June, 2010

Understanding Institutions and Institutional Change in Weak Post-Soviet Democracies: The Cost of "Doing Business" Reforms in Moldova

  • Olga Nicoara

    Assistant Professor of Economics, Ursinus College
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The 2010 World Bank “Doing Business” study ranks Moldova among the top 10 reformers out of 183 countries under annual evaluation. The success is attributed to a number of new policy reforms started in 2009 that aim to simplify the existing administrative processes of business formalization. However, like several other transition democracies, Moldova lacks the institutional foundations to support beneficial reforms, a fact illustrated in recent quantitative and qualitative country studies revealing a poor economic performance, lasting high levels of corruption, massive out-migration, decreasing media freedom, and frequent electoral protests and political blockades. Accordingly, the accuracy of the World Bank evaluation of the entrepreneurial environment in Moldova is questionable. The list of reforms seems to be a mere quantitative expression of the institutional change. In fact the recent “Doing Business” study seems to fail to consider the Moldovan reforms in light of the quality of the underlying institutional arrangements and their dynamics affecting the entrepreneurial environment. To correct this fault, the World Bank assessments of reform achievements should aim at a better understanding of institutions and institutional change in Moldova, and future reforms should address the causes of existing weaknesses in the institutional framework.