ECONOMY

EU enlargement creates new terms of competition for firms

The sooner enterprises grasp that competition now takes place on different terms the better, says the Development Ministry’s general secretary for industry, Nikos Leontaritis. «In the new international environment we cannot compete on the basis of low labor costs. We must compete on the basis of knowledge, and ability to create new knowledge with commercial applications,» he says. In this interview with Kathimerini, Leontaritis dismisses suggestions that boosting the competitiveness of Greek industry will be sought through strengthening certain branches only, and draws attention to the opportunities and dangers posed by European Union enlargement. Recently, the Papastratos tobacco industry changed hands and Schiesser Pallas shut down its Palco factory. How do you view these changes? Undoubtedly, the closing of a plant with 500 workers, apart from its economic implications, also has social consequences. By contrast, in Papastratos’s acquisition by Philip Morris we have a demonstration of interest in a Greek enterprise by a global giant. I would say this serves the interests of the Greek economy, as foreign investment promotes the creation of new jobs and contributes to our integration in the international environment. As regards Palco, I would like to repeat what the development minister, Akis Tsochadzopoulos, said: «When entrepreneurial benefits are not in line with national benefits, there is divorce and foreign capital seeks a new location for its activities.» We must understand that we are in a new era where competition takes place on different terms. Firms are born and grow, while others go out of business or go elsewhere in search of more competitive conditions. Obviously, we cannot compete with China or other countries in labor-intensive industries, given their low labor costs, nor prevent the relocation of an enterprise. We must compete on the basis of knowledge and the ability to create new knowledge with commercial applications. The target is to create an environment attractive for the creation of new businesses, to improve the skills of our work force with a view to their adaptation to the requirements of sectors with possibly higher added value and income, to improve the competitiveness of Greek industry and its dynamic integration in the global economy. On the other hand, the government will not remain indifferent to the social dimensions of the loss of a large number of jobs, and we have undertaken specific initiatives to support this group of workers who have become unemployed through no fault of their own. How is the competitiveness of industry affected by European Union enlargement and the further change in the economic map? Enlargement enriches Europe as a whole, creates new opportunities for European firms and promotes a broader acceptance of European standards. On the other hand, while we have a more favorable framework for enterprises and economic activity, it is worth noting that we are no longer an island hoping to tap its local potential and survive. Conditions are extremely competitive, but there is transparency and the game is not won through spin or communication exercises. It is greatly important for us to realize that we cannot rely on our own plans and it forces us to make our industry competitive; now that the EU is growing into 25 members we shall have to take into account that we are influenced by what happens at a broader level, and that we are acquiring additional equal competitors in the European market and society. What are the sectors of the Greek economy expected to be hit the hardest by enlargement? We expect exports to be affected, competition in certain branches of industry, dangers for small enterprises due to the lower labor costs in the new countries, a likely distortion of the conditions of competition due to the policies of the new members in attracting foreign investment, and problems because of lower EU investment subsidies. We must ignore, however, that we also possess significant advantages compared to the new partners in many sectors and we can collaborate, innovate together and create new products, which means new possibilities, not just new markets. In the last National Competitiveness and Development Council session you discussed the new industrial policy and how to improve competitiveness. What is the content of this policy? Are we seeing a return to branch policies? In no case, no one claims such a thing. We simply consider the particular branches in order to formulate our overall policy. As you know, in the last decade we placed great emphasis on services and less on industry. But given the enlargement, which creates a truly European-scale industry, the changes in the international environment – which also imply changes inside companies themselves – we must take into account these requirements and characteristics of the particular sectors and individual enterprises. For instance, there is no sense in simply talking about small and medium-sized enterprises, but about policies concerning small and very small firms, or about policies concerning groups of enterprises that may have a Community dimension. What are the main sources of problems faced by Greek industry? The most important ones are related to the efficient operation of firms, the diffusion of innovation, successful adaptation to the new realities, finance, and the sustainable growth of enterprises. We place priority on dealing in a systematic way with the problems related to competitiveness with qualitative and quantitative targets within very strict timetables. For instance, we have committed ourselves to fully launching by next September the Guarantee Fund for Small and Very Small Enterprises, which will ease their access to the capital market.