Investment potential untapped

Report shows the gap between Greece’s image as an investment destination and the actual inflows

The tapping of Greece’s comparative advantages vis-a-vis the other countries in Southeast Europe, such as its infrastructure in telecommunications, transport and logistics, as well as favorable conditions for research and development, could turn the country into an investment hub in the region, a recently released report suggests.

However, the report, prepared by business consultancy firm Ernst & Young Southeast Europe, on the attractiveness of the region for investment, notes that Greece has been unable to tap its advantages.

The study, covering seven countries (Bulgaria, Cyprus, Greece, Moldova, Romania, Serbia and Turkey), was conducted on the basis of questionnaires answered by the top executives of 200 multinational companies, 120 of which are active in the region. It compared investors’ opinions with the actual inflows of foreign direct investment (FDI) as these are recorded in Ernst & Young’s European Investment Monitor.

The study’s main findings are as follows:

* Western Europe is by far the most attractive region for potential business location, according to 34 percent of respondents. Central Europe comes second with 18 percent. The region of SE Europe seems to be gaining ground, with 8 percent of respondents based outside it considering it the most attractive for business investment.

* SE Europe’s attractiveness is based on mainly economic criteria: 40 percent of respondents consider low labor costs its main advantage, while 31 percent consider its rising productivity an advantage.

As regards Greece, the report shows a lack of correlation between the image of the country among foreign investors and real investment activity. In particular:

* In SE Europe, Greece is ranked in third place, mustering the preference of 48 percent of respondents, after Romania (58 percent) and Turkey (49 percent).

However, this perception does not translate into actual investment activity: In the 2001-2005 period, Greece attracted just 4 percent of the total FDI in SE Europe. Eighty-five percent of FDI in the region was absorbed by three countries, Romania (40 percent), Bulgaria (25 percent) and Turkey (20 percent).

* Greece comes in on top in 11 of the 18 attractiveness criteria examined in the study, including telecommunications infrastructure (37 percent of respondents), quality in the domain of research and development (22 percent), and transport and logistics (28 percent). It is also equal with Romania as the country with the highest quality of labor force (22 percent).

* The respondents ranked as the most important sectors in which measures must be adopted in order to improve Greece’s attractiveness in investment – the flexibility of labor laws (29 percent) and of administrative procedures (28 percent), the further development of transport and communications infrastructure (26 percent), compliance with the rules set by the European Union’s economic regulatory framework (24 percent) and a reduction in the level of taxation (21 percent).