Foreign direct investment continues decline in Greece
Foreign direct investment (FDI) in Greece posted a dramatic decline of 64.3 percent in 2007 year-on-year, according to data by the Organization for Economic Cooperation and Development (OECD). FDI in this country shrank from $5.4 billion in 2006 to just $1.9 billion in 2007. That was against a trend in the other OECD member-states, which saw an average increase of 31 percent in FDI on a yearly basis last year. The so-called structural changes of the previous Greek governments and the «reforms» of the current one have apparently failed to persuade foreign investors that Greece has a business-friendly environment. Bureaucracy, corruption, inflexibilities in the labor market and the unstable institutional environment have condemned Greece to the last spot on the OECD chart in terms of competitiveness and the attraction of FDI. Greece finds itself below countries such Kazakhstan, Uzbekistan and Costa Rica in terms of attractiveness for investment and competitiveness. Worse, every year Greece falls lower: In 2002, it held the 40th spot according to the competitiveness and entrepreneurship index; in 2006, it was at the 48th place and in 2007 it fell to the 53rd spot. FDI inflows are smaller every year in Greece compared with neighboring countries, such as Bulgaria, Italy and Turkey, with Albania being the only exception. While those countries receive investments of $5-$20 billion, Greece gets no more than $2 billion. Even that amount actually concerns share capital increases and stakes in existing Greek companies. The only year that saw a significant inflow of foreign investment was 2006, when major foreign funds came in for the acquisition of Greek banks, such as Emporiki and Geniki. Foreigners’ investor preference for existing companies is obvious by their positioning in Greek stocks and bonds as well as other investments, reaching 400 million euros in total. All this means that there are no new enterprises being created and therefore no new jobs. Competition is not bolstered, which, in turn, does not help competitiveness. It is exactly this low competitiveness that negatively effects the balance of deficits and inflation. Boosting competitiveness requires long-term strategic planning, starting with education and the labor market up to the economy. At the same time, Greek businesses and investment capital seeking opportunities abroad continue to increase. Unlike foreign funds invested in Greece, local capital going into the Balkans, the eurozone and Asia prefers to create new production units, as well as investing in existing firms. Data up to 2007 show that total FDI reached 21 billion euros, while Greek investment abroad amounts to 36 billion euros. Investors in Greece come mostly from the eurozone (1.4 billion euros in 2007 and 3.2 billion euros in 2006); Greeks in turn prefer to invest in Turkey, Spain and the Balkans (2.1 billion euros in 2007, 2.3 billion euros in 2006). In the first six months of 2008, FDI reached 2.716 billion euros for an improved net inflow of capital of 1.55 billion euros. The most important fund injections were by Deutsche Telekom, which paid 2.548 billion euros for its 19.99 percent stake in OTE telecom, and 50 million euros paid by Cyprus company Alapis into its subsidiary in Greece, Alapis Farma. Major FDI projects in 2007 The two most important foreign investments in Greece during 2007 concerned the inflow of 322 million euros from UK building materials company Lafarge for the acquisition of National Bank’s stake in cement company AGET Heracles, and 300 million euros from Rhone Capital and Zarkona Trading in the buyout of Infote. There was also a notable flight of 104 million euros with the departure of General Biscuits SA from the share capital of E.I. Papadopoulos. Other significant foreign investments in Greece last year were: -169 million euros for the participation of Endesa Europe (from Spain) in the share capital increase of Endesa Hellas. – 110 million euros by Societe Generale to cover the share capital increase of Geniki Bank. – 88 million euros by the Wind group (from Italy) for the completion of the buyout of Wind Hellas. – 40 million euros by ING Continental (from the Netherlands) for the share capital increase of ING Hellenic Life Insurances. – 30 million euros by TBU International (from Luxembourg) for the share capital increase of Dionysus Leisure.
