ECONOMY

Gov’t in pursuit of investment

Greece’s geographical position, high growth rate and educational level of its citizens, and low risk factors are comparative advantages which can reverse the sharp decline in the amounts of foreign direct investment (FDI) it has been attracting in recent years, Development Minister Dimitris Sioufas said yesterday. «The country has a series of comparative advantages which remain latent. Tapping them can restore investment, attracting foreign interest and capital,» he told a conference of the American-Hellenic Chamber of Commerce on the Greek economy. He noted that according to a recent report by the United Nations Conference on Trade and Development (UNCTAD) for the 2001-2003 period, Greece ranks 127th in the amounts of FDI it attracts but its potential place is 37th. Sioufas said the present government’s economic policy is aimed at making the best of the comparative advantages by giving priority to structural changes, privatizations and measures in support of entrepreneurship and competitiveness. The government’s initiatives in this framework aim at fiscal recovery by limiting waste and public consumption, tax reform mainly by lowering rates for individuals and firms under a stable regime, and the introduction of a point system of investment incentives for old and new firms which will favor research and development, small enterprises and export-oriented companies. Further initiatives will include a simplification of licensing and operating requirements for enterprises to combat red tape and a new energy policy, particularly as regards natural gas and the promotion of the country’s links with Turkey and Italy; bolstering the economy’s outward-looking situation and emphasis on economic diplomacy; improvements in the mechanisms and distribution of European Union investment subsidies under the Third Community Support Framework (CSF). Sioufas noted that the favorable past conditions for investment in Greece, which have been mainly subsidized under the CSF, are showing signs of weakening. Construction activity in particular, which absorbed most prior investment, is facing a downturn; interest rates are on the rise, and absorption of CSF funds is becoming increasingly difficult. «We lagged in investment that would increase added value, substitute imports and create stable jobs… The main orientation was toward expanding the domestic market rather than conquering larger export shares,» Sioufas said. Arapoglou Speaking at the same conference, Takis Arapoglou, president of the National Bank of Greece (NBG) – the country’s biggest – listed a number of changes in attitude which are important for Greece to integrate itself in the globalized economy. «We must change mentality if we wish to make up for lost time… The way to independent sustainable growth is only through competitiveness if we wish to stop mortgaging our future. And competitiveness means a change in mentality, where we neither look to others nor blame others,» he said. «We must acknowledge that competitiveness means to achieve more with less resources, both economic and human… We must not be concerned about a possible short-term rise in unemployment which can force us to mortgage our future with transient handouts… We must cease discussing whether we are going to work 39 or 40 hours a week when we have such a long distance to cover. «We must start calling things by their name in crucial sectors such as tourism and admit that we have more beds than we need and of a much lower quality than required to justify quality and high prices able to offset our high operating costs… Let us stop complaining and putting the blame on the government, advertising or Turkey,» Arapoglou said. He continued with issues likely to stir reaction from labor unions. «We must cease presenting national issues along party lines… The social insurance issue, which is being touched again lately in such a manner, is a national one. «We must stop relying on popular legislative provisions with a view to maintaining non-competitive concerns. We must adopt measures recognizing that several existing companies must be shut down because they are not competitive and are not entitled to support, despite the fact that we all understandably accept that small enterprises are the backbone of the economy.» Unions react The General Confederation of Greek Labor (GSEE) later slammed Arapoglou’s admonitions. «It seems that the government and its appointed bankers have double standards. They generously grant tax privileges and loans to large enterprises (many of which contract their activity and lay off workers) that lead to the ‘strangulation’ of small and medium-sized firms, the base of the country’s productive activity and economy… «We have to take a stand against such options, which, if implemented, will lead to the demise of small and medium-sized enterprises and add thousands to unemployment which is already the second-highest in Europe,» GSEE said in a statement. Tourism falls from position of top Greek earner in Olympic year Tourism has been shunted out of top spot as Greece’s biggest foreign exchange earner by shipping, in a year the country was expecting an increase in visitors for the Olympic Games. Deputy Finance Minister Petros Doukas credited shipping’s rise to China’s robust economic growth. «One country we must thank for the progress of Greek shipping is China. It has rendered Greek shipping a stronger foreign currency earner than tourism,» Doukas told the American-Hellenic Chamber of Commerce conference on the economy’s prospects after the Games. He said shipping would bring in about 7.8 billion euros ($9.9 billion) in foreign currency this year, versus 6.9 billion euros expected from tourism. Greek companies own about 19 percent of the world’s shipping fleet – oil tankers, general cargo, container ships – engaged in world trade. Hopes of a tourism boom on the back of this year’s August 13-29 Games were dashed when fewer-than-expected visitors showed up, deterred by security concerns, price hikes and poor marketing. Tourism employs about 800,000 people and last year made up about 18 percent of Greece’s gross domestic product (GDP). The country, famed for its sandy beaches on hundreds of islands, had 12 million visitors in 2003 – a million more than its overall population. Greece’s 160-billion-euro economy is expected to grow at 3.9 percent next year, based on the government’s 2005 draft budget, which aims to reduce this year’s 5.3-percent-of-GDP fiscal deficit to 2.8 percent, below the European Union’s limit. Doukas said the high price of oil would have a negative impact on world economic growth, corresponding to a «transfer of wealth from Western economies to the oil producing countries.» «In the case of Greece, it will mean a transfer of income higher than 6 billion euros,» he said. The government’s 2005 budget assumes an average oil price of $45 per barrel. (Reuters)