distr.
640,1 903,2 1296,6 1429,4 1583,1 1328,6 1256
ATU Gagauzia
888,4 999,4 1723,3 1325,4 1501,6 20006,3 1460,9
The data show that in the past six years none of the other developing regions has been able
to sustainably increase the share of the overall attracted private investments, while the
municipality's share has steadily increased from 52% in 2003 to almost 70% in 2008. Such
tendencies suggest that the growth in production over the recent years in Moldova has
concentrated in the capital particularly due to the fulminant absorption of the private
investments and the increase in the production capacity. The evolutions assessment
provides a strong positive estimate in terms of the viability of creating an industrial park in
Chisinau.
The analysis of the investments structure in Chisinau appears quite indicative (tab. 27).
Before the global economic crisis, a share of more than 25% of investments was distributed
to dwelling constructions.
45
Table 25: Structure of fixed investments, mun. of Chisinau
The current situation of the investment areas leaves room for efforts to attract investments
in the industry by reducing the construction share, which can also be achieved by
promoting the creation of the industrial parks in the area.
Figure 14 shows the schematic data on the share of enterprises in the municipality of
Chisinau, by field of activity:
Figure 14: Economic agents by type of activity, mun. of Chisinau 2008-2009, %
The factors proposed in the following list that could contribute to the improvement of the
capital's investment climate. A great deal of the factors can be considered as intended
results upon the creation of the industrial park:
Enterprise density in the area;
Public investments financed by local budgets;
Expenses intended for infrastructure financed by the local budgets;
Density of vocational and higher education institutions;
46
Local final consumer demand, expressed as the sum of retail sales volume and the
volume of services rendered to population (expressed as per capita);
The economic heritage, expressed as the value of fixed assets per capita, i.e. the
existence of large companies owning production assets that can be exploited by a
private investor;
Density of national roads;
Density of local roads;
Density of financial institutions.
2.3.2.1.1 Other economic activities in the municipality of Chisinau
In the following, we will provide the description of other economic activities of interest,
also compliant with the legal requirements on the development of this feasibility study. It
will thus forward an ample compilation describing the economic environment of Chisinau
municipality, a location the characteristics of which will provide an attractive platform to
the potential residents of the future IP, including the foreign investors.
Transport and communications industries registered the following results:
Volume of freight carried by road transport enterprises in January-December 2010
amounted to 2160,81 thousand tons, an increase of 19.0% compared to the previous
year, what is a key factor in identifying infrastructure opportunities to raw
materials suppliance in the IP and transportation of finished products from the IP to
the markets.
The road cargo turnover amounted 1314.4 million ton-kilometres, increasing by
18.1% compared to the same period last year.
The volume of goods shipped by auto transporters in Chisinau is 49.2% per total
country; the cargo turnover reaches a 60.4% rate.
According to the NBS statistics, 1.2985 tons of goods were transported by air in
January-December 2010, an increase of 55.9% compared to the corresponding
period of last year, the cargo turnover amounted to 1669,1 thousand ton-km,
increasing by 52.6% from the same period last year.
Airline companies transported 649,200 passengers, an increase of 41.3% from
January to December 2009. The passenger turnover by air transport was 750.8
million passenger-kilometres, increasing by 24.3% over the same period last year.
2.4 HUMAN POTENTIAL OF THE REGION NECESSARY FOR THE PARK ACTIVITY The population of Chisinau was 756,5 thousand inhabitants as of 01.01.2010, with 90,6%
of urban population. After the 2004 census the number of municipality residents increased
by 44,4 thousand8.
The territorial distribution of the populations in the municipality of Chisinau is represented
in the table below:
8 National Bureau of Statistics - 2010
47
Table 26: The territorial distribution of the population in the Chisinau municipality, thousand
Census data as of
05.10.2004 01.01.2006 01.01.2007 01.01.2008 01.01.2009 01.01.2010
Total 712,2 717,9 755,1 755,2 755,9 756,6
Urban population
644,2 648,9 686,1 686,1 686,5 686,7
of which:
Chisinau total 589,4 593,8 630,3 630,3 630,6 630,8
Botanica 156,6 157,6 171,1 171 171,1 171,2
Buiucani 107,8 108,6 110,7 110,7 110,8 110,9
Centre 90,5 91 93,5 93,5 93,5 93,4
Ciocana 101,8 103 117,3 117,3 117,3 117,5
Rîşcani 132,7 133,6 137,7 137,7 137,8 137,8
towns: 14,3 14,4 14,4 14,4 14,4 14,4
Codru 9,9 9,9 10 10 10 10
Cricova 15,4 15,5 16,1 16,1 16,2 16,2
Durleşti Sîngera 7,4 7,4 7,4 7,4 7,5 7,5
Vadul lui Vodă 4,6 4,6 4,5 4,5 4,5 4,5
Vatra 3,3 3,3 3,3 3,3 3,3 3,3
Rural population (villages)
Condriţa 0,7 0,7 0,7 0,7 0,7 0,7
Coloniţa 3,3 3,3 3,3 3,3 3,4 3,4
Ghidighici 5,1 5,1 5,1 5,1 5,1 5,1
Dobrogea şi Revaca
4,3 4,2 4,2 4,2 4,2 4,2
Communes
Băcioi 10,6 10,5 10,5 10,5 10,5 10,6
Bubuieci 6,7 7,1 7,1 7,1 7,2 7,3
Budeşti 5 5 5 5 5,1 5,1
Ciorescu 7,1 7,1 6,9 6,9 7 7
Cruzeşti 1,7 1,7 1,7 1,7 1,7 1,7
Grătieşti 6,2 6,3 6,3 6,3 6,3 6,3
Tohatin 2,5 2,5 2,5 2,5 2,5 2,5
Truşeni 8 8,2 8,2 8,3 8,3 8,3
Stăuceni 6,8 7,4 7,5 7,5 7,6 7,6
In the age profile, over 70% of the Chisinau municipality population is of working age (15-
56 years old), which is a significant production factor which can be exploited through the
creation of the industrial park:
48
Table 27: Municipality population by age, 01.01.2010
In addition to that, it can be observed that the availability of working-age population in a
30km radius that could be employed in the industrial park, is technically the entire
population of the municipality of Chisinau. Therefore, the possibility of a labour shortage
upon the establishment of the industrial park in the municipality of Chisinau can be
omitted.
According to the NBS data, the employees statistics by type of economic activities in
Chisinau mun., concludes that only cca 15% of the employees are engaged in industrial
activities. In addition to the energy sector and construction this share rises to 23.2%. The
table below shows the share of employees on the entire list of economic activities in
Chisinau:
Table 28: Employees distribution by type of activity, mun. Chisinau, thousand people
2008 Share, % 2009 Share, %
Agriculture, hunting 5,1 1,9 4,5 1,7
Extractive industry 0,8 0,3 0,7 0,3
Manufacturing industry 43,4 16,4 39,2 15,2
Power and thermal energy, gas, water 8,1 3,1 8,1 3,1
Constructions 15,3 5,8 12 4,6
Wholesale and retail trade 34,9 13,2 34,8 13,5
Hotels and restaurants 7,4 2,8 7 2,7
Transport and communications 25,5 9,7 24,9 9,6
Financial activities 12 4,5 11,8 4,6
Real estate transactions 26,3 10 27,3 10,6
Public administration 19,5 7,4 20,9 8,1
Education 32,1 12,2 32,8 12,7
Health and social care 22,4 8,5 23,5 9,1
Other collective, social and personal services 11,1 4,2 11 4,3
The average monthly salary paid in the industrial sector in Chisinau is of cca. 3300 lei (fig.
15).
Age group, years
Total
Urban population
Rural population
Total Of which: : 0 - 14 3 - 6 3 - 7 7 - 16 15 - 56/61 57/62 and over
756643 686751 69892 99958 87649 12309 27735 24386 3349 33580 29503 4077 66 437 58283 8154
556090 506058 50032 100595 93044 7551
49
Figure 15: Average monthly salary by type of activity, mun. of Chisinau, 2009, lei
1 Financial activities 9 Health and social care
2 Power and thermal energy, gas, water 10 Other collective, social and personal services
3 Transport and communications 11 Wholesale and retail trade
4 Public administration 12 Education
5 Extractive industry 13 Agriculture, hunting and forestry
6 Real estate transactions 14 Hotels and restaurants
7 Construction 15 Fishing and fish-farming
8 Manufacturing industry
According to the National Employment Agency, the number of officially registered
unemployed, (including those registered at 01.01.2010), constitutes 18713 persons,
increasing by 30.5% compared with January-December 2009.
The establishment of the industrial park is expected to directly contribute to a decrease in
the number of the unemployed. The unemployment situation, on the other hand, also
demonstrates the availability of labour force as a work factor in the Chisinau area.
The workforce qualification in Chisinau ranks the highest in the economy, given the prior
existence of a number of industrial plants and the secondary and vocational education
systems.
The future residents of the industrial park, including the foreign investors group, will enjoy
the possibility to employ the existing qualified personnel or invest in staff qualifications
according to their production needs. In this regard, Chisinau features the educational
infrastructure to provide specialists in industry and manufacturing. The professional
educational potential is marked in the following table:
50
Table 29: All level education, mun. of Chisinau, 2009
2003/200
4 2004/200
5 2005/2006 2006/2007 2007/2008 2008/2009 2009/2010
Secondary vocational education
Number of institutions 26 24 21 21 19 19 19
Number of students 7881 7690 8151 7759 7812 8044 7081
Teaching personnel 636 694 725 696 674 654 658
Students per teacher 12,4 11,1 11,2 11,1 11,6 12,3 10,8
Secondary specialized education (colleges)
Number of institutions 31 28 25 23 22 21 21
Number of students 11197 14643 16744 18572 19034 19822 19065
of which:
full time 10332 13916 15961 17852 18507 19570 19065
part time 865 727 783 720 527 252 -
Teaching personnel 1083 1200 1286 1307 1370 1694 1697
Students per teacher 10,3 12,2 13 14,2 13,9 11,7 11,2
Higher education
Number of institutions 34 28 28 25 25 25 27
Number of students 90194 99110 109274 111279 107498 100449 98076
of which:
full time 61596 67117 71625 72437 71273 66693 70995
part time 28598 31993 37649 38842 36225 33756 27081
Teaching personnel 4974 5161 5516 5875 5742 5674 5714
Students per teacher 18,1 19,2 19,8 18,9 18,7 17,7 17,2
51
2.5 REGIONAL INFRASTRUCTURE (ZONAL) REQUIRED IN THE INDUSTRIAL PARK
ACTIVITY Figure 16 Zonal&territorial delimitation of Chisinau Municipality infrastructure
According to the European statistical data, the capital of the Republic of Moldova falls into
the hierarchy of cities with a population between 500,000 and 1,000,000 inhabitants.
The Chisinau municipality comprises 19 territorial administrative units of which 7 cities
and 12 communes. The municipality has a total area of 57 164 ha of which 19 054 34
hectares of incorporated area. Referring to the ratio of urban and rural land, the areas of
the territorial administrative units for urban areas show a total figure of 26 491 ha (of
which 15 025 ha are city incorporated) and for rural areas a total area of 30 673 ha (of
which 4 027 ha incorporated).
The administrative area of the towns represent 46% of the total municipality area, with
Chisinau covering the largest surface, followed by Singera, and Cricova, the smallest by
surface.
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2.5.1 TRANSPORT INFRASTRUCTURE The Chisinau Municipality external transportation system spans railway, road and air
transportation systems, connecting the municipality's most important economic links with
the localities in the republic and with foreign countries. The transportation system of
Chisinau has a radial structure. The territory of the municipality is crossed by the railway
line Razdelinaia-Ungheni, the international highways Brest-Chisinau-Odessa, Chisinau-
Dubasari-Poltava, Chisinau-Leuseni, Chisinau-Soroca-Ukraine, Chisinau-Giurgiulesti-
Romania, the national roads with access to road communications in the neighbouring
countries Chisinau-Ungheni-Romania, Chisinau-Basarabeasca-Ukraine, Moldova-Bolgrad-
Ismail, and other national and local roads.
Chisinau Air Station performs the passenger, mail and cargo transportation services on the
international lines. Each of these transportation types holds an important role in ensuring
the needs of the economic system of the republic, of Chisinau and the surrounding districts.
The municipality is served by 5 state and 13 private air carriers that ensure the
international passenger and cargo service through the international airport.
The external passenger transport throughout the municipality is carried out by 466 bus
routes, of which 117 (25.1%) - international, 275 (59%) - interurban and 74 (15.9%) -
suburban.
The system of the external transport economic connections of the municipality is
performed through a very dense network of roads of different economic destinations and
technical categories.
Characteristics of the auto roads:
Total length, - 142,6 km, including;
International - 51 km
National - 48,5 km
Local - 43,1 km
Chisinau street system is based on a radial pattern, which means that several
thoroughfares connect downtown and the suburbs. The length of the streets and roads
within the arranged territories is of 481.3 km, of which 225.3 km (46.8%) are assigned to
the category of urban and sector thoroughfares. In recent years a number of major
thoroughfares in the city have been restored.
Currently the public transport network consists of 121 routes, including trolleybus routes -
26, bus routes - 32, maxi-taxi routes - 63.
Chisinau, an important transit hub between the CIS countries and south-eastern Europe.
The alteration of the traditional ties with the eastern neighbours, together with the
isolation from west, the poor quality of transport infrastructure, the economic recession
53
and stagnation of the entire region have driven Chisinau towards the periphery of the
transeuropean economic flows.
However, the EU enlargement to the East, the Balkan stabilization and the economic revival
in Russia create qualitatively new premises in the development of Chisinau, enhancing its
economic and geopolitical importance. The existing conditions prove favourable for
overcoming the barriers as well as for the fructification of the connection effect between
the euro-atlantic and the Eurasian space, through the extensive and intensive development
of communication and logistics infrastructure in order to intermediate the financial and
economic, cultural, informational, touristic and spiritual flows to/from Russia and the CIS
from/towards the European Union.
Pursuant to the pan-european corridor scheme adopted in 2004, Chisinau is located on the
corridor IX (Helsinki - St. Petersburg - Moscow - Kiev - Chisinau - Bucharest - Istanbul -
Alexandroupolis). This presents an important opportunity for Chisinau.
In order to enhance Chisinau intermediation role between East and West flows, the city will
cooperate closely with the cities of Iasi, Cluj, Oradea and Odessa in the active promotion of
the modernization of Oradea - Cluj - Iaşi - Chişinău - Odessa corridor. This could bring
Chisinau almost 450 km closer to Budapest and the whole Mediterranean area (bypassing
the Oriental Carpathians) and create an alternative pan-European corridor segment Milan -
Kiev that would cross Chisinau. Meanwhile, Chisinau set the construction of the European
type railway Iasi - Chisinau and the electrification of Razdelnaya-Ungheni railway as a main
priority.
2.5.2 DRINKING-WATER SUPPLY NETWORK
The Chisinau Municipality water supply system provides water to Chisinau and the
localities such as Vadul lui Voda, Stăuceni, Colonita, Durlesti, Singera, Ialoveni, Vatra,
Ghidighici, Codru, Bubuieci and Tohatin. The total length of the pipelines (aqueducts) and
distribution network has a length of 1570 km. The number of existing wells is about 80.
Water supply system relies on the surface water and groundwater use, the capacity of all
intakes gathering about 435,000 m3/day, including the Nistru River - 400,000 m3/day,
groundwater sources -35 000 m3/day. The water supply is carried out from the Nistru
intake located in the village of Cosernita and the underground intakes (Ialoveni, Ghidighici,
Petricani).
The first water supply system from Nistru (DBC-I) with a capacity of 40,000 m3/day
consists of a first level water pumping station, water treatment facilities in Vadul lui Voda,
second level water pumping station and the 0800 mm aqueduct, L = 18 km (built in 1958).
DBC-I water supplies Vadul lui Voda and partially Chisinau from Tohatin reservoirs.
The second water supply system of Nistru river (DBC-II) with a capacity of 360,000
m3/day consists in a process of collecting water from the river bed, combined with the first
level water pumping station, two pumping stations, water-ducts 0 1200 mm and 0 1400
mm, L = 17 km, sewage-treatment facilities located in the north-east of Chisinau (built in
1971). DBC - II provides Chisinau with drinking and waste water through four aqueducts -
54
2-0 1200 mm and 2-0 1000 mm. Two aqueducts with a diameter of 600 mm supply the
industrial area of Ciocana Noua with technical water and one aqueduct of 800 mm
diameter - the industrial zone of Singera.
Cricova city's water supply is performed through groundwater collections with a daily
capacity of 2400 m3, the actual water uptake constitutes 1400 m3/day. Part of the villages
use water collected from wells or shafts. The quality of groundwater sources does not meet
sanitary standards for their content of fluoride and hardness.
2.5.3 DRAINAGE NETWORK The municipality of Chisinau features a centralized sewerage system of waste water and
partly a divisor system organized in four areas. The sewerage networks and facilities are
served by JSC "Apa-Canal Chisinau". The sewerage system covers 95% of all residential
areas and the industrial waste water in the city is characterized by the indicators in table
30.
Table 30: Drainage network of Chisinau Municipality
Indicators (km) Year 2005
Length of the drainage networks of which: 911,80
Main collectors 71,00
Street network 368,50
Neighbourhood network 472,30
The existing landscape condition imposes pressure drainage pumping in some residential
and industrial areas of the city. The waste water pumping in free drainage networks in the
city and in the treatment facilities are conducted at 24 pumping stations, including four
inter-districtual.
The wastewater is collected in two main collectors located along the river Bic, on its right
and left banks, with a 2000mm diameter and the rectangular - 2.5x2m). The main drainage
volumes of the city discharge freely in the drainage network.
Chisinau sewage treatment stations are located in the south-east region of the city on an
area of 90.0 hectares, including sludge areas (28.2 ha) and has a projected capacity of
treatment for biological and mechanical cleaning of 466,000 m3/day. The residual waters
of other Chisinau localities are pumped into the Chisinau sewage treatment station, such as
of Durlesti (20% of the population), Codru (50% of the population), Singera (10% of the
population), Ghidighici (40% of the population), Straseni (30% of the population), and
Truşeni (only industrial areas).
The other localities in the suburban Chisinau (Vadul lui Voda and Cricova) are not
connected to the sewage system. In Vadul lui Voda, the wastewater of the recreational area,
industrial and commune objects are treated at its own facilities and subsequently
discharged into Nistru.
55
2.5.4 HEATING ENERGY SUPPLY
Chisinau heating energy supply is carried out mainly by the centralized heating system, as
well as by the local systems. The share of the autonomous heating systems is constantly
growing and is estimated at 5% of the total consumption, while 95% are served by the
centralized supply system.
The centralized system is based on CET-1 and CET-2 heat sources, the West, South and East
heating systems (the Eastern station currently does not operate). The centralized system
consists of two pipe networks, including 252.4 km pipe lines, hot water - 228.3 km, heating
319.9 km and steam heating -1.4 km. The centralized system includes 507 central units, 22
pumping stations, 3002 elevators and 568 supervision nodes.
2.5.5 NATURAL GAS SUPPLY Chisinau gas supply is performed from a single source - the ACB main in the north of the
republic (Ananiev - Cernauti - Bogorodceni) by Şoldăneşti-Rezina connection and through
the Ribnita-Chisinau main.
There are currently 200 thousand apartments supplied with gas in Chisinau, of which over
196 thousand - with natural gas.
2.5.6 POWER ENERGY
The power supply of Chisinau is carried out by the electricity distribution networks owned
by "RE Chisinau" SA - a foreign-equity enterprise within Union Fenosa Moldova group. The
sources of the electrical energy coverage are: CET-1, with a capacity of 66 MVA, CET-2 -
with a 240 MVA production capacity; CTE Moldoveneasca (Moldovan Thermoelectrical
Station) - 1200 MVA.
2.5.7 MINERAL RESOURCES Chisinau and its surrounding territory is rich in numerous building materials deposits:
lime, limestone, rough stone, clay, sand, gravel. Five stone and lime deposits are currently
operating in: Cricova, Mileştii Mici, Chisinau, Fauresti, Caramida. Tile is produced from raw
materials extracted from quarries in Bubuieci and Milestii Mici, sand, pebbles and gravel
are extracted in Cobusca and Vadul lui Voda.
2.5.8 WASTE MANAGEMENT Waste management is the collection, transport, processing and disposal of waste materials.
In Chisinau and Codru this service is provided by the municipal undertaking "Regia
Autosalubritate" with the help of 68 trucks. The remaining townships are served by other
companies engaged by their respective city halls. Dwelling-adjacent areas are supervised
by the housing stock managements, EXDRUPO company and "Spatii verzi" (Green Spaces)
are responsible for the cleanliness on the public roads and spaces. The City Hall's
Directorate General for community housing and planning is coordinating the activity of the
waste management entities in the municipality.
The waste collections in Chisinau and Codru are being transported to the transhipment
station before their final storage at the landfill nearby Tantareni. The landfill was opened in
1991 on a 22.5 ha site. Its exploitation period is estimated to last until 2015.
56
Until present there have been stored about 12.335 million m3 of waste. The collected waste
is not being selected for recycling.
The waste collection services for domestic and industrial waste in Chisinau and Codru have
about 500,000 registered beneficiaries, of which 21 000 in individual homes and about
489,000 in multi-storey residential blocks and an estimated 5,600 contracts with
companies and approximately 260 000 contracts with natural persons. In 2005 the
Direction transported 997,000 m3 of waste according to the data held by the enterprise.
The challenges faced by the waste service refers to the lack of coverage of the entire
territory of the municipality and environmental issues arising from the waste and storage
methods and the technologies used throughout the process from collection to storage.
Chisinau municipality has all the infrastructure required for the establishment of an
industrial conglomerate, including onto the former location of Production Complex
"Tractor Plant in Chisinau ".
57
2.6 TECHNICAL AND PRODUCTION INFRASTRUCTURE TO BE CONNECTED TO THE
INDUSTRIAL PARK Figure 17: Space representation of the territory adjacent to the Tractor Plant in Chisinau
The industrial park is intended to be located on the territory of former Production Complex
„Tractor Plant in Chisinau”, currently reorganized into 10 joint stock companies with the
state as the controlling shareholder. The adjacent land plot measuring 32,888 ha, assigned
with the cadastre number 01.00.518.184, is a state property and is granted for use for an
indefinite term. De facto, the ten joint stock companies represent former production
divisions of the Complex, comprising different surfaces endowed with different real estate
objects, as follows:
Table 31: Production Complex “Tractor Plant in Chisinau”. Structure and surface area of the properties
№ Company name Total are of the land plot, m2
Area of buildings in property, m2
Production area, m2
1 „TRACOM” JSC 207 477 82 496 44 301 2 „REUPIES” JSC 8 443 6 652 5 140 3 „RADIATOR” JSC 15 100 10 331 8 640 4 „ARALIT” JSC 9 386 5 800 5 632 5 „BICOTRA” JSC 6 296 4 703 4 278
58
6 „ZIDARUL-SV” JSC 13 200 11 000 9 000 7 „PRESUDOR” JSC 28 800 21 287 1 5978 8 „DOTARCOM” JSC 5 818 5 286 4 032 9 „FORJACOM” JSC 14 735 10 380 8 644 10 „MAPASAUTO” JSC 19 625 40 33 1 790 Total 328 880 161 968 107 435
All the subjects are located on: MD 2004, Municipality of Chisinau, 170 Columna street,
Buiucani sector.
The adjacent land was assigned for use to JSC "Tracom" for an indefinite term. The other
nine companies rent the adjacent land nearby the production buildings, where "Tracom"
acts in the capacity of lessor.
JSC Tracom owns currently a great number of the estates on the territory of the former
Complex. Officially the enterprise owns over 30 subjects, as shown below:
Table 32: Structure and area of JSC „Tracom” buildings
Subject name Cadastral no. Area Destination (production
warehouse, admin. building)
1 Construction F 01.00518.184.01 142,80 Production
2 Main unit A-A 01.00518.184.03 1 662,40 Warehouse N17
3 Main unit B, B1, B2, B3, B4, B5, B6 01.00518.184.04 1 929,40 Production
4 Main unit A, W,R,Q 01.00518.184.05 1 441,30 Administrative building
5 Main unit C-C 01.00518.184.06 2 151,90 Administrative building
6 Main unit B-B 01.00518.184.07 138,20 Warehouse
7 Main unit F-F 01.00518.184.08 1 019,40 Air compression Division
8 Main part Ş-10 01.00518.184.10 39 562,80 Production Unit
9 Main part S-S 01.00518.184.11 5 713,90 Production Unit
10 Main part P-P 01.00518.184.12 6 356,80 Warehouse
11 Main part 2 01.00518.184.13 107,70 Power transformer station
12 Main part I 01.00518.184.14 308,90 Warehouse
13 Main part G 01.00518.184.14 821,00 Production, warehouse
14 Main part 3 01.00518.184.15 95,90 Power transformer station
15 Main part P 01.00518.184.16 967,30 Production
16 Main part L 01.00518.184.17 302,50 Building and antifire boxes
17 Main part T 01.00518.184.18 207,21 Garage Construction
18 Main part O 01.00518.184.19 1 102,10 Production unit
19 Main part C 01.00518.184.20 1 013,10 Production
20 Main part M-M 01.00518.184.21 523,90 Water circulation pumping station
21 Main part L-L 01.00518.184.22 40,30 Ancillary building
22 Main part N-N 01.00518.184.23 81,10 Neutralization and cleaning station
23 Main part Ş-Ş 01.00518.184.24 414,90 Ancillary building
24 Main part G-G 01.00518.184.25 741,60 Warehouse
25 Main part K-K 01.00518.184.26 63,30 Fire station
26 Main part Z-Z 01.00518.184.27 155,00 Fuel Pump Station
27 Main part PT 01.00518.184.28 119,70 Thermal substation
28 Main part FI 01.00518.184.29 151,50 Passing point
29 Main part G 01.00518.184.30 75,60 Ancillary building
59
30 Commercial construction Î-Î 01.00518.184.59 126,00 Commercial construction
31 Main part A 01.00518.184.217 65,70 Gasification station
Total - 67 603,21 -
The former Production Complex „Tractor Plant in Chisinau” underwent two construction
phases throughout its history - the construction carried out over the 1930-1940 and 1970-
1980 periods.
The constructions of the 30-40s are in an advanced state of decay, liable to demolition. An
example of such construction is shown in fig. 16:
Figure 18: Construction of the 1930-1940 period on the territory of Tractor Plant in Chisinau
The constructions carried out in the 1970-1980 years are in a satisfactory condition,
compared with the previously presented. However, they require substantive renovating
investments (fig. 17):
60
Figure 19: Construction built during 1970-1980 on the territory of Tractor Plant in Chisinau
The infrastructure objects are on the balance of JSC „Tracom” and consist of:
Natural gas supply is performed through the control point (ГРП) with a 3 atm. average
pressure. The technical state of the gas network is satisfactory and does not require any
additional investment.
Figure 20: Gas supply network
61
Electricity supply is provided through high voltage electricity wires from Chisinau. The
central point of distribution (ЦPП-6) operates within the territory. It has a 50 000 kWh.
capacity. The electricity is supplied through 12 feeders with a length of 21 km. Both high
voltage distribution network (underground and overhead) and transformer stations have a
radial structure, enabling the residents of the territory to connect to the electric power
network. There are 8 high voltage distribution centers and 23 transformers in all on the
territory.
The electricity networks capacity will cover with reserves the necessities of the future
residents of the industrial park since it was set to serve an excessively high consumption of
electricity, during the operating period of the plant.
The technical state of the electricity networks is satisfactory and does not require any
additional investment.
Figure 21: Electricity supply networks on the territory of Tractor Plant in Chisinau
Water supply. The water is pumped from the 200 mm diameter municipal aqueduct, at a
3-atmospheres pressure. Two artesian wells operate within the territory, having a
productivity of 25m3/h and 15m3/h respectively. The length of the water supply networks
is 9.5 km. The territory is crossed by three main urban wastewater pipes (rain and
household water), that are treated at a 900m3/h capacity and then discharged into the
municipal sewer system.
The water supply system is in an advanced state of obsolescence and requires thorough
repairs.
62
Railroad. The railway transportations are performed through Calea ferată Chisinau, to
which the territory residents have access routes via the station "Visterniceni". The
connection through "Visterniceni" station will fully ensure the transportation of goods to
both international and international markets.
A railway network is mounted within the territory, with a length of 3.8 km, as a connection
means with Chisinau railway station. The railway section on the territory of the intended
industrial park is an advanced state of depletion in need of thorough repairs.
Figure 22 The railway on the territory of the Tractor Plant in Chisinau
Highways. The territory has access to other districts of the city through a network of paved
highways. It is also connected to the route Chisinau - Balti by a paved highway located at 3
km and also has access to the international highways, a potential access to the markets in
Romania and Ukraine, as well as to the international ports such as Giurgiulesti, Ismail and
Odessa.
Telecommunications. The territory is connected to the internal telephone network
(УATC-49 for 500 numbers), MOLDTELECOM fixed telephone network and ORANGE
mobile network. It is also endowed with fax connection, access to the interurban and
international network, including the internet network.
Social infrastructure objects. The following objects are located within the territory: 3
public catering objects - 1 culinary outlet and 2 canteens, 3 medical service points. All these
objectives require major repairs.
The territory of the former Production Complex "Tractor Plant in Chisinau", located on
Mihai Viteazul Street in Chisinau, possesses all the facilities and infrastructure objects
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required for the establishment of an industrial park. As it has been emphasized in this
section, a number of infrastructure objects require thorough repairs. The investment
amount shall be estimated in the following chapters.
3 THE STRATEGY FOR THE ESTABLISHMENT OF AN INDUSTRIAL
PARK WITHIN THE FORMER „PRODUCTION COMPLEX TRACTOR
PLANT IN CHISINAU” Compliant with the Law on industrial parks no. 182, 15.07.2010, the initiators for the
creation of an industrial park can be the following subjects of law:
1. Central specialized public authorities of the public administration;
2. Local public administration authorities, including those of Gagauz Autonomous
Territorial Unit;
3. State and municipal enterprises;
4. Commercial organizations registered in the Republic of Moldova.
Although the adjacent land of former Production Complex "Tractor Plant in Chisinau" is a
state-owned property, transferred to JSC "Tracom", and that the state owns the controlling
block of shares of all 10 joint stock companies created on this territory, following the
privatization program in 1995 and 1999, only the specialized central Authority can stand
as the initiator of the industrial park establishment, in this case, the Ministry of Economy of
Moldova.
This chapter will review the five distinct options identified with respect to the possibility
of creating an industrial park onto the territory of former Production Complex "Tractor
Plant in Chisinau", as follows:
1. The establishment of the industrial park through fiduciary management of the 10
joint stock companies created on the territory of former Production Complex
"Tractor Plant in Chisinau", following the privatization program in 1995 and 1999;
2. Establishment of the industrial park by reorganization through merger (merger
and acquisition) of the 10 joint-stock companies created on the former territory of
Production Complex "Tractor Plant in Chisinau”, following the privatization
program in 1995 and 1999;
3. Establishment of the industrial park through an asset lease agreement of the 10
joint stock companies created on the territory of former Production Complex
"Tractor Plant in Chisinau”, following the privatization program in 1995 and 1999;
4. Establishment of the industrial park by setting up a new joint stock company with
its registered capital formed by the contributions of the 10 joint stock companies,
created on the territory of former Production Complex "Tractor Plant in Chisinau",
following the privatization program in 1995 and 1999.
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5. Establishment of the industrial park by selling the share blocks to private
investors, state-owned blocks of shares of the 10 joint stock companies created on
the territory of former Production Complex "Tractor Plant in Chisinau", following
the privatization program in 1995 and 1999.
3.1 ESTABLISHMENT OF THE INDUSTRIAL PARK THROUGH THE FIDUCIARY
MANAGEMENT OF THE 10 JOINT STOCK COMPANIES CREATED ON THE TERRITORY OF
FORMER PRODUCTION COMPLEX TRACTOR PLANT IN CHISINAU, FOLLOWING THE
PRIVATIZATION PROGRAM IN 1995 AND 1999 The notion of fiduciary management infers the definition set forth in the Civil Code art.
1053, by which all the ten joint-stock companies on the former territory of Production
Complex Tractor Plant in Chisinau, following the privatization program in 1995 and 1999
(hereinafter 10 joint stock companies), are to surrender their assets under the fiduciary
management of the industrial park management company, which implies the undertaking
of responsibility to manage the assets of the 10 joint stock companies for their benefit.
Fiduciary management implies particular legal aspects related to contract specifications:
By transferring the assets under the fiduciary management, the owner exercises his
rightful powers of attorney, which is the case for the ten joint-stock companies that
own the assets. The owner powers of attorney will be transferred to the
management company of the industrial park, with particular limitations specified in
the trust agreement.
The fiduciary management contract shall be executed for the benefit of the ten joint
stock companies.
The transfer under the fiduciary management of the ten companies’ assets will not
result in the ownership passing towards the management company of the industrial
park. However, as previously mentioned, the management company will be
submitted the owner' rights concerning the assets management in its behalf, for the
owner's benefit, i.e. for the benefit of the ten joint stock companies.
As objects of the fiduciary management contract may appear the entire property assets of
the ten joint stock companies or parts of it (goods or separate rights).
The management company of the industrial park will be entitled to the owner's rights
concerning the transferred patrimony (Art. 315, Civil Code). In other words, the
management company will behave as the owner in its relationships with the third parties,
although legally not holding such quality. The ten joint stock companies, as the asset
owners, shall not submit their owner powers of attorney, but only the possibility to realize
them through the management company of the industrial park.
The enforcement of the contractual obligations arising from the fiduciary management
agreement bears a free-of-charge character. Though, the legislator left much flexibility in
the indicative norm, with regard to a negotiation of a possible remuneration for the
industrial park management company.
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The law provides certain ways of performing the remuneration where the contract
establishes a payment towards the management company, namely:
a) percent of the revenue (profit) obtained from the fiduciary management of the assets of
the ten joint-stock companies;
b) a fixed amount of money;
c) in the form of purchasing a part of the assets transferred under fiduciary management.
Anticipating the situation where the asset lease payment of the ten joint stock companies
to the future residents of the park will constitute a source of income for the management
company, there shall be set the lease amount of the sum for the ten joint stock companies
and the amount for the management company of the industrial park.
In the relationships with the residents of the park, the management company bears liability
limited to the goods received under the fiduciary management. Under the civil liability the
law establishes that the management company is deemed liable for all the powers of
attorney conferred by the agreement.
The establishment of the fiduciary management over the activity of the ten joint stock
companies in general and over their assets in particular will be made upon the Council
decision of these companies, which will enter fiduciary management agreements with the
management company of the park.
The powers of the executive bodies of the ten joint stock companies, unlike the council
powers may be delegated to the management company of the industrial park under the
same contract of fiduciary management. In such manner, the management of the ten joint
stock companies will see a certain strengthening. At the same time, the attribution of the
Councils of the ten joint stock companies may not be delegated, according to the law in
force (art. 65, Law no. 1134 of 02.04.1997, on the joint stock companies).
Compliant with the art. 6 par. 1 of Law no. 182 of 15.07.2010 on industrial parks, the
initiators for the creation of an industrial park can be the following subjects of law:
a) central specialized public authorities of the public administration;
local public administration authorities, including those of Autonomous Territorial
Unit of Gagauzia;
b) state/municipal enterprises;
c) commercial companies registered in Moldova.
Paragraph two of the same article provides that, in order to create an industrial park, the
central body of the public administration must establish:
A public capital commercial company,
A public-private commercial company,
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Transfer the public-owned property destined for the creation of the industrial park
to the enterprises selected on a competitive basis according to the Law no. 179 of
10.07.2008 on public-private partnership.
In this respect, upon the approval of one of the four options for setting up an industrial
park, analyzed in this chapter, i.e. fiduciary management, reorganization through merger,
asset lease or sale of the state owned block of shares, the specialized central body of the
public administration can decide on any of the legal forms of the commercial company -
managing entity of the industrial park.
In other words, any legal organizational form of the administrative company of the
industrial park, set by law (public capital company, public-private capital company, public-
private partnership) can be applied in the four options for creating the industrial park.
3.1.1 PUBLIC CAPITAL COMPANY The concept of public-owned company is exposed in Law no. 121 of 04.05.2007, on the
administration and denationalization of public property, namely: A commercial
organization with public capital is a company whose registered capital is formed entirely
from the state or territorial-administrative unit contribution.
Currently, 10 joint stock companies are operating within the territory proposed for the
industrial park. Although the state is the controlling shareholder in these companies, the
structure of the shareholders includes private subjects who hold shares of stock in
different amounts. State shares in the capital stock of these companies are presented as
follows:
Table 33: Equity structure of the 10 jsc created on the territory of f ormer „Production Complex Tractor Plant in Chisinau”, following the privatization programs in 1995 and 1999
No. Company name
Registered capital Price 1 share
Share of the state
no. of shares thousand lei No. shares thousand lei %
1 "Tracom” JSC 2 274 887 52 322,40 23 2 114 024 48 622,55 92,93
2 "Bicotra" JSC 31 635 632,70 20 19 340 386,80 61,13
3 "Aralit" JSC 104 753 2 199,81 21 77 396 1 625,32 73,88
4 "Radiator" JSC 45 723 2 148,98 47 32 169 1 511,94 70,36
5 "Reupes" JSC 139 873 2 098,10 15 108 064 1 620,96 77,26
6 "Zidarul-SV" JSC 259 090 3 627,26 14 234 170 3 278,38 90,38
7 "Presudor" JSC 377 667 8 686,35 23 341 713 7 859,40 90,48
8 "Forjacom" JSC 326 817 7 516,81 23 310 167 7 133,84 94,91
9 "Dotarcom" JSC 50 156 1 153,59 23 33 604 772,89 67,00
10 "Mapasauto" JSC 79 490 1 828,28 23 65 410 1 504,43 82,29
Total 82 214,29 3 336 057 74 316,51
The presence of numerous shareholders in the registered capital of these companies,
besides the state, rules out the version of creating the industrial park with one of the
enterprises as the management company, since none of the enterprises meet the law
provisions, specifically: an organization whose registered capital is formed entirely of
government contribution.
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3.1.2 PUBLIC-PRIVATE CAPITAL COMPANY The concept of public-owned private company can be completed through the legal
provisions of Law no. 179 of 10.07.2008, on public-private partnership, which in art. 18
par. 6 defines the joint venture company as a private company with public capital.
All ten joint stock companies bear the legal status of public private capital companies and
therefore any of these ten companies can be assigned the title of the public-private
company - management company of the industrial park.
Undoubtedly, the best candidate for creating the industrial park would be JSC "Tracom",
since the balance of this company comprises all the infrastructure and it is also the owner
of most administrative and production buildings. Moreover, JSC "Tracom" is the successor
in title of former Production Complex "Tractor Plant in Chisinau" and has the right to use
the adjacent land offered by the state.
If we rule out the version of using one of the ten joint stock companies in order to create
the industrial park, the central specialized body of the public administration can establish a
new commercial company, whose capital will be formed of both the state's and private
investors' contributions.
3.1.3 TRANSFER OF PUBLIC ASSETS DESTINED FOR THE CREATION OF AN INDUSTRIAL PARK
TO A COMPANY SELECTED ON A COMPETITIVE BASIS COMPLIANT WITH PUBLIC
PRIVATE PARTNERSHIP LAW This scenario proves unsustainable, since the only public assets is the tract of land adjacent
to the park. Otherwise, all the infrastructure and inputs are privately owned and belong to
the registered capital of the 10 companies located within the future park. The value of the
tract of land equals zero for the potential investor, who would consider the possibility to
create a legal public-private partnership, since the adjacent land cannot be separated from
the estates located within its territory that are privately-owned by the 10 private
companies, acting as separate legal subjects.
A public private partnership could be accepted only upon the purchase of ten companies'
blocks of shares by a strategic investor, who would additionally have the possibility to both
privatize the state-owned adjacent land and own the assets and properties located on this
land.
A private partnership transaction would be possible whether the state would decide on a
consolidation of the ten companies by merger or acquisition and subsequently sell the
already consolidated block of shares to a private investor, an option which will be
discussed later.
Therefore, the implementation of the fiduciary management option for the establishment
of the industrial park provides two opportunities: the use of public capital or a public
private capital commercial company. The schematic representation of this option is shown
below:
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Figure 23: The schematic representation of the fiduciary management option of the ten joint stock companies and their assets
or
The option entails a fiduciary management contract between the management company of
the industrial park, either publicly-held or public-private and the ten joint stock companies.
The transfer of the property of the ten joint-stock companies under the fiduciary
management of the company administering the industrial park is carried out upon the
decision by the general meetings of shareholders of the ten joint-stock companies. The
general meeting issues an order stating that the boards of the ten joint stock companies
must sign fiduciary management agreements with the management company of the
industrial park.
Table 34. Estimating the benefits and disadvantages of placing the patrimony of the ten joint stock companies under the fiduciary management
Fiduciary management of the ten joint stock companies patrimony Benefits Disadvantages
Transaction performed in a short time – up to 6 months
Possibility to consolidate the assets of the 10 joint stock companies, without proceeding to their judicial reorganization
The establishment of the fiduciary management avoids the liquidation of the 10 joint stock companies or their reorganization into other legal forms. The 10 joint stock companies can be lately reorganized, provided that these powers are included in the contract of fiduciary management
Flexibility in asset distribution to the future residents The legal guaranties provided for the residents of the industrial park on the use of the ten companies
Newly established
public capital company,
management company
of the industrial park
1. " Tracom “JSC 2. " Bicotra " JSC 3. " Aralit " JSC 4. "Radiator" JSC 5. " Reupes " JSC 6. "Zidarul - SV" JSC 7. " Presudor " JSC 8. " Forjacom " JSC 9. " Dotarcom " JSC 10. " Mapasauto " JSC
. Fiduciary
management
agreements
IP residents Contracts
JSC Tracom
IP Management
company
Public-private company
1. " Tracom JSC" 2. " Bicotra " JSC 3. " Aralit " JSC 4. "Radiator" JSC 5. " Reupes " JSC 6. "Zidarul - SV" JSC 7. " Presudor " JSC 8. " Forjacom " JSC 9. " Dotarcom " JSC 10. " Mapasauto " JSC
. Fiduciary
management
agreements
IP residents Contracts
69
assets will require additional legal relationships, such as asset lease or alienation.
Whole or partial transfer of the assets, or separate transfer of each existing asset, or of a part of the asset, depending on market circumstances and the residents' intention
Lack of law subordinate normative acts (regulations by Government Decision) regulatory of the procedure for placing under the fiduciary management of the assets of the commercial companies where the state is the controlling shareholder of the registered capital. Such normative acts regulate the alienation and lease procedures (including of unused goods).
The possibility to alienate, pledge, lease, etc. the assets taken under fiduciary management
3.1.3.1 Conclusions
The option for fiduciary management of the assets of the ten joint-stock companies is a
theoretically viable theory for the creation of the industrial park on the territory of former
Production Complex "Tractor Plant in Chisinau”. Unlike the economically developed
countries, Moldova does not have the experience of fiduciary management. Moreover, there
are no law subordinate regulations governing the fiduciary management of the assets
owned by companies where the state is the controlling shareholder.
Assuming a legislation adjustment on the methods of fiduciary management of the
company assets, where the state is the controlling shareholder in the registered capital, the
establishment of the fiduciary management can serve as the initiator of the industrial park
on the former territory of the Production Complex Tractor Plant in Chisinau.
3.2 THE ESTABLISHMENT OF THE INDUSTRIAL PARK THROUGH MERGER (MERGER AND
ACQUISITION) OF THE 10 JOINT STOCK COMPANIES CREATED ON THE TERRITORY OF
FORMER PRODUCTION COMPLEX "UZINA DE TRACTOARE DIN CHISINAU",
FOLLOWING THE PRIVATIZATIONS IN 1995 AND 1999 The essential condition for creating the industrial park on the territory of former
"Production Complex Tractor Plant in Chisinau" is the consolidation of the assets of the ten
joint stock companies, on the one hand, and obtaining the right to use these assets by the
management company of the industrial park, on the other side.
The right to use the patrimony can be achieved through the powers provided by the
fiduciary management. In this situation, the ten joint stock companies - as owners of the
property, submit their patrimony rights to the management company of the industrial
park, which by virtue of these powers, can decide on the property, whether by lease or
alienation to the future residents.
All the ten joint stock companies operate below the threshold of profitability, with an
extremely inefficient use of the assets. The establishment of the industrial park and
provision of these assets into use to the future residents will impose a de facto liquidation
of these ten companies, since they will no longer carry out production activities or use their
own assets. Their only source of income would be the payments for the lease to the future
residents. It is expected that all ten joint stock companies will only act formally, without
70
any production activities, as stipulated in their statutes, which requires their imperative
reorganization.
The state as the controlling shareholder of all ten companies is bound to make use of its
legal powers to reorganize them, without damaging any property rights of other
shareholders.
In this regard, the solution identified refers to the realization of merger or acquisition.
The decision on the reorganization of the ten joint stock companies will be taken by the
general meeting of every company. In this case, the state in its capacity of majority
shareholder holds the legal supremacy to reform and address the situation.
The only exception is JSC "Bicotra" where the state owns only 61.13% of the share capital
of the company, considering that the decision on the reorganization can be approved by
two thirds of the total votes of shareholders. The analysis presented is focused on worst-
case scenario, based on the assumption that the private shareholders of JSC "Bicotra" will
oppose the reorganization process. This scenario places JSC "Bicotra" as a future resident of
the industrial park. Its unstable economic and financial situation will lead however, to
reorganization in the future.
The economic concentration of the companies can be performed through merger or
acquisition. Their merger is performed through the consolidation of their balance sheets,
that is, through the consolidation of all the properties, property and non-property rights.
Absorption means that the reorganizing companies cease to exist and pass their full rights
and obligations to the joint stock company to be established. This involves the emergence
of a new company, a new legal subject which will assume all their rights and obligations.
The establishment of the industrial park on the former territory of Production Complex
Tractor Plant in Chisinau through consolidation is not the ultimate solution since the same
result can be achieved through an existent joint stock company (e.g. JSC Tracom), where
the state has all the legal rights to take the decisions, without the establishment of a new
commercial company. This can be achieved by means of absorption of the ten joint stock
companies.
The absorption will result in the liquidation of the nine joint stock companies, which will be
absorbed after the reorganization, with the passing of their full rights and obligations to
"Tracom", i.e. the acquiring legal person.
JSC "Tracom" will "absorb" the remaining nine joint stock companies, considered the best
option, since at the time of absorption, JSC "Tracom" already has the right to use the land
adjacent to the industrial park and is the owner of all the infrastructure objects of the
future industrial park.
In both cases the state will retain at least two thirds of the share capital, thus having all the
legal powers for making future consolidated decisions and strengthening its position in the
administration of the entire property of the industrial park.
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Below is shown the schematic representation of the consolidation and absorption
processes.
Figure 24: Graphic representation (consolidation/absorption) of the existing ten joint stock companies
3.2.1 PROCEDURE FOR MERGER THROUGH ABSORPTION The reorganization of the joint stock companies by merger (absorption) implies the
following phases:
a) Document drafting necessary to adopt decisions to reorganize (draft of merger
agreement, draft of transfer document and the consolidated balance sheet). This set
of documents can be developed including the contracting private consulting
companies;
b) Adoption of decisions related to the reorganization of each company, of the ten joint
stock companies involved in the reorganization;
c) Disclosure of the information on the reorganization of companies to creditors and
public bodies;
d) Obtainment of authorization for the reorganization of company from the National
Commission of Financial Market;
e) Registration of the reorganization in the State Register of Enterprises and
Organizations;
f) Making entries in the state register of the securities related to the reorganization;
g) Introduction of the reorganization related changes in the Register of securities
holders and/or closure of private accounts where applicable and completion of the
reorganization.
"Bicotra" SA
"Aralit" SA
"Radiator" SA
"Reupes" SA
"Zidarul - SV" SA
"Presudor" SA
" Forjaco m " SA
"Dotarcom " SA
"Tracom SA"
"Mapasa uto" SA
Consolidation – creation of a new legal subject
"Bicotra" SA
"Aralit" SA
"Radiator" SA
"Reupes" SA
"Zidarul - SV" SA
"Presudor" SA
"Dotarcom " SA
"Mapasa uto" SA
" Forjacom " SA
JSC “ Tracom ”
Absorption – based on an
existing legal subject
JSC “ IP ”
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3.2.1.1 Drafting the documents necessary for reorganization by merger
In case of absorption, JSC "Tracom" - the acquiring company which will continue to operate
after the absorption process, acquires all the rights and obligations of the absorbed
companies in accordance with the transfer documentation, the consolidated balance sheet
and the merger agreement.
In order to adopt decisions related to the reorganization through merger process, the ten
companies involved are to prepare the following draft documents:
a) merger agreement;
b) transfer documentation;
c) consolidated balance sheet;
e) changes in the statute of the acquiring company – JSC „Tracom” or the statute with the
new wordings.
In case of absorption, the amount of the increased capital of the acquiring company - JSC
"Tracom" shall not exceed the total amount (summary) of net assets submitted by the ten
absorbed joint stock companies.
The proportion of the conversion (exchange) of shares in circulation in the registered
capital of JSC "Tracom" - the absorbing company, will be determined based on the market
net asset value per share of all the ten companies involved in the merger.
Shareholders' quota in the registered capital of JSC "Tracom" shall be proportionate to the
previously held quota by each of them reported to the net assets of the emerging
companies.
The draft merger agreement will be prepared by the authorized organs of the ten joint
stock companies involved in the merger, along with the transfer documentation and the
consolidated balance sheet.
The transfer documentation is prepared by each of the absorbed companies after their
patrimony valuation on their market value.
The consolidated balance sheet will be developed by the company being acquired or by the
authorized persons of the companies involved in the absorption, on the basis of the
interim balance sheets prepared by each participating company separately.
The Interim Balance Sheet will reflect the data on the assets and liabilities of the ten joint-
stock companies upon the last managing date, adjusted to the market value in accordance
with the assessment acts previously performed.
The acts of transfer and the consolidated balance sheet will contain provisions relating to
the succession of the entire patrimony of the ten joint-stock companies towards JSC
"Tracom" in respect of all rights and obligations to all their debtors and creditors.
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The modifications to the statute or the statute in the new wording will be developed by JSC
"Tracom" - the acquiring company, in agreement with the companies being absorbed and
will contain, where necessary - information on the changes in the registered capital,
founders and their held quotas as well as information about the reorganized society and
the succession of the rights and liabilities of the companies acquired.
3.2.1.2 Adopting the decisions on the reorganization through merger
The decision on the reorganization through merger, prior to the date where JSC "Tracom"
will absorb the nine joint stock companies will be approved by the general meeting of
shareholders of each of the ten joint stock companies, with at least two thirds of the total
votes present at the meeting.
Upon the merger through absorption of the ten joint stock companies JSC "Tracom", as the
acquiring company, shall adopt the decision whereby it will be approved:
a) merger agreement;
b) transfer documentation;
c) the conversion proportion (exchange) of the shares in circulation in the
supplementary issue of shares of the absorbing company;
d) the consolidated balance sheet;
e) the increase of the registered capital, if necessary, through additional issuance made in
order to convert (exchange) the shares of companies to be absorbed and the date of the
draw list of subscribers;
f) changes and additions to the statute or the statute in new wording of JSC „Tracom”
Upon the merger through absorption, the nine joint stock companies absorbed will adopt
the decisions on:
a) merger agreement;
b) transfer documentation;
c) the consolidated balance sheet;
d) the proportions of conversion (exchange) of the shares in circulation in the
supplementary issued shares of JSC "Tracom"
3.2.1.3 Disclosure of the information on the reorganization through merger
Disclosure of information on the reorganization of the concerned joint stock companies is
performed for the notification of their creditors, partners, government bodies that have
performed their registration and other public bodies towards which companies have
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certain obligations. The event is also disclosed to the shareholders who have not
participated in the decisions related to the reorganization.
The executive bodies of the ten joint-stock companies shall inform in writing all the
creditors within 15 days of the decision on the reorganization. They will also publish an
opinion on the reorganization in two consecutive editions of the Official Monitor of the
Republic of Moldova.
The territorial office of the State Registration Chamber shall be notified within three days
of the adopted decision on registration, by submitting the requested documents.
In order to perform the controls on the debts to the State Budget of the ten joint stock
companies and controls required for the bank accounts closure (of the nine joint stock
companies to undergo liquidation following the reorganization), it is required to inform
and submit the necessary documentation to the main or territorial tax inspectorate.
All ten joint stock companies subject to reorganization will publish in the newspapers
established in the statutes the reorganization-related decisions of the general meetings of
shareholders. They shall also submit all the necessary information to the National
Commission of the Financial Market (art. 54 of Law no. 199 of 18.11.1998 on securities
market).
The creditors shall have the opportunity to seek guarantees of the concerned joint stock
companies, within a 2 months period of the last notice provided that they can prove the
companies cannot satisfy their claims. The creditors are only entitled to request guarantees
if they prove that the reorganization will jeopardize the claim collections.
3.2.1.4 Obtainment of the authorization for the reorganization through merger
from the National Commission of the Financial Market
All ten joint stock companies shall submit requests to the National Commission of the
Financial Market in order to obtain the authorization for the absorption of the nine joint
stock companies by JSC "Tracom". The requests shall be submitted within a 2 month
period of the notice published in the Official Monitor of the Republic of Moldova,
concerning their reorganization.
In order to receive the authorizations for their reorganization through merger
(absorption), the ten joint-stock companies shall submit at the National Commission of the
Financial Market the following documentation:
a) A free-form request of authorization with the indication of the reorganization
form, signed by the head of the executive body;
b) Minutes of general meeting of shareholders prepared under Art. 64 of the Law on
joint stock companies, which are attached the following documents:
- Merger agreement;
- Amendments to the constitution of JSC „Tracom” – the absorbing company;
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- Transfer documentation and the consolidated balance of sheet;
c) Copies of the acts on the asset valuation according to the market prices, performed
by licensed organizations;
d) Copies of the notices on the reorganization of the joint stock companies published in
two consecutive editions of the Official Monitor of the Republic of Moldova;
e) Confirmation of the lack, fulfilment or guarantees regarding the requests of the
company creditors;
f) The assessment report on the securities called for redemption by shareholders and
the confirmation of the completion of the redemption;
g) Copies of the constitution of the ten joint stock companies involved in the
reorganization with the amendments performed before the decision to reorganize;
h) The document certifying compliance with art. 11 par. (3) of Law no. 1265 of
05.10.2000 on state registration of enterprises and organizations;
i) The financial statements of the ten joint stock companies subject to reorganization,
performed upon the last management before the adopted decision on the
reorganization;
j) The evidence on the information disclosure regarding the events and actions
affecting the economic-financial activity of the issuer, compliant with the
requirements set out in art. 54 of the Law on Securities Market;
k) Copies of certificates of state registration of the companies and excerpts from the
state Register of enterprises and organizations that certify the legal address of the
reorganizing companies;
l) The original certificates of the state registration of securities of the absorbed
companies.
3.2.1.5 Registration of the reorganization in the State Register of enterprises and
organizations
The registration of the reorganization through merger (absorption) in the State Register of
enterprises and organizations will take place after the creditor claims have been satisfied
or by providing guarantees accepted by the creditors, the controls performed by the tax
authorities, obtainment of the authorization for the reorganization from the National
Commission for the Financial Market, but not earlier than three months since the last
notice on the reorganization has been published in the Official Monitor of the Republic of
Moldova.
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3.2.1.6 Making entries in the state register of securities relating to the
reorganization
The registration of the increase in the registered capital of JSC "Tracom" - the acquiring
company through the additional issue of shares for the purpose of converting the shares
held by the shareholders of the absorbed companies shall be registered at the National
Commission of the Financial Market together with the authorization for the reorganization
of JSC "Tracom".
The reorganization of the joint stock companies through merger will require the
establishment of two general meeting of the shareholders, each of which will be held for
two separate purposes.
I Shareholders meeting:
Adoption of decisions related to the reorganization by each of the ten joint stock
companies involved in reorganization;
Empowerment of the executive body in preparing all the necessary documents and
following the legal procedures described previously for the reorganization through
merger of the companies.
II Shareholders meeting
There shall be adopted the decision on the approval of the:
Merger agreement;
Transfer documentation;
Proportion conversions (exchange) of shares in circulation in the supplementary
issued shares of the absorbing company;
Consolidated balance sheet;
Increase of the registered capital, if appropriate, through the supplementary issue
with the purpose of conversion (exchange) of the shares if companies to be
absorbed and the date of the subscribers list shall be drawn up;
Amendments and additions to the statute or the statute in the new drawing of JSC
„Tracom”.
In the following it is graphically shown the schematic representation of the reorganization
period required for the completion of the merger procedure (absorption) of the ten
companies. On average approx. 110 days are needed to complete the successful
reorganization described in this chapter (Fig. 23).
Table 35 Stages of the merger process and the implementation term
Days 10 20 30 40 50 60 70 80 90 100 110
1 Drafting the documents necessary for the reorganization by merger
2 Performing the patrimony evaluation to determine the proportion of share conversion
3 Convening the general meetings of shareholders 4 Adopting the decision on the adoption through merger
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5 Disclosure of information on the reorganization through merger 6 Creditor claims wording and the enforcement guarantees
7 Reorganization registration with the State Register of enterprises and organizations
8 Reorganization registration with the State Register of Securities
9 Reserved term for the reorganization process
Table 36 Assessment of the benefits and disadvantages in the creation of the industrial park through merger (absorption)
Establishment of the industrial park though merger of companies (absorption) Benefits Disadvantages
Consolidation of the companies’ assets
Consolidation of blocks of shares and the possibility to privatize the consolidated block
The alienation of assets towards the residents shall be performed through a contest according to Law no. 121 of 04.05.2007 regarding the administration and deetatization of public property. In this situation the industrial enterprises will need to pass the contest to obtain the resident status and subsequently the tender for the purchase of assets. The companies operating within the IP are not guaranteed that they will win the tender for purchase of assets.
Flexibility of asset allocation towards the future residents.
The possibility to transfer the assets either as a whole, or each asset separately or of a part of an asset, depending on market circumstances and the availability of residents
The consolidated legal stability of the park represents the most attractive aspect for potential investors, especially foreign.
The optimal option for the establishment of the industrial park by one strategic investor that could subsequently lease the production facilities or start his own production activity using the entire patrimony of the park
JSC "Tracom" as the absorbing company shall obtain ownership of all existing patrimony - ideal situation for the management company of the industrial park.
Liquidation of the nine joint stock companies which do not lead a coherent operational activity, thus generating losses.
Either of the absorbed companies shall be able to choose whether to continue their economic activities within JSC "Tracom" - as separate departments.
3.2.2 OPINIONS The reorganization of the joint stock companies through merger, namely absorption shows
to be an optimal solution for the creation of the industrial park on the territory of former
"Production Complex Tractor Plant in Chisinau". However, this option calls for
amendments to the Law on the administration and deetatization of public property no. 121
of 04.05.2007. The amendments shall provide the park residents the possibility to procure
the company assets, where the state holds the controlling quota in the registered capital,
without passing a competition, since they have already passed the contest on becoming a
park resident. (Art. 19, Law no. 182 of 15.07.2010 on industrial parks).
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3.3 THE ESTABLISHMENT OF THE INDUSTRIAL PARK THROUGH THE LEASE OF ASSETS OF
THE TEN JOINT STOCK COMPANIES CREATED ON THE TERRITORY OF FORMER
"PRODUCTION COMPLEX TRACTOR PLANT IN CHISINAU", FOLLOWING THE
PRIVATIZATION PROGRAM IN 1995 AND 1999 One of the arrangements to transfer the assets located within the territory of former
Production Complex "Tractor Plant in Chisinau" to the future residents of the industrial
park is the conclusion of a lease agreement.
The lease arrangement in this case can be applied using two different scenarios:
a) Lease of the assets of the joint stock companies;
b) Lease of the assets of the joint stock companies, where they are qualified as unused
assets of the companies.
3.3.1 LEASE OF THE ASSETS OF THE JOINT STOCK COMPANIES
A lease agreement is an arrangement where the ten joint stock companies (the lessor)
transfers his owned property for use and temporary ownership to the management
company (the lessee) who undertakes to pay the rent.
The assets of the ten joint stock companies on the territory of former "Production Complex
Tractor Plant in Chisinau" (hereinafter joint stock companies) may constitute subjects to
lease by the separate characteristics of each asset. This implies that the lease agreement
shall provide a separate chapter where each asset shall be mentioned separately or there
can be concluded several lease agreements for each asset individually.
In order to perform a transaction to transfer the assets into use or ownership of the ten
joint stock companies to the future residents of the park, there will be initiated legal
relationships of lease and sublease.
The existence of ten separate joint stock companies owning the assets of the former
"Production Complex Tractor Plant in Chisinau" shall impose the use of an intermediary
company or a newly established one or one of the existing ten companies that will act in
the capacity of a lessor in relation to the ten joint stock companies. At the same time, the
company shall act in the capacity of lessor in its relation to the future residents of the
industrial park. The graphical representation of these relationships is shown in the figure
below:
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Figure 25: Graphical representation of the lease transaction of the assets upon the establishment of the industrial park
Or
The ideal option in this case would be the designation of JSC "Tracom" as the management
company of the industrial park, since JSC "Tracom" is the owner of all the infrastructure
objects holding also the right to use the state-owned plot of land adjacent to the future
industrial park.
This transaction will enable the management company of the industrial park to lease all
assets of the ten joint stock companies and later sublease them according to its own
preferences. Thus, the management company shall be able to either lease the assets as a
Newly established commercial
company, managing company of
the industrial park
Asset lease
1. " Tracom”” JSC 2. " Bicotra " JSC 3. " Aralit " JSC 4. "Radiator" JSC 5. " Reupes " JSC 6. "Zidarul - SV" JSC 7. " Presudor " JSC 8. " Forjacom " JSC 9. " Dotarcom " JSC 10. " Mapasauto " JSC
1
Asset
Sublease 2
Industrial
Park
residents
JSC Tracom as Management
Company of the IP
Asset lease 1
Asset
sublease 2
IP residents
1 . " Bicotra " JSC 2 . " Aralit " JSC 3 . "Radiator" JSC 4 . " Reupes " JSC 5 . "Zidarul - SV" JSC 6 . " Presudor " JSC 7 . " Forjacom " JSC 8 . " Dotarcom " JSC 9 . " Mapasauto " JSC
80
whole, or separately, or lease part of an asset, depending on the market circumstances and
the availability of residents.
In practice the lease/sublease relations will allow the use and possession of the existing
assets within the respective limits without the need for legal reorganization of the ten
joint-stock companies (through liquidation, sale, merger, etc.).
The lease of the assets of the ten joint stock companies falls under the provisions of large
scale transactions. Compliant with the laws in force (law no. 1134 of 02.04.1997 on the
joint stock companies), large scale transactions are carried out by the decision of the joint
stock company board, adopted by unanimity by all council members, provided that the
goods subject to transaction have a market value of more than 25% of the company's
assets, but not exceeding their 50% value, as per the last balance sheet.
The 50% maximum proportion of the assets market value is not representative as the
establishment of the industrial park entails the lease of the entire patrimony. Moreover, the
imposed unanimity vote may obstruct the transaction if the elected members of the
minority shareholders refuse or oppose the lease implementation.
In this situation each of the joint stock companies shall convene the General Meeting of
shareholders who will decide upon:
The decision on the conclusion regarding the large scale transaction on the lease
and subsequent sublease of all the assets of the joint stock companies;
Changing where necessary the priority directions of the company activity to confirm
the asset lease as the main source of income.
Decisions of the general meeting of shareholders shall be taken by two-thirds of the votes
represented, which allow JSC Bicotra, where the state owns only 61.13% of the company's
share capital, to reject the lease transactions. In this case JSC Bicotra will become a resident
of the industrial park.
As mentioned previously, one of the prerequisites to signing the tenancy is the valuation of
the asset for rent. Determination of the leased asset includes the obligation of the
management company of the industrial park to transfer the assets without material defects.
The establishment of the industrial park entails significant investments for the renovation
of the technical and production infrastructure. Such investments are expected to be
performed by the future residents of the park, aspect required to be reflected in the lease
agreement.
The management company of the industrial park is obliged to transfer the assets in a
condition propitious for their purpose use and preserving their initial state for the entire
period of the lease. This is a mandatory rule and the parties cannot agree otherwise.
In the event of any material flaws, such as the need for repairs during the lease period,
residents may require:
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Rent reduction, or
Compensation of caused damages.
In order to avoid any disputes in this respect and establish clear conditions for the use of
assets by the residents, there will be necessary to include clauses that ensure legal stability
of the lease.
The management company of the industrial park shall be exempted from liability for the
defects in the assets, i.e. their current state in need for repair whether the clauses will be
stipulated in the contract by mutual agreement of the parties. Moreover, the lease
agreement will include a description of the assets' condition upon their moment of lease,
specifying existing material defects.
The establishment of lease may be of interest to the future residents as long as the civil
code in force provides equal protection of the sublease rights. Besides their direct
relationships with the management company of the industrial park, the future residents
are entitled to a series of rights towards the ten joint stock companies, in particular the
right to seek enforcement of the companies' contractual obligations, since the residents are
not part of the lease agreement.
This right arises from the fact that the sublease agreement was concluded with the consent
of the ten joint stock companies. The contents of the law shows that the industrial park
resident is entitled to seek the enforcement of the contractual obligation on behalf of the
ten joint stock companies upon the occurrence of the following conditions:
Asset owners do not honour their contractual obligations;
If the contractual interests of the residents in the industrial park (sublease) are
affected.
Another important aspect of the lease/sublease refers to the rights and in particular, the
obligations related to the capital repairs of the leased assets.
The Civil Code lays down an enacting norm on the conduct of repairs, including as a result
of pressing needs. The management company of the industrial park is bound to do all the
repairs, unless otherwise stipulated in the law or the agreement. For these reasons, it is
important that the lease agreement between the management company and the industrial
park and the prospective residents includes clauses that provide the obligation of the
residents to bear the cost of repairs.
3.3.2 THE EFFECTS OF CHANGING THE OWNER OF THE LEASED ESTATE The lawful establishment of the lease/sublease endows the asset owners, i.e. the ten joint
stock companies, with the right to alienate the respective leased assets.
These legal provisions provide freedom to the ten joint stock companies on the alienation
of the existing assets, even if these assets are covered by lease/sublease agreements. The
legal situation described provides a flexible legal status for the joint stock companies to use
its assets. In its inception phase, the industrial park can be started by leasing the
production assets to the future residents. The second phase may imply the exercise of the
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owner right on behalf of the ten joint stock companies to sell their assets in subsequent
periods. Such flexibility is confirmed by the ability to identify a strategic investor, which
could take over all the patrimony of the park in an advanced stage, when the industrial
park already exists and demonstrates its economic viability. In this case, the industrial park
property will be worth significantly more compared to the initial situation, when the
industrial park was created.
Upon the decision to alienate the industrial park assets after the lease agreement
termination, the agreement retains its legal value, in a way guaranteeing the full rights of
the industrial park residents.
The termination of the lease agreement on the initiative of the management company of the
industrial park:
The resident does not use the leased asset following its purpose of use or in
accordance with the contractual provisions.
Intentional or negligent damage to the leased assets or creating a real danger for
such deterioration. Applying the rule to the situation of the industrial park, the
object of the contract is in a deplorable state, in a real danger to crumble and
therefore requires clear and urgent capital repair, which contractually must by
performed by the resident. The resident consciously and negligently fails to honor
this obligation.
Failure to pay the rent on time is also a reason to early lease termination.
There may be provided other reasons for the termination of the lease by mutual
agreement of the parties initiated by the management company of the industrial
park.
3.3.3 THE LEGAL CONSEQUENCES OF IMPROVEMENT OF THE LEASED ASSETS
This legal aspect is of great importance since the leased assets will require repairs on
behalf of the residents and on the other hand, the residents shall benefit from a range of
incentives. From the legal point of view, it will be necessary to establish a balanced relation
between the amount of investments incurred by the residents and the value of these
incentives provided to residents by the state.
Upon the termination of the contractual relationships, the parties are to decide on the fate
of the improvements in the leased assets made during the lease. The law follows two
categories of improvements: made by permission of the management company of the
industrial park and without its permission.
With regard to the improvements made with the consent of the management company of
the industrial park that can be separated without damaging the asset, the Civil Code
stipulates a general rule: these improvements may be separated from the asset in favour of
the resident or compensated by the management company of the industrial park.
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Other consequences occur if improvements made with the permission of the
administrative company of the industrial park cannot be separated without damaging the
property.
In this situation the resident is only entitled to request the administrative company of the
industrial park to compensate the value of these improvements.
It is important to stress that the rules on the improvements made with the consent of the
administrative company of the industrial park bear an enacting character and therefore
there may be constituted other arrangements regarding the fate of these improvements.
E.g. they become property of the administrative company of the industrial park without its
obligation to compensate the residents with the value of the improvements.
3.3.4 THE LEASE OF ASSETS WHERE THEY ARE QUALIFIED AS UNUSED ASSETS OF THE
ENTERPRISES
This scenario is characteristic of all the aforementioned legal provisions on the lease
agreement, with minor legal derogations concerning the legal status of the assets.
These derogations/differences are stipulated in the Government Decision Nr. 483 of
29.03.2008 for the approval of procedures for the lease of unused assets and Government
Decision no. 480 of 28.03.2008 on the approval of the Regulations on the procedure of
determination and trade of the unused assets of the companies.
Criteria used in determining the unused asset in the company activity:
Long-term non-use of the assets in the technological process or according to their
direct purpose (more than a year for the fixed assets and 3 years for the immovable
assets);
Unprofitable use of assets related to the changes in operating conditions;
Replacement of assets with more performing ones;
Long-term lack of production volumes and orders for some assets (more than 1 year
for the fixed movable assets and 3 years for the immovable ones);
Surplus of assets and lack of personnel for their use and exploitation;
Ineffectiveness of continued use of the assets because of their advanced state of
physical and/or moral obsolescence;
Thus, the assets of former Production Complex "Tractor Plant in Chisinau" ca be effortlessly
qualified legally as unused assets of the companies.
The unused goods of the companies with wholly or majority owned capital can be leased
only with the consent of the authority managing the block of shares or the publicly-owned
share in the registered capital of the respective company.
This provision is similar to that for the lease agreements upon the conduct of large scale
transactions. Accordingly, the exploitation of the unused goods does not represent an
advantage. Moreover, the institution of law incorporates some restrictive rules, such as
84
non-admittance of lease with right of redemption (financial rental, financial leasing) of the
unused assets (Law no. 121 of 04.05.2007 on the administration and deetatization of public
property).
In this context, the assets of the ten companies cannot be evaluated as unused assets, since
they can be given into lease in their capacity of production assets towards the future
industrial park residents.
Table 37: Estimating the benefits and disadvantages in creating the industrial park by renting the assets of the joint stock companies
Lease of assets of the ten joint stock companies Advantages Disadvantage
Short term for carrying out the transaction – up to 3 months
Possibility to consolidate the 10 joint stock companies, without recourse to their reorganization
Impossibility to liquidate the 10 joint stock companies (tenants), though they can be reorganized through other means, such as merger
Flexible asset allocation to the future residents Possibility of renting the assets as a whole, or their separate lease or the partial lease of an asset, depending on the market circumstances and availability of residents.
Impossibility to alienate the assets to the future residents, which is a key impediment to the creation of the industrial park.
The duration of the lease/sublease agreement may last for 30 years
Impossibility to benefit from the 0,3 tariff reduction on the annual payment for the lease of the publicly-owned land
Realizing the capital investments for renovating the assets of the industrial park at the expense of the residents
3.3.5 OPINIONS
The procedure of lease regulates and guarantees a variety of rights for both the
administrative company of the industrial park and for the future residents, regarding the
use, possession and exploitation of the improved leased assets, strengthening of the
existing assets, maintaining lease relationships with the park residents, also upon the
alienation these assets, etc.
However, the lease can not constitute a separate solution, but as an integral part of the
solution of fiduciary management or merger, where the lease will be used as a tool in
renting the existing assets to the future residents of the industrial park.
3.4 THE ESTABLISHMENT OF AN INDUSTRIAL PARK BY SETTING UP A NEW JOINT STOCK
COMPANY WHOSE REGISTERED CAPITAL SHALL BE FORMED BY THE CONTRIBUTIONS
OF THE 10 JOINT STOCK COMPANIES CREATED ON THE TERRITORY OF FORMER
PRODUCTION COMPLEX "TRACTOR PLANT IN CHISINAU", FOLLOWING THE
PRIVATIZATION PROGRAM IN 1995 AND 1999 This solution recommends itself as a classic case of establishing a joint stock company
(hereinafter referred to as company), whose founders will be the ten joint stock companies
- legal persons.
85
The establishment shall imply:
Conclusion of a company contract (the decision on setting-up a company);
Subscription for shares issued of the ten joint stock companies and
Holding a constituent meeting.
As the company shall be established by the contribution of the ten joint stock companies in
a non-monetary form by transferring their patrimony in the company's capital, the
contribution requires an assessment compliant with the National Commission of Financial
Market Decision on the approval of the Regulation on the securities and related assets
assessment, no. 36/9 of 27.12.2001.
The patrimony of the founding joint stock companies as payment for the shares shall be
transferred by means of a handover/reception act by the executive body of each founder
within one month of the state registration date of the company.
This tool has the same purpose - to consolidate the assets of the 10 joint stock companies.
The setting-up of a new joint stock company whose registered capital shall be formed from
the contribution of the 10 joint stock companies shall change the legal status of the
patrimony ownership. The state and the remaining minority shareholders will hold an
indirect equity quota in the new company without the right to dispose of these assets;
The newly established joint stock company will enjoy all the owner's legal powers in
relation to the acquired patrimony;
The legal status of the assets transferred in the capital of the new joint stock
company will not fall under the provisions of Law on the management and
deetatization of public property no. 121 of 04.05.2007, as property of the companies
where the state holds the controlling interest in the registered capital. The assets
will get the legal regime of a private property without any restrictions on the civil
circuit.
The property transferred in the capital of the newly created joint stock company
could be alienated, leased, given under fiduciary management, upon the company's
own decision;
The state will retain all the levers of control over the new company by delegating in
its council representatives of the ten companies in which the state holds the
controlling interest;
The levers of control laid down at the previous hypothesis will be set out in the
newly created joint stock company statute, where the main clause provide in this
regard the right to delegate representatives in the new company council based on
the ten joint-stock companies voting, where the State holds the ex officio control,
and not by the provisions of the managers of these companies.
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In the following it is represented the graphical realization of the transaction on the set up
of a new joint stock company whose registered capital shall be formed on the account of
the 10 joint stock companies created on the territory of former Production Complex
"Tractor Plant in Chisinau":
Figure 26: Establishment of a new joint stock company whose registered capital shall be formed through the contributions of the 10 joint stock companies on the territory of former
Production Complex „Tractor Plant in Chisinau"
Here it is required to define some of the legal consequences regarding the transaction
discussed:
The assets of the new joint stock company shall comprise the assets transferred in
its registered capital on behalf of the ten joint stock founding companies;
The newly established joint stock company becomes the owner of the received
assets and shall be able to alienate the assets towards the future residents;
By alienating its own assets the newly established joint stock company will diminish
its registered capital by the amount of the alienated assets;
The values of the net assets of the company cannot be lower the size of its registered
capital (art. 39, p. 5, Law no. 1134 of 02.04.1997 on the joint stock companies).
Along with the alienation of its assets to the residents, the net asset value will also
see a decrease. Such non-corresponding values of the registered capital with the
asset net value entitles any shareholder to the right to require a reduction of the
registered capital in two consecutive financial years (except the first financial year).
Thus, the new joint stock company will be able to alienate its assets towards the
future residents during a period of three years;
The company registered capital may not be less than 20 000 lei (art. 40, p.2 and
art.45 p.2, Law 1134 of 02.04.1997 on joint stock companies). This provision shall
limit the alienation of the newly created company's assets by the time the assets
JSC Management
Company
Asset transfer
in the registered
capital
IP Residents
Asset Sale
Reducing the registered
capital on the account of the
assets sold to the residents
1. " Tracom JSC
" 2. " Bicotra " JSC
3. " Aralit " JSC 4. "Radiator" JSC 5. " Reupes " JSC 6. "Zidarul - SV" JSC 7. " Presudor " JSC 8. " Forjacom " JSC 9. " Dotarcom " JSC 10. " Mapasauto " JSC
87
received in its registered capital from the ten founding joint stock companies will be
worth at least 20 000 lei.
Steps to set up the new joint stock company whose registered capital shall be formed by
the contributions of the 10 joint stock companies created on the territory of former
Production Complex "Tractor Plant in Chisinau":
1. Holding general meetings of shareholders by every joint stock company where it
will be decided (by adopting the positive vote with two thirds of the shareholders
present at the meeting):
Acceptance on behalf of the joint stock companies to set up a new joint stock
company by contributing to its registered capital with the assets owned by
the ten joint stock companies;
Authorizing the founding joint stock company councils to prepare all the
necessary documentation with regard to the establishment of the new
company and requiring the executive body to follow the related orders;
Authorizing the Councils of the founding joint stock companies to approve
the market value of the non-monetary contribution provided by the audit
organization or another specialized organization which will perform the
asset assessment to be submitted in the registered capital of the future joint
stock company;
2. Carrying out a market assessment of the founding joint stock companies assets
which will be submitted as contribution in the registered capital of the new joint
stock company.
3. Holding general meetings of shareholders by every joint stock company where it
will be decided (by adopting the positive vote with two thirds of the shareholders
present at the meeting):
Approving the list of goods to be transferred in the registered capital of the
newly created joint stock company;
Authorizing the Councils of every joint stock company with the exclusive
right to delegate its members as representatives of the joint stock companies
in the general meeting of shareholders in the future established joint stock
companies and shall hold the exclusive status of the founders’ representative
of the newly established company.
4. The establishment and registration of the new joint stock company already with the
participation of the ten companies councils holding the representative status of the
new company founders.
Similar to the lease and fiduciary management, the transfer of the patrimony in the
registered capital of another commercial company is subject to the provisions concerning
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the large-scale transactions. Consequently, the carrying-out of this transaction shall be
appointed by the ten general meetings of all the joint stock companies concerned where
there will be necessary to adopt the positive vote of 2/3 of the shareholders present at the
meeting.
Table 38: Analysis of benefits and drawbacks of establishing a new joint stock company whose
registered capital shall be formed by the contributions of the 10 joint stock companies
Establishment of a new joint stock company whose registered capital shall be formed by the contributions of the ten joint stock companies Benefits Drawbacks
Short-term in performing the transaction of up to 3 months
Avoidance of the Law on the administration and deetatization of public property no. 121 of 04.05.2007 upon the alienation of the ten joint stock companies assets, since the transfer of these companies' assets implies also the transfer of their right to asset ownership, case where the application of the law provisions mentioned becomes impossible.
The possibility to consolidate the assets of the ten joint stock companies without recourse to their reorganization
Inequality of the net asset value with the registered capital value. The registered capital value will permanently be lower the net asset value, since the newly established company will sell the assets to the IP residents.
The new company shall hold the ownership of the received property as well as the right to decide on it.
The State and the private minority shareholders will own only indirect shares in the registered capital of the newly created joint stock company, as the shareholders of this company will be the ten companies - legal persons.
Possibility of maintain a rigid state control, although the state shall hold an indirect quota in the newly established joint stock company
The duration of the lease/sublease agreement can last for 30 years
Performing the capital investments for the renovation of the park assets at the expense of the residents
3.4.1 OPINIONS
The establishment of the industrial park through the transfer of the existing patrimony of
the ten joint stock companies in the registered capital of the administrative company could
constitute the appropriate solution for the park establishment at the moment. It should be
noticed, however, that the concerned solution is to be carried out provided that the
solution described in the chapter on "Steps to create the industrial park on the platform
of former "Production Complex Tractor Plant in Chisinau"" proves impossible to
implement.
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3.5 THE ESTABLISHMENT OF THE INDUSTRIAL PARK BY SELLING THE SHARE BLOCKS TO
PRIVATE INVESTORS, STATE- OWNED STAKES IN THE 10 JOINT STOCK COMPANIES
CREATED ON THE TERRITORY OF FORMER "PRODUCTION COMPLEX TRACTOR
PLANT IN CHISINAU", FOLLOWING THE PRIVATIZATION PROGRAM IN 1995 AND
1999 The state holds the controlling interest in all the ten companies, created after the 1995 and
1997 privatization program of former "Production Complex Tractor Plant in Chisinau".
State's quota in the joint stock capital of these companies is presented as follows in the
Table 39:
Table 39: Estimating the level of deetatization of the companies on the territory of Tractor Plant in Chisinau
No. Company name
Registered capital Price per share
State share
No. of shares thousand lei no. of shares thousand lei %
1 "Tracom” JSC 2 274 887 52 322,40 23 2 114 024 48 622,55 92,93
2 "Bicotra" JSC 31 635 632,70 20 19 340 386,80 61,13
3 "Aralit" JSC 104 753 2 199,81 21 77 396 1 625,32 73,88
4 "Radiator" JSC 45 723 2 148,98 47 32 169 1 511,94 70,36
5 "Reupes" JSC 139 873 2 098,10 15 108 064 1 620,96 77,26
6 "Zidarul-SV" JSC 259 090 3 627,26 14 234 170 3 278,38 90,38
7 "Presudor" JSC 377 667 8 686,35 23 341 713 7 859,40 90,48
8 "Forjacom" JSC 326 817 7 516,81 23 310 167 7 133,84 94,91
9 "Dotarcom" JSC 50 156 1 153,59 23 33 604 772,89 67,00
10 "Mapasauto" JSC 79 490 1 828,28 23 65 410 1 504,43 82,29
Total 82 214,29 3 336 057 74 316,51
The key point will be to identify the investor or investors to take over these companies and
become residents of the industrial park.
In the case of a single strategic investor the sale of the share blocks shall be made
compliant with the provision set out in the Law no. 121 of 04.05.2007 on the
administration and deetatization of public property.
The nominal value of the state-owned shares is about 74 million lei. In addition to the price
paid upon the shares purchased, the investor will guarantee additional investments
required for the establishment of the industrial park.
The normative price, which in effect is a low price for the land, will be a solid premise for
attracting investors.
The reduction in the investment costs on the land purchase will allow the investor to make
the necessary investments for the establishment of the industrial park, with the
infrastructure and production factors necessary for the deployment of the economic
activity of the residents of the industrial park.
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The source of income of the investor shall comprise the profits from the lease of the
production facilities of the industrial park, services and alienation of the land, after the
industrial park term has expired.
At the time of the transfer of the adjacent land to the investor, the state shall necessarily
impose conditions on the development prospects of the plot of land after the term for the
industrial park has expired. This perspective would correlate with the general
development plan of Chisinau. At this point the state is to define his strategies and views on
the development of the land, which, in turn, must be accepted by the investor.
The establishment of the industrial park through the transaction referred to shall require
identification and negotiation procedures with the strategic investor. These activities are
established as a subsequent step to the feasibility study on the development of the
industrial park.
In terms of economic and social impact, the development of the industrial park by a
strategic investor shall have a maximum possible influence on the exploitation of the area
and of the existing production assets.
Table 40: The analysis of benefits and drawbacks on the establishment of the industrial park by selling the the state's share block to private investors.
Establishment of the industrial park by selling the state's share to a private investor Benefits Drawbacks
The consolidation of assets and their sale prior to their complete obsolescence which will substantially diminish its present value
Uncertainty in identifying a strategic investor
Optimum conditions for a strategic investor who shall have legal coverage and optimum guarantees for the establishment and functioning of the industrial park
Additional efforts, including financial, on the identification of a strategic investor and the accomplishment of the transaction
Attraction of direct investments by selling the shares blocks and implementation of the investment plan by the investor
Can be considered as a step in establishing the industrial park rather than an actual solution
The development of the plot of land according to the general development plan of the municipality following the expiration of the industrial park
The strategic investor may use the industrial park for his own production activity or create an industrial conglomerate providing the potential residents with productions facilities
The sale of the share blocks to private investors held by the state in the 10 joint stock
companies created on the territory of former Production Complex "Tractor Plant in
Chisinau", following the privatization program in 1995 and 1999, is estimated as a step in
the establishment of the industrial park and not as an actual solution. Thus, this instrument
can be used upon the sale of the assets to the potential buyers - residents of the industrial
park and only later shall be established the industrial park and its management company.
The companies whose sale of the share blocks failed shall be absorbed by the IP
management company – JSC „Tracom”.
91
3.6 STEPS IN THE ESTABLISHMENT OF THE INDUSTRIAL PARK ON THE PLATFORM OF
FORMER PRODUCTION COMPLEX „TRACTOR PLANT IN CHISINAU” The establishment of the industrial park on the platform of former Production Complex
"Tractor Plant in Chisinau" implies undergoing several strategic stages. These stages are
determined by the existing economic and zonal circumstances. At present the territory of
former Production Complex "Tractor Plant in Chisinau" can be conventionally separated
into two separate areas, as shown in the figures below.
Such delimitation is based on the concept of the types of industrial companies - prospective
residents of the industrial park. The types of the future residents of the park may vary but,
on average, the characteristics of small and medium enterprises indicate the engagement of
a cca 5000 m2 area.
Figure 27: Estimate on the topology of the companies to contribute to the establishment of the industrial park on the platform of former Production Complex "Tractor Plant in Chisinau"
On the other hand, the option of attracting a single strategic investor is not overruled. A
strategic investor may develop the territory of the industrial park under his own
production needs. The type of the strategic investor considered in the present analysis
involves a large-scale production company, with special organizational needs and
allocation of production activities, substantive energy consumption and for these reasons,
shall need to develop the territory under its specific production needs, such as companies
in the machine-building industry.
Another determinant factor in the conventional delimitation of the territory of the future
industrial park into two separate areas is the state of the production facilities, including the
existing buildings.
Types of resident companies in the industrial park
Small and medium
enterprises requiring
average surfaces of 5000 m2.
Strategic investor - large
manufacturing enterprise
with special needs
organization and allocation
of production activities, with
substantially high energy
consumption, such as
enterprises in the machine
building industry
Zone no. 1 Zone no. 2
92
The history of former Production Complex "Tractor Plant in Chisinau" has seen two
construction phases - construction performed in the 1930-1940 years and during 1970-
1980.
The constructions performed during '30-40s are in an advanced state of decay. According
the diagram shown, most of them are located in area no. 1. On the other hand, the area and
its buildings are suitable for their transfer to the small and medium enterprises. Such type
of enterprises usually requires an average of 5000m2 of production area. Despite their
deplorable condition, there are known success stories where private companies have taken
over some of these premises and established their own production activities by performing
renovations. The diagram indicates these premises in shaded blue. Furthermore, 12
companies expressed immediate interest in taking over such premises when the industrial
park is created.
Area no. 2 is intended for a strategic investor, a large production enterprise, which will
develop this land according to its own production needs.
93
Figure 28: Estimation of the territorial distribution of the companies to contribute at the establishment of the industrial park on the platform of former Production Complex "Tractor Plant in Chisinau"
94
Steps to create the industrial park on the platform of former Production Complex
"Tractor Plant in Chisinau"9
Step 1. Sale through investment tender of the publicly-held block of shares
This stage involves the sale of the share blocks owned by the state in the ten joint stock
companies, excepting JSC "Tracom". The sale of the share blocks shall be carried out
compliant with the provisions set out in the Law on the administration and deetatization of
public property no 121 of 04.05.2007, through an investment tender for the publicly-held
share block.
The sale of the share blocks owned by the state in the ten joint stock companies aims at
transferring the assets of these companies to the future residents of the park into private
property.
At the same time, the state, in its capacity of the controlling shareholder shall be able to
turn its shares to profit and also transfer these assets to producton companies - future
residents of the park.
This step in the establishment of the industrial park is defined as an 'attempt' since the sale
of the share blocks owned by the state and the assessment of the potential residents of the
park appears difficult to forecast.
In addition, the difficulties in the sale of the state-owned share blocks in these commercial
companies are subject to the following factors:
The prospective residents shall incur the cost for both the purchase of the share
blocks and the investment expenses related to the renovation of the acquired
property. The amount of the financial effort to establish a business within the
industrial park shall thus be double and may diminish the attractiveness of
becoming a resident of the industrial park;
Residents of the industrial park in the impossibility of selecting the necessary
assets. Refers to the cases where a prospective resident will require the possession
and use of a certain premise without having to purchase the entire patrimony of the
joint stock company. Or the need of using and possessing several premises -
property of several joint stock companies, being in the position of buying more
share blocks.
As previously mentioned, the described step bears an attempting character. The non-
purchased companies will form a new joint stock company whose capital will be formed
from the contribution of these joint stock companies and which will be assigned the role of
the administrative company of the park.
9 See Annex: Action Plan for the establishment of the industrial park on the platform of former Production Complex "Tractor Plant in Chisinau"
95
Step 2. Granting JSC „Tracom” the Industrial Park title
Step 1 and 2 will be implemented simultaneously.
Step 3. Undertaking actions to promote the new industrial park
With reference to the identification of a strategic investor.
The identification process of the strategic investor can be achieved following a
consolidated effort of the all specialized divisions and subdivisions, including the sector
agencies of the Ministry of Economy of the Republic of Moldova.
The implementation of this step requires the establishment of a deadline date. Obviously,
zone no. 2 cannot continue unexploited for an indefinite period of time. Thus, it is
suggested a 24 months period of time since the establishment of the industrial park for the
identification of the strategic investor. In the event that the deadline will not be met and
there will be no objective basis for the extension of this period, it is recommended the
exploitation of the zone by several undertakings. Accordingly, the territory will be
submitted to a number of companies, possibly of the type described, small and medium
enterprises, which require production surfaces of an average of 5000m2, deviating from
the initial strategy where the zone was exploited by a single industrial enterprise.
Step 4. The opportunity of creating a free economic zone on the territory of the
industrial park
The opportunity to create a free economic zone on the territory of the industrial park will
be realized according to the provisions of Law on free economic zones no. 440 of
27.07.2001.
The newly established park or part of its territory can obtain the subzone statute of the
Free Industrial Zone "Expo-Business-Chisinau", depending on the identified
investors/residents, following the activities performed in Steps 1-3. The activity in the free
economic zone "Expo-Business-Chisinau", including the granted incentives, fall under the
provisions of Law 1 on free economic zones no. 440 of 27.07.200.
The opportunity to create the "Expo-Business-Chisinau" free zone will be mentioned in
Step 1, in order to enhance the attractiveness on the privatization of the state-owned
shares in the nine joint stock companies (except JSC "Tracom").
The free industrial subzone „Expo-Business-Chisinau” shall comprise a strictly delimited
area within the industrial park, where the local and foreign investors will be allowed, on
preferential terms, types of entrepreneurial activity. This raises the main hypothesis, that
the establishment of a free economic zone will be subject to the availability of the residents
whose production will be destined to export. This fact can be determined upon the
assignment of the park resident status and based on the investment and development plans
provided by these companies.
96
The free economic zone shall occupy only some parts of the industrial park territory, where
its residents will conduct their entrepreneurial activities. The area can be both established
in zone no. 1 and zone no. 2.
The setting-up of a free economic zone can constitute a significant advantage especially in
the process of identifying a strategic investor for the development of the territory in zone
no. 1 of the park.
Step 5. Merging by absorption the joint stock companies the share blocks privatization
of which did not succeed
The completion of Step 1 will determine which of the ten joint stock companies did not
succeed in selling their state-owned share blocks. These companies will be reorganized
through merger by absorption by the IP management company, JSC "Tracom".
In order to perform this transaction the companies whose blocks of shares had not been
privatized will be excluded from the list of assets subject to privatization, compliant with
the Law on the administration and deetatization of public property no. 121 of 04.05.2007.
97
4 THE ESTIMATED VALUE OF THE INVESTMENT REQUIRED FOR
THE ESTABLISHMENT OF THE INDUSTRIAL PARK The investment amount is conditioned by the de facto existence of the park, that is, it is not
the case of a “green field” project. The industrial park is proposed to be located on the basis
of the patrimony of former "Production Complex Tractor Plant in Chisinau", which implies
the consideration of the hypotheses presented below.
The investment plan for the proposed industrial park will be consisted of two chapters. The
first chapter refers to the amount of the capital investments intended for the technical and
production infrastructure renovation to be connected to the industrial park. The second
chapter will include the investment amount intended for the construction/renovation of
the production premises, transferred to the future residents of the park.
The first investment chapter is more significant as it relates to the creation of the minimum
conditions for the assignment of the territory under the production activities performed by
the residents, while the second chapter comprises the actual investments made by the
residents in their own businesses.
4.1 ELEMENTS OF THE INVESTMENT PLAN FOR THE RENOVATION OF TECHNICAL AND
PRODUCTION INFRASTRUCTURE TO BE CONNECTED TO THE INDUSTRIAL PARK.
The components of the investment plan were divided by investment object type, see tables
below:
Table 41: Investment plan elements: electrical energy network
Category of investment costs Measure unit Quantity Total, lei
1 Projected annual electricity consumption thousand kWt/h 7000
2 Wire length el. energy m 16569 3 Repair costs 558 943 Total 558 943
Table 42: Investment plan elements: water/sewage network
Category of investment costs Measure unit Quantity Total, lei
1 Artesian wells units 2
2 Length of water/sewage network m 9500
3 Projected annual water consumption m3 12600 4 Materials (pipe diameter 140 mm) m 9500 3 800 000 5 Installation costs x x 1 140 000
Total 4 940 000
Table 43 Investment plan elements: road/railroad network
Category of investment costs Measure unit Quantity Total, lei
1 Auto roads length m 4100 2 Road area in need of repair m2 2000
98
3 Current repair costs x 2000 900 000
6 Railway length m 3200
Railway length in need of repair m 2600 2 870 000 Total 3 770 000
Table 44: Investment plan elements: telecommunications
Category of investment costs Measure unit Total, lei 1 Change of telephone network x 300 000 2 Establishment of internet network м 100 000 Total 400 000
The table below presents the consolidated investment plan of the investment components
listed previously:
Table 45: Consolidated investment plan: renovation of the technical and production infrastructure to be connected to the industrial park
Category of investment costs Lei 1. Electrical energy network 558 943 2. Water/sewage 4 940 000 3. Roads/railroads 3 770 000 4. Telecommunications 400 000 5. Other investment costs 2 900 000 12 568 943
Therefore, the investments necessary for the renovation of the technical and production
infrastructure to be connected to the industrial park is estimated to amount cca 13 million
lei.
The funding source of the investments necessary for the technical and production
renovation shall constitute the sale of the state-owned share blocks in the joint stock
companies located on the territory of former "Production Complex Tractor Plant in
Chisinau".
The next investment phase will comprise the actual investments in the reconstruction of
production premises and the purchase of the necessary equipment. This investment sum
shall be calculated estimative and shall be considered upon the investment project analysis
in the following chapter.
The characteristics of the investment projects for the industrial parks established within
former production plants:
The price for the property and assets of the company in bankruptcy is 30-50% lower
than the market price;
Repair/reconstruction of the buildings requires lower investment amounts as for
the construction of new ones;
99
Construction of a new industrial park could cost the developer an average of 30%-
50% more expensive;
Real and immediate availability of engineering networks, transport communications
and other infrastructure facilities, which in turn, need capital repairs.
Workforce availability, as an "inherited" factor of production of the reorganized
plant.
Table 46: Investments in production infrastructure by the future residents of the industrial park
m2
Repair cost per unit, Lei
Total, Lei
Production area 107 435 2 720 292 223 200 Other buildings, incl. administrative 54 533 2 720 148 329 760 Equipment investments x x 308 387 072
Total 748 940 032
100
5 THE ECONOMIC AND FINANCIAL FORECAST OF THE ACTIVITY
PERFORMED BY THE MANAGEMENT COMPANY The starting point in forecasting the financial results of the management company lies in
defining the hypotheses on financial forecasts:
The period for the financial forecast is of 30 years, i.e. the operating time of the
industrial park;
The services rendered to the residents by the management company were projected
to rise by cca 3.5% per year;
The interest rate considered was set at a 6% rate in euro per year
The refinancing rate of the National Bank in the upcoming 30 years was estimated at
a 5% rate;
Average inflation rate in the upcoming 30 years – 7%.
5.1 OPERATIONAL ACTIVITY OF THE MANAGEMENT COMPANY OF THE INDUSTRIAL
PARK The lease of premises and of the adjacent land to the future residents of the industrial park
was projected as one of the main sources of income.
The lease as a source of income refers to the leases of the administrative spaces, industrial
production spaces and the adjacent land of these spaces.
The price for the housing space was calculated by an algorithm whose result is presented
in Table 47:
Table 47: Price-setting for the rent of the administrative spaces of the IP, Euro
1. Total area, m2 54 533 2. Cost per 1m2 repair of administrative buildings 170 3. Total cost for administrative building repairs 9 270 610 4. Period of usage, months 180 5. Annual interest 6% 6. Investment cost 1m2 per month 2,26 7. Average rental price 1m2 in Chisinau 6,00 8. Rental price 1m2 for residents 3,74
The total investment costs intended for the renovation of the administrative buildings
amounts to about 9.3 million euro. The lease amount was drawn with reference to a 15-
year period of use (180 months).
The investment cost for renovating 1sq.m. of administrative premise was therefore set at
2.26 euro per month.
„9 270 610*(1+6%)^15/180/54 533”
101
„9 270 610*(1+6%)^15” – represents the investment amount in time, given that the IP
resident will currently incur investment costs to renovate the administrative buildings.
Taking into account the fact that the resident may deposit the money in a bank account for
a 6% interest rate, the investment amount will increase accordingly (1+6%)^15 times
(throughout 15 years).
Considering the rental market price of cca 6 euro/m2 minus the investment cost for 1sq.m.
of administrative building per months of 2.26 euro, the estimated rental price for 1sq.m.
was set at 3.74 euro.
The calculation of the IP adjacent land rental was concluded compliant with the Law on the
normative price and land sale/purchase procedure Nr.1308-XIII of 25.07.97 and the Law
on industrial parks no. 182 of 15.07.2010:
Table 48 Estimated rent calculation
Rental of public plot of land
Normative price10, lei 19 873,34
Rental price in Chisinau11 10% Rental coefficient12 0,5
Total rent, lei/m2 6459
A second important source of revenue of the management company of JSC "Tracom"
industrial park will constitute the services area, namely (per annum):
Table 49 Estimated calculation of revenues generated by provision of services
Rendering natural gas supply services, thousand m3 500
Rendering electrical supply services, thousand kWh 7 000
Rendering water supply services, m3 126 000
Telecommunication services 360
The following tables show the financial and economic evolution of the IP management
company, seen through the projected financial result and cash flow.
10 Law on the normative price and the procedure for land sale-purchase 11 Ibidem 12 Applying the up to 0.3 reduction coefficient by the management company, Law on industrial parks
102
Table 50: Projected financial result of the IP managing company (a)
Table 51 Projected financial result of the IP managing company (a)
Report on financial results 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
V?nz?ri nete 1 372 796 1 441 435 1 513 507 1 589 183 1 668 642 1 752 074 1 839 677 1 931 661 2 028 244 2 129 657 2 150 953 2 172 463 2 194 187 2 216 129 - Costul m?rfurilor v?ndute 76 197 80 007 84 007 88 207 92 618 97 248 102 111 107 216 112 577 118 206 119 388 120 582 121 788 123 006 materiale ?i componente 76 197 80 007 84 007 88 207 92 618 97 248 102 111 107 216 112 577 118 206 119 388 120 582 121 788 123 006 Profitul brut 1 296 599 1 361 429 1 429 500 1 500 975 1 576 024 1 654 825 1 737 567 1 824 445 1 915 667 2 011 450 2 031 565 2 051 881 2 072 399 2 093 123 Profit p?n? la impozitare 1 296 599 1 361 429 1 429 500 1 500 975 1 576 024 1 654 825 1 737 567 1 824 445 1 915 667 2 011 450 2 031 565 2 051 881 2 072 399 2 093 123 - Impozitul pe profit 181 524 190 600 200 130 210 137 220 643 231 676 243 259 255 422 268 193 281 603 284 419 287 263 290 136 293 037 Profitul net (pierdere) 1 115 075 1 170 829 1 229 370 1 290 839 1 355 381 1 423 150 1 494 307 1 569 023 1 647 474 1 729 847 1 747 146 1 764 617 1 782 264 1 800 086 - dividende 0 0 0 0 0 0 0 0 0 0 0 0 0 0 = profit nerepartizat 1 115 075 1 170 829 1 229 370 1 290 839 1 355 381 1 423 150 1 494 307 1 569 023 1 647 474 1 729 847 1 747 146 1 764 617 1 782 264 1 800 086 pl??i de leasing calculate 1 115 075 2 285 904 3 515 274 4 806 113 6 161 494 7 584 643 9 078 951 10 647 973 12 295 447 14 025 294 15 772 440 17 537 057 19 319 321 21 119 407
Report on financial results
2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 TOTAL
V?nz?ri nete 2 260 673 2 283 280 2 306 113 2 329 174 2 352 466 2 375 990 2 399 750 2 423 748 2 447 985 2 472 465 2 497 190 2 522 162 2 547 383 2 572 857 62 030 136 - Costul m?rfurilor v?ndute 125 478 126 733 128 000 129 280 130 573 131 879 133 198 134 530 135 875 137 234 138 606 139 992 141 392 142 806 3 442 969 materiale ?i componente 125 478 126 733 128 000 129 280 130 573 131 879 133 198 134 530 135 875 137 234 138 606 139 992 141 392 142 806 3 442 969 Profitul brut 2 135 195 2 156 547 2 178 113 2 199 894 2 221 893 2 244 112 2 266 553 2 289 218 2 312 110 2 335 232 2 358 584 2 382 170 2 405 991 2 430 051 58 587 167 Profit p?n? la impozitare 2 135 195 2 156 547 2 178 113 2 199 894 2 221 893 2 244 112 2 266 553 2 289 218 2 312 110 2 335 232 2 358 584 2 382 170 2 405 991 2 430 051 58 587 167 - Impozitul pe profit 298 927 301 917 304 936 307 985 311 065 314 176 317 317 320 491 323 695 326 932 330 202 333 504 336 839 340 207 8 202 203 Profitul net (pierdere) 1 836 268 1 854 631 1 873 177 1 891 909 1 910 828 1 929 936 1 949 235 1 968 728 1 988 415 2 008 299 2 028 382 2 048 666 2 069 153 2 089 844 50 384 964 - dividende 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 = profit nerepartizat 1 836 268 1 854 631 1 873 177 1 891 909 1 910 828 1 929 936 1 949 235 1 968 728 1 988 415 2 008 299 2 028 382 2 048 666 2 069 153 2 089 844 50 384 964 pl??i de leasing calculate 24 773 762 26 628 393 28 501 569 30 393 478 32 304 306 34 234 242 36 183 477 38 152 205 40 140 620 42 148 919 44 177 301 46 225 967 48 295 120 50 384 964
Net sales
-Cost of sold goods
materials and parts
Gross Profit
Profit before taxation
-Profit tax
Net Profit (loss)
-dividends
=undistributed profit
calculated leasing payments
Net sales
-Cost of sold goods
materials and parts
Gross Profit
Profit before taxation
-Profit tax
Net Profit (loss)
-dividends
=undistributed profit
calculated leasing payments
103
Table 52: Projected cash flow of the IP management company (a)
Table 53 Projected cash flow of the IP management company (b)
Monetary means report 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
Venituri din v?nz?ri 1 619 899 1 700 894 1 785 938 1 875 235 1 968 997 2 067 447 2 170 819 2 279 360 2 393 328 2 512 995 2 538 125 2 563 506 2 589 141 2 615 032 2 641 183 Cheltuieli pentru materiale ?i componente -89 912 -94 408 -99 136 -104 080 -109 293 -114 753 -120 497 -126 505 -132 839 -139 490 -140 881 -142 279 -143 718 -145 144 -146 597 Impozite -414 912 -435 657 -457 439 -480 313 -504 327 -529 544 -556 020 -583 824 -613 014 -643 663 -650 100 -656 603 -663 167 -669 800 -676 498
Fluxul monetar din activitatea opera?ional? 1 115 075 1 170 829 1 229 363 1 290 842 1 355 377 1 423 150 1 494 302 1 569 031 1 647 475 1 729 841 1 747 143 1 764 624 1 782 257 1 800 089 1 818 088
Investi?ii ?n capitalul circulant 63 082 3 154 3 312 3 478 3 651 3 834 4 025 4 227 4 438 4 660 979 989 998 1 009 1 018
Fluxul monetar din activitatea investi?ional? 63 082 3 154 3 312 3 478 3 651 3 834 4 025 4 227 4 438 4 660 979 989 998 1 009 1 018
Fluxul monetar din activitatea financiar? 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Flux monetar total pe perioada 1 178 157 1 173 983 1 232 675 1 294 320 1 359 028 1 426 984 1 498 327 1 573 259 1 651 913 1 734 501 1 748 122 1 765 613 1 783 255 1 801 098 1 819 106 Mijloace b?ne?ti la sf?r?itul perioadei 1 178 157 2 352 140 3 584 814 4 879 135 6 238 163 7 665 147 9 163 474 10 736 732 12 388 645 14 123 146 15 871 268 17 636 881 19 420 136 21 221 233 23 040 339
Sales revenue
Materials and components expenses
Taxes
Cashflow from operational activity
Short term capital investments
Cashflow from investment activity
Cashflow from financial activity
Total Cashflow
Monetary means at the end of the period
Monetary means report
2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 TOTAL
Venituri din v?nz?ri 2 667 595 2 694 271 2 721 213 2 748 425 2 775 910 2 803 669 2 831 705 2 860 022 2 888 623 2 917 509 2 946 684 2 976 151 3 005 912 3 035 971 73 195 561 Cheltuieli pentru materiale ?i componente -148 059 -149 550 -151 040 -152 554 -154 071 -155 624 -157 166 -158 747 -160 327 -161 943 -163 551 -165 193 -166 839 -168 508 -4 062 707 Impozite -683 263 -690 094 -696 996 -703 965 -711 006 -718 115 -725 298 -732 550 -739 876 -747 273 -754 747 -762 294 -769 918 -777 617 -18 747 893
Fluxul monetar din activitatea opera?ional? 1 836 273 1 854 626 1 873 177 1 891 906 1 910 832 1 929 930 1 949 241 1 968 726 1 988 419 2 008 293 2 028 385 2 048 664 2 069 156 2 089 847 50 384 961
Investi?ii ?n capitalul circulant 1 029 1 038 1 049 1 060 1 071 1 081 1 092 1 102 1 114 1 124 1 136 1 147 1 159 1 171 118 226
Fluxul monetar din activitatea investi?ional? 1 029 1 038 1 049 1 060 1 071 1 081 1 092 1 102 1 114 1 124 1 136 1 147 1 159 1 171 118 226
Fluxul monetar din activitatea financiar? 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Flux monetar total pe perioada 1 837 301 1 855 664 1 874 227 1 892 965 1 911 902 1 931 011 1 950 333 1 969 829 1 989 533 2 009 417 2 029 522 2 049 812 2 070 315 2 091 017 50 503 187 Mijloace b?ne?ti la sf?r?itul perioadei 24 877 641 26 733 305 28 607 532 30 500 497 32 412 399 34 343 410 36 293 743 38 263 572 40 253 105 42 262 522 44 292 044 46 341 856 48 412 170 50 503 187
Sales revenue
Materials and components expenses
Taxes
Cashflow from operational activity
Short term capital investments
Cashflow from investment activity
Cashflow from financial activity
Total Cashflow
Monetary means at the end of the period
104
Table 54: Projected financial indexes of the IP management company (a)
Table 55: Projected financial indexes of the IP management company (b)
FINANCIAL SITUATION INDICATORS 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
Rentabilitatea activelor 189,0% 66,3% 41,4% 30,5% 24,4% 20,5% 17,8% 15,8% 14,2% 13,0% 11,6% 10,5% 9,6% 8,9% 8,2% Rentabilitatea capitalului propriu 200,0% 68,9% 42,4% 31,0% 24,7% 20,7% 17,9% 15,9% 14,4% 13,1% 11,7% 10,6% 9,7% 8,9% 8,3% Rentabilitatea activelor pe termen lung - - - - - - - - - - - - - - - Cheltuieli opera?ionale la venituri din v?nz?ri (raport) 5,6% 5,6% 5,6% 5,6% 5,6% 5,6% 5,6% 5,6% 5,6% 5,6% 5,6% 5,6% 5,6% 5,6% 5,6% Profitabilitatea v?nz?rilor 81,2% 81,2% 81,2% 81,2% 81,2% 81,2% 81,2% 81,2% 81,2% 81,2% 81,2% 81,2% 81,2% 81,2% 81,2%
Rentabilitatea profitului contabil (brut) 1702% 1702% 1702% 1702% 1702% 1702% 1702% 1702% 1702% 1702% 1702% 1702% 1702% 1702% 1702% Rentabilitatea profitului net 1463% 1463% 1463% 1463% 1463% 1463% 1463% 1463% 1463% 1463% 1463% 1463% 1463% 1463% 1463%
Viteza de rota?ie a activelor 2,33 0,82 0,51 0,38 0,30 0,25 0,22 0,19 0,18 0,16 0,14 0,13 0,12 0,11 0,10 Viteza de rota?ie a capitalului propriu 2,46 0,85 0,52 0,38 0,30 0,25 0,22 0,20 0,18 0,16 0,14 0,13 0,12 0,11 0,10
Coeficientul lichidit??ii generale (curente) 18,20 34,58 50,18 65,04 79,19 92,67 105,50 117,73 129,37 140,45 156,27 171,94 187,44 202,80 218,00 Coeficientul lichidit??ii intermediar? 18,20 34,58 50,18 65,04 79,19 92,67 105,50 117,73 129,37 140,45 156,27 171,94 187,44 202,80 218,00 Coeficientul lichidit??ii absolute 18,20 34,58 50,18 65,04 79,19 92,67 105,50 117,73 129,37 140,45 156,27 171,94 187,44 202,80 218,00 Capital circulant net 1 115 075 2 285 904 3 515 274 4 806 113 6 161 494 7 584 643 9 078 951 10 647 973 12 295 447 14 025 294 15 772 440 17 537 057 19 319 321 21 119 407 22 937 494
Coeficientul general de solvabilitate 0,95 0,97 0,98 0,98 0,99 0,99 0,99 0,99 0,99 0,99 0,99 0,99 0,99 1,00 1,00 Coeficientul de autonomie 17,20 33,58 49,18 64,04 78,19 91,67 104,50 116,73 128,37 139,45 155,27 170,94 186,44 201,80 217,00
FINANCIAL SITUATION INDICATORS 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040
Rentabilitatea activelor 7,7% 7,2% 6,8% 6,4% 6,1% 5,8% 5,5% 5,3% 5,1% 4,9% 4,7% 4,5% 4,4% 4,2% Rentabilitatea capitalului propriu 7,7% 7,2% 6,8% 6,4% 6,1% 5,8% 5,5% 5,3% 5,1% 4,9% 4,7% 4,5% 4,4% 4,2% Rentabilitatea activelor pe termen lung - - - - - - - - - - - - - - Cheltuieli opera?ionale la venituri din v?nz?ri (raport) 5,6% 5,6% 5,6% 5,6% 5,6% 5,6% 5,6% 5,6% 5,6% 5,6% 5,6% 5,6% 5,6% 5,6% Profitabilitatea v?nz?rilor 81,2% 81,2% 81,2% 81,2% 81,2% 81,2% 81,2% 81,2% 81,2% 81,2% 81,2% 81,2% 81,2% 81,2%
Rentabilitatea profitului contabil (brut) 1702% 1702% 1702% 1702% 1702% 1702% 1702% 1702% 1702% 1702% 1702% 1702% 1702% 1702% Rentabilitatea profitului net 1463% 1463% 1463% 1463% 1463% 1463% 1463% 1463% 1463% 1463% 1463% 1463% 1463% 1463%
Viteza de rota?ie a activelor 0,09 0,09 0,08 0,08 0,07 0,07 0,07 0,07 0,06 0,06 0,06 0,06 0,05 0,05 Viteza de rota?ie a capitalului propriu 0,09 0,09 0,08 0,08 0,08 0,07 0,07 0,07 0,06 0,06 0,06 0,06 0,05 0,05
Coeficientul lichidit??ii generale (curente) 233,05 247,95 262,71 277,32 291,78 306,10 320,28 334,32 348,22 361,98 375,61 389,10 402,46 415,68 Coeficientul lichidit??ii intermediar? 233,05 247,95 262,71 277,32 291,78 306,10 320,28 334,32 348,22 361,98 375,61 389,10 402,46 415,68 Coeficientul lichidit??ii absolute 233,05 247,95 262,71 277,32 291,78 306,10 320,28 334,32 348,22 361,98 375,61 389,10 402,46 415,68 Capital circulant net 24 773 762 26 628 393 28 501 569 30 393 478 32 304 306 34 234 242 36 183 477 38 152 205 40 140 620 42 148 919 44 177 301 46 225 967 48 295 120 50 384 964
Coeficientul general de solvabilitate 1,00 1,00 1,00 1,00 1,00 1,00 1,00 1,00 1,00 1,00 1,00 1,00 1,00 1,00 Coeficientul de autonomie 232,05 246,95 261,71 276,32 290,78 305,10 319,28 333,32 347,22 360,98 374,61 388,10 401,46 414,68
Assets rentability
Own capital rentability
Long term assets rentability
Operational expenses/sales revenue ratio
Sales profitability
Accountancy profit rentability (gross)
Net profit rentability
Assets rotation
Own capital rotation
General liquidity ratio
Intermediary liquidity ration
Total liquidity ratio
Net short-term capital
General solvency ratio
Autonomy ratio
Assets rentability
Own capital rentability
Long term assets rentability
Operational expenses/sales revenue ratio
Sales profitability
Accountancy profit rentability (gross)
Net profit rentability
Assets rotation
Own capital rotation
General liquidity ratio
Intermediary liquidity ration
Total liquidity ratio
Net short-term capital
General solvency ratio
Autonomy ratio
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6 SOCIAL AND ECONOMIC IMPACTS OF THE INDUSTRIAL PARK ON
THE REGIONAL DEVELOPMENT The methodology for defining the impact of public policies, of the decision to create the industrial park, was laid out in the document called "Guidelines for the ex-ante analysis of the public policies impact”13. This guide provides ways of assessing the anticipated impact, through which were
identified the key indicators for assessing the potential impact of creating an industrial
park, namely:
Job creation;
Fiscal impacts;
Economic impacts;
Social and poverty impact;
Environment impact;
Administrative impacts.
The evaluated scope of the expected impact reflected in the guide will serve as a guideline
in presenting a more detailed impact analysis in this feasibility report, with deeper analysis
on the calculated evaluation of the possible impacts and their argumentation.
6.1 IMPACT ASSESSMENT The economic impacts of the establishment of an industrial park can be estimated through
the direct and indirect results.
The economic impact presumes an envisaged change of an economic activity. E.g. investing
in a warehouse would create an economic impact. All the money earned in finished
products sales has a multiplicative effect on the economy.
The returns are created directly, i.e. there is a direct impact of the raw materials
procurement, wages, goods and services needed for production, taxes, dividends and
savings. SMEs that obtain the payments for goods and services from consumptions (direct
economic impact), also the employees who receive salaries - these returns are
consequently used in local consumption or outside of it, which generates an indirect
economic multiplier. This methodology will provide a snapshot of the extra income of the
industrial park area: how much does a leu obtained from storage generate, from
manufacturing and marketing of goods and services, i.e. what revenue flights will occur
outside the industrial park area for their later use in the national economy.
13 Selection of public policy Proposals Volume II, 2010
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The direct economic impact of a group of companies is estimated by calculating the volume
of goods produced (estimated as sales revenue), creation of jobs and payroll, tax payments,
and other annual income generated by their annual operations.
The indirect impact results from:
The resident companies of the park purchasing goods and services from the local
and regional suppliers;
Employees of the park spending their salaries to consume goods and services. These
indirect effects generate additional income, job opportunities in the adjacent
segments of the industrial park.
The overall economic impact totals both the direct and indirect effects.
The indirect effects are calculated using the economic multiplier coefficients 14.
According to the analytical data provided by the Ministry of Economy in the Information on
the implementation of the State Program to support small and medium enterprises sector,
in 2009 the average sales revenue of an enterprise amounted to cca MDL 1,581,100. The
average number of employees per enterprise in 2008 was of eight people, posting identical
data as of 2008.
The assessment of the sales volume for an enterprise will be carried out considering the
value presented by the Ministry of Economy; job opportunities will increase double on the
account of the industrial agglomeration. These features are typical of an industrial park,
where the employment rate is generally high.
The development of the industrial park, that requires a proper use of the reconstruction
investments and funding of production factors, is expected to be carried out over a period
of 2 years. Consequently, the optimal sales volume of the industrial park residents is to be
achieved in the second year, i.e. the moment the park will fully operate.
The annual growth in sales and salaries is expected to rise by 7%. The financial and
economic forecasts cover a period of 30 years. The calculations have been performed in
terms of Euro.
14 Marginal Propensity to Consume Locally; Marginal Propensity to Leak Locally
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Table 56: Direct economic impact of the establishment of the industrial park (a)
Table 57: Direct economic impact of the establishment of the industrial park (b)
2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 Total
Flux net monetar rezidenţi 12 364 13 229 14 155 15 146 16 207 17 341 18 555 19 854 21 243 22 731 24 322 26 024 27 846 29 795 391 422
Salarii achitate de rezidenţi 4 043 4 326 4 629 4 953 5 300 5 671 6 068 6 493 6 947 7 433 7 954 8 511 9 106 9 744 128 005
Flux monetar net compania administratoare 1 837 1 856 1 874 1 893 1 912 1 931 1 950 1 970 1 990 2 009 2 030 2 050 2 070 2 091 50 503
Salarii achitate comp. de administratre 655 701 750 803 859 919 983 1 052 1 126 1 205 1 289 1 379 1 476 1 579 20 746
Taxe/impozite la buget 3 709 3 969 4 247 4 544 4 862 5 202 5 566 5 956 6 373 6 819 7 297 7 807 8 354 8 939 117 426
Total Impact direct 22 609 24 081 25 656 27 339 29 139 31 064 33 123 35 325 37 679 40 197 42 891 45 771 48 852 52 148 708 102
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 Flux net monetar reziden?i 4 481 4 795 5 131 5 490 5 874 6 285 6 725 7 196 7 700 8 239 8 815 9 432 10 093 10 799 11 555 Salarii achitate de reziden?i 1 465 1 568 1 678 1 795 1 921 2 055 2 199 2 353 2 518 2 694 2 883 3 085 3 301 3 532 3 779 Flux monetar net compania administratoare 1 178 1 174 1 233 1 294 1 359 1 427 1 498 1 573 1 652 1 735 1 748 1 766 1 783 1 801 1 819 Salarii achitate comp. de administratre 238 254 272 291 311 333 356 381 408 437 467 500 535 572 612 Taxe/impozite la buget 1 344 1 438 1 539 1 647 1 762 1 886 2 018 2 159 2 310 2 472 2 645 2 830 3 028 3 240 3 467 Total Impact direct 8 707 9 230 9 852 10 517 11 228 11 986 12 797 13 663 14 587 15 576 16 558 17 612 18 739 19 944 21 232
Residents net cash flow
Wages disbursed by residents
Operator company net cash flow
Wages disbursed by operator company
Taxes to the budget
Overall direct impact
Residents net cash flow
Wages disbursed by residents
Operator company net cashflow
Wages disbursed by operator company
Taxes to the budget
Overall direct impact
6.2 INDIRECT IMPACT FORECAST (MULTIPLICATIVE ECONOMIC EFFECT) The indirect impact is calculated by means of the economic multiplying coefficients. Their
values were estimated based on the experience of similar parks in Eastern Europe and the
impact values of the investment projects implemented in Moldova15, where investments
have been made in SMEs at an average rate of 80%; 20% of which representing
investments in the working capital.
Table 58 Indirect impact forecast (multiplicative economic effect)
Economic multiplier Industrial
park region
Chisinau National Economy
Sales revenues, coefficient 1,254 1,323 1,689
Sales revenue, euro 554 174 584 666 746 411
Job creation, coefficient 1,497 1,586 1,807
Job creation, places 902 955 1 088
The interpretation is simple. Every euro of the sales revenue, earned in the industrial park,
will increase the region' total revenue (Buiucani) by 1.254 EUR, by 1.323euro the revenue
of Chisinau and by 1.689euro - the national economy. Similar calculations apply to the job
creation algorithm.
6.3 INVESTMENT APPRAISAL16 The appraisal of investment projects consists in defining the usefulness of the projected
investments, in order to determine the soundness of an investment initiation. The bottom
line in this process refers to the investment assessment in time, considering future
monetary depreciations, though currently invested. Both net present value and the internal
rate of return of the project are used to perform this assessment:
a) Investment amount
Table 59 Estimate of investment amount (€)
Renovation of technical and production infrastructure Thousand euro
1. Power networks 35 2. Water/Sewage 309 3. Roads-Railroad 236 4. Telecommunications 25 5. Other investment costs 181
Subtotal 786 Production investments by the future IP residents
Thousand euro 6. Renovation of production buildings 18 264 7. Other buildings, incl. administrative 9 271 8. Equipment investments 19 274
Subtotal 46 809 Total investments 47 594
15 The World Bank Rural Investment and Services Project (RISP II), Competitiveness Enhancement Project, IFAD Program for the Development Rural Affairs 16 Capital budgeting/investment appraisal
109
b) Discount rate – 12% per annum;
c) Forecast period – 30 years.
d) Consolidated results
Table 60 Estimate on several financial basic projections
Investment amount, thousand Euro 47 594
Direct sales impact 441 925
Indirect impact sales 117 552
Job creation, direct 518
Job creation, indirect 418
Taxes/duties 117 426
NPV 74 981
IRR 25%
6.3.1 OPINIONS
Both economic and financial forecasts, as well as the impact assessments of the industrial
park creation on the territory of former Production Complex "Tractor Plant in Chisinau,
have fully demonstrated the viability of the idea of establishing an industrial conglomerate
of this type.
The strategic location of the industrial park, existence of an infrastructure that requires
comparatively no major investments, access to local and external markets, availability of
skilled labour, make the necessary hypotheses to establish a successful industrial park.
7 ENVIRONMENTAL IMPACT ASSESSMENT UPON THE CREATION
OF AN INDUSTRIAL PARK The Law on environmental protection No. 1515 of 16.06.1993 is the legal framework
governing the legal relations concerning projects implementations that can pose damage to
the environment.
The Law on Environmental Protection comprises general provisions on the State Ecological
Expertise (No. 851 of 29.05.1996). Article 21 determines the purposes of the expertise, and
(b) is of special importance, as it refers to the environmental impact evaluation of all
economic activities, taken separately or together, which may affect the environment,
people's health, their living standards (the same legal stipulation is foreseen in Art. 6 (1) of
the Law on Ecological Expertise and Environmental Impact assessment).
Therefore, any project is required to undergo the state ecological expertise. According to
art. 25 (Law on Environmental Protection) the state ecological expertise can evaluate any
project upon the initiative of the environmental bodies, other departments and ministries
or public organizations.
Article 23 stipulates that all new programs and projects on building, expansion,
reconstruction and modernization of economic and social objectives that may affect the
environment, regardless of location, financing sources and other conditions, are subject to
expertise. Accordingly (Art. 24), beneficiaries are to provide the project documents
according to [i] regulations in force, [ii] in agreement with the ministries, local
administration departments, and with the organizations interested in the location and
technical supply of the object, and [iii ] authorization issued by the surveillance and state
control authorities to perform such type of economic activity [iv] under the state-approved
list.
In addition to the national legal provisions, it is important to assess the negative
environmental impact limits, occurring following the creation of the industrial park, from
the international organizations perspective.
Considering the contribution of the World Bank project, that funded a number of studies on
the creation of industrial parks in Moldova, and more importantly, that such organizations
can contribute substantially to parks financing, this study will refer to the World Bank
institutions' provisions on the environmental impact that may actually serve as an
environmental guide to attract foreign investments to finance the needs of the industrial
park.
The key document for the development of an industrial park, which is normally, the
Development Plan, covers issues such as: details about the specifics of the industrial park
location (e.g., avoidance of food contamination by ensuring that the adjacent and nearby
units are compatible), water and air quality management, including the use of water
treatment facilities, solid waste management, including their recycling, waste and
hazardous materials management, noise control, work safety.
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A major benefit of the environmental impact (in terms of industrial parks), represents the
possibility to benefit from the economy of scale, sharing facilities and waste effluents. At
the same time, enterprises, as individual units, must follow individual methodologies for
the environmental impact improvement, depending on their separate production activity
(State Ecological Expertise). The environmental impact management plan for each resident
should be included in the contract signed with the management company.
7.1 POLLUTING INDICATORS The following recommendations should be taking into account upon the creation of an
industrial park.
To encourage the use of vapour recovery systems, where appropriate, to control the losses
of volatile organic compounds (VOCs) from the storage tanks, in order to achieve a 90-
100% recovery rate.
To encourage the residents to use of low-nitrogen oxide emissions (NOx) of the thermal
units. The use of fuels with low sulfur content (or an emission level of 2.000 milligrams per
cubic meter mg/Nm3 SOx). A sulphur recovery system may be feasible for large
installations, when the concentration of hydrogen sulphide from exhaust pipes exceeds
230mg/Nm3.
The emission level for the design and functioning of the industrial park must be established
through the environmental assessment (ecological expertise for example).
There will hereby be presented the following emission levels accepted by the World Bank
Group in making decisions regarding the provision of financial assistance. Any deviations
from these levels will be described in the project documentation. The dilution of emissions
or effluents to achieve the prescribed limits is unacceptable.
Emissions into the atmosphere. Acceptable pollution limits
For individual or common stacks:
Tabel 61 Estimated acceptable emission levels
Parameter Maximum value
mg/Nm3
Particles 50 for large units (PM)* 150 for small units
NOx For energy consumption lower than 10 Giga Joules per hour: 750 (solid fuel) 460 (liquid fuel) 320 (gaseous fuel)
SOx 2000 Hydrogen sulfide 15
* For units that emit significant quantities of toxic metals, the emission limit is 20 mg / Nm.
Liquid effluents. The following maximum levels are to be obtained:
Parameter Maximum value,
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miligrams per litre PH 6 - 9 Oils and fats 10 Cadmium 0.1 Chromium (hexavalent)
0.1
Chromium (total) 0.5 Copper 0.5 Lead 0.1 Nickel 0.5 Zinc 2 Phenol 0.5 AOX 1 Benzene 0.05 Benzo(a)pyrene 0.05 Sulfide 1
Solid waste and sludges
The generation of sludge should be minimized to the lowest level possible. The sludge must
be treated or stabilized in case that toxic metals are identified.
Ambient noise
The noise abatement measures should achieve either the levels given below or a maximum
increase in background levels of 3 dB (A). Measurements shall be taken by the noise
receptors located outside the noise units (sources).
Table 62 Estimation of acceptable levels for environmental pollution indicators
Maximum Allowed Leq
(hour), in dB(A)
Day Night Receptor 07:00 - 22:00 - 22:00 07:00 Residential; 55 45 Industrial; 70 70 Commercial
Monitoring and reporting
The closure tests should be repeated frequently, both upon the project initiation and at
later stages of the development.
A daily monitoring of the particle emissions from stacks is recommended, along with a
monthly monitoring of the sulphur content in the used fuel, in combustion sources. A daily
monitoring of the liquid effluents for all the applicable parameters mentioned above,
except for aromatics, metals, and sulphides, which must be monitored at least once a
month.
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The Industrial Park Administration shall encourage the residents in monitoring the data
analysis, performing regular reviews, and comparing the data with the operating standards
in order to undertake all necessary corrective actions. It is recommended to keep the
records of the monitoring results in an acceptable format. The records must be reported to
the competent authorities and stakeholders, as appropriate (e.g. financier). Industrial parks
must maintain records of the accidental environmental pollutants emissions and take
appropriate corrective action to prevent their future occurrence. The industrial park
administration is recommended to organize appropriate trainings for the residents on how
to improve the environmental impact.
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Annexes
Annex 1: Action Plan for the establishment of an industrial park on the platform of former “Tractor Plant in Chisinau”
No. Actions Executive body Duration Month
4 5 6 7 8 9 10 11
STEP I. INVESTMENT TENDER TO SELL PUBLIC TRADED SHARE BLOCKS
1 Document preparation on the privatization by investment contest of the state-owned share blocks (point 6, GD. 919), in the following joint stock companies: „Forjacom”, „Radiator”, „Dotarcom”, „Aralit”, „Reupes”, „Zidarul”, „MapasAuto”, „Presudor” „Bicotra”, including:
PPA, Ministry of Economy
1,1 File preparation of the goods (share blocks) to be privatized. PPA 10 days
1,2 The initial sale prices calculation for the JSCs shares PPA 1 day
1,3 Tender book preparation of the investment obligations and of specific privatization requirements Ministry of Economy 10 days
1,4 Press release draft elaboration APP, Ministry of Economy 1 day
2 The organisation of the contest Commission meeting, including: APP, Ministry of Economy, Contest Commission
3 days
2,1 The terms and conditions of the investment contest Contest Commission
2,2 The approval of the tender books regarding the investment bonds and additional requirements on privatization Contest Commission
2,4 The press release approval on contest organisation Contest Commission
2,6 Confirmation of the public dissemination of contest information PPA 5 days
2,7 Reception and registration of the contest applications PPA min 30 days
2,8 Bidders' familiarization with contest conditions PPA during the exposure period
3 The contest Contest Commission
4 The determination of the contest winners Contest Commission
5 The preparation of minutes and press release on the contest results Contest Commission, PPA, Ministry of Economy
7 days
6 The publication of press release on the contest results PPA, Ministry of Economy 1 day
7 Conclusion of sale-purchase contracts with the contest winners PPA within 30 days of the approval
8 Monitorization of conditions regarding the fulfilment of the sale-purchase contracts PPA, Contest Commission Throughout the term established
by SC
STEP II. THE INDUSTRIAL PARK TITLE AWARDING (Law 182/2010)
9 Ordinary JSC "Tracom" general meeting of shareholders on: Company Council and Executive Body of JSC Tracom
not later than May
116
the industrial park creation based on JSC “Tracom” property and the adjacent state-owned land
the empowerment of the company and executive board to elaborate the necessary documents on the assignment of the industrial park title
the approval of Statute amendments and additions (types of activities)
10 Registration of amendments and addenda to the Statute at the State Chamber of Registration Company Council and Executive Body of JSC Trscom, NCFM
1 day
11 Elaboration of documents on the assignment of the industrial park title by JSC "Tracom" (art. 8, Law 182/2010) JSC Executive Body 4 weeks
12 Document submission to the Ministry of Economy JSC Executive Body 1 day
13 Examination of the submitted documents and elaboration of draft Government decision on assigning JSC Tracom the IP title:
Ministry of Economy 4 weeks
JSC Tracom is assigned the IP title and the administrative functions
exclusion of p. 81, Annex 2 of the GD 945/2007
14 Promotion of the Government decision on JSC Tracom industrial park title awarding Ministry of Economy 2 weeks
STEP III. INDUSTRIAL PARK PROMOTION
15 Project promotion on the establishment and functioning of the industrial park through the mass media: newspaper and magazine publishing, promotional and informational materials placement on Ministry of Economy web page, MIEPO and other web pages, TV, etc..
MIEPO, Ministry of Economy Permanent
15 Project promoting on the establishment and functioning of the industrial park through national and international organizations: MIEPO, Chamber of Commerce and Industry, representations of embassies and diplomatic missions of the Republic of Moldova from abroad and diplomatic missions and consulates in Moldova, bilateral Chambers of Commerce, consulting companies, investment funds, international financial institutions.
MIEPO, Ministry of Economy Permanent
STEP IV. ESTABLISHMENT OF A SUB-ZONE of the FEZ “EXPO-BUSINESS-CHISINAU”
16 Feasibility study and the expertise elaboration on the establishment opportunity for FEZ "Expo-Business-Chisinau” Ministry of Economy, Administration FEZ "Expo-
Business-Chisinau", Management Company
2 weeks
17 Elaboration and promotion of the draft law amending the Law No. 625-XIII of 03.11.1995 on the "Expo-Business-Chisinau” FEZ
Ministry of Economy 4 weeks
STEP V. REORGANIZATION BY MERGER (ABSORPTION) OF THE JOINT STOCK COMPANIES WHERE STATE'S SHARE PACKAGES WERE NOT PRIVATIZED THROUGH INVESTMENT CONTEST
117
18 Establishment of the working group on the reorganization by merger (absorption) of JSC "Tracom" and of joint stock companies in which the state's shares weren't privatized
Representatives of the involved companies, PPA, National
Securities Commision, Ministry of Economy
2 days
19 Convening the general meeting of the companies involved in the merger on the decision on their merger Bodies of the companies concerned
4 weeks approval of decisions on the reorganization by the companies involved in the merger empowering the executive bodies in preparing the necessary documents and in succeeding the legal
procedures for the companies' reorganization by merger
22 Information disclosure upon companies' reorganization, including, to the companies' creditors and public bodies Bodies of the companies concerned
15 days
20 Contest concerning the selection of company licensed in property and securities evaluation of the involved joint stock companies
Bodies of the companies concerned
4 weeks
21 Property and security evaluation of the involved joint stock companies Evaluating company 3 weeks
23 Obtaining the company's reorganization authorization from the National Commission of Financial Market Bodies of the companies concerned
1 day
24 Elaboration of draft documents related to the reorganization by merger: Working group 4 weeks
the merger contract between JSC "Tracom" and the absorbed companies;
the document of goods transfer elaborated by each absorbed company;
the consolidated balance sheet elaborated by JSC "Tracom";
amendment draft of JSC “Tracom” Statute
25 Convening general meetings by each company involved in the reorganization through merger Bodies of the companies concerned
4 weeks
25,1 Convening general meeting of shareholders in each absorbed company that will adopt decision on: Bodies of the absorbed companies
4 weeks
merger agreement;
the act of transfer (covering goods to be submitted valued at market price);
proportions of conversion (exchange) of the circulating d shares in the additional shares issued by the absorbed company
25,2 Convening general meeting of shareholders of JSC „Tracom” that will adopt decision on: JSC Tracom Executive Body 4 weeks
merger agreement;
the act of transfer;
approval of the estimation report concerning the market value of non monetary contributions considered as payment for the securities subscribed;
consolidated balance sheet ;
increase of the share capital;
approval of the results on the additional securities issues and the list of subscribers;
proportions of conversion (exchange) of the circulating shares in the additional shares issued by the absorbed company;
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changes and additions to the statute.
26 Reorganization registration in the state Register of legal entities and organisations The state chamber of registration
1 week
27 Making reorganization-related entries in the State Register of Securities National Commission Financial Market
1 week
28 Introduction of the reorganization-related changes in the register of the security holders and/or closure of personal accounts (where applicable) and completion of reorganization.
Independent Registry 1 week