ECONOMY

Global, domestic data point to competitiveness problem

Greece appears to be gradually losing its attraction as a country of investment for foreign investors, data released by a UN agency and the Bank of Greece yesterday indicated, with economists saying the ominous trend should spur the government to take more measures to improve the business environment. In its World Investment Report for 2001, the UN Conference on Trade and Development (UNCTAD) said Greece, together with Oman, Botswana and Sierra Leone, posted the largest declines in foreign direct investments over the past decade in terms of country rankings. In the period 1998-2000, Greece was ranked a dismal 125th in the FDI Performance Index, two places down from Turkey and way below many of its Balkan neighbors. The discouraging ranking came despite a steady increase in inward foreign direct investment flows, which rose to $1.56 billion from $85 million between 1998 and 2001. While cross-border private investments on a global level showed a fall for the first time in a decade in 2001, with the largest decline in 30 years, this fact will be cold comfort to Greece. Foreign direct investments, the bulk of which are cross-border mergers and acquisitions, are often considered a key engine of growth for developing countries. More ominous for Greece, foreign direct investments in the first half of the year shrank drastically, provisional statistics released by the Bank of Greece yesterday showed. The inflow of direct investments in the first half of the year amounted to just 45 million euros, a 77-percent drop year-on-year, despite a hefty jump in June inward investments to 117 million euros due to French bank Credit Agricole’s acquisition of an additional 2.35-percent stake in Commercial Bank. The statistics paint a worrying picture of Greek competitiveness, economists said. «The figures reflect Greece’s shrinking competitiveness and its contracting market share in both goods and services,» said Christos Avramides of Proton Investment Bank. He said the fact that Greece experienced a net outflow of direct investments in the first half of the year showed that «we don’t attract foreign investments.» EFG Eurobank Ergasias economist Platon Monokroussos said the only way to boost Greek competitiveness is to speed up structural reforms, open up markets and simplify procedures for setting up companies. A stable and clear taxation system would also help clarify the situation for foreign investors. Greece’s current account deficit widened by 9.8 percent to 4.39 billion euros in the first half of the year but was down by 26 percent to 543 million euros in June, the central bank said yesterday. The trade deficit expanded to 11.14 billion euros and the income deficit to 1 billion. The services surplus in contrast improved to 4.15 billion euros. Greece’s reserve assets stood at 8.2 billion euros at the end of June.