Moldova positions itself to support Ukraine reconstruction

Moldova positions itself to support Ukraine reconstruction
The war in Ukraine is still raging, but international companies are already setting up in Moldova with the aim of supporting the reconstruction.
By Clare Nuttall in Yerevan May 29, 2024

International companies are already setting up in Moldova with the aim of supplying the reconstruction of Ukraine, as the small country is expected to benefit from its location on Ukraine’s western border. 

While Moldova, with a population of 2.5mn and one of the poorest countries in Europe, is a small market, the opportunities related to the Ukraine reconstruction are huge. The World Bank estimated the total cost of reconstruction at $411bn back in March 2023, but this total is only rising with the prolongation of the war. 

According to Moldova’s Deputy Prime Minister and Minister of Economic Development and Digitalisation Dumitru Alaiba, the country has already seen an upturn in interest from investors in sectors such as construction materials looking at the Ukraine reconstruction. 

“Once this war is over we will of course play a role in terms of supporting Ukraine with necessary goods and products. We see already increased interest from investors looking at opportunities for Ukraine,” Alaiba said in an interview with bne IntelliNews in Yerevan earlier this month. 

For example, says Alaiba, a new construction materials factory opened last year just a few hundred metres from the border with Ukraine, looking at the Ukraine market. 

He also references a producer pipes for water supply and sanitation from Romania which acquired a local plant in January, intending to triple production by the end of the year, again looking at the Ukraine market. 

On top of that, Alaiba mentions a new paint factory and an asphalt company that have opened up in Moldova, also looking to Ukraine. 

“This [investments anticipating Ukraine’s post-war reconstruction] is happening. It’s not yet a very visible phenomenon, but there are such stories and experiences and I’m sure they will continue because Moldova’s is right there; it’s logistically very attractive to invest in Moldova now to be ready when the time comes,” says Alaiba. 

The European Bank for Reconstruction and Development (EBRD) head of Moldova, Catarina Bjorlin Hansen, confirmed in a separate interview with bne IntelliNews that the bank has seen companies looking to Moldova as they position themselves for the reconstruction. 

“We have not financed any such companies yet but we would love to do it. We are talking to companies. There are lots of business delegations coming to Moldova,” she says. 

The extent of destruction in Ukraine is immense. Essential infrastructure such as roads, bridges, railways, airports and utilities will all have to be rebuilt. On top of that further funds will be needed to restore housing, schools, hospitals, commercial buildings and factories. Estimates of the cost continue to rise as the conflict persists.

When it comes to supporting Ukraine, Alaiba says Moldova is “already playing a significant role”. “We are active participants in the solidarity lanes; second, we have a lot of Ukrainian trade transiting Moldova as we speak, a lot of goods and grain,” he told bne IntelliNews.

Since the start of the war, Moldova has hosted the highest number of refugees per capita in Europe, and facilitated trade through its railway network. This is despite the heavy toll the war in neighbouring Ukraine took on Moldova’s own economy, which was further strained by Russia’s weaponising of its gas supplies. 

At the same time, Moldova’s external orientation has shifted. Pre-war, Moldovans elected a solidly pro-EU government and president. But the small country started the war in a very vulnerable position; economically it was at the mercy of Russia as its gas supplier, while part of its territory, Transnistria, is controlled by pro-Russian separatists. After the invasion, there was speculation about whether Russian forces could take the Ukrainian city of Odesa and push through to Transnistria, as well as questions about the role Russian so-called ‘peacekeepers’ in the breakaway republic might play

However, Russia was held at bay by the fierce resistance from Ukraine and is now bogged down in fighting in the east of the country, far from Moldova. The authorities in Transnistria, moreover, have shown no interest in becoming embroiled in the war. At the same time, Chisinau has successfully diversified its power supplies with the help of its Western partners. This has freed the Moldovan government to take decisive steps towards Western integration with its successful application for EU candidate status. 

Moldova is also benefiting from the interlinked trends of ‘nearshoring’ and ‘friendshoring’, given its location on the edge of the EU and the current government’s firm commitment to EU integration. 

Still, as both Alaiba and Hansen point out, Moldova needs to do more to upgrade its infrastructure to play a greater role in the reconstruction. 

Roads and railways are already being overhauled with the support of its international development partners. Some of these projects have a direct connection to the war in Ukraine, enabling Ukrainian producers to get their goods via Moldova and Romania to international markets. The same links will be valuable to Moldova-based companies exporting to Ukraine. 

“We are investing heavily in infrastructure – in roads, in railroads, in logistics. To be frank we been as a country overlooking this aspect of logistics infrastructure for the last three decades and been barely capable of supporting needs of our economy, but with the pressure from the Ukraine crisis it’s been cracking at the sides,” says Alaiba. “We have to invest in this, which is what we are doing in order to be attractive [to investors] and ensure smooth transit of goods across Moldova.”