Why foreign investors bypass Greece

Slowly but surely, the Greek economy is losing the battle to win more foreign investment. This is a vital issue which directly affects the country’s development – one perhaps even more important than the promotion of exports, which can only be successful if investment has preceded it. To be sure, explaining why Greece is being bypassed by foreign investors requires no major effort. In fact, the best Greek companies invest abroad, while the Greek investment scene is so shallow that the relevant indicator only sees a spike when a relatively large Greek company is acquired by a foreign group. If we exclude foreign investment in bonds and shares, virtually the only other placements from abroad concern the acquisition of existing firms, mainly commercial, not the setting up of a new subsidiary. In reality, they buy a market share in order to promote their products. It is no coincidence that in some foreign supermarket chains most products are imported; in their home markets they have the potential for concluding better deals. The globalization of commerce has an inevitable impact on production. The present government’s investment incentives law, introduced earlier this year, marks a valiant effort to fill the gap. It provides important incentives and bolsters the potential for regional development. Generous investment incentives have existed for many years, but results have been poor. Because this is self-evident, there is a tendency for such incentives to be supplemented by tax breaks for the profitable investment ventures. This is correct, as loss makers can also receive investment subsidies but are untaxable. However, not even the advantage of low taxation seems enough to attract new investment to Greece. Everyone knows that in many other countries taxation is even lower, but again, the difference between 20 and 25 percent tax rates cannot be the main reason for someone deciding on which country to invest in. The main deterrents to new investment are the lack of clarity and complexity of the investment environment; lack of clarity as regards where and under what terms a venture can be implemented; the lack of clear environmental regulations; and a lack of clarity in most of the country over what kind of enterprises are allowed to be set up in specific areas. But even where it is clear, the endeavor is complex. Many stages are involved, with local, regional and national authorities waiting round every corner for «toll» charges. In view of such obstacles, the real question is why, indeed, some investment schemes get implemented.

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