NEWS

Bureaucracy and corruption hurt business

Bureaucracy, corruption and high taxation keep investors away from Greece and undermine the country’s competitiveness, according to a World Bank report. Another report, by the Organization for Economic Cooperation and Development (OECD), shows that, in 2005, foreign direct investment in Greece declined 71 percent, to $600 million, from $2.1 billion in 2004, taking Greece to last place among the 30 OECD member states. Greece is also next to last among the old 15 EU members (that is, excluding the 10 newcomers who joined in May 2004) regarding competitiveness, with only Italy being worse. High business costs in Greece are attributed to several factors, including high taxes and relatively high wages. However, most of the cost is attributed to bureaucracy and corruption. According to the World Bank report, fully 56 percent of the surveyed businesspeople expect to pay a bribe to tax officials to expedite their affairs or avoid a more thorough inspection of their books. The bribe averages 0.23 percent of a company’s sales. The World Bank survey also shows that enterprises with a presence in Greece suffer more from cuts in electricity and water, twice the average in OECD countries. It will also surprise some that they spend twice as much as in other OECD countries on security and protection from crime. Beyond corruption, the difficulty of starting a business in Greece also impacts on foreign investment. To this mujst be added the difficulty of new firms to find financing. Several banks who have set venture capital subsidiaries or departments use them for anything but such financing. Greek company law constitutes another obstacle to economic activity. One recent example is the agreement by National Bank of Greece, Greece’s largest, to acquire Turkey’s Finansbank. It had to wait almost two months for the shareholders to approve that decision. In Cyprus, by comparison, the Bank of Cyprus will only need one shareholders’ meeting to approve its decision to bid for Greece’s Emporiki Bank, while National Bank had to call for successive shareholders’ meetings to ensure the necessary quorum. In the meantime, several events happened simultaneously, including the decline of stock markets and a run on the Turkish lira, which focused investor interest on the short-term implications and not the long-term benefits of the agreement.