ECONOMY

How to attract more foreign investment

In his talks with his Japanese counterpart Junichiro Koizumi in Tokyo tomorrow, Prime Minister Costas Karamanlis is certain to impress upon his host that the Greek government is determined to make the country a much more attractive place for foreign investors. He is bound to point out that the government is gradually cutting the corporate tax rate over four years, from 35 percent to 25 percent, it has introduced investment incentives and has simplified procedures for the licensing of manufacturing units. I am afraid that Japanese businesspeople will find such arguments alone unpersuasive (note that Japan is the second-largest exporter of investment funds after the United States), when many of them have had personal negative experiences. For instance, a number of Japanese companies submitted plans for wind parks in Laconia and other places approximately more than 10 years ago. The total budgeted investments come to more than 300 million euros, but to date they only remain on paper, having repeatedly met with objections by the Council of State, the country’s highest administrative court, which endorsed complaints by local residents. Evidently, the responsibility lies neither with the Council of State nor the locals but with the Public Works and Town Planning Ministry, which has not yet managed to produce a clear zoning plan showing prospecting investors where they can put their money and where not. Because everything in Greece happens at the last minute and because the prime minister told his ministers that he cannot go empty-handed to Japan, they hastened to produce a zoning plan for Laconia that defines the areas where the installation of wind parks is allowed. And so, the Japanese company that was interested in investing in the particular area (an investment of about $50 million) will now be able to do so, after submitting an environmental effects study and obtaining the license in a few months’ time. The question is what is to be done with the rest of the proposed investments. Indeed, what future is there for wind parks in Greece, which has inexhaustible potential? Deputy Development Minister Giorgos Salagoudis has admitted that it takes more than three years (sic) for an investor to obtain a license for a wind park on the breezy islands in the Aegean. And this is at a time when Greece has a power deficit and is importing electricity from Bulgaria and Turkey. Fortunately, the Public Works Ministry had encouraging news late last month. It announced the assignment of a study for zoning plans in industry, tourism and renewable energy sources. These will be ready in May 2006, while the national zoning plan is making progress. The realization of these programs is certain to improve Greece’s attractiveness for foreign investment, but, of course, one should not expect anything resembling the occasional foreign economic miracle anytime soon. According to Bank of Greece data, foreign capital investment amounted to $1,351 million in 2004, the best year since 1990. Obviously, the improvement was due to projects related to the Olympic Games, because this year there has been a decline again: The same data show that in the eight months to August, foreign investment reached $413 million against $924 million in the same period last year. It is really up to us to lift the disincentives to foreign investors, who not only lay down their money but also bring know-how and new entrepreneurial behavior. This is also bound to bolster investment by Greeks themselves, who are increasingly investing abroad.