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Victoria Mindova

Greece is in its sixth year of recession and it does not seem likely that the country's problems will end soon. Fiscal consolidation in the country is underway, the GDP continues to decline and unemployment remains above 27%. The only chance for Greece to recover is by becoming a more attractive destination for foreign direct investment (FDI). In order for this to materialize, Greece has to make a series of changes, some of which have already been completed.

The liberalization of the market and occupations is a step in the right direction whereas the cumbersome bureaucracy and the slow administrative and judicial decisions remain the biggest challenge. It can take from six months to three years to obtain a permit to start a business and the majority of legal disputes related to corporate law remain unsolved for years.

So far, foreign direct investments have not been a priority of the Greek governments and both economists and professionals recognize this.

The annual report of the United Nations Conference on Trade and Development (UNCTAD) shows that foreign direct investment in Greece amounted to $ 2.9 billion in 2012 compared to 2011, when the amount was only $ 1.1 billion.

The note of hope that is present in the data is not as promising as presented by the Greek politicians.
 
"Although we see a slight increase in foreign direct investment compared to 2011, the absolute numbers are so small that in no case can we be very optimistic," Maria Papanasthasiou, a professor at Middlesex University and representative of UNCTAD in Greece, told GRReporter. She presented the results of the report and analyzed the data.

The increase in foreign investment comes mainly from the recapitalization of banks which was announced last year and the need for additional funds to stabilize the financial system.

"Do not get it wrong. These are not investments in manufacturing and processing," states Nicholas Vernicos, who is a fourth generation shipping magnate and chairman of the Greek representation of the International Chamber of Commerce.

"Low investment is not only the result of the crisis; this trend has been typical in recent years. This is related to Greece’s attitude to foreign direct investment," says Nicholas Travlos, a professor at the American University in Athens.

According to him, the very attitude towards entrepreneurship and profit in Greece is wrong. The country's economy is set to rest on the massive state system on which almost every business relies.

"If you ask foreign investors about the biggest obstacle to starting a business here, they will not tell you that this is the amount of taxes but that the complex system of the state and the large number of laws hinder entrepreneurship."

"Before the crisis, the state had opted for public-private partnership and for governance with local businesses and it had made almost no legal or economic effort to attract foreign direct investment," say economists. The picture they present shows that the Greek rulers treated foreign investors as if they were intruders. This is now changing, mainly under the pressure of the economic crisis.
 
Unfortunately, the competitiveness of Europe in the global market is decreasing. For the first time in world history, the flow of foreign direct investments to developing countries is higher than that to developed ones. This indicates a change in the overall trend of the world economy and poses new challenges to the countries of the continent.

Asia, Africa and Arab countries are gaining more strength and the potential for growth and profit from them attracts the investors. According to Papanasthasiou, although the total amount of foreign direct investments in the world fell by 18% in 2012, there are large capital reserves in the world that have not yet been put into circulation. The effects of the recent global financial crisis are still being felt and business continues to be careful and it is not taking big steps.

The United States, Japan and China were among the biggest investors in the world in 2012. "The government's orientation to Chinese investment is reasonable especially bearing in mind the fact that the country is the third biggest source of foreign direct investment," states Maria Papanasthasiou while presenting the report data.

In Greece, there are already a number of major Chinese investments which have been made in the country despite the acute economic crisis. One of them is the purchase of part of the port of Piraeus. The others are associated with the expansion of trade relations. Experts predict that soon there will be a boom in the Chinese interest in real estate in Greece.

"Based on our experience gained in Cyprus, we believe that Greece has the potential to make one billion euro annually in turnover through real estate trade with Chinese investors," states Miltos Kabouritis of Dolphin Capital Investment Fund.

In the context of improving the business relations between China and Greece, the two countries have signed this week a new cooperation agreement. This time, the agreement is between the Union of Greek Municipalities, Athens mayoralty, Attica Bank on the Greek side and SUMEC, which is one of the largest state trade companies in China. SUMEC will participate in an investment fund which will direct funds to develop projects related to the expansion of municipal infrastructure (energy saving and landfills), recycling, energy production from renewable sources (biomass and biogas) and to the establishment of business parks and innovation incubators.