Baruch M. Gurfein: New Tech in Moldova

Published: December 13, 2006

Baruch M. Gurfein is a former AOL business development executive (ICQ) who is now Founding Partner & CEO at New Tech, a successful investment and business development company. New Tech has focused on the former USSR from Moldova on one side to Kyrgyzstan on the other with many successful projects in telecom, infrastructure and real estate and a rich experience in the Internet, Telecom, ISP and Wireless Space.

SRAS: Most Americans would have to hunt to find Moldova on a world map. How did you first become involved in investments in that country?

Baruch M. Gurfein: CEO of New TechBaruch M. Gurfein: Well how did I get to Moldova… the first time I came to Moldova I had no plans on making any investment, I came for 2 weeks in order to help an investor who was looking into making a large telecom investment. He wanted help looking into the financial side and leading his due diligence. On the flight in I sat next to a man who would later be my partner. He owned a medical center in Moldova and was already looking for a partner, and one thing led to the other. Now I have been in Moldova for over 4 years

SRAS: So how did New Tech get its start? Where did the financing come from?

Baruch: My partner and I had put in a few million USD to get started and then once we had a few good projects going that made money, we turned to a few banks around the world and, with our good personal and business track records, we raised the other 400 million USD to expand the projects around the FSU. My partner’s money was made from his insurance business in Israel and my money came from working at high tech companies and making successful exits.

SRAS: What educational and professional experience did you have with international business and foreign languages before you were selected to help that investor?

Baruch: Well, my last position was at the US-based company AOL as Executive Director of International Sales of the IM division, handling international sales and investments for the previous ten years all over the world – yet never in the FSU region. With regards to foreign languages, I speak several including English, Hebrew, and German and now am working on my Russian.

A church in central ChisinauSRAS: What are your investments in Moldova and elsewhere?

Baruch: We invest in telecom, real estate, and infrastructure mostly. I think the coolest investment is that we are now putting in 200 speeding and red light violation cameras as a BOT project with the local government. (Note: BOT is “Build/Operate/Transfer” and is usually a public infrastructure project that utilizes structured financing from private sources.) I can not really talk about projects outside of Moldova as most of them are in development and we do not want to make them public. At the same time I can say we are working with in the telecom and energy markets in Central Asia and in Kazakhstan we are looking at expanding into real estate as well. I came to Central Asia via some contacts I made speaking at a conference for the EBRD (European Bank for Restructuring and Developing) in Taiwan. They had so many good things to say that I wanted to learn more.

SRAS: Those Americans who do know of Moldova know that it is one of Europe’s poorest countries with a troubled government. What have been your main challenges to doing business in Moldova?

Baruch: The main problem has been market education: I have had to explain to companies what an investment is vs. what a loan is and get past the local mentality of not registering anything to avoid paying any taxes. And the worst of all is when you offer to finance a project free of charge to large local companies such as the local phone company and they do not do the deal with you because you refused to bribe them.

SRAS: Having had experience in the FSU myself, the second part doesn’t actually surprise as much as the first; how can one finance a project free of charge? Do you collect money some other way?

Baruch: We get our money from the revenue generated. So if the fine is 10 USD per red light violation we will get 20% of that fine or, for example, 10% of the revenue on the calls terminated into voicemail revenue which the phone company would not be collecting without our investment.

SRAS: Do you think the current political problems with the break-away region of Transdnestria has hindered foreign investment in and the economic development of Moldova as a whole?

Baruch: I see Moldova as a place like Israel, when you watch the news and read the paper and it sounds like it is a really bad place – dangerous and risky. The real problem is getting the investor to come and see for himself. Once he has come and walks down the main streets and gets to see how nice the locals are: smart, hard-working, and full of potential, the investor can see that the politically troubled parts of the country are actually something you will never have to deal with – so long as you don’t try to take a land-route vacation to Odessa, that is, which takes you straight through Transdnestria. You can really live a good life as an investor in this country. Yet, looking at it from a financing point of view, if this political problem was removed the cost of money and country risk would be reduced – something that would really help the local economy grow.

SRAS: Speaking of everyday life, what is there to do in Chisinau, the capital of Moldova? Are there clubs/theatres/sites that you would recommend?

Baruch: There is not much of a social life in Chisinau – yet there is a great night life for about a week. Music has not changed in the 4 years I have been in Moldova, so after a week or two it can get … bring a good book and make a few good friends. You can meet at each other’s homes and have a beer, or talk or see a film you rent by DVD.

SRAS: So they have English-language DVD rentals in Chisinau? Or is you Russian good enough already that you can watch them in Russian (the other official language of Moldova).

Baruch: You can get them in English and it is a good way to learn Russian if you want to watch it in Russian and remember the words you do not know.

SRAS: Another specific business/political question: Moldova’s current president, a democratically elected Communist, has gone forward with plans to privatize sections of the Moldovan economy. Do you see this plan as going forward smoothly, do you see it as helping or harming the economy.

Central Chisinau at DuskBaruch: The president of Moldova is just about as communist as the president of the USA – not at all. He is using the party name to get the nostalgia out of the voters as during the communist times there was more food and work. Going out of the large cities you can find many, I would say about 20% of the population, who do not have enough to eat on a regular basis. As for the plan, nothing in Moldova is smooth but it is going in the right direction, and it is getting privatized. At the end of the day the more international investors there are in Moldova, the more jobs there are and the more the local economy is grows – so it must be good.

SRAS: And who are the major investors that are taking over these industries?

Baruch: French, Italian, and Romanian in the lead and then Israeli, German, and Russian.

SRAS: I find it interesting that the Americans aren’t listed here – why do you think these other nationalities are more willing to invest than Americans?

Baruch: For starters it is closer to Europe than the USA, also most Americans could not find Moldova on the map if they looked for it. In addition I think if I was living in the US I could go to Central America before Europe and as there are no natural resources in Moldova they do not come.

SRAS: Do you think the economy is anywhere close to saturated in any industry?

Baruch: Far from it – anything that needs labor would be a good investment. If you needed to build a textile mill or produce building material or even develop software with a focus on export to Europe or the CIS, this would be a good place to find highly-qualified workers at low cost and at the same time not have large export and transport costs.

SRAS: Wow. And do you think there is opportunity for students to study/intern in Moldova? What would be the value of their doing so (in terms of future employment in/concerning Moldova and general resume building).

Baruch: Well if you can make something happen in Moldova, you can make it happen anywhere in the world. I would not go and just study in Moldova as the only thing you can really learn is how to drink – but from a work or internship experience this can be a great place. Moldova is a small country with a difficult economy. That really helps you learn what not to do and how to deal with a collapsing economy and government as well as local problems. What not to do would be things like not to work on a non-contract basis yet still never trust the contract; it is a good place to learn how to think out of the box and I think any one that can make it in a place like Moldova would never fail when a problem occurs in a western country. You would tell yourself: “If I lived in Moldova and made it I can handle this as well.”

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About the author

Josh Wilson

Josh Wilson is the Assistant Director for SRAS. He has been managing publications and informative websites covering geopolitics, history, business, economy, and politics in Eurasia since 2003. He is based in Moscow, Russia. For SRAS, he also assists in program development and leads the Home and Abroad Programs

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