ECONOMY

Greece fails to attract foreign investors, UN report shows

Foreign investors refrain from investing their capital in Greece, as the United Nations’ annual report on global investment (World Investment Report 2003), published yesterday, abundantly shows. In 2002, net foreign direct investment (FDI) in Greece reached only $50 million, the smallest amount among all European countries. According to the same report, put out by the United Nations Conference on Trade and Development (UNCTAD), Greece is among the bottom 30 countries, out of a total of 150 examined, in attracting foreign investment. Worse still, the report does not see an improvement in the situation in the near future, since it is the 10 new European Union members, eight of them Eastern European countries, who are the magnets for foreign investment. As for investments relocating from Greece to other Balkan countries, the report regards it as a natural trend, since these concern mainly labor-intensive enterprises. However, if Greece proceeded with the necessary reforms – in taxation, the labor market, etc. – it could attract capital-intensive and high-tech investments, as do all other EU members. Bank of Greece Governor Nicholas Garganas has already warned about the dangers of diminishing FDI inflows. Looking at the past four years, such inflows have varied widely but were never as low as during 2002. In 1998, they stood at $85 million; in 1999, $571 million; in 2000, about $1 billion; and in 2001, $1.5 billion. Way behind Europe To give an idea of Greece’s gap with other EU members, Portugal, the second worst-off country, showed $4.2 billion in net FDI inflows in 2002. The leading EU country last year was, perhaps surprisingly, Luxembourg, with net inflows of $125.6 billion, out of the EU’s total of $374.3 billion. Next in line were France ($51.5 billion), Germany ($38 billion), the Netherlands ($29.1 billion) and the United Kingdom ($24.9 billion). Ireland, which, according to past declarations by Prime Minister Costas Simitis, is an example to avoid, attracted net FDI of $19.03 billion. The disturbing figures prompted the Hellenic Center for Investment (HCI) a government-appointed «one-stop shop» designed to facilitate investment, to put out a statement saying that the 2002 figure was a statistical fluke, because of loan repayments by foreign firms’ Greek subsidiaries to the parent companies. However, UN experts estimate such repayments to be just 400 million euros ($363 million). This does not account for the bulk of the decline from 2001, which was $1.45 billion. Thus, loan repayments are not «the main reason» for last year’s disappointing performance, as the HCI claims. The total holdings of foreign investors in Greece amounted in 2002 to $12.056 billion, about 9 percent of the country’s gross domestic product. However, according to the UN’s FDI Performance Index, which indicates a country’s attractiveness to foreign capital, Greece is in 113rd position among 118 countries, just a notch below Turkey. Another index used in the study, the FDI Potential Index, which is an indicator of a country’s potential for attracting foreign direct investment in the future, places Greece in 36th place, one place below the one in last year’s report.