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: Stela.lavric@iuventus.md

CONTENTS
1 Industrial Park concept ............................................................................................................................................... 7 1.1 1.2 1.3 1.4 Aims and objectives of the feasibility study .............................................................................................. 9 Methodology of the study ................................................................................................................................. 9 Types of resident enterprises of the industrial park .................................................................. 11010 Legal expertise on the Law provisions regarding the establishment of Industrial Parks ... 14 Incentives provided upon the creation and functioning of industrial parks .................. 16 Legal compliance of the industrial park management company ......................................... 16

1.4.1 1.4.2

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 Net foregin investment flow ................................................................................................................ 21 2.1.1

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 2.2.2 Historical evolution of the Production Complex Uzina de tractoare din Chisinau ... 26 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 2.3.2 2.4 2.5 Industry........................................................................................................................................................ 41 Investment actvity ................................................................................................................................... 43

Human potential of the region necessary for the park activity ...................................................... 46 Regional infrastructure (zonal) required in the industrial park activity ................................... 51 Transport infrastructure ...................................................................................................................... 52 Drinking-water supply network ........................................................................................................ 53 Drainage network .................................................................................................................................... 54 Heating energy supply ........................................................................................................................... 55 Natural gas supply ................................................................................................................................... 55 Power energy............................................................................................................................................. 55 MIneral resources .................................................................................................................................... 55 Waste management ................................................................................................................................ 55

2.5.1 2.5.2 2.5.3 2.5.4 2.5.5 2.5.6 2.5.7 2.5.8 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

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 3.1.2 Public capital company.......................................................................................................................... 66 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 3.2.2 Procedure for merger through absorption ................................................................................... 71 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 3.3.2 3.3.3 3.3.4 3.3.5 Lease of the assets of the joint stock companies......................................................................... 78 The effects of changing the owner of the leased estate............................................................ 81 The legal consquences of improvement of the leased assets ................................................ 82 The lease of assets where they are qualified as unused assets of the enterprises ....... 83 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 6 6.1 6.2 6.3 Operational activity of the management company of the industrial park ............................... 100 Impact assessment .......................................................................................................................................... 105 Indirect Impact forecast (multiplicative economic effect) ............................................................. 108 Investment appraisal ..................................................................................................................................... 108 3 Social and economic impacts of the industrial park on the regional development ....................... 105

6.3.1 7 7.1

Opinions ..................................................................................................................................................... 109

Environmental impact assessment upon the creation of an industrial park ................................... 110 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 4

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 5

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 UNIDOs 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

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 Marshalls 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.

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Economics of agglomeration cities, industrial location, and regional growth. Masahisa Fujita 2002. Cambridge University, UK. 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.

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
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.

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)

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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

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 states contribution or from that of the administrative-territorial unit (Law Nr. 121 of 04.05.2007 on administration and deetatization of public property). States 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 publicprivate capital, that is, commercial companies whose registered capital is not formed entirely from states contribution neither from states 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) .
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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;

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 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.

17

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 20092011, 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 20082011: Creation of three industrial parks in the regional growth area until 2011.

 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

19

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

20

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 # Gross final consumption Remittances Imports Exports 1999 2009 % of GDP Pos. ECA % of GDP Pos. ECA 115,3 5 150,5 2 9,5 4 22,4 2 67,4 9 72,4 3 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.

Europe and Central Asia reference region in the World Bank statistics, comprising 58 countries, including Europe and former USSR states
7

21

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 # 1 2 3 4 5 6 2009 Area Real estate transactions Trade Construction Manufacturing Ind. Transports & Communication s Other % 73,1 23,5 22,5 14,2 13,3 7,6 2008 Area Financial activities Trade Real estate transactions Manufacturing Ind. Transports & Communications Agriculture % 36, 5 27, 8 13, 5 9,5 5,9 2,6 2007 Area Financial activities Real estate transactions Trade Manufacturing Ind. Constructions Transports & Communication s % 37,1 29,4 15,7 5,8 5,1 4,1 2006 Area Transports & Communicatio ns Trade Real estate transactions Manufacturin g Ind. Financial activities Constructions % 26,9 24,2 15,5 15,2 15,0 2,0

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# 7 8 9 10 11

2009 Area Health Hotels & Restaurants Agriculture Financial activities Energy, gas, water

% 6,9 4,6 2,1 -14,6 -53,3

2008 Area Constructions Other Hotels & Restaurants Health Energy, gas, water

% 2,5 2,3 0,2 0,0 -0,8

2007 Area Hotels & Restaurants Other Agriculture Energy, gas, water Education

% 2,8 0,8 0,7 -1,5 0,0

2006 Area Agriculture Other Hotels & Restaurants Health

% 1,0 0,6 0,3 0,1

Energy, gas, -0,9 water Authors 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 # 1 2 3 4 5 6 7 8 9 Direct investments in registered capital Real estate transactions Financial activities Trade Transport&communications Manufacturing Industry Constructions Energy, gas, water Agriculture other Credits and loans 26,3 20,4 18,8 13,1 10,2 4,7 4,1 0,9 1,5 Financial activities Manufacturing Industry Trade Energy, gas, water Real estate transactions Transports&communications Hotels&Restaurants other 25,1 22,6 20,5 12,6 8,0 4,8 2,1 4,3

Source: NBM data, NBS publications

23

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
24

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%;
25

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 . The plant renovation project was developed by Institute from Harikov, Ukraine. In 1961 within the 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 Chiinu was founded. In 1995 and subsequently, in 1999, compliant with the privatization and restructuring Program of the former "TRACTOR PLANT IN CHIINU 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 -2. 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
26

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:
27

Table 4: Performance indicators of the companies in former Production Complex Tractor Plant in Chisinau
Dotarcom Indicators 2009 Total long-term assets, thousand lei Long-term asset decapitalization 2006-2009, thousand lei Asset decapitalization coefficient % Total asset rentability Long-term material asset rentability Total liquidity ratio (N=2.0-2.5) Operational activity result: profit (loss) per employee, lei Sales revenue per employer, lei Bankruptcy risk (Altman's score N>2.675) 2661,9 2009 1730,4 2009 338,8 2009 15437,6 2010 x 2009 16576,4 2009 494,5 2009 2683,5 2010 x 2009 1967,7 2010 x 2009 1694,0 2010 x MaPasAuto Bicotra Forjacom Presudor Zidarul Reupes Aralit Radiator

267,7

26,8

76,7

2415,5

1204,7

373,5

449,4

327,5

180,0

9 -9% -25%

2 -10% -13%

18 -9% -28%

14 -4% -4%

x -3% -4%

7 -7% -7%

43 -40% -82%

14 -32% -6%

x 5% 11%

14 -17% -32%

x 2% 5%

10 -16% -26%

x -2% -4%

7,40

1,49

1,09

0,83

0,86 4760 3 4158

1,55

0,97

1,75

2,12

1,76

1,85

1,35

1,25

-6911

-14797

-4771

-47373

-141719

-63470

-22264

2981

-8532

1186

-15415

-2009

39437

20803

5795

518

1043

31249

18313

74245

35061

43976

34272

1,68

0,63

0,68

0,79

0,89

-2,23

0,48

1,99

0,93

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 JSC Forjacom JSC Zidarul-SV JSC MaPasAuto JSC Presudor Total State budget debts, thousand lei 90,8 41,8 38,2 31,0 201,8

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 JSC Forjacom JSC Zidarul-SV JSC MaPasAuto Total Debts to the Social Insurance Fund, thousand lei 54,2 116,3 72,6 243,1

Salaries payable during the same operating time amounted to 1203,1 thousand lei.
Table 7: Personnel debts except JSC Tracom Company JSC Radiator JSC Zidarul-SV Personnel debts, thousand lei 515,0 395,9

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JSC Bicotra Total

391,2 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.
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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 -70 and -70. 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:

Main asembly conveyor

Production subdivisions

Auxiliary subdivisions

Service subdivisions

Production related transport

Repairs sector Assembly subdivisions Testing subdivision

Storehouse

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.
30

TDC warehouse

Finished tools storages

Sets storages

Building repair and maintenance

Mechanical

Electrical

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 sales revenue Sales of finished products Sales of goods Total 2010 3 887 689 3 027 006 44 761 Last quarter total 427 474 196 871 10 841

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Servicing Rental revenue

442 113 373 809

111 563 108 199

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 Sales revenue Cost of sales Gross profit (global loss) Other operating revenue Commercial expenses General and administrative expenses Other operational expenses Results of operating activity: profit (loss) Result of investment activity: profit (loss) Result of financial activity: profit (loss) Result of financia&economic activity: profit (loss) Exceptional result: profit (loss) Profit (loss) of reporting period before taxation EBT Income tax expenses (savings) Net profit (loss) 40,683,832 33,598,053 7,085,779 5,388,406 565,344 6,596,456 5,112,195 200,190 45,821 29,318 275,329 0 275,329 116,872 158,457 2008 8,224,827 6,962,025 1,262,802 2,201,102 267,501 5,871,811 2,869,595 (5,545,003) 5,260,942 56,231 (227,830) 0 (227,830) -1,269,388 1,041,558 2009 6,098,898 5,310,766 788,132 1,838,299 615,127 8,223,217 2,437,920 (8,649,833) -4,961,223 576,771 (13,034,285) 0 (13,034,285) 0 (13,034,285) -13,309,614 -116,872 -13,192,742 -4,834.1% -100.0% -8,325.8% 2009 versus 2007, +/-34,584,934 -28,287,287 -6,297,647 -3,550,107 49,783 1,626,761 -2,674,275 -8,850,023 -5,007,044 547,453 -13,309,614 -85.0% -84.2% -88.9% -65.9% 8.8% 24.7% -52.3% -4,420.8% -10,927.4% 1,867.3% -4,834.1%

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As on 01.10.2010:
Expenditure category Total consumption and expenses Material consumption and expenses Amortization Salary expenditure (incl. state and medicine insurance) Other operational expenditure Net profit 01.10.2010 6 542 298 1 242 385 132 725 3 703 082 1 464 106 1 061 916 Last quarter 1 948 697 208 979 41 949 1 222 907 474 862 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 Up to 35 y.o. between 35-45 y.o. between 45-55 y.o. over 55 years Total No. of people 12 11 39 47 109 Share in total staff 11,0% 10,1% 35,8% 43,7% 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 University degree Secondary education Unskilled workers Total No. of people 22 38 49 109 Share in total employed staff 20,2% 34,9% 44,9% 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 Compensation claims 292 717 33 597

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Credit amount and interest payments Debts to the state budget Debts to the Social Insurance Fund Debts to the Medical Insurance Fund Other creditors Total

387 956 2 500 321 492 731 149 804 737 584 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
ASSETS I. Long-term assets Non-tangible assets Fixed assets Long-term financial assets Other long-term assets TOTAL CHAPTER 1 II. Current assets Goods and material stocks - materials - short-term objects of small value - products - goods - other Short-term receivables Monetary means Other current assets TOTAL CHAPTER II TOTAL GENERAL ASSETS 5 444 43 164 378 1 204 526 446 331 44 820 679 22 994 946 8 286 478 7 276 126 5 285 976 355 744 1 790 622 4 243 509 28 236 27 364 27 294 055 72 114 734

2008
-2 320 -1 356 632 0 -83 988 -1 442 940 859 849 -1 347 331 -1 475 253 3 699 353 -11 925 -4 995 -3 082 915 86 931 22 450 -2 113 685 -3 556 625

2009
-2 205 -5 371 610 592 090 -20 261 -4 801 986 -5 009 807 -824 208 -1 476 406 -2 695 644 10 054 -23 603 -113 148 -18 694 113 099 -5 028 550 -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).
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Table 14: Asset weight in JSC Tracom capital ASSETS I. Long-term assets Intangible assets Fixed assets Long-time financial assets Other long-term assets TOTAL CHAPTER 1 II. Current assets Goods and materials stocks - materials - short-term objects of small value - products - goods - other Short-term receivables Monetary means Other current assets TOTAL CHAPTER 2 TOTAL GENERAL ASSETS 0,0% 59,9% 1,7% 0,6% 62,2% 31,9% 11,5% 10,1% 7,3% 0,5% 2,5% 5,9% 0,0% 0,0% 37,8% 100,0% 0,0% 61,0% 1,8% 0,5% 63,3% 34,8% 10,1% 8,5% 13,1% 0,5% 2,6% 1,7% 0,2% 0,1% 36,7% 100,0% 0,0% 62,0% 3,1% 0,6% 65,7% 32,1% 10,4% 7,4% 10,7% 0,6% 3,0% 1,8% 0,2% 0,3% 34,3% 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 productions 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.

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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
36

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 Absolute liquidity ratio (0.20-0.25) Interim liquidity ratio (0.7-1.0) Total liquidity ratio (2.0-2.5) 0.00 0.45 2.88 2008 0.02 0.21 4.02 2009 0.01 0.13 2.06 2009 compared to 2007, +/0.01 231.6% -0.32 -0.82 -70.5% -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 Gross profit margin Profit margin from operating activities Net profit margin Sales cost margin 17.4% 0.5% 0.4% 82.6% 2008 15.4% -67.4% 12.7% 84.6% 2009 12.9% -141.8% -213.7% 87.1% 2009 versus 2007, +/-4.5% -142.3% -214.1% 4.5%

Over the last 3 years companys 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

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2007 Return on home equity (ROE) Return on total assets (ROA) Return on shared equity (ROI) 0.3% 0.4% 0.3%

2008 1.7% -0.3% 2.0%

2009 -26.6% -22.2% -24.9%

2009 versus 2007, +/-26.9% -22.6% -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 Net asset accounts (NAA) Working capital (WC) Need for working capital (NWC) Net treasury (NT) 61 296 018 17 807 537 17 751 937 55 600 2008 62 296 827 18 919 088 18 754 107 164 981 2009 48 954 156 10 378 403 10 119 017 259 386 2009 versus 2007, +/(12 341 862) ( 7 429 134) ( 7 632 920) 203 786 -20.1% -41.7% -43.0% 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 Debt rate (<1) Indebtedness ratio (<=2) Solvency ratio (financial risk) (<=1) 0.15 0.18 0.02 2008 0.09 0.10 0.00 2009 0.17 0.20 0.00 2009 versus 2007, +/0.02 0.02 (0.02) 10.9% 13.1% -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.
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Table 20: Bankruptcy probability index of JSC Tracom Bankruptcy probability index Altmans "Z" score Assets mobilization degree Assets return Self-financing ratio Equity ratio in sources The rotation speed of assets x x x x x x 2007 0.38 0.12 0.73 0.56 2008 0.99 0.37 -0.07 0.15 0.76 0.12 2009 0.54 0.34 -0.13 -0.06 0.89 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

POSSIBILITY TO ATTRACT RESIDENTS IN THE INDUSTRIAL PARK

AND

An industrial park is proposed to be established on the territory of former Production Complex Uzina de Tractoare din Chiinu, 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
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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 JanuaryDecember 2009. The average monthly salary of a worker in the economy of Chisinau in JanuaryDecember 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.

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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,
41

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 Total Mun. Chiinu Northern distr. Central distr. Southern distr. ATU Gagauzia micro 31095 21034 3668 4182 1450 761 small 8329 5104 1252 1185 538 250 medium 1685 880 327 262 144 72 large 1012 675 138 109 63 27 total 42121 27693 5385 5738 2195 1110 Total/1000 people of working age 17,7 47,0 8,5 8,2 6,2 10,5

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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 countrys 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

Number of enterprises Average number of employers Sales revenues, mn. lei Financial result before taxation. Profit (+) Loss (-), mn lei

2007 26 327 317 192 111 664,66 9 100,00

2008 27 693 322 515 129 377,74 11 784,14

2009 29 376 305 150 108 718,95 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

Fixed investments

In 2010, % versus 2009 joint (public and Total public private private) foreign of joint ventures 99 119,8 89 82,9 79,8 109,6 43

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

National average Mun. of Chiinu North distr. Central distri. South distr. ATU Gagauzia

2003 948,4 2294,8 684,6 391,1 640,1 888,4

2004 1305,1 3350 782 576,5 903,2 999,4

2005 1958,4 5115,8 1071 891,6 1296,6 1723,3

2006 2672,3 7122,8 1666,8 1221,4 1429,4 1325,4

2007 3689,1 10611,4 1935,3 1785,5 1583,1 1501,6

2008 4239,6 12877,8 2102,2 1661,3 1328,6 20006,3

2009 2707,0 5585,1 1412,9 1065 1256 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.

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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;
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 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

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Table 26: The territorial distribution of the population in the Chisinau municipality, thousand

Total Urban population of which: Chisinau total Botanica Buiucani Centre Ciocana Rcani towns: Codru Cricova Durleti Sngera Vadul lui Vod Vatra Condria Colonia Ghidighici Dobrogea i Revaca Bcioi Bubuieci Budeti Ciorescu Cruzeti Grtieti Tohatin Trueni Stuceni

Census data as of 05.10.2004 712,2 644,2 589,4 156,6 107,8 90,5 101,8 132,7 14,3 9,9 15,4 7,4 4,6 3,3 0,7 3,3 5,1 4,3

01.01.2006 717,9 648,9 593,8 157,6 108,6 91 103 133,6 14,4 9,9 15,5 7,4 4,6 3,3 0,7 3,3 5,1 4,2

01.01.2007 755,1 686,1 630,3 171,1 110,7 93,5 117,3 137,7 14,4 10 16,1 7,4 4,5 3,3 0,7 3,3 5,1 4,2

01.01.2008 755,2 686,1 630,3 171 110,7 93,5 117,3 137,7 14,4 10 16,1 7,4 4,5 3,3 0,7 3,3 5,1 4,2

01.01.2009 755,9 686,5 630,6 171,1 110,8 93,5 117,3 137,8 14,4 10 16,2 7,5 4,5 3,3 0,7 3,4 5,1 4,2

01.01.2010 756,6 686,7 630,8 171,2 110,9 93,4 117,5 137,8 14,4 10 16,2 7,5 4,5 3,3 0,7 3,4 5,1 4,2

Rural population (villages)

Communes 10,6 6,7 5 7,1 1,7 6,2 2,5 8 6,8 10,5 7,1 5 7,1 1,7 6,3 2,5 8,2 7,4 10,5 7,1 5 6,9 1,7 6,3 2,5 8,2 7,5 10,5 7,1 5 6,9 1,7 6,3 2,5 8,3 7,5 10,5 7,2 5,1 7 1,7 6,3 2,5 8,3 7,6 10,6 7,3 5,1 7 1,7 6,3 2,5 8,3 7,6

In the age profile, over 70% of the Chisinau municipality population is of working age (1556 years old), which is a significant production factor which can be exploited through the creation of the industrial park:

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Table 27: Municipality population by age, 01.01.2010

Age group, years Total
Of which: :

Total 756643 99958 27735 33580 66437 556090 100595

Urban population 686751 87649 24386 29503 58283 506058 93044

Rural population 69892 12309 3349 4077 8154 50032 7551

0-14 3-6 3-7 7-16 15-56/61 57/62 and over

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 Agriculture, hunting Extractive industry Manufacturing industry Power and thermal energy, gas, water Constructions Wholesale and retail trade Hotels and restaurants Transport and communications Financial activities Real estate transactions Public administration Education Health and social care Other collective, social and personal services 5,1 0,8 43,4 8,1 15,3 34,9 7,4 25,5 12 26,3 19,5 32,1 22,4 11,1 Share, % 1,9 0,3 16,4 3,1 5,8 13,2 2,8 9,7 4,5 10 7,4 12,2 8,5 4,2 2009 4,5 0,7 39,2 8,1 12 34,8 7 24,9 11,8 27,3 20,9 32,8 23,5 11 Share, % 1,7 0,3 15,2 3,1 4,6 13,5 2,7 9,6 4,6 10,6 8,1 12,7 9,1 4,3

The average monthly salary paid in the industrial sector in Chisinau is of cca. 3300 lei (fig. 15).

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Figure 15: Average monthly salary by type of activity, mun. of Chisinau, 2009, lei

1 2 3 4 5 6 7 8

Financial activities Power and thermal energy, gas, water Transport and communications Public administration Extractive industry Real estate transactions Construction Manufacturing industry

9 10 11 12 13 14 15

Health and social care Other collective, social and personal services Wholesale and retail trade Education Agriculture, hunting and forestry Hotels and restaurants Fishing and fish-farming

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:

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Table 29: All level education, mun. of Chisinau, 2009

2003/200 4 Number of institutions Number of students Teaching personnel Students per teacher Number of institutions Number of students full time part time Teaching personnel Students per teacher Number of institutions Number of students full time part time Teaching personnel Students per teacher 26 7881 636 12,4 31 11197 10332 865 1083 10,3 34 90194 61596 28598 4974 18,1 5 24 7690 694 11,1 28 14643 13916 727 1200 12,2 28 99110 67117 31993 5161 19,2 2004/200 2005/2006 2006/2007 2007/2008 2008/2009 2009/2010

Secondary vocational education 21 8151 725 11,2 25 16744 of which: 15961 783 1286 13 Higher education 28 109274 of which: 71625 37649 5516 19,8 72437 38842 5875 18,9 71273 36225 5742 18,7 66693 33756 5674 17,7 70995 27081 5714 17,2 25 25 25 27 98076 21 7759 696 11,1 23 18572 17852 720 1307 14,2 19 7812 674 11,6 22 19034 18507 527 1370 13,9 19 8044 654 12,3 21 19822 19570 252 1694 11,7 19 7081 658 10,8 21 19065 19065 1697 11,2

Secondary specialized education (colleges)

111279

107498

100449

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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, ChisinauDubasari-Poltava, Chisinau-Leuseni, Chisinau-Soroca-Ukraine, Chisinau-GiurgiulestiRomania, the national roads with access to road communications in the neighbouring countries Chisinau-Ungheni-Romania, Chisinau-Basarabeasca-Ukraine, Moldova-BolgradIsmail, 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
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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 - Iai - Chiinu - 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, Stuceni, 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 53

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) Length of the drainage networks of which: Main collectors Street network Neighbourhood network Year 2005 911,80 71,00 368,50 472,30

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 Trueni (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.

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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 oldneti-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, Miletii 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.
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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 ".

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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 1 2 3 4 5 Company name TRACOM JSC REUPIES JSC RADIATOR JSC ARALIT JSC BICOTRA JSC Total are of the land plot, m2 207 477 8 443 15 100 9 386 6 296 Area of buildings in property, m2 82 496 6 652 10 331 5 800 4 703 Production area, m2 44 301 5 140 8 640 5 632 4 278

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6 7 8 9 10

ZIDARUL-SV JSC PRESUDOR JSC DOTARCOM JSC FORJACOM JSC MAPASAUTO JSC Total

13 200 28 800 5 818 14 735 19 625 328 880

11 000 21 287 5 286 10 380 40 33 161 968

9 000 1 5978 4 032 8 644 1 790 107 435

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 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 Construction F Main unit A-A Main unit B, B1, B2, B3, B4, B5, B6 Main unit A, W,R,Q Main unit C-C Main unit B-B Main unit F-F Main part -10 Main part S-S Main part P-P Main part 2 Main part I Main part G Main part 3 Main part P Main part L Main part T Main part O Main part C Main part M-M Main part L-L Main part N-N Main part - Main part G-G Main part K-K Main part Z-Z Main part PT Main part FI Main part G Cadastral no. 01.00518.184.01 01.00518.184.03 01.00518.184.04 01.00518.184.05 01.00518.184.06 01.00518.184.07 01.00518.184.08 01.00518.184.10 01.00518.184.11 01.00518.184.12 01.00518.184.13 01.00518.184.14 01.00518.184.14 01.00518.184.15 01.00518.184.16 01.00518.184.17 01.00518.184.18 01.00518.184.19 01.00518.184.20 01.00518.184.21 01.00518.184.22 01.00518.184.23 01.00518.184.24 01.00518.184.25 01.00518.184.26 01.00518.184.27 01.00518.184.28 01.00518.184.29 01.00518.184.30 Area 142,80 1 662,40 1 929,40 1 441,30 2 151,90 138,20 1 019,40 39 562,80 5 713,90 6 356,80 107,70 308,90 821,00 95,90 967,30 302,50 207,21 1 102,10 1 013,10 523,90 40,30 81,10 414,90 741,60 63,30 155,00 119,70 151,50 75,60 Destination (production warehouse, admin. building) Production Warehouse N17 Production Administrative building Administrative building Warehouse Air compression Division Production Unit Production Unit Warehouse Power transformer station Warehouse Production, warehouse Power transformer station Production Building and antifire boxes Garage Construction Production unit Production Water circulation pumping station Ancillary building Neutralization and cleaning station Ancillary building Warehouse Fire station Fuel Pump Station Thermal substation Passing point Ancillary building

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30 31

Commercial construction - Main part A Total

01.00518.184.59 01.00518.184.217 -

126,00 65,70 67 603,21

Commercial construction Gasification station -

The former Production Complex Tractor Plant in Chisinau underwent two construction phases throughout its history - the construction carried out over the 1930-1940 and 19701980 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):

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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 () 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

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Electricity supply is provided through high voltage electricity wires from Chisinau. The central point of distribution (P-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.

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Railroad. The railway transportations are performed through Calea ferat 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 (ATC-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, publicprivate 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 Registered capital No. 1 2 3 4 5 6 7 8 9 10 Company name "Tracom JSC "Bicotra" JSC "Aralit" JSC "Radiator" JSC "Reupes" JSC "Zidarul-SV" JSC "Presudor" JSC "Forjacom" JSC "Dotarcom" JSC "Mapasauto" JSC Total no. of shares 2 274 887 31 635 104 753 45 723 139 873 259 090 377 667 326 817 50 156 79 490 thousand lei 52 322,40 632,70 2 199,81 2 148,98 2 098,10 3 627,26 8 686,35 7 516,81 1 153,59 1 828,28 82 214,29 Price 1 share 23 20 21 47 15 14 23 23 23 23 Share of the state No. shares 2 114 024 19 340 77 396 32 169 108 064 234 170 341 713 310 167 33 604 65 410 3 336 057 thousand lei 48 622,55 386,80 1 625,32 1 511,94 1 620,96 3 278,38 7 859,40 7 133,84 772,89 1 504,43 74 316,51 % 92,93 61,13 73,88 70,36 77,26 90,38 90,48 94,91 67,00 82,29

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
1. " Tracom JSC 2. " Bicotra " JSC

IP residents

Contracts

Newly established public capital company, management company of the industrial park

Fiduciary . management agreements

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

or
JSC Tracom IP Management company
IP residents Contracts Fiduciary . management agreements
1. " Tracom JSC" 2. " Bicotra " JSC

Public-private company

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

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 The establishment of the fiduciary management avoids the liquidation of the 10 joint stock companies Possibility to consolidate the assets of the 10 joint or their reorganization into other legal forms. The 10 stock companies, without proceeding to their judicial joint stock companies can be lately reorganized, reorganization provided that these powers are included in the contract of fiduciary management The legal guaranties provided for the residents of the Flexibility in asset distribution to the future residents industrial park on the use of the ten companies

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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 The possibility to alienate, pledge, lease, etc. the assets taken under fiduciary management

assets will require additional legal relationships, such as asset lease or alienation. 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).

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
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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 worstcase 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

Absorption based on an existing legal subject

Consolidation creation of a new legal subject

JSC IP JSC Tracom

"Bicotra" SA "Radiator" SA "Presudor" SA "Aralit" SA "Reupes" SA "Mapasa uto" SA "Forjacom " SA "Radiator" SA "Zidarul SV" SA "Presudor" SA "Dotarcom " SA "Tracom SA" "Mapasa uto" SA "Forjaco m " SA "Dotarcom " SA "Reupes" SA "Zidarul SV" SA "Bicotra" SA "Aralit" SA

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.
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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 jointstock 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 1 2 3 4 Drafting the documents necessary for the reorganization by merger Performing the patrimony evaluation to determine the proportion of share conversion Convening the general meetings of shareholders Adopting the decision on the adoption through merger

10

20

30

40

50

60

70

80

90

100

110

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5 6 7 8

Disclosure of information on the reorganization through merger Creditor claims wording and the enforcement guarantees Reorganization registration with the State Register of enterprises and organizations Reorganization registration with the State Register of Securities 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 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 Consolidation of blocks of shares and the possibility industrial enterprises will need to pass the contest to to privatize the consolidated block 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

Newly established commercial company, managing company of the industrial park

Asset
Sublease

Industrial Park residents

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

Or
JSC Tracom as Management Company of the IP

Asset sublease IP residents

Asset lease
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

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
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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
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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 Short term for carrying out the transaction up to 3 months Possibility to consolidate the 10 joint stock companies, without recourse to their reorganization 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. The duration of the lease/sublease agreement may last for 30 years Realizing the capital investments for renovating the assets of the industrial park at the expense of the residents Disadvantage Impossibility to liquidate the 10 joint stock companies (tenants), though they can be reorganized through other means, such as merger Impossibility to alienate the assets to the future residents, which is a key impediment to the creation of the industrial park. Impossibility to benefit from the 0,3 tariff reduction on the annual payment for the lease of the publiclyowned land

3.3.5 OPINIONS The procedure of lease regulates and guarantees a variety of rights for both administrative company of the industrial park and for the future residents, regarding use, possession and exploitation of the improved leased assets, strengthening of existing assets, maintaining lease relationships with the park residents, also upon alienation these assets, etc.

the the the the

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.
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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"
1. "TracomJSC 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

IP Residents

Asset Sale

JSC Management Company

Asset transfer in the registered capital

Reducing the registered capital on the account of the assets sold to the residents

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
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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 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 Short-term in performing the transaction of up to 3 companies assets, since the transfer of these months companies' assets implies also the transfer of their right to asset ownership, case where the application of the law provisions mentioned becomes impossible. Inequality of the net asset value with the registered The possibility to consolidate the assets of the ten capital value. The registered capital value will joint stock companies without recourse to their permanently be lower the net asset value, since the reorganization newly established company will sell the assets to the IP residents. The State and the private minority shareholders will own only indirect shares in the registered capital of The new company shall hold the ownership of the the newly created joint stock company, as the received property as well as the right to decide on it. 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 Registered capital No. 1 2 3 4 5 6 7 8 9 10 Company name "Tracom JSC "Bicotra" JSC "Aralit" JSC "Radiator" JSC "Reupes" JSC "Zidarul-SV" JSC "Presudor" JSC "Forjacom" JSC "Dotarcom" JSC "Mapasauto" JSC Total No. of shares 2 274 887 31 635 104 753 45 723 139 873 259 090 377 667 326 817 50 156 79 490 thousand lei 52 322,40 632,70 2 199,81 2 148,98 2 098,10 3 627,26 8 686,35 7 516,81 1 153,59 1 828,28 82 214,29 Price per share 23 20 21 47 15 14 23 23 23 23 State share no. of shares 2 114 024 19 340 77 396 32 169 108 064 234 170 341 713 310 167 33 604 65 410 3 336 057 thousand lei 48 622,55 386,80 1 625,32 1 511,94 1 620,96 3 278,38 7 859,40 7 133,84 772,89 1 504,43 74 316,51 % 92,93 61,13 73,88 70,36 77,26 90,38 90,48 94,91 67,00 82,29

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 Uncertainty in identifying a strategic investor their complete obsolescence which will substantially diminish its present value Optimum conditions for a strategic investor who Additional efforts, including financial, on the shall have legal coverage and optimum guarantees identification of a strategic investor and the for the establishment and functioning of the accomplishment of the transaction industrial park Attraction of direct investments by selling the shares Can be considered as a step in establishing the blocks and implementation of the investment plan by industrial park rather than an actual solution the investor 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.

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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"

Types of resident companies in the industrial park

Zone no. 1

Zone no. 2

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

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.
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The history of former Production Complex "Tractor Plant in Chisinau" has seen two construction phases - construction performed in the 1930-1940 years and during 19701980. 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.

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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"

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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 nonpurchased 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.

See Annex: Action Plan for the establishment of the industrial park on the platform of former Production Complex "Tractor Plant in Chisinau"
9

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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.

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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.

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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 1 2 3 Projected annual electricity consumption Wire length el. energy Repair costs Total Measure unit thousand kWt/h m Quantity 7000 16569 558 943 558 943 Total, lei

Table 42: Investment plan elements: water/sewage network Category of investment costs 1 2 3 4 5 Artesian wells Length of water/sewage network Projected annual water consumption Materials (pipe diameter 140 mm) Installation costs Total Measure unit units m m3 m x Quantity 2 9500 12600 9500 x Total, lei

3 800 000 1 140 000 4 940 000

Table 43 Investment plan elements: road/railroad network 1 2 Category of investment costs Auto roads length Road area in need of repair Measure unit m m2 Quantity 4100 2000 Total, lei

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3 6

Current repair costs Railway length Railway length in need of repair Total

x m m

2000 3200 2600

900 000 2 870 000 3 770 000

Table 44: Investment plan elements: telecommunications 1 2 Category of investment costs Change of telephone network Establishment of internet network Total Measure unit x Total, lei 300 000 100 000 400 000

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 1. 2. 3. 4. 5. Category of investment costs Electrical energy network Water/sewage Roads/railroads Telecommunications Other investment costs Lei 558 943 4 940 000 3 770 000 400 000 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;

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 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 Production area Other buildings, incl. administrative Equipment investments 107 435 54 533 x x Total Repair cost per unit, Lei 2 720 2 720 Total, Lei 292 223 200 148 329 760 308 387 072 748 940 032

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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. 2. 3. 4. 5. 6. 7. 8. Total area, m2 Cost per 1m2 repair of administrative buildings Total cost for administrative building repairs Period of usage, months Annual interest Investment cost 1m2 per month Average rental price 1m2 in Chisinau Rental price 1m2 for residents 54 533 170 9 270 610 180 6% 2,26 6,00 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 15year 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
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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 Rental price in Chisinau11 Rental coefficient12 Total rent, lei/m2 19 873,34 10% 0,5 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 Rendering electrical supply services, thousand kWh Rendering water supply services, m3 Telecommunication services 500 7 000 126 000 360

The following tables show the financial and economic evolution of the IP management company, seen through the projected financial result and cash flow.

Law on the normative price and the procedure for land sale-purchase Ibidem 12 Applying the up to 0.3 reduction coefficient by the management company, Law on industrial parks
10 11

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Table 50: Projected financial result of the IP managing company (a)

Report on financial results Net sales V?nz?ri nete ofm?rfurilor sold goods --Cost Costul v?ndute materials parts materiale and ?i componente Gross Profit Profitul brut Profit before taxation Profit p?n? la impozitare tax pe profit --Profit Impozitul Net Profit Profitul net (loss) (pierdere) --dividends dividende =undistributed profit = profit nerepartizat calculated leasing payments pl??i de leasing calculate 2012 1 372 796 76 197 76 197 1 296 599 1 296 599 181 524 1 115 075 0 1 115 075 1 115 075 2013 1 441 435 80 007 80 007 1 361 429 1 361 429 190 600 1 170 829 0 1 170 829 2 285 904 2014 1 513 507 84 007 84 007 1 429 500 1 429 500 200 130 1 229 370 0 1 229 370 3 515 274 2015 1 589 183 88 207 88 207 1 500 975 1 500 975 210 137 1 290 839 0 1 290 839 4 806 113 2016 1 668 642 92 618 92 618 1 576 024 1 576 024 220 643 1 355 381 0 1 355 381 6 161 494 2017 1 752 074 97 248 97 248 1 654 825 1 654 825 231 676 1 423 150 0 1 423 150 7 584 643 2018 1 839 677 102 111 102 111 1 737 567 1 737 567 243 259 1 494 307 0 1 494 307 9 078 951 2019 1 931 661 107 216 107 216 1 824 445 1 824 445 255 422 1 569 023 0 1 569 023 10 647 973 2020 2 028 244 112 577 112 577 1 915 667 1 915 667 268 193 1 647 474 0 1 647 474 12 295 447 2021 2 129 657 118 206 118 206 2 011 450 2 011 450 281 603 1 729 847 0 1 729 847 14 025 294 2022 2 150 953 119 388 119 388 2 031 565 2 031 565 284 419 1 747 146 0 1 747 146 15 772 440 2023 2 172 463 120 582 120 582 2 051 881 2 051 881 287 263 1 764 617 0 1 764 617 17 537 057 2024 2 194 187 121 788 121 788 2 072 399 2 072 399 290 136 1 782 264 0 1 782 264 19 319 321 2025 2 216 129 123 006 123 006 2 093 123 2 093 123 293 037 1 800 086 0 1 800 086 21 119 407

Table 51 Projected financial result of the IP managing company (a)

Report on financial results Net sales V?nz?ri nete ofm?rfurilor sold goods --Cost Costul v?ndute materials parts materiale and ?i componente Gross Profit Profitul brut Profit Profit p?n? before la impozitare taxation --Profit Impozitul tax pe profit Profitul net (loss) (pierdere) Net Profit --dividends dividende = profit nerepartizat =undistributed profit pl??i de leasing calculated leasingcalculate payments 2027 2 260 673 125 478 125 478 2 135 195 2 135 195 298 927 1 836 268 0 1 836 268 24 773 762 2028 2 283 280 126 733 126 733 2 156 547 2 156 547 301 917 1 854 631 0 1 854 631 26 628 393 2029 2 306 113 128 000 128 000 2 178 113 2 178 113 304 936 1 873 177 0 1 873 177 28 501 569 2030 2 329 174 129 280 129 280 2 199 894 2 199 894 307 985 1 891 909 0 1 891 909 30 393 478 2031 2 352 466 130 573 130 573 2 221 893 2 221 893 311 065 1 910 828 0 1 910 828 32 304 306 2032 2 375 990 131 879 131 879 2 244 112 2 244 112 314 176 1 929 936 0 1 929 936 34 234 242 2033 2 399 750 133 198 133 198 2 266 553 2 266 553 317 317 1 949 235 0 1 949 235 36 183 477 2034 2 423 748 134 530 134 530 2 289 218 2 289 218 320 491 1 968 728 0 1 968 728 38 152 205 2035 2 447 985 135 875 135 875 2 312 110 2 312 110 323 695 1 988 415 0 1 988 415 40 140 620 2036 2 472 465 137 234 137 234 2 335 232 2 335 232 326 932 2 008 299 0 2 008 299 42 148 919 2037 2 497 190 138 606 138 606 2 358 584 2 358 584 330 202 2 028 382 0 2 028 382 44 177 301 2038 2 522 162 139 992 139 992 2 382 170 2 382 170 333 504 2 048 666 0 2 048 666 46 225 967 2039 2 547 383 141 392 141 392 2 405 991 2 405 991 336 839 2 069 153 0 2 069 153 48 295 120 2040 2 572 857 142 806 142 806 2 430 051 2 430 051 340 207 2 089 844 0 2 089 844 50 384 964 TOTAL 62 030 136 3 442 969 3 442 969 58 587 167 58 587 167 8 202 203 50 384 964 0 50 384 964

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Table 52: Projected cash flow of the IP management company (a)

Monetary means report Sales din revenue Venituri v?nz?ri Materials and components expenses Cheltuieli pentru materiale ?i componente Taxes Impozite Cashflow from operational activity Fluxul monetar din activitatea opera?ional? Investi?ii Short term ?n capitalul capital investments circulant Fluxul monetar din activitatea investi?ional? Cashflow from investment activity Fluxul monetar din activitatea financiar? Cashflow from financial activity Flux monetar total pe perioada Total Cashflow Mijloace b?ne?ti la sf?r?itul perioadei Monetary means at the end of the period 2012 1 619 899 -89 912 -414 912 1 115 075 63 082 63 082 0 1 178 157 1 178 157 2013 1 700 894 -94 408 -435 657 1 170 829 3 154 3 154 0 1 173 983 2 352 140 2014 1 785 938 -99 136 -457 439 1 229 363 3 312 3 312 0 1 232 675 3 584 814 2015 1 875 235 -104 080 -480 313 1 290 842 3 478 3 478 0 1 294 320 4 879 135 2016 1 968 997 -109 293 -504 327 1 355 377 3 651 3 651 0 1 359 028 6 238 163 2017 2 067 447 -114 753 -529 544 1 423 150 3 834 3 834 0 1 426 984 7 665 147 2018 2 170 819 -120 497 -556 020 1 494 302 4 025 4 025 0 1 498 327 9 163 474 2019 2 279 360 -126 505 -583 824 1 569 031 4 227 4 227 0 1 573 259 10 736 732 2020 2 393 328 -132 839 -613 014 1 647 475 4 438 4 438 0 1 651 913 12 388 645 2021 2 512 995 -139 490 -643 663 1 729 841 4 660 4 660 0 1 734 501 14 123 146 2022 2 538 125 -140 881 -650 100 1 747 143 979 979 0 1 748 122 15 871 268 2023 2 563 506 -142 279 -656 603 1 764 624 989 989 0 1 765 613 17 636 881 2024 2 589 141 -143 718 -663 167 1 782 257 998 998 0 1 783 255 19 420 136 2025 2 615 032 -145 144 -669 800 1 800 089 1 009 1 009 0 1 801 098 21 221 233 2026 2 641 183 -146 597 -676 498 1 818 088 1 018 1 018 0 1 819 106 23 040 339

Table 53 Projected cash flow of the IP management company (b)

Monetary means report Sales revenue Venituri din v?nz?ri Materials and components expenses Cheltuieli pentru materiale ?i componente Taxes Impozite Cashflow from operational Fluxul monetar din activitateaactivity opera?ional? Short term capital investments Investi?ii ?n capitalul circulant Fluxul monetar din activitatea investi?ional? Cashflow from investment activity Fluxul monetar din activitatea financiar? Cashflow from financial activity Flux monetar total pe perioada Total Cashflow Mijloace b?ne?ti la sf?r?itul perioadei Monetary means at the end of the period 2027 2 667 595 -148 059 -683 263 1 836 273 1 029 1 029 0 1 837 301 24 877 641 2028 2 694 271 -149 550 -690 094 1 854 626 1 038 1 038 0 1 855 664 26 733 305 2029 2 721 213 -151 040 -696 996 1 873 177 1 049 1 049 0 1 874 227 28 607 532 2030 2 748 425 -152 554 -703 965 1 891 906 1 060 1 060 0 1 892 965 30 500 497 2031 2 775 910 -154 071 -711 006 1 910 832 1 071 1 071 0 1 911 902 32 412 399 2032 2 803 669 -155 624 -718 115 1 929 930 1 081 1 081 0 1 931 011 34 343 410 2033 2 831 705 -157 166 -725 298 1 949 241 1 092 1 092 0 1 950 333 36 293 743 2034 2 860 022 -158 747 -732 550 1 968 726 1 102 1 102 0 1 969 829 38 263 572 2035 2 888 623 -160 327 -739 876 1 988 419 1 114 1 114 0 1 989 533 40 253 105 2036 2 917 509 -161 943 -747 273 2 008 293 1 124 1 124 0 2 009 417 42 262 522 2037 2 946 684 -163 551 -754 747 2 028 385 1 136 1 136 0 2 029 522 44 292 044 2038 2 976 151 -165 193 -762 294 2 048 664 1 147 1 147 0 2 049 812 46 341 856 2039 3 005 912 -166 839 -769 918 2 069 156 1 159 1 159 0 2 070 315 48 412 170 2040 3 035 971 -168 508 -777 617 2 089 847 1 171 1 171 0 2 091 017 50 503 187 TOTAL 73 195 561 -4 062 707 -18 747 893 50 384 961 118 226 118 226 0 50 503 187

103

Table 54: Projected financial indexes of the IP management company (a)

FINANCIAL SITUATION INDICATORS Assets rentability Rentabilitatea activelor Own capital rentability Rentabilitatea capitalului propriu Long term assets rentability Rentabilitatea activelor pe termen lung Operational expenses/sales revenue Cheltuieli opera?ionale la venituri din ratio v?nz?ri (raport) Sales profitability Profitabilitatea v?nz?rilor Accountancy rentability (gross) Rentabilitateaprofit profitului contabil (brut) Net profit rentability Rentabilitatea profitului net Assets rotation Viteza de rota?ie a activelor Own capital rotation Viteza de rota?ie a capitalului propriu General Coeficientul liquidity lichidit??ii ratio generale (curente) Coeficientul lichidit??ii intermediar? Intermediary liquidity ration Coeficientul lichidit??ii absolute Total liquidity ratio Capital circulant net Net short-term capital Coeficientul general de solvabilitate General solvency ratio Coeficientul de autonomie Autonomy ratio 2012 189,0% 200,0% 5,6% 81,2% 1702% 1463% 2,33 2,46 18,20 18,20 18,20 1 115 075 0,95 17,20 2013 66,3% 68,9% 5,6% 81,2% 1702% 1463% 0,82 0,85 34,58 34,58 34,58 2 285 904 0,97 33,58 2014 41,4% 42,4% 5,6% 81,2% 1702% 1463% 0,51 0,52 50,18 50,18 50,18 3 515 274 0,98 49,18 2015 30,5% 31,0% 5,6% 81,2% 1702% 1463% 0,38 0,38 65,04 65,04 65,04 4 806 113 0,98 64,04 2016 24,4% 24,7% 5,6% 81,2% 1702% 1463% 0,30 0,30 79,19 79,19 79,19 6 161 494 0,99 78,19 2017 20,5% 20,7% 5,6% 81,2% 1702% 1463% 0,25 0,25 92,67 92,67 92,67 7 584 643 0,99 91,67 2018 17,8% 17,9% 5,6% 81,2% 1702% 1463% 0,22 0,22 105,50 105,50 105,50 9 078 951 0,99 104,50 2019 15,8% 15,9% 5,6% 81,2% 1702% 1463% 0,19 0,20 117,73 117,73 117,73 10 647 973 0,99 116,73 2020 14,2% 14,4% 5,6% 81,2% 1702% 1463% 0,18 0,18 129,37 129,37 129,37 12 295 447 0,99 128,37 2021 13,0% 13,1% 5,6% 81,2% 1702% 1463% 0,16 0,16 140,45 140,45 140,45 14 025 294 0,99 139,45 2022 11,6% 11,7% 5,6% 81,2% 1702% 1463% 0,14 0,14 156,27 156,27 156,27 15 772 440 0,99 155,27 2023 10,5% 10,6% 5,6% 81,2% 1702% 1463% 0,13 0,13 171,94 171,94 171,94 17 537 057 0,99 170,94 2024 9,6% 9,7% 5,6% 81,2% 1702% 1463% 0,12 0,12 187,44 187,44 187,44 19 319 321 0,99 186,44 2025 8,9% 8,9% 5,6% 81,2% 1702% 1463% 0,11 0,11 202,80 202,80 202,80 21 119 407 1,00 201,80 2026 8,2% 8,3% 5,6% 81,2% 1702% 1463% 0,10 0,10 218,00 218,00 218,00 22 937 494 1,00 217,00

Table 55: Projected financial indexes of the IP management company (b)

FINANCIAL SITUATION INDICATORS Rentabilitatea activelor Assets rentability Rentabilitatea capitalului propriu Own capital rentability Rentabilitatea Long term assets activelor rentability pe termen lung Operational expenses/sales revenue Cheltuieli opera?ionale la venituri din ratio v?nz?ri (raport) Sales profitability Profitabilitatea v?nz?rilor Accountancy profit rentability (gross) Rentabilitatea profitului contabil (brut) Net profit rentability Rentabilitatea profitului net Assetsde rotation Viteza rota?ie a activelor Own capital rotation Viteza de rota?ie a capitalului propriu General liquidity ratio generale (curente) Coeficientul lichidit??ii Intermediarylichidit??ii liquidity ration Coeficientul intermediar? Total liquidity ratio Coeficientul lichidit??ii absolute Net short-term capital Capital circulant net General solvency ratio Coeficientul general de solvabilitate Autonomy ratio Coeficientul de autonomie 2027 7,7% 7,7% 5,6% 81,2% 1702% 1463% 0,09 0,09 233,05 233,05 233,05 24 773 762 1,00 232,05 2028 7,2% 7,2% 5,6% 81,2% 1702% 1463% 0,09 0,09 247,95 247,95 247,95 26 628 393 1,00 246,95 2029 6,8% 6,8% 5,6% 81,2% 1702% 1463% 0,08 0,08 262,71 262,71 262,71 28 501 569 1,00 261,71 2030 6,4% 6,4% 5,6% 81,2% 1702% 1463% 0,08 0,08 277,32 277,32 277,32 30 393 478 1,00 276,32 2031 6,1% 6,1% 5,6% 81,2% 1702% 1463% 0,07 0,08 291,78 291,78 291,78 32 304 306 1,00 290,78 2032 5,8% 5,8% 5,6% 81,2% 1702% 1463% 0,07 0,07 306,10 306,10 306,10 34 234 242 1,00 305,10 2033 5,5% 5,5% 5,6% 81,2% 1702% 1463% 0,07 0,07 320,28 320,28 320,28 36 183 477 1,00 319,28 2034 5,3% 5,3% 5,6% 81,2% 1702% 1463% 0,07 0,07 334,32 334,32 334,32 38 152 205 1,00 333,32 2035 5,1% 5,1% 5,6% 81,2% 1702% 1463% 0,06 0,06 348,22 348,22 348,22 40 140 620 1,00 347,22 2036 4,9% 4,9% 5,6% 81,2% 1702% 1463% 0,06 0,06 361,98 361,98 361,98 42 148 919 1,00 360,98 2037 4,7% 4,7% 5,6% 81,2% 1702% 1463% 0,06 0,06 375,61 375,61 375,61 44 177 301 1,00 374,61 2038 4,5% 4,5% 5,6% 81,2% 1702% 1463% 0,06 0,06 389,10 389,10 389,10 46 225 967 1,00 388,10 2039 4,4% 4,4% 5,6% 81,2% 1702% 1463% 0,05 0,05 402,46 402,46 402,46 48 295 120 1,00 401,46 2040 4,2% 4,2% 5,6% 81,2% 1702% 1463% 0,05 0,05 415,68 415,68 415,68 50 384 964 1,00 414,68

104

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 impact13. 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

105

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

106

Table 56: Direct economic impact of the establishment of the industrial park (a)
2012 2013 4 795 1 568 1 174 254 1 438 9 230 2014 5 131 1 678 1 233 272 1 539 9 852 2015 5 490 1 795 1 294 291 1 647 10 517 2016 5 874 1 921 1 359 311 1 762 11 228 2017 6 285 2 055 1 427 333 1 886 11 986 2018 6 725 2 199 1 498 356 2 018 12 797 2019 7 196 2 353 1 573 381 2 159 13 663 2020 7 700 2 518 1 652 408 2 310 14 587 2021 8 239 2 694 1 735 437 2 472 15 576 2022 8 815 2 883 1 748 467 2 645 16 558 2023 9 432 3 085 1 766 500 2 830 17 612 2024 10 093 3 301 1 783 535 3 028 18 739 2025 10 799 3 532 1 801 572 3 240 19 944 2026 11 555 3 779 1 819 612 3 467 21 232

Residents net reziden?i cash flow Flux net monetar Wages disbursed by residents Salarii achitate de reziden?i Operator company net cashflow Flux monetar net compania administratoare
Salarii achitate comp. de administratre Wages disbursed by operator company

4 481 1 465 1 178 238 1 344 8 707

Taxes to the Taxe/impozite labudget buget

Total Impact direct Overall direct impact

Table 57: Direct economic impact of the establishment of the industrial park (b)
2027 2028
13 229 4 326

2029
14 155 4 629

2030
15 146 4 953

2031
16 207 5 300

2032
17 341 5 671

2033
18 555 6 068

2034
19 854 6 493

2035
21 243 6 947

2036
22 731 7 433

2037
24 322 7 954

2038
26 024 8 511

2039
27 846 9 106

2040
29 795 9 744

Total

Residents netrezideni cash flow Flux net monetar Wages disbursed by residents Salarii achitate de rezideni Operator net cash flow Flux monetarcompany net compania administratoare Wages disbursed by operator company Salarii achitate comp. de administratre Taxes to the Taxe/impozite la budget buget Overall direct Total Impact directimpact

12 364 4 043

1 837
655 3 709 22 609

1 856
701 3 969 24 081

1 874
750 4 247 25 656

1 893
803 4 544 27 339

1 912
859 4 862 29 139

1 931
919 5 202 31 064

1 950
983 5 566 33 123

1 970
1 052 5 956 35 325

1 990
1 126 6 373 37 679

2 009
1 205 6 819 40 197

2 030
1 289 7 297 42 891

2 050
1 379 7 807 45 771

2 070
1 476 8 354 48 852

2 091
1 579 8 939 52 148

391 422 128 005 50 503 20 746 117 426 708 102

107

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 Sales revenues, coefficient Sales revenue, euro Job creation, coefficient Job creation, places Industrial park region 1,254 554 174 1,497 902 Chisinau 1,323 584 666 1,586 955 National Economy 1,689 746 411 1,807 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

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
15

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 Direct sales impact Indirect impact sales Job creation, direct Job creation, indirect Taxes/duties NPV IRR

47 594 441 925 117 552 518 418 117 426 74 981 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.

109

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.

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 90100% 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 Particles (PM)* Maximum value mg/Nm3 50 for large units 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, 111

PH Oils and fats Cadmium Chromium (hexavalent) Chromium (total) Copper Lead Nickel Zinc Phenol AOX Benzene Benzo(a)pyrene Sulfide

miligrams per litre 6-9 10 0.1 0.1 0.5 0.5 0.1 0.5 2 0.5 1 0.05 0.05 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

Receptor Residential; Industrial; Commercial

Maximum Allowed Leq (hour), in dB(A) Day Night 07:00 22:00 22:00 07:00 55 45 70 70

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.
112

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.

113

Annexes

114

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 4 5 6

Month 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: 1,1 1,2 1,3 1,4 2 2,1 2,2 2,4 2,6 2,7 2,8 3 4 5 6 7 8 File preparation of the goods (share blocks) to be privatized. The initial sale prices calculation for the JSCs shares Tender book preparation of the investment obligations and of specific privatization requirements Press release draft elaboration The organisation of the contest Commission meeting, including: The terms and conditions of the investment contest The approval of the tender books regarding the investment bonds and additional requirements on privatization The press release approval on contest organisation Confirmation of the public dissemination of contest information Reception and registration of the contest applications Bidders' familiarization with contest conditions The contest The determination of the contest winners The preparation of minutes and press release on the contest results The publication of press release on the contest results Conclusion of sale-purchase contracts with the contest winners Monitorization of conditions regarding the fulfilment of the sale-purchase contracts PPA, Ministry of Economy

PPA PPA Ministry of Economy APP, Ministry of Economy APP, Ministry of Economy, Contest Commission Contest Commission Contest Commission Contest Commission PPA PPA PPA Contest Commission Contest Commission Contest Commission, PPA, Ministry of Economy PPA, Ministry of Economy PPA PPA, Contest Commission

10 days 1 day 10 days 1 day 3 days

5 days min 30 days during the exposure period

7 days 1 day within 30 days of the approval 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

 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 10 11 12 13 the approval of Statute amendments and additions (types of activities) Registration of amendments and addenda to the Statute at the State Chamber of Registration Elaboration of documents on the assignment of the industrial park title by JSC "Tracom" (art. 8, Law 182/2010) Document submission to the Ministry of Economy Examination of the submitted documents and elaboration of draft Government decision on assigning JSC Tracom the IP title: 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 Company Council and Executive Body of JSC Trscom, NCFM JSC Executive Body JSC Executive Body Ministry of Economy 1 day 4 weeks 1 day 4 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.. 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

15

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 "ExpoBusiness-Chisinau", Management Company Ministry of Economy 2 weeks

17

Elaboration and promotion of the draft law amending the Law No. 625-XIII of 03.11.1995 on the "Expo-BusinessChisinau FEZ

4 weeks

STEP V. REORGANIZATION BY MERGER (ABSORPTION) OF THE JOINT STOCK COMPANIES WHERE STATE'S SHARE PACKAGES WERE NOT PRIVATIZED THROUGH INVESTMENT CONTEST

116

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 Bodies of the companies concerned

2 days

19

Convening the general meeting of the companies involved in the merger on the decision on their merger 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 Information disclosure upon companies' reorganization, including, to the companies' creditors and public bodies Contest concerning the selection of company licensed in property and securities evaluation of the involved joint stock companies Property and security evaluation of the involved joint stock companies Obtaining the company's reorganization authorization from the National Commission of Financial Market Elaboration of draft documents related to the reorganization by merger: 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 Convening general meetings by each company involved in the reorganization through merger Convening general meeting of shareholders in each absorbed company that will adopt decision on: 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 Convening general meeting of shareholders of JSC Tracom that will adopt decision on: 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;

4 weeks

22 20 21 23 24

Bodies of the companies concerned Bodies of the companies concerned Evaluating company Bodies of the companies concerned Working group

15 days 4 weeks 3 weeks 1 day 4 weeks

25 25,1

Bodies of the companies concerned Bodies of the absorbed companies

4 weeks 4 weeks

25,2

JSC Tracom Executive Body

4 weeks

117

changes and additions to the statute. 26 27 28 Reorganization registration in the state Register of legal entities and organisations Making reorganization-related entries in the State Register of Securities 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. The state chamber of registration National Commission Financial Market Independent Registry 1 week 1 week 1 week

118