Greece’s dismal record in attracting foreign direct investments is projected to continue over the next five years, underlining the many problems that are scaring investors away, according to an Economist Intelligence Unit report released by the Federation of Greek Industries (SEV) yesterday. Greece ranked 18th out of 22 European countries in the volume of FDI it attracted in the period 1998-2002, below Portugal, the Czech Republic, Hungary and Slovakia, according to the March 31 report. Investors sank on average a paltry $1.06 billion per annum into Greece in the last seven years, about a quarter of the amount they invested in Portugal. FDI in Greece in 2001 amounted to just 1.3 percent of gross domestic product or $1.6 billion, and was estimated to have declined to $1.3 billion in 2002, equivalent to 1 percent of GDP. The bulk of the investments is focused on the tourism industry and traditional sectors such as chemicals, food processing and building materials. «The coming years will be crucial for Greece with competition from Eastern European countries intensifying. We need to step up the pace,» said Odysseas Kiriakopoulos, SEV president. Over the next five years, the average FDI in Greece is expected to increase by 60 percent to $1.7 billion, doubling the country’s share of foreign funds among the 22 countries to 0.4 percent from 0.2 percent, the report estimated. In contrast, foreign investors are projected to scale back on their investments in the region. In absolute terms, however, the size of the investment in Greece is seen as lagging substantially behind 17 other European countries. The report said problems ranging from excessive red tape to relatively high taxes, underdeveloped infrastructure and delays in the privatization program were holding back FDI. The immense distance separating Greece from the major European markets, its small market size and political instability in neighboring countries were also cited as barriers. The report singled out structural reforms, tax incentives and an efficient transportation and telecommunications systems as vital for attracting FDI. Lowering the costs and time for setting up a business is also crucial. «Revamping the educational system to match it with the needs of the economy, focusing on new technology and adopting transparent procedures, are equally important,» SEV noted. The apparent success in capturing the November 17 terrorist group, enhanced security measures due to the 2004 Olympic Games and the improvement in Greek-Turkish relations, on the other hand, have contributed to enhancing the corporate climate, the report pointed out. Greece is projected to leapfrog to 29th ranking in the corporate climate table between 2003-2007, up four places, it said.