Shifting landscape: Business leaders embrace digital transformation in Moldova and Romania

Charles Vernon

Managing Partner, Vernon | David

Digitalisation is set to be a key trend for businesses in Moldova and Romania in the next few years and those organisations that embrace it quickly will find themselves at a significant advantage.

When former Moldova’s Minister of Economy and Infrastructure, Sergiu Railean, launched the country’s SME Digitisation Programme in June this year, tellingly the event was entirely online.

Railean’s broadcast was addressed to the country’s increasing online audience (3 million internet users and counting) as well as to business entrepreneurs, with a promise to create a 20 million lei (1 million) development fund to help SME owners digitalise their business processes and sell their products or services online. The programme will provide support to create websites, online stores and also grants to businesses to buy digital technologies and solutions.

Also, at the event Iulia Costin, general director of ODIMM (the organisation for small and medium enterprises sector development), said: “At least 100 SMEs, beneficiaries of the programme, will receive a ‘voucher’ worth a maximum of 20,000 lei for accessing consulting and mentoring services to develop their own website, set up on social pages, develop an online profile and make company and product descriptions, etc.

“Also, entrepreneurs will benefit from financial support of 200,000 lei for the purchase of equipment and software in order to introduce new technologies in the context of digitalisation of SMEs and to eliminate or minimise market risks for at least 20 companies.”

Moldova: small business owners

For many small business owners in Moldova these were important gestures by the government, acknowledging that the digital economy has now become vitally important for the future, as more people across the country have embraced online services since the start of the COVID-19 pandemic. It also shone a light on the need for businesses to adapt to new customer expectations and post pandemic economic realities.

Indeed, the importance of the digital transformation agenda in all business sectors was emphasised by the former interim prime minister, Aureliu Ciocoi, when he told business leaders:  “The COVID-19 pandemic has highlighted the high level of importance of digital availability globally and in each individual country. In response to new challenges, digital transformation remains one of the highest priorities. The Republic of Moldova is a country with all the necessary conditions needed for a rapid and impactful digital transformation.”

To build on the government’s digital transformation agenda, Ciocoi, along with UNDP resident representative in Moldova, Dima Al-Khatib, recently launched the Dialogue of Digital Transformation Development Partners in the Republic of Moldova. This sets out a new overall vision on how digitalisation will move forward in the country following the conclusion of the Digital Agenda for Moldova 2020, which set the digital transformation agenda in 2013.

In the coming years, the Dialogue promised to be an important forum for discussions between government and digital transformation providers to identify areas that require intervention and build capacity in the coming months. [https://eufordigital.eu/Moldova-opportunities-for-digital-transformation-in-focus-in-dialogue-with-development-partners]

Digitalisation: transforming Moldova and Romania

Digital transformation is not just about accessing the internet or setting up social media pages. For Moldova and Romania it’s a sea change in the way organisations and their customers interact. Importantly, it’s also integral to how companies integrate their business processes to remain competitive while delivering value for customers.

Faster digitalisation will also prove to be a carrot on a stick for foreign investors who will be looking at the opportunities the new digital landscape in Central and Eastern Europe offers.

According to a McKinsey report, for Romania the potential economic and developmental benefits of digitalisation could reach up to €42 billion in additional gross domestic product (GDP) by 2025. This would lead to increased global competitiveness and prosperity for the country’s 20 million people and allow Romania to join the most digitally advanced economies in Europe.

To bring this about, the Romanian government recently dissolved its Ministry of Communications and replaced it with the Authority for the Digitalization of Romania (ADR).

The ADR has taken over the activities and structures in technology information, information society and the national interoperability framework. The new organisation claims it will oversee the complete digital transformation of the Romanian economy and society in the coming years – aiming for the 2025 target.

Learning from the Baltics

Looking outside the region for examples, government and business leaders in Moldova and Romania have been eyeing the digitalisation of the Baltic States with interest in the past few years – hoping to learn lessons they can use at home.

Estonia, often branded the digital republic, has digitised 99% of its public services, for example. Moreover, when trust in public services are declining across the world, Estonia regularly achieves one of the highest ratings of trust in government in the EU. The Estonian government claims that this digitisation of public services saves more than 1,400 years of working time and 2% of its GDP annually, according to PwC.

Meanwhile in Lithuania, in the past five years the digital economy has been steadily growing (7.6% of the total economy at the end of 2019, the EU average in 2017 – 10.3%). It’s  currently the 5th most significant sector of the economy in terms of its added value and the the information technology (IT) sector has grown by 56% growth over five years, while the number of information and communications technology (ICT) professionals in Lithuania increased by 17%, accounting for 2.7% of the total number of persons employed at the end of 2019, according to Invest Lithuania.

If companies seeking to invest in or acquire a business that provides IT and digital infrastructure and related services in Moldova or Romania, advice from local experts is crucial. While much bureaucracy has been taken out of the investment and M&A process in Moldova and Romania in recent years, there is still plenty that can trip up overseas investors if they don’t have experts in the countries giving them advice – and all this could mean that a deal fails to complete or doesn’t deliver the anticipated values in years to come.

We know the Moldovan and Romanian markets, with a wealth of experience advising clients in the banking and digital sectors as well as a host of others in Romania and beyond. We can help inward investors to navigate the both countries systems to ensure that your investment, acquisition or new business has the best chance to succeed in the short-, medium- and long-term.

Internet users in Moldova

  • There were 3.07 million internet users in Moldova in January 2020.
  • The number of internet users in Moldova decreased by 6,846 (-0.2%) between 2019 and 2020.
  • Internet penetration in Moldova stood at 76% in January 2020.

Social media users in Moldova

  • There were 1.40 million social media users in Moldova in January 2020.
  • The number of social media users in Moldova increased by 187 thousand (+15%) between April 2019 and January 2020.
  • Social media penetration in Moldova stood at 35% in January 2020.

Mobile connections in Moldova

  • There were 4.36 million mobile connections in Moldova in January 2020.
  • The number of mobile connections in Moldova increased by 40 thousand (+0.9%) between January 2019 and January 2020.
  • The number of mobile connections in Moldova in January 2020 was equivalent to 108% of the total population

Source: Dataportal.com

Internet users in Romania

  • There were 15.49 million internet users in Romania in January 2021.
  • The number of internet users in Romania increased by 133 thousand (+0.9%) between 2020 and 2021.
  • Internet penetration in Romania stood at 80.7% in January 2021.

Social media statistics for Romania

  • There were 12.00 million social media users in Romania in January 2021.
  • The number of social media users in Romania increased by 1.0 million (+9.1%) between 2020 and 2021.
  • The number of social media users in Romania was equivalent to 62.6% of the total population in January 2021.

Mobile connections in Romania

  • There were 26.00 million mobile connections in Romania in January 2021.
  • The number of mobile connections in Romania decreased by 511 thousand (-1.9%) between January 2020 and January 2021.
  • The number of mobile connections in Romania in January 2021 was equivalent to 135.6% of the total population.

Source: Dataportal.com