ECONOMY

Positive views of investment law

Greek manufacturing firms are generally optimistic about the impact of the government’s investment incentives enacted earlier this year, according to a joint study by the Federation of Greek Industries (SEV) and business research firm ICAP. The study, «Greek Manufacturing: An Appraisal of 2004 and Projections for 2005,» shows that 40.6 percent of the manufacturing firms surveyed believe the law will help strengthen competitiveness and investment potential. This view tends to be stronger among larger firms. About 20 percent believe the law’s impact will be negligible. Most are adopting a «wait-and-see attitude,» while a few firms are not yet familiar enough with the provisions to comment. When the firms were surveyed at the end of March, 13.5 percent said they intended to submit investment schemes under the new law, while another 41.5 percent considered it likely. The pattern was stronger among small and midsized firms (those with assets of less than 30 million euros), while a large number of big firms expressed certainty that they would avail themselves of the new law. «If such plans are implemented, a rejuvenation of investment in manufacturing is likely in the near future,» said ICAP’s economic adviser Costas Aivalis. Corporate tax rates will be gradually reduced from 35 to 25 percent over four years. Nearly 24 percent of manufacturing firms estimate this change will have a decisive impact on competitiveness and investment, while slightly more (23.9 percent) say the measure will have minimal impact. Another 7.5 percent believe the impact will be negative. Most firms consider it too early to accurately appraise the results of the corporate tax cuts. Nevertheless, more than a quarter of them think the tax cuts will lead to a rise of their undistributed profits for investment. Only a few said they intend to boost their dividend payouts. Small firms more upbeat The small and midsized Greek manufacturing firms surveyed generally show much more optimism when considering their prospects in 2005. The projected 19.1 percent increase in investment in 2005 (18.6 percent in 2004) is wholly accounted for by small and midsized firms. In contrast, bigger ones generally said they planned to limit their investment activity this year. The outlook for sales and exports is more subdued than last year. Sales are projected to rise 6.3 percent, against 9.5 percent in 2004, while exports are seen rising 11.5 percent, compared to 15.6 percent last year. Employment levels are projected to remain steady, with only a 0.2 percent rise against a 1.2 percent drop in 2004. Labor costs are projected to rise by 3.3 percent, compared to 1.5 percent last year. Gross manufacturing profits are estimated to have risen 7.6 percent in 2004, pretax profits 1.2 percent and exports 17.8 percent. SEV’s president Odysseas Kyriakopoulos said this year’s negotiations with labor unions for a national pay pact are likely to be particularly difficult. Results Separately, Economy and Finance Minister Giorgos Alogoskoufis said yesterday private investment proposals are proliferating on the back of the government’s investment incentives law. He said as many as 204 plans had been submitted by June 23, totaling 441.3 million euros. Fifty-seven of those proposals have been approved, amounting to 98.6 million euros. Alogoskoufis noted that in the past, when similar laws started operating from September, approvals only took place at the end of the year, so there were no investments implemented at this time of year. Most investment plans have been submitted in Crete (34), with 19 of them already approved, amounting to 17.5 million euros. The state subsidy to them will come to 7.3 million euros.