Food processing (including sugar and vegetable oil) is the largest domestic industry, followed by power generation, engineering (mostly agricultural machinery, foundry equipment, refrigerators, freezers, and washing machines), hosiery, shoes, and textiles. Industrial production decreased by 10 percent in 1999 and the sector, which accounts for less than 15 percent of GDP, has been declining ever since independence, devastated by rising energy prices, the decline in agriculture, and the loss of markets. The conflict with Transnistria has had a significant effect on this sector since all production of electric machines, power transformers, gas containers, slate, 95 percent of the cotton fabrics, 87 percent of the electricity, and a large part of the cement industry are located there.
The food industry accounted for 58.2 percent of the manufacturing output in 1997, far ahead of energy production (18.4 percent), the second largest industry. The importance of the third largest sector, engineering and metal processing, declined from almost 18 percent in 1990 to 5.9 percent in 1997. Similarly, the importance of light industry, which was the second biggest sector after food-processing in 1990, has also declined, from 21.1 percent in 1990 to 5.8 percent in 1997. Efforts to produce exports for more stable and lucrative markets such as those in the European Union (EU) have been difficult due to the lower product quality of Moldovan firms. Wine represents a major product of Moldova's economy, with exports in a good year accounting for up to 50 percent of the total export income. The wine industry has attracted some western investment and loans from the EBRD, but in 1998 Russia still accounted for 85.6 percent of wine export sales. The tobacco processing industry remains one of the country's most important; during Soviet times, the republic produced 40 percent of the USSR's annual crop. Moldova plans to privatize Tutun, the country's largest tobacco concern. Some new industries, such as scrap metal processing, chemicals, and medical equipment, have also emerged since independence. The construction materials industry is expanding through exports of cement, gypsum, and ceramics, and through investment in civil engineering