Moldova, a place you should consider when investing in IT

Travelling through European countries I noticed that most of them are swept by the same trend: they aim to become a regional center for start-ups, new technologies and innovation. No doubts chances of success are high, except for one little detail: cost. Maintaining a team of good developers is not the cheapest thing.

Operational costs (salaries and rent) in the United States and Western European countries are very high. That’s why many businesses have turned to outsource to countries that are still in transition. Some more courageous entrepreneurs have opened offices in Moldova, a tiny country in Eastern Europe, located between Ukraine and Romania.

Location, Internet. What else?

Location alone should not be enough for one to make an investment decision. There are other factors that should be taken into consideration. Few people know that Moldova’s Internet penetration rate is about 70%, or that is in the top 20 places with the fastest Internet speed in the world. (Net Index, top7 in 2013).

Salaries, pretty attractive (for investors).

One of my friends is working in the US in the tech industry and earns a salary of approximately $5–7k /month. A medium salary in Western Europe for a senior web developer is at least 4-5k € /month. Guess what, Moldova could be very attractive from this perspective: the salary for an entry-level developer starts from $300/month, a medium-level developer — about $1k, and senior developers go as high as $1.2–1.5k. It is not the best price in the world, but definitely more competitive than the ones in Berlin, London or in the US.

What about renting an office?

Another issue you should pay attention to is renting. Renting a workspace in the capital city of Moldova, Chisinau, in the city center would cost a business about 10–13$/m2 per month (about $156/m2/year). That is extremely cheap when you compare it to alternative locations. According to the Cushman & Wakefield Research, Office Space Across the World, office renting in San Francisco would cost 548 €/ m2/year, Berlin — 264 €/ m2/year, London — 743 €/ m2/year.

Renting an office of 200 sq. m. in Moldova would cost:

200 sq. m. x 13$ = $2600/month including utilities.
TOTAL: ~ $31 200/year

Taxes. The interesting part.

There is one more important thing to add: the Moldovan government has adopted a law that guarantees fiscal advantages to IT companies. Companies don’t pay any social security taxes on salaries paid to employees in excess of $400. Yes, if your employee has a salary of $1k, the company would pay taxes for only the first $400, and that would not exceed more than $100–150.

So, in the end, you could outsource to Moldova quite cheaply. I don’t know how it compares to China or India, but there’s one nice advantage: you need just 1–2 hours to get there by plane if you are in Europe. It would take a little longer from the US: about 10–12 hours.

To sum it up:

If you plan to make an IT investment, I strongly recommend taking into consideration Republic of Moldova as one of your first options.

You’ll get:

1. Low rent prices for offices;
2. Qualified work force;
3. Low salaries compared to countries like Great Britain, US, Germany;
4. Fiscal incentives for IT companies;
5. Close geographical location;
6. High Internet speed.

Moldova is also known for the low cost of living, extraordinary traditions, excellent food and famous wineries. There are many anecdotes about their hospitality, but I’ll let you find that out personally.

Just try it.

Underground winery, Moldova, PhotoCredit: PilcrowMagazine