ECONOMY

Expansion abroad the only way forward for local firms

When asked about the prospects for the Greek economy and businesses after the 2004 Olympics, top managers say that an outward-looking strategy is a one-way street, especially now that an important cycle of the Greek economy is coming to an end, with its positive and negative effects. The negative effects include the fact that European Union funds, amply provided through the Third Community Support Framework, will begin to dry up and that Olympics-related infrastructure projects and services, which helped boost many business sectors, will be part of the past. The positive effects have to do with the intense exposure of the Greek economy abroad and the expected rise in the country’s, and its businesses’, prestige and reliability. This is, therefore, a crucial time for Greek firms. They must either decide to sell, inside Greece, services that will meet great international demand – and one can think only of tourism at present – or come out decisively and become active in foreign markets in order to expand turnover. There’s plenty of scope for banks, insurance companies, construction firms and other large industries to do so. In any case, the domestic market has shown signs of fatigue and saturation since 2002, keeping a lid on many companies’ growth. This situation will get worse, beginning in 2005, and the first victim will be the construction sector, one of the country’s biggest employers. The only solution to get out of this crisis, managers repeat, is to become more international and expand into new markets. The immediate and viable solution is expansion into the Balkans; trying to expand into central Europe or the Far East would be an overreach. Its geographical position alone provides Greece with a relative advantage as far as access into the Balkan markets is concerned. Two other favorable factors are the long tradition of trading among the Balkan peoples and the fact that Greece has already begun investing there, especially by buying up local companies. This investment in other Balkan countries has accelerated over the past couple of years, with banks showing the way as they acquire formerly state-controlled financial institutions. However, this penetration is not yet impressive. Further significant investment initiatives are needed in order for this market of 40-million-plus consumers to become an important one for Greek enterprises. The strategy Greek enterprises must follow includes direct investment, the expansion of their networks in cooperation with local business groups, the transfer of managers and know-how, and long-term agreements with each country to boost exports. In this way most large Greek companies can grow, increase their profitability and create the conditions for long-term prosperity. Factors favoring this strategy include preparations by Bulgaria and Romania to join the EU in 2007 or soon thereafter – Croatia has also applied to join – and the United States’ strategic interests in the area, which seem to favor investments in the two countries as a reward for their support. A less helpful factor is Greek policy, for the simple reason that it is nonexistent in the sense of lacking an export thrust. Ideally, enterprises and the State ought to be partners in this enterprise and the government ought to encourage alliances and provide investment and commercial incentives. At present, however, it does not provide any help.