Why FDI eludes Greece

Foreign institutional investors now control about 30 percent of the share capital of the five largest Greek banks: National, Alpha, Eurobank, Emporiki and Piraeus. Together with their placements in some of the other large Greek corporations, the value of their shares in blue chips approximates 20 billion euros. Unhappily, even this impressive figure does not allow any claim that Greece is an attractive place for foreign investment. Such placements of foreign funds are only short-term and can be repatriated at the touch of computer keys by dealers in London or New York. Although they represent a vote of confidence in the future of these enterprises and the Greek economy, such indirect investment does not offer a stable basis for growth in tourism or industry and does not boost employment. At the same time, foreign direct investment (FDI) in plants and other businesses in neighboring Bulgaria this year is projected to reach 4.5 billion euros and in Romania, 5 billion. In contrast, FDI in Greece last year amounted to just 1 billion euros and is not seen exceeding even half that amount this year. National Bank’s president, Takis Arapoglou, who is currently investing large sums in an expansion of the bank’s network in the neighboring Balkan countries, says that Greece will need many years to persuade foreign businessmen to invest here long-term. Because although the present government is moving in the right direction, improving the bleak picture formed over the years from statist policies is a long-term proposition. The World Bank’s annual report on «Doing Business» in 155 countries, released on Tuesday, ranks Greece 80th in terms of business-friendliness and worst among the OECD’s 30 members. And by favorable business conditions we do not mean low labor costs. As main opposition leader George Papandreou’s economic adviser Iraklis Polemarchakis says, «we should not opt to compete on the ground of labor costs.» «But this does not mean that we should not make efforts to contain pay raises… We need a positive business environment, appropriate infrastructure, simplification of procedures and a friendly and supportive public administration.»