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Stories From The Field

This is a section for real entrepreneurs running real business in Moldova to share their experience, frustrations, lessons and insights with the community at large.

Category contains 27 blog entries contributed to teamblogs

Have you ever had one of those moments when someone says something that you have long known to be true but they way they say it makes the knowing it both stronger and clearer in an instant? This happens to me from time to time when a single turn of phrase can open up an idea more powerfully than an entire novel. This was the case recently when I was talking to a German friend with lots of experience in the Moldovan financial system who said the following. 

 

"in America or Germany the fiscal authorities are primarily concerned with uncovering fraud. In Moldova they don't look for fraud, they look for errors."

 

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minus the unibrow, this was me

 

For anyone who hasn't spent a lot of time dealing with this system day in and day out, or who has never dealt with a system like the US has let me explain a bit. In America we have what is called a "voluntary compliance" system for taxes. This means that you are expected to pay your taxes honestly and, by and large, to figure out what you owe yourself. The IRS (America's fisc for my Moldovan friends) is tasked with collecting this money and seeking out people who try to evade taxes and punishing them. Via audits, etc they seek out fraud and attempt to put tax evaders in jail. By and large they manage to do this and have managed to take down numerous major criminals and outlaws who previously avoided attempts by police, rivals and vampires to end their reign. 

 

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pictured: (left) Al Capon only hours before issuing the order
that instigated "Bloody Tuesday" which rid Chicago of Vampires.
(right) some asshole who thought he was too good to pay taxes.

 

The IRS is a much maligned organization (sometimes a too bit harshly) and rarely engenders any love from the American public. That said, what they do makes sense at some level. They look at your filings to assess if they represent a "best and good faith effort" to pay what you owe. They know that everyone makes mistakes and that the complexities of US tax code make it impossible for everyone to file a perfect return. In fact, while preparing a book supporting the Fair Tax Neil Bortz asked 7 US accounting firms and the IRS to prepare his tax return. None of the 8 returns were the same and all had mistakes. Knowing this, no one is expected to get it right 100% of the time and the IRS doesn't put you in jail for errors but just asks that you pay the difference when they are pointed out (plus penalties, etc). 

Moldova is not like this. As I mentioned in Accounting Part 1 Moldova has about 5000x more accounting overhead than a similar US company seeking to buy something as innocuous as a single onion. What I may have failed to mention in part 1 is that, as a business owner, you live in constant fear of making an error on one of the hundreds of documents you need to file in order to buy that onion because if you do you are fucked. You see they have the broad authority to come after you as dictated by a law that no one knows and fewer understand. In short, that onion will eventually see you facing the option of stringent legal consequences (unspecified and unknown by design) or paying a bribe. The complexity of the system, just like in America, means that there will be lots of mistakes. Unlike in America Moldovan government officials use that complexity as a tool to bend you over a barrel for bribes. The finding of errors lines their pockets and that is the focus of both the laws and the official implementing them. 

 

Enter the heist of the century. 

 

You know what happens when a system is geared towards extracting pennies in bribes from transactions as small as $2? Someone steals literally everything because NO ONE is watching. Am I being over dramatic here? you decide. In case you haven't been following news from Moldova someone stole about one billion dollars from three of the country's largest banks last November causing the government to inject emergency capital into the banks to cover the loss and stave off a banking system collapse. Here are a few links to get you caught up:

USA Today - CNN MoneyRFE/RL - RFE/RL (again) 

So what's a billion dollars? Well in Moldova it's 1/8 of the country's GDP... or it was before the heist. You see, much like Al-Qaeda post 9-11 the person who stole this cash realized that not only were they about to do something terrible and destabilizing but that this fact was awesome insider trading information. After the heist the Moldovan Lei collapsed and in that moment the person who stole the money in the first place made untold amounts of additional money by short selling the Lei on currency exchanges. When the dust settled from all of this 1 billion dollars was no longer 1/8 of the country's GDP - it was 1/5. That's right, they stole so much money that the value of money itself was altered. 

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that's like... a LOT of money

On face value this heist tied with the previous largest of all time by cash value. Considering that the other first place ranking is Qusay Hussein (yes, THAT Hussein) and that his "arrest" by the 101st airborn looked something like this:

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You could say that this is pretty historic company for Moldova's mastermind to be in. It doesn't really do it justice though. Simply put, a billion dollars is more money that I will likely ever see. It's objectively a lot. But 1/8 of a country's economy? That's subjectively a SHITFUCKINGMOTHERLOADHOLYHELLHOWCOULDTHATEVERHAPPENIT'SFARFARTOOMUCHTOBEPOSSIBLE ton. Otherwise known as "oodles of money."

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which is somewhat better to be in possession of than the pictured "oodles of heartburn"

 

 

For perspective, if someone stole 1/8 of the US GDP that would equal about 2 trillion dollars or, about 2x the amount the United States has spent on the Iraq and Afgan wars combined. Given that perspective the financial turbulance that Moldova faced is pretty understandable. What is not particurally understandable is how little people in Moldova seem to care. Granted, this theft took place exactly during a heated election and the weeks following it's revelation were largely a "hold onto your buts" kinda ride (many stores closed or prices literally changed between the time you picked an item up and when you got to the register). That said, far to many people have just shrugged and said "well we knew they were corrupt" (following the widespread belief that the culprits were the country's political leaders). This past weekend there was a rally in Chisinau about holding someone... literally anyone, accountable but much of the country just shrugged and went about life. 

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behold! the tapestry of apathy!

 

Moldova, I am saying this as a friend. As someone who has invested time, money, blood, sweat and not a few tears here. As an owner of a Moldovan business and a legal long term resident. This is why we can't have nice things. It's not about the fact that the laws penalize businesses while failing to punish thieving oligarcs. It's not about the fact that it takes 6 government issued documents to buy a head of lettuce. It's not about the system being rigged to steal, via bribery, 'dollars' from someone making just over a hundred dollars a month while letting millionaires steal billions. It's not even about how silly and archaic laws make everyone's life just a bit harder as they try and make an honest living. It's about what you are doing about it. Someone stole 1 billion dollars from Moldova because the system is broken and no one is trying to fix it. No one wants to go into the tough job of looking over every single fiscal law and asking "do we need this?" and "does this create a pretext for bribe collection?" and "are we seeking to punish criminals or punish those who misunderstand it?" Well someone needs to. 

Since I first wrote this post and today there has been a major protest in Chisinau over this theft (I would like to make a witty joke about how our OSE editorial process is long and nuanced but in reality we're just slow). Keep it up team. In a second update Moldova.org explained that somewhere between 10000 and 40000 people went to the protest (counting is hard) and while that's amazing more is needed. Many people are likely to say "nothing will ever change" but that's just because...

 

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In honor of the 4th I will end on this note. Leia tells Admiral Tarkin that "The more you tighten your grip, the more star systems will slip through your fingers." The Moldovan Government could learn from this. 6 documents for an onion that are checked, rechecked and ultimately lost (with their loss blamed on you, the business owner) is just the kind of tight grip that let's billions of dollars slip away into the ether with no one noticing. Put differently, in the immortal words of 38 Special, 

 

"Hold on loosely

But don't let go

If you cling too tightly to her 

You're gonna lose control, yeah, yeah, yeah"

 

 

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Hiring someone in Moldova is so hilariously convoluted and difficult that we have actually had to hire a professional HR manager as an employee of our company simply in order to file the paperwork to employee the company's founders (technically we also have an accountant and 1 employee but this would literally be just as hard hiring only ourselves). This woman has been working on site now for 2+ weeks and we are still not through the daily stacks of paperwork. Keep in mind we are 6 people (including the HR manager who is now also tasked with figuring out how to hire herself). This is all the subject of a future post I'll be writing but as a primer, I wanted to introduce you all to the world of Moldovan employment bureaucracy in the context of getting a job in the food service industry. 

While our team's collective western food service expertise is encompassed in Matt's 2 weeks at Taco Bell in high school, I have enough friends who have waited tables to know a few things. Namely, it's a hard job, but it's not necessarily a hard job to get. You walk into a restaurant, ask about openings, apply, and get in dependent on whether or not they see you as a fit. 

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no experience? that's fine! no, no we don't want to hear about any "record" - just sign on the line!


I'm not trying to oversimplify things but basically if you get the job you show up to work, they train you and you start. Hopefully by the end of the cycle payroll has you entered in and you get your check. Done and done. This is not the process in Moldova. If you want a job in food service (waiter, bartender, cook, whatever) in Moldova you need to know that...

#1 It's not the restaurant's job to train you, but the government's (but also the restaurant's?)

In order to be hired in food service in Moldova you need a health department issued little blue passport from the health department (no not THAT blue passport). This certifies a number of things from your personal hygiene to your basic knowledge on health topics. If some percentage of you are saying "that sounds reasonable" read on.

The point here is that the government has a declared responsibility for these things which they make you re-up on ever 2 years. As owners of our restaurant who plan to stand behind our own bar and serve customers legally we went through this process with the masses of teenage waiters and elderly babushka cooks. All the way through Vlad kept asking "so if my employee is found to have [name the disease of the day] and gets someone sick you're going to be legally responsible?" to which he received the reply of "no." This is also true if they cross contaminate food or outright poison someone. This basically means that there is a huge bureaucracy (spanning at least 3 offices in Chisinau) that certifies and trains people in a way that legally must be duplicated by their employers as a means to ensure that their staff are in compliance and because, at the end of the day, it's on the company's head. Needless to say there is a lot of needlessness here. If you are an employee entering the process expect a LOT of redundancy. 

#2 The government certification process was hilariously long and difficult

Go to this office and get a stamp certifying that you are you. They will print you a document with your picture and name and you will take that to another office who will stamp it. Then go to your doctor who will certify your health and stamp it. Then go to a radiologist who will give you a full torso x-ray (needed every year - sounds safe) who will also stamp it. Then go back to the first office and get them to stamp that you were at the 2nd office. 

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Getting the point? (source)

If you're lucky your company will have someone doing some of the legwork or at least telling you where to go (in our case we had Vlad who put a LOT of time in). In most cases that isn't the case though because cafes don't want to even consider people without the stamps. That means this is on you - 16 year old Moldovan teenager getting your first job. Good luck!! Consider it an "introduction to bureaucracy 101" class or a practical lesson in "how little Moldova cares about your time or theirs." In another practical lesson as to their views on privacy brace yourself because...

 

#3 There will be numerous indignities along the way

"bend over and spread your cheeks" - always fun words to hear in a government office. If you want to wait tables here you will hear them because Moldova wants to swab your ass. Twice 

 

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provided without comment

 

Dependent on how "lucky" you are that isn't the end of it either. At one office we were split into 2 groups, Vlad and Matt in one and myself and our employee in the other. They were assigned to room 7 and we were assigned to room 6 (supposed to be identical). They got their blood taken. We got our blood taken AND an STD test. For anyone who has never experienced this google it at your peril. Women get a pap smear. 

What does any of this have to do with serving tables or pouring beer at a bar? who knows. Certainly the people performing the test don't. Short of their fear that I will do unmentionable things to the food I can't imagine the need for tests of this type. Furthermore, the whole thing is endlessly silly because if I get certified an immediately contract something terrible and wind up getting someone sick the Moldovan government isn't going to so much as respond to comment. It seems like the most likely case is that they just wanna see your junk. 

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Moldova is like that one weird kid in every school who swears he isn't looking but everyone knows totally is...

#4 There will be a 7 hour health class with no point whatsoever

This past thursday I got to attend my state mandated health certification class. It was 7 hours long and I didn't quite know what to expect except that Vlad and Matt had attended the day before and said it was the most boring, senseless, soulless waste of time in the history of the world. In a sense I guess I did know what I was expecting. 

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well said... but presupposes that time wasting is a problem. We need to start a little more basic that that here (source)

Anyhow, it was that and more. Let's start by noting that this is done in the Soviet education style. There are no books, materials, visual aids, discussions or interruptions. A teacher will regurgitate from memory, at an incredible speed, the lesson that they have given 1000x before, verbatim, and you must hastily write notes. In our case the first hour and a half was a listing of all the possible fines you, your employer, your company or your suppliers might incur during the course of your work along with the sums which vary according to many factors. Basically it was a list that was read for an hour and a half. This was completely without context and was, essentially, a list of the punishments that will be visited on you for messing up various parts of that later lesson if you fail to learn them then they are taught to you.

The second part was a knowledgeable, if irrelevant, run down on "health." Basically it was a 2 year high school health curriculum crammed into 3.5 hours. I could comment on how silly it was that we all had to sit there and listen to the fact that smoking causes cancer, etc as a prelude to being allowed to work in a restaurant but honestly I haven't the heart. Most of these people had literally never heard this before and had LOTS of questions. As my class was Russian and therefore much older this was quite amazing to see (explaining this is a talk about demographics here but people who only speak Russian generally belong to the older generation). This would be a good time to say "great work" or "I appreciate your service" to any of the Peace Corps Volunteers or their Partner Teachers who work tirelessly, and in the case of the partners without official appreciation (or often pay) to teach Health in Moldovan schools. A subject that is neither taught nor appreciated at any official level. From me - big thanks to you all. I hope there was at least one person in the Romanian language room who could tell the others how and why to wash their hands because they had been exposed to that information before by a PCV (because it's unlikely otherwise literally ever in rural MD).

 

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shameless plug well deserved

Ok, enough of that. The final part of the class was a 1.5 hour session on actual kitchen and restaurant rules. Sadly these were less "helpful" and more "crazy." How many cutting boards must you have? Multiples of 9. yup, you heard that right. 9 is the minimum and they all have a specific purpose. If you want more of one you need another set so it must always be divisible by 9. Sinks? lots (post coming soon on kitchens). Want to clean with chlorine? we can tell you how to dilute it properly. Actually, we'll do better! we will read you a dilution table for 20 min so you can copy it down. 

In case you didn't gather as much this entire class could have been accomplished by 15 cents worth of handout paper. 

#5 At last half of you fail the test the first time

The test for this 7 hour class is conducted the following day. It is a verbal quiz on topics covered during the terrible lecture. If you fail you can come back the next day up to 3 times in a row. Sadly, you will not be admitted to the test unless you can prove you attended the whole class. 

Ok, so ~1/2 of everyone fails the test - must be hard right? Not really. I'm not saying it's easy, especially if you weren't exposed to health topics much in school, but it isn't hard. Honestly, the failure rate staggered us until we started looking at things from a slightly different context. Education is different here. As a product of American high school I know that when the teacher says "this is important but won't be on the test" it's a cue to sleep.

 

 

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don't even pretend that I'm alone here

 

Furthermore, while dozing if I hear the words "make sure to copy this down" or "pay attention to this point" or "THIS WILL ABSOLUTELY BE ON THE TEST," I subconsciously jolt awake and start writing (strangely this mental training carried over to Russian perfectly). Criticize me as you will but this got me through college and does for most Americans. Call it tactics

This is not well understood in Moldova. As I said before that classroom was full of people hastily scribbling notes for 7 hours. That means when the teacher said "this will not be on the test" people kept writing with just the ferocity of the key points section. This yielded a MASSIVE pack of notes for most of the students to hastily crunch in the hallway vs a few short bulleted lists my colleague and I put together on the drive over to the test. Just as the teacher said, the key points section was quizzed - the multi page chlorine dilution table that was dutifully read to us was not. 

This all gets to a much more interesting talk about education and educational systems that we don't have time for today. Suffice to say I'll end on the advice, to a fictional audience member who read this post and thinks "oh yeah - I'll go sign myself up for a little blue medical passport tomorrow!" and comes to the test - study smart, not hard. 

 

 

Tagged in: Bureaucracy Cafe
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Meet the Good Guys - the 3 Best Businesses We've Encountered in Moldova

So here's a new type of entry for us to have on OSE. Today I'd like to share with you companies that we've encountered in the course of doing business here that have stood out as great examples of how to conduct a quality business in Moldova. It's important for me to note that this list is only compiled from our experiences here so a) we have no doubt missed lots of great companies (post them in the comments below with why they're awesome and we'll try and include it in a future post!) and b) we may have judged a company as awesome from our limited experience where someone else had a different experience there. In either case take to the comments to let us know what you think! Here are the picks. They aren't ordered so don't get too hung up on the numbers except as an organizational convenience :)

Without further ado our list...

 

#1 Metro

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What are they all about? 

Everything. Metro is Moldova's sole big box store and resembles something like a Costco/Sam's Club from the US. It's a German store so it stands to reason that it's clean and efficient and generally well stocked. Metro carries everything from patio furniture to fresh fish and manages pretty well to remain relevant both as a restaurant / business supply location and a one stop shop for individuals looking for quality stuff in a western atmosphere. 

Where can they be found?

2 in Chisinau and 1 in Balti mean that Metro is never that far away. In Chisinau there's one on the north road just south of Stauceni and one on the way to the airport. 

Why are they awesome?

Other than having lots of useful stuff Metro is awesome for 2 distinct business reasons. 

1) Factura Fiscals

Remember our lengthy conversation about accounting in Moldova and all the legwork involved in buying even something as cheap as $2? The paperwork, conversations with accountants, stamps and stamps and stamps and stamps? Well at Metro there is none of that. Someone at Metro (presumably German) looked at the system and said, "wait a minute! they require 2 receipts, semi-official and super-official for any purchase but only if you're a company!? this is terrible! we want people to shop here with ease. Let's just print every single person a factura fiscal from the register and that way our customer doesn't have to worry." So that's what they did - and it's wonderful. The time everyone saves is incredible. Simply put, it makes good business sense and thank god the Germans rarely miss opportunities like that. 

2) Delivery

Metro delivers for restaurants. This is not only convenient it is legally necessary if you want to follow the letter of the law. You see it's not legal for me to shop there in my own car and drive it to my restaurant because I do not have a legally approved climate controlled stainless steel interior delivery vehicle as required by Moldovan law. More on this at a later date but suffice to say Metro has you covered. God bless the Germans. 

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in the end though, "Moldova will out" (pictured: aisle close for forklift
which is working in the background)

b2ap3_thumbnail_logo.png#2 Supraten

 

What are they all about? 

Construction - home remodel and contractor supply.

Where can they be found?

Online here and at г. Кишинёв, ул. Петрикань, 84

Why are they awesome?

Superten is Moldova's Home Depot or Lowes - they have it all. Need drywall, anchors, a pneumatic hammer and a hanging kitchen table light that looks like a birds-nest? this is your one stop shop. Mostly super practical but catering to all the funny tastes amongst us, Superten is stocked. Furthermore their staff actually know what they're talking about and want to help. Now they're not exactly Home Depot or Lowes here but by Moldovan terms it's great. For businesses they make things easy (though not as much as Metro) by having an on site office with no fewer than 12 accountants on staff to print you factura fiscals. Their second building has another such office with 5 more accountants in it in case you're shopping there for lighting or bathroom fixtures. Not too shabby. 

What's their closest competition? (aka who do they outshine?)

Basically the bazaar which is a nonstarter. The bazaar is great if you really need that one backward threaded bolt to fit your soviet made drill from 1978 AND have all day to spend AND are ok being sold on having some guy rewind your drill's motor to increase it's efficiency which will only take him 5 hours and cost you 87 cents. Superten is your in-and-out shop. Though I am gonna try this place soon...

 #3 Клякса "Blot" (picture at top of page - poor quality because I snapped it with my crappy phone)

What are they all about? 

Paint. Particularly Tikkurila paint from Finland. 

Where can they be found?

sos Muncesti 165 Chisinau for the main store or products at Supraten

Why are they awesome?

Two big reasons here. Firstly, these guys get paint. If you have a question they will have an answer and if they don't know they will tell you that and find someone who does. Anyone reading this who has lived in Moldova knows that this isn't uncommon so much as totally and utterly unheard of (caring enough to answer a customer question that is). I was referred to their store because they have a rep who spends all day in Supraten helping people pick out their paints. Remember how I mentioned that Supraten had good customer service? their paint reps look grumpy and unknowledgeable next to "Blot's" rep. She patiently worked with my designer friend and I to pick our paint and walked us through a range of options from the Tikkurila that her company sold there to Superten's many other brands. At the end of the day her product was better and sold itself and I had no idea until I was back there looking for another paint product that she actually wasn't just an especially helpful Supraten employee. It was 4 of 4 stars for sales - built trust, recommended product, made sale and followed up next time I was there. This brings me to the second reason this company is awesome. They have amazing customer service. 

In case you didn't get it from the fact that they a) had a representative in a hardware store and b) she REALLY knew what she was talking about and wanted to make sales, here's a bit more evidence. Eventually I went to their main store (address above) because they had larger buckets of paint they could mix. When I met the staff there they worked with me to get the product I wanted and as it mixed handed me a survey to ask how I found their store, what I wanted to buy and what they didn't have and could carry to make me a happier customer. I was flabbergasted. More so when they gave me a 5% discount card applicable on my first purchase and in perpetuity. The second time I was there the employees remembered me by name and happily greeted me. One time I forgot to take a register receipt (I had the factura but Moldova needs both) and their accountant called me up to remind me to return so I didn't get into trouble down the line. This company *gets it.* Their product is premium and costs a premium price but it's superior and they sell it marvelously. 5 stars. If every other company in Moldova had customer service this good they would be competing with Germany.

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sadly Moldova's early lead in the horse drawn cart market has
thus far failed to turn into long term cross-sector gains

 

 

 So those are the top 3 companies we've worked with so far. Clearly, 2 of them are remodel oriented so I expect to add entries like this as we go. Do you have any great Moldovan businesses that you have worked with and want to highlight? mention them in the comments and we can include them in a future posting! a rising tide floats all boats as they say and the more good Moldovan businesses the better for all of us. 

 

For anyone who enjoys this blog AND remembers this post about how hard it is to get a loan in Moldova AND thought at that time, "wow I really wish I could give these guys like a few bucks and get a t-shirt or something cool back" then I have a solution for you!! We are running an Indiegogo to help cover the startup costs of our business! You can click here to take a look at our page. Watch our pathetic attempt at a promotional video and support us in return for some cool perks!

If none of that applies to you just click on the following picture. There's candy there: 

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Tagged in: Good Guys
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Posted by on in Stories From The Field
You have two cows...

We've all heard the classic economics analogy jokes about cows my favorites are these:

Communism: You have two cows. You give them to the government, and the government then gives you some milk.

Fascism: You have two cows. You give them to the government, and the government then sells you some milk.

Capitalism: You have two cows. You sell one and buy a bull.

Nazism: You have two cows. The government takes both and shoots you.

 

To add to this list though is one I heard for Moldova when I first got here over 2 years ago. It goes something like...

Moldova: You have two cows. The government steals one and you give the other to your illiterate cousin to neglect. You buy a sport-coat and call yourself a "businessman."

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in case that wasn't bleak enough enjoy this picture (source)

 

The reason we're talking about cows, as some people with experience in Moldova might have guessed, is because today we're going to talk a bit about management and employees in Moldova. Keep in mind that as an entrepreneur starting out in my first venture my personal experience with managing a team is very limited. This article is more about observations from living and working in Moldova that my mind tied together based on reactions people have to how we are running our company here. That will get clearer in time so bear with me. 

 

I have a few anecdotes to describe how this works here.

At an NGO

Firstly, there was an NGO I worked with where the director go sick and was out for a few months. She would come in once at the end of each month and, in a frenzy, try and keep the ship from sinking. We had a full time accountant, a full time lawyer and a full time social worker but without the director the bills didn't get paid, legal complaints against beneficiaries didn't move forward and the social worker's case files didn't get forwarded to the appropriate state bodies. Mostly everyone watched wedding videos that winter. Don't get me wrong here, this isn't just about employees being lazy or needing constant oversight. The other problem is that without the Director wielding their all powerful stamp none of those functions could be accomplished. Either way you can see what it does to staff initiative. 

 

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"Initiative is Punished" but sending pictures of cats to my boss
during the work day makes her like me more
(picture source is a hilarious article btw)

 

What About Businesses? 

From our cow analogy though you can see that the main perception of Moldovan businessmen is that they are simply absent. There is a business a block away from the location of my future restaurant in Chisinau. It's a pretzel and donut bakery that, like every other one in the city, somehow manages to make something that looks relatively like a pretzel but tastes like a sweet role (not in a positive way). Anyhow, a few weeks ago I walked in their for the first time. Outside there was a fold out street sign identifying the place but the door, down a flight of stairs from the street, gave me pause as it's sign said "pawnshop." I decided to go in anyhow and discovered that while there was a small pawnshop there the little bakery was open and much larger than I had thought. It had a number of tables and lots and lots of goods on display (no customers however). I ordered 3 pretzels. The woman working there told me "no we don't have any." I looked around in confusion since they not only had a display area with 3 baskets of pretzels behind glass but they had 2 more baskets on the counter top in the "right out of the oven" fresh baked goods area. I asked, "what do you mean you don't have any?! look at all these pretzels!" She responded "they are all very old and cannot be eaten, we have a few donuts if you want some." I bought 2 jelly donuts of which 1 had any jelly in it.

Another similar story was at a kebab stand by the university in Balti that I would sometimes go to. At 2pm I went in and asked for a kebab. They told me no because they have no lavash (like tortilla bread) and they will have more tomorrow. This was required for every dish they sold. I was confused because they had the option of walking 3 blocks to the supermarket, restocking and continuing work. Instead, they cooked all the fillings for the kebabs that they couldn't sell and sat there turning down every single customer until the place closed at 6pm.

Anyone living in Moldova knows countless versions of these. Bars that close at 10 pm friday night and throw out paying customers against their marked hours since no management was present. Loan officers playing around on facebook instead of trying to figure out how to help a customer. Kitchen suppliers refusing to quote a price for an oven and instead insisting on giving a package quote with lots of stuff we'll never need or buy (update on suppliers and buying kitchen goods coming soon) etc etc etc. 

 

What's the point of these stories? well basically these employees had zero interest in selling me anything. So what is the interest? Why even come to work?!

 

Basically the goal structure is messed up. Management cares much more about appearances and authority than money so employees care much more about staying out from underfoot than sales. From the loan officers who could be giving loans if they wanted but instead surf facebook to the restaurant employees who make sure they have a clean "prepared looking" workspace even if it can't make any sales, no one is working to make their companies money. Admittedly there are a whole lot of cultural leftovers from the Soviet Union here (more than possible to address in this post) but one key attitude to understanding all of this is the following:

In America a good team leader is someone who brings together a diverse set of skill-sets to solve problems more efficiently than the sum of it's parts. In Moldova a good team leader is one that retains absolute control over their teams doings and is necessarily smarter at their specialty than any member of the team in order to maintain that control. In America an outstanding employee reflects well on their manager. In Moldova an outstanding employee is a threat to the manager. In America employees are expected to go above and beyond to get "the job" done. In Moldova all worries about "the job" or goals is reserved for the manager and initiative on behalf of employees is punished. 

 

So how do people see us? Batshit crazy Americans

What inspired me to write this post is the insane looks I get constantly as I go to work, pick up a hammer and remodel my restaurant. One contractor coming in asked if I was the electrician and how I came to have such a job in Moldova as an American. I told him I was the owner of the business and he laughed and said, seriously, how did an American Electrician come to be here. I reiterated my ownership of the business and he went back to work thinking that Americans have a very odd sense of humor (absolutely not believing me). This came up before when we were appealing our visa denial and the bureaucrats we dealt with could not fathom why we wanted to work in our own business. They kept saying "give the money to your partner who will hire people and you will go back to America." There is a strong attitude here that businesspeople do not involve themselves in business (except perhaps to stamp things and yell at people). For sure this isn't true of all business here (I promise a hopeful upcoming post about good businesses here). It is a fact that this is how MANY people here understand the notion of business. You have a cow and it (magically) makes you money. It's also an excuse to employ an underserving relative or friend.

That's how business "works" in Moldova. 

 

 

For anyone who enjoys this blog AND remembers this post about how hard it is to get a loan in Moldova AND thought at that time, "wow I really wish I could give these guys like a few bucks and get a t-shirt or something cool back" then I have a solution for you!! We are running an Indiegogo to help cover the startup costs of our business! You can click here to take a look at our page. Watch our pathetic attempt at a promotional video and support us in return for some cool perks!

If none of that applies to you just click on the following picture. There's candy there: 

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Posted by on in Stories From The Field
Accounting Part 1

This last week I started to write my first serious post dedicated to corruption in Moldova. While I've touched on the subject a bit in my short post about The DMV or the epic saga that was our visa approval process but nothing dedicated to corruption. As you might have noticed from the title of this post this is not such a post. I realized that even starting that conversation was so daunting without certain background elements explained that it was totally unmanageable in scope. I'll try again soon but in the meantime I decided it was time to share a glimpse into accounting in Moldova - by far the most batshit insane and corrupt part of doing business here bar none.

Let me preface this article by saying that it is just a first effort to scratch the surface of this madness. By no means do I have even a rudimentary grasp on the workings of the accounting and fiscal systems in Moldova and attempts I've made to understand them have come up very short. As a team we've decided that someone needs to start taking night classes on accounting here just to get some idea of what's going on (and we have a full time accountant hired now). So with that said here's a bit about what I do know right now. Pardon me if I made bad assumptions as to intentions or root causes behind these things. After dealing with this for a day it is easy to assume that the system was entirely crafted by unhinged lunatics on a bender and to forget that there are real people trying to address real problems in the government here. That said, as you will see, they are failing spectacularly. 

 

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like this but with more stamps

 

Without further ado let's start with... 

Facturas for Everything

What is a"factura" ask? Great question. If you melded a standard store receipt with the gravitas of a birth certificate you have a factura. Basically it's a REALLY REALLY important receipt that you need to get for literally everything you buy as a company. They look like this...

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To properly explain this system let me walk you through a trip I made to the hardware store for materials for our cafe's remodel. The hardware store in town is called "Supraten" and is basically a Moldovan version of Home Depot (a comparison that carries with it high praise from me as a former Home Depot employee and lifelong fan). After picking out the things I need I go to the checkout lane and buy them with the company debit card receiving in return a receipt. I must then present this receipt to the door checker man who stamps it after which I proceed to my car to dump the stuff in the trunk. This is where the fun begins. I then grab my Smokehouse SRL company stamp from the car and return to the store. In a side room marked "Accounting" I enter to find myself face to face with no fewer than 10 accountants and a handful of hapless schmoes about to go through the same process as me. I then wait to see an accountant and present them with my receipt. The accountant then pulls up my company's information on the computer (or asks for a financial information form from me if it's my first time) and begins making facturas. They pull out three sheets of impeccable security paper and individually barcode scan them and load them into the printer. The factura is then printed on them and she signs and stamps sheets 1-3. I take sheet #1 for my company and sheet #3 for my accountant to file with the government's fiscal office so they have a record of this transaction. Sheet #2 stays with the store so I need to sign and stamp it for the company and return it to them. When I get back to my company I give sheets #1 and #3 to our accountant who needs to enter them into the state mandated accounting system called 1C line by line. She then files sheet #3 with the appropriate financial office. Sheet #1 has my actual store receipt (the register printout) stapled to it. If this is lost the entire process is deemed invalid and you will be fined. Let me also say that this run through is far and away an "ideal" version of this situation. Supraten has 10+ accountants on staff from 9-5 weekdays. If you buy on a weekend or outside of those hours you need to come back another time for the factura. Worse still, if you are buying from a smaller company they often only have an accountant that comes in one day a week so you need to run back on that day and get your factura. Worse still not any employee at my company can do this - only an Administrator or someone with other legal empowerment can. That means the person in charge of the company has to spend a hell of a lot of time running around to collect all this stuff. Oh and by the way here's a picture of that factura from before up close...

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you will note that the amount is stated as 39 MDL which, at time of writing, is $2

 

If you think all of that is confusing wait until you find out that there's...

 

Lots and Lots of Stuff You Aren't Allowed to Buy

 

Have you ever worked at an office and only made it through the afternoon because of that sweet injection of caffeine received from a nice cup of coffee in the employee break room? Yeah, in Moldova that's illegal. At least as a business expense - companies can't buy refreshments for people without some kind of higher justification. Why not? Who knows - you just can't. We wanted to serve BBQ to friends who were volunteering to paint our location as a nice "thank you" but our accountant said that this is impossible. We thought - there must be some mistake and dug a bit deeper only to find that there IS a way but it needs to be dubbed an official taste testing which needs to be justified by sign-in sheets and various paperwork. This is all because that program I mentioned before - 1C, the state mandated software that creates financial reporting - needs everything to be placed in a "bucket" or category to be justified and the available ones differ by the industry you're approved to work in (I do not have confirmation for differing by industry - please chime-in in the comments if you can shed some light). Coffee for employees has no such bucket and so is categorically prohibited. 

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it's amazing what simple acts can make you a criminal in Moldova (source)

 

As you can start to imagine this all leads to...

The Result is Widespread Corruption by Necessity

Most people reading this from in Moldova are probably thinking "wait a minute - my office has coffee in it! what gives?!" The answer as I understand it falls into one of two categories. The first is simple working around the rules. In the office I worked in as a Peace Corps Volunteer the staff basically all chipped in to buy some necessities. Occasionally I would bring in a box of tea as my contribution. Combined with the fact that parties in Moldova are catered by the person being celebrated (aka on your birthday you bring food for everyone) this worked out to address all of the problems of our small office. A friend of mine from the states with an IT startup here solves the problem by buying coffee and tea out of his own pocket. This is pretty much the normal approach for evading facturas and all the silliness that goes with the accounting system here - use cash. What about big companies though? How does this work if you have hundreds or even thousands of employees?

Obviously I can't speak for these companies with certainty but I know that often the answer is "creative accounting."

 

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sadly there are fewer musical interludes than similar
past efforts at bringing creativity to accounting...

 

Many companies are structured, legally or illegally, to never make profits which yields a lump sum of side cash which can be used without all of the maddening restrictions mentioned above. I can't speak to the methods used for this but I know that at least one of the larger chain restaurants here has been around for many years and never turned any profit. I also know that a large beverage distributor here is able to provide cash kickbacks to places that exclusively sell their products. These examples at least involve some level of honest business with dishonest components. Not so for the coffee suppliers we talked to - 2 out of 3 refused to even speak to us when they found out we wanted to buy their product as a company instead of with under the table cash. Their response to all those facturas is basically...

 

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None of that even scratches the surface though. Landlords want money in cash, consultants refuse to work for company cash (more on that in an upcoming post about how messed up HR is here), and if the business is small enough it literally will not sell to another business because of the trouble. All in all the best way to finance a business here is with a suitcase full of cash. In theory this would get you into lots of trouble because buying a microwave out of your pocket and putting it in you company's break room is illegal but that's all solvable thanks to...

 

Indescribable Ambiguity 

The appropriate answer to any question about accounting here is "no one knows" fullstop. We have asked the same question (about transferring money from the states) to 2 accountants, a lawyer, our bank and finally an employee of the national bank only to get as many answers as people. Literally no one has any idea what is going on. I can't buy coffee for the break room? This realization leads to asking your accountant endless stupid questions because, since there is no apparent framework for the answers you receive, normal people can't possibly know what to do. It's utterly paralyzing. The fines associated with messing up are catastrophic and unsurvivable and literally no one has any idea how to avoid them. The answer of course harkens back to a saying I've mentioned before that "nothing is allowed but everything is possible." You can figure it out somehow if you look hard enough and waste enough time. When we're talking about buying coffee though it's much easier to say "screw it" and buy it out of pocket. When we're talking about being fined because you bought an out of pocket microwave it's easier to pass them a bill and watch it go away. Such is Moldova. 

We have had so much trouble with this that Matt and I started bombarding a friend stateside who agreed to help guide us through our LLC's accounting with stupid questions about what we are and aren't allowed to do. Her response was always a well thought out description of our tax liabilities in different circumstances. This led us to the realization that we were being morons. The US government literally doesn't care at all what we do with OUR money as long as we pay taxes and don't do anything criminal. Fullstop. 

 

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This leads to the realization that in Moldova...

 

The Root of the Problem is Focus

Remember what I said at the front about my ability to really come up with a root analysis because I don't have enough info? Well, remember later on when talked about ambiguity? Basically we may never have full answers as to what is going on with this messed up system. That said, with the info available to me here it goes.

The Moldovan Government has legislated as if it's prime directive is preventing people from stealing from themselves.

What does this mean? Well basically all of the above complications are meant to document, end to end, the cashflow process for any and all company activities. To me it seems like the government is really concerned that I will buy eggs and bread with the company and make myself breakfast. This leads to the system of super official receipts, 1C data entry, filing expenditure reports constantly to the fiscal office, etc. In essence all companies in Moldova are being audited with great scrutiny every single day in the hopes of finding that they are using company money for personal expenses. Predictably, at least to anyone not writing the laws here, this has forced an economic reaction that forces business owners to take the exact actions the laws are designed to prevent at a level that makes it so widespread that any attempts to clamp down on the criminality would require jailing the entire country. Anything that widespread is a cheap bribe so forcing compliance is a nonstarter. Anyone can see that this regulation is not only failing but was focused in the wrong direction to begin with. The government setting out to regulate companies in order to prevent owners from stealing from themselves or their shareholders essentially injects the government into a conversation to which it was not invited. If I'm an investor and suspect wrongdoing I will take action. If I am an owner and an employee steals from me I will take action. What exactly does the government have to do with this? Why do they care?

The answers should be "nothing at all" and "they shouldn't." In a view that is slightly simplistic but nonetheless informative the US government works in the opposite way to this. They are only involved in business regulation when a) they are brought in by a 3rd party (business dispute going to the courts) or b) they have a vital interest there. In the US most financial regulations that effect small business day to day involve encouraging a payment of taxes and discouraging tax evasion. At the end of the day the US government wants to make it's money and knows it needs to get out of your way so you can make yours. Because of their failure to understand this the Moldovan Government is creating a system that not only encourages but necessitates criminality while retarding their own tax collection potential and the economy as a whole. 

 

Think I'm crazy or off base? Many Moldovan friends do. Add your thoughts to theirs in the comments below :)

 

 

 

 

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