ECONOMY

FDI nearly trebled in 2012 as parent firms funded subsidiaries

The flow of foreign direct investment (FDI) into Greece returned to pre-crisis levels last year, amounting to $2.945 billion, compared to $1.143 billion in 2011, according to the annual report of the United Nations Conference on Trade and Development (UNCTAD) presented in Athens on Wednesday.

However, by no means does this constitute proof that Greece has suddenly become a popular destination for investment, as FDI amounted to just 1.5 percent of the country’s gross domestic product while almost all of that was capital from parent groups abroad for participation in the share capital increases of subsidiaries in Greece, rather than new and productive investments.

Speaking during the report’s presentation at Deree College in the northern suburb of Aghia Paraskevi, Deputy Development Minister Notis Mitarakis argued that a realistic target for the country would be to treble the ratio of FDI to GDP. He went on to note that with unemployment in Greece at 27 percent, the country has to accept all investments and not just those that are characterized as high in added value.

Earlier, UNCTAD’s representative in Greece, Marina Papanastasiou, had stressed the need to focus on attracting high added-value investments related to research and innovation, adding that the mere production of raw materials and their manufacturing abroad constituted low-value and non-sustainable investments. She also noted that UNCTAD generally favors the idea of export production zones based on the model of special economic zones which enjoy special tax and labor status.

FDI reserves in Greece – i.e. previous investments that continue to operate – came to $37.8 billion last year, from $29.17 billion in 2011. The amount for 2012 corresponds to 14.7 percent of GDP, which is also particularly low compared with the European Union average of 46.6 percent, according to the report.

The crisis in Greece has also resulted in Greek companies with activities in the Balkans withdrawing from the region, resulting in a net decline of $39 million in Greek FDI last year, from a net rise of $1.77 billion in 2011.