BoG pleads for end to obscured benefits of foreign investment

Foreign investment is indispensable for boosting the competitiveness of the Greek economy, Bank of Greece (BoG) Governor Nikos Garganas stresses in his latest report. According to BoG data for the January-September 2002 period, there was a net outflow of direct investment of 425.1 million euros, against an inflow of 1 billion euros in the same period last year. Except for few exceptions, the foreign investors who brought money to Greece in recent years aimed at realizing capital gains via the stock market or tapping the high interest rates of Greek State bonds. Now, the doldrums of the stock market and the fall of interest rates to about the same levels as those of German bonds are good enough reasons to keep foreign investors away. To be sure, these are not the only ones: They are supplemented by intransparency, high levels of corruption, inadequate structural changes and an imperceptible fear of those in authority by those bringing investment proposals from abroad. A characteristic point about their contact with Greece made by foreign investors, whether small or big, is the conspiracy of silence they face and the disposition of authorities to impede or delay their plans. In the few big projects that have got under way, at least the time schedules are kept and delivery is occasionally on time, in major contrast with local contractors, who, as a rule, overshoot budgets and continuously stretch their time schedules. This is another advantage that demonstrates the beneficial nature of foreign investment in Greece, despite claims to the opposite by the supporters of national capitalism. Foreign investors mean opening up the market, greater transparency, more competition and, especially, greater positive results for the public – possibly at lower cost. BoG is well aware of all this, and this is the reason Garganas proposes structural changes and boosting competition which will change the quality of the game. The result will be «a bolstering of healthy competition, an increase in the flexibility of the markets for products, labor and capital, and an improvement in the efficiency of public administration. «Inflationary pressures will be dampened, the stamina of the economy against external upheavals will be bolstered, unemployment will fall and real convergence (with EU partners) will be accelerated, along with the convergence of real incomes and living standards.» The report makes 10 crucial points for improving the competitiveness of the Greek economy: (1) Trimming inflation, which is higher than the EU average. (2) Speeding up privatizations to make the public sector more efficient. (3) Immediate adoption of fiscal measures to reduce the huge debt and allow greater leeway for short-term moves at times of recession, such as at present. (4) Upgrading a policy for attracting foreign investment, which will lead to lower unemployment. (5) Immediate action to deal with structural weaknesses which feed the current account deficit. (6) Limiting primary public spending, where the government has become laxer this year. The report notes that the reduction of the budget deficit in the 2000-2002 period amounted to 0.8 percent of GDP, instead of the 2.3 percent initially planned. (7) Putting a lid on wage claims, as well as on price hikes by public and private enterprises. (8) It forecasts a GDP growth rate of 3.4 percent in 2002, against the government’s 3.8 percent. (9) It draws attention to the fact that consumers in Greece, as well as in the rest of the EU, have the feeling that the price index is higher than statistics portray. (10) It places high priority on a gradual return to the conditions of price stability that prevailed in 1999 and 2000.