Banks, ports, energy and tourism only woo investors
Both Prime Minister Costas Karamanlis (in his informal lunch with British businessmen in London last Tuesday) and Economy Minister Giorgos Alogoskoufis (during his multiple contacts in New York earlier this month) received ample confirmation that Greece is virtually left out of the trillions of dollars of investment capital flooding the planet. The reasons for the country’s marginalization must be sought exclusively in the government’s delays in quelling corruption in the public sector, particularly in tax offices; in making the labor market more flexible by ending the professional closed shops; and, especially, in putting in place a zoning pilot plan that will protect investors. This year has seen a record in the profits of the world’s largest investment banks from mergers and acquisitions. Despite rising interest rates, the global financial system is seeing liquidity at phenomenal levels. In Greece, foreign private equity funds recently acquired the Mont Parnes casino and cell phone operator TIM Hellas, probably aiming at realizing capital gains from selling them later. The year 2006 has been an exceptional one for Greece. Credit Agricole’s acquisition of Emporiki Bank brought in $2.5 billion. In previous years, the foreign investment inflow in all sectors did not exceed $1 billion, when in neighboring Bulgaria this year it is projected to reach $5 billion, and in Turkey $10 billion, the global total being around 780 billion. According to World Bank data, Greece trails all its European partners in direct investment. Things are rather better at the bourse. Just over half the capitalization of the Athens Stock Exchange – about 70 billion euros – is accounted for by foreign investors. In his contacts, Alogoskoufis found that they are happy with the returns they enjoy from Greek listed firms and believe that these will continue for some time, mainly because the government is tidying up public finances and is resolved to continue with privatizations. Four promising sectors The contacts made by the prime minister and his economy chief showed that Greece can expect foreign investment only in the following sectors: – First, in the financial system. The foreign banks, insurance companies and private equity funds will continue to be interested in acquiring majority stakes or as strategic partners in Greek financial institutions. Therefore, one cannot rule out aggressive buyout bids for Greek banks in the near future, which may lead them to defensive mergers. – Second, in the energy sector. If the Burgas-Alexandroupolis oil pipeline, linking the Black Sea with the Aegean, and the natural gas pipeline linking Turkey with Italy through Greece are realized, this country will become an important energy hub which will attract investors either in power plants or in projects for power distribution in the region. – Third, in the tourism sector, where – the Greek officials were told – the countries can attract tremendous amounts of foreign investment, not in luxury hotels but in large residential holiday complexes. Alogoskoufis remarked that just two such planned schemes, in Messinia and in the Toplou monastery on Crete, will bring about $1 billion. But a prerequisite for such large investments is the existence of clear zoning plans. This, Environment and Public Works Minister Giorgos Souflias has promised, will be in place in the spring. – Fourth, in the transit trade in the country’s big ports. There is a strong interest by European, Arab and Chinese companies but the government’s plans for privatizing some port services is running into opposition by labor unions. The sooner we prepare changes in these four areas, the faster foreign investment will come. Greece is now a country of high labor costs and there is no hope for foreigners to come and invest in factories. Besides, Greek industrialists are emigrating to neighboring Balkan countries. – Finally, a point made to the Greek officials by foreign bankers holds special interest: The expansion of Greek banks and businesses in the Balkans is a significant strategic advantage in attracting foreign institutionals to invest in their shares, as they realize their long-term profit potential.