Make reforms to attract investment

Year after year Greece has ranked at the bottom of the OECD table in foreign direct investment, a failure that should debunk enduring myths and disclose the structural problems dogging the local economy. Great Britain and the United States enjoy the lion’s share of foreign investment, a fact which demonstrates that foreign companies are not always after low labor costs alone. In fact, private corporations seem to prefer countries that take steps to trim the cost of red tape and minimize other obstacles and which have straightforward regulations. Greece is sorely lacking in this respect, which explains its poor ranking in successive OECD reports. In fact Greece’s performance is reminiscent of Third World countries, pulling just $600 million in direct foreign investment a year. Red tape remains the biggest problem. Foreign investors know that even if they clear all the hurdles on the path to establishing a new business, company executives will be busy meeting the constant demands of the public sector. The ensuing corruption will be a constant and unofficial tax on their revenue. Another problem is the continuing discrediting of the education system, which has failed to provide a reservoir of employees with up-to-date skills necessary for firms to operate to their maximum potential. Three years ago the current prime minister said that at least 15 major investment plans had stymied because of bureaucratic snags. However, the political changeover does not seem to have changed public sector practices. Investors’ inertia in 2005 is proof of that. The government must translate words into action. Simplifying bureaucratic procedures – perhaps by adopting the successful Belgian model – would only be the first step. Most importantly, there is need for a structural overhaul of the state apparatus and the education system. Otherwise, Greece will remain a perennial laggard.