ECONOMY

Stronger incentives in development for attracting foreign direct investment

A group of older and younger money market and banking professionals gathered recently to discuss the subject of foreign direct investment and how to attract it. One of the older members of the group spoke first: «A few decades ago, at the beginning of the 1960s, our basic incentives for attracting foreign investment,» he said, «was our inexpensive labor and the legal guarantees, embedded the Constitution, regarding the right to repatriate funds. Today, we can no longer speak of cheap labor that would give us a competitive advantage, while the deregulation of the money market and the introduction of the euro allow for the free movement of capital. Therefore, what should be our new incentives for attracting investment capital?» The answer actually complemented and added to the question. «Those may have been the old incentives, along, of course, with tax breaks and other perks. Yet no individual factor was of greatest importance. The whole environment was indeed investment-friendly. Many important infrastructure projects had been begun, the tragic Greek civil war was over and the country was on its way to establishing an association with the then European Community.» A financial analyst concurred: «I agree. Development is not something to be dictated. It must be sought after in the same manner one attempts to find water in the ground. It also takes many water sources for the land to become arable all over; availability of capital, infrastructure, a land use policy, a stable legal and tax regime without impediments, orderly labor relations guaranteeing investors they will not face unpleasant surprises, competitiveness in local and international markets and a friendly social environment…» A lady in the group added a different note: «You cannot leave out protection of the environment, entertainment possibilities, and other such attractions, as these foreign executives will want to live comfortably in the country along with their families… this is something else to consider…» So, how does Greece rate in attracting foreign investment? There were no great differences in opinion concerning the answer to this question. Greece’s investment climate could be upgraded via the Olympics, which have provided the opportunity for the country’s considerable new infrastructure projects to be exhibited the world over by the media. The success of the Games will work as a great advertisement for the country. The high degree of political stability enjoyed by Greece – since the government and the main opposition party have more or less the same policies concerning economic matters as well as the country’s political choices within the international community – is a basic prerequisite for foreign investors to consider possibilities. Yet the whole point is not simply to attract foreign investors’ interest but to see proposals implemented without undue delays and unforeseeable or bureaucratic problems. Among the strongest incentives to new investment is the example of previous foreign investment operating smoothly in a climate of peaceful industrial relations. «The capital that comes here to stay and is invested in productive uses, rather than in seeking temporary gain, needs security, productivity, competency and qualified staff – which fortunately now abounds in Greece – as well as direct access to cheap services of all kinds, such as in telecommunications, transport and access to advanced technology,» said a businessman. These points, made toward the end of the discussion, were considered as granted and self-explanatory. Another question, more specific, begged an answer: «In which sectors could capital – whether Greek, foreign or combined – be invested?» The group again found no difficulty in agreeing that that depended on entrepreneurship. Sectoral studies may be of assistance but it is the entrepreneur who will seek and find where profits are to be made. In Ireland, someone pointed out, they are now investing in biotechnology, medicine and research. He welcomed Economy and Finance Minister Giorgos Alogoskoufis’s recent announcement that the government’s new development law will provide incentives for capital-intensive investment, particularly in technological fields. The eldest among the professionals was the last to speak: «There must be strong tax incentives, availability of venture capital, as well as the stock market being restructured so as to overcome the shock of recent years once and for all. The banking system must play a dynamic role in this direction, boosting productive entrepreneurship. Financial tools have always played a primary role in industrial and tourism development and the good performance of an enterprise largely depends on the proper use of these tools. Sound entrepreneurship does exist in Greece and can contribute to new investment.»