Low technological adaptability drives the ever-rising Greek trade deficit, study says

Greece remains stuck on the export model that prevailed in the 1990s, characterized by raw materials and labor-intensive goods, a think-tank study presented in Thessaloniki yesterday suggests. The report, presented by Prof. Theodosios Palaskas, research director of the Foundation for Economic and Industrial Research (IOBE), notes that Greek exports appear unable to compete with their respective products in markets other than those of Eastern and Central Europe. The conclusion also amounts to a warning, as a number of these countries are preparing to become European Union members and, as a result, are expected to increase their demand for low-cost, quality and specialized technology-intensive goods. A worrying sign, IOBE notes, is that Greece’s external trade deficit has swollen by 230 percent in the last two decades; Greece ranks 105th in the world in terms of exports as part of GDP (8.3 percent in 2000). «The competitiveness of enterprises is closely related to their technological development. The low-cost factor is no longer a competitive advantage, not even for the traditional (labor-intensive) productive activities… The competitive advantage of economies is now tested on characteristics regarding quality, novelty in design and innovative products… Competitiveness depends on the capacity for technological adaptation,» says the report. A second part of the study was prepared jointly with Panteion University and the University of Oxford and is based on comparisons between Greece and four other EU member states, Italy, Spain, the UK and Ireland. They show a number of important differences: 70.6 percent of Greek small and medium-size enterprises (SMEs) finance their investment from own funds, compared to an average of 56.1 percent of the other countries. It therefore appears that banks can do much more; only 20.6 percent of Greek SMEs believe that banks play the most important role in the financing of their investment, compared to 37.4 percent in the four EU partners. Greece’s unenviable record in technological adaptability is in line with its comparatively lowest share of spending on research and development as part of GDP. Further training is also funded at low levels.