Why Greece
Foreign Direct Investment
Despite the severe economic crisis Greece has been facing since 2010, the country's performance in attracting foreign investment in 2012 was satisfactory in comparison with the previous year. The total (gross) capital inflows to the country in 2012 amounted to 2.9 billion Euro, while net inflows reached 2.3 billion Euro.
Investment Incentives in Greece
Greece’s Investment Incentives Law governs the terms and conditions of direct investment in Greece and provides for incentives, available to domestic and foreign investors, dependent on the sector and the location of the investment.
In February, 2011, the Greek Parliament voted on and passed the Investment Law, which establishes new objectives, new procedures, and new financing tools, and creates the necessary conditions for a healthy and outward-looking business environment.
The investment law is committed to results, speed, and transparency.
The Law
• Contains a defined annual budget and an aid ceiling.
• Addresses all sectors of the economy, except those expressly articulated in Article 2 of the Law
• Is mindful of scarce public funds by providing incentives through tax exemptions, subsidies, leasing and soft loans. For every one Euro of subsidy provided, three Euros of tax exemptions are provided.
• Provides for both the electronic submission of every investment plan and the submission in hard copy to the Investor Service Offices.
• Contains specified and fixed application deadlines (April and October) except for Major Investment Plans (>€50 million), which are submitted throughout the year.
• Introduces a new evaluation process by establishing the National Register of Evaluators and Auditors.
• Focuses on sustainable investment projects that are environmentally friendly, promote innovation, regional cohesion, youth entrepreneurship, and that create jobs.
The new Investment Law provides for aid rates from 15% to 55% dependent on the Region that the investment is realised, and on the size of the company.
Investment categories
1. General Entrepreneurship
2. Regional Cohesion
3. Technological Development
4. Youth Entrepreneurship
5. Large Investment Plans
6. Integrated, Multi-Annual Business Plans
7. Partnerships and Networking (Clustering)
Types of aid
a. Tax relief—Tax relief (lasting from 8 to 10 years) comprising exemption from payment of income tax on pre-tax profits which result, according to tax law, from any and all of the enterprise’s activities.
b. Subsidy—Gratis payment by the State of a sum of money to cover part of the subsidised expenditure of the investment.
c. Leasing subsidy—Includes payment by the State of a portion of the installments paid under a leasing agreement executed to acquire new machinery and/or other equipment.
d. Soft loans by ETEAN (National Fund for Entrepreneurship and Development). The amount to be covered by a bank loan may be funded by soft loans from credit institutions that cooperate with ETEAN enterprises.
The Greek Economy - At a Glance
Official name: Hellenic Republic
Eurozone Status: Member
Currency: Euro
GDP 2011: 211.6 billion Euro (at constant prices of previous year). GDP for 2011 reached 182 billion Euros at constant prices of 2005.
The Economy
The Greek economy, having achieved high growth rates until 2008, showed signs of recession in 2009 as a result of the global financial crisis, whereas from 2010 onwards the recession has been intensified considerably due to country’s fiscal imbalances. The need for consolidation has led the country to embark on a trilateral mechanism of financial support, comprising the EU, the IMF and the ECB. The restrictive income policy and drastic limitation of public expenses during the past two years had a negative impact on GDP growth, leading to its decrease by 3.5% in 2010 and 6.9% in 2011 (constant prices of year 2005). For 2012, it is estimated that the decrease of GDP will have continued at 6,7% (Government Budget 2013, Athens, October 2012). The recession is also expected to continue in 2013, but at lower levels, due to expected growth in the economy.
However, reforms and restrictive policy implementations have already begun to bear positive results. The public deficit decreased by 34.8% in 2010 and by 16.8% in 2011 compared with the previous year. The completion of PSI in 2012 will drastically reduce the public debt and will contribute to creating a more stable macroeconomic framework. An improvement in the development trends of GDP is expected in 2014 through the acceleration of reforms aimed at the development of a more attractive investment and business environment, including liberalisation of a number of markets, faster licensing procedures, the new Investment Law, flexibility in the labour market, as well with a reduction in the cost of production factors due to the crisis. It is estimated that this year the decrease of GDP will end and there will be a return of the Greek economy to positive growth.
Employment - Unemployment
Unemployment in Greece, up to 2008, was relatively low at 7.6%, approximately the mean value of the Eurozone. During 2009, unemployment rose as a result of the international crisis that also affected Greece and reached 9.5%. In 2010 unemployment showed a further increase, at 12.5%, as a result of the restrictive fiscal policy due to the debt crisis. In 2011, unemployment rose further to 17.7%, as a consequence of the general economic crisis and the measures applied towards fiscal consolidation. Youth unemployment that exceeds 40%, is one of the major problems arising from the domestic economic crisis.
Investment
In 2011, fixed capital formation in Greece reached 31.5 billion Euros at constant prices of the previous year, showing a decrease of 14.4% compared with the levels of 2010 (36.8 billion Euros). This decrease is due to the drastic reduction of public expenses and the restrictive fiscal policy resulting from the financial crisis in Greece.
Despite the domestic crisis of public debt and Greece’s inclusion in the IMF- EU - ECB support mechanism, Foreign Direct Investment (FDI) was at relatively satisfactory levels in Greece during 2010, and were further increased in 2011, exhibiting stabilising trends. More specifically, total capital inflows in the country in 2010 amounted to 2.7 billion Euros, and in 2011 amounted to 3.3 billion Euros, showing an increase of 22%.
Despite the economic crisis the net FDI inflow in Greece also showed a significant increase of 366% between 2010 and 2011, beginning from the low levels of 281.4 million Euros in 2010 and reaching 1.3. billion Euros in 2011. This sharp increase is mainly due to the review of 2010 volumes in which the losses of the foreign companies in Greece were integrated as negative reinvested earnings, according to the methodology of OECD and UNCTAD. However, undoubtedly the volume of net FDI inflow in 2011 was at relatively high levels, despite the intense economic crisis during this year.
International Trade
The export of Greek goods during 2011 showed a significant increase for the second consecutive year, reaching, at current prices, 22.4 billion Euros, up from 16.2 billion Euros in 2010. This increase is due to the reduction of the price of goods, intermediate goods, production factors as a result of the domestic economic crisis that makes Greek products more competitive, and due to the exploration for foreign markets by Greek businesspeople. It is noted that imports to Greece at current prices in 2011 amounted to 43.3 billion Euros whereas in 2010 they reached 47.7 billion Euros. Export growth in 2011, and the corresponding decrease of imports, have resulted in the further reduction of the trade deficit of Greece.
Trade / Exports – Imports of goods
Exports
In 2011, the total value of Greek exports totaled 22,451 million Euros, accounting for 10.44% of Greece’s GDP. Despite the economic crisis in Greece this year, exports showed a significant increase in volume, up 38%. This increase is largely due to two factors that are directly or indirectly connected with the domestic economic crisis:
• Increase of Greek products’ competitiveness as a result of the reduction of prices and cost of production factors in Greece
• Increasing outward-looking nature of Greek companies through the exploration for new markets, given the recession in the domestic market
Destination Countries (2011)
Exports to the European Union (EU) reached 51% in 2011, highlighting the importance of Greek foreign trade to the EU. In 2011, Greek exports to Turkey and China increased, with volumes doubling.
Main Export partners:
• Italy (9%)
• Germany (8%)
• Turkey (8%)
• Cyprus (6%)
• Bulgaria (6%)
• USA (5%)
• UK (4%)
• France (3%)
• Russia (2%)
• Switzerland (1%)
Imports
Imports fell in 2011, to 43,272 million Euros, down from 47,721 million Euros in 2010. A determining factor in this drop was the restrictive economic policy implemented in 2011 as a result of the economic crisis.
Countries of origin (2011):
The main trade partner of Greece for imports in 2011 was the EU, at 54%.
Main countries:
• Germany (11%)
• Russia (9%)
• Italy (9%)
• China (6%)
• France (5%)
• Netherlands (5%)
• UK (3%)
• USA (2%)
Infrastructure
Greece has a developed infrastructure that enables the uninterrupted implementation of most investment activities. Within the framework of holding the 2004 Olympic Games in Athens, and in investment in the following years, a number of changes and improvements in a variety of areas—including the infrastructure of Greece—were materialised.
The economic crisis that has intensified since 2010, and continues today, has inevitably reduced available resources. However, through private investor participation, and given Greece’s current restrictive capabilities, investment in strategic projects that facilitate transport, logistics, and telecommunications will continue , so the flow of goods, services, and information is carried out efficiently, promptly, and cost effectively.
Road Network
During the last decade, the road network has seen substantial improvements. One of the largest infrastructure projects in Europe is the Egnatia Highway, a new East-West highway corridor connecting the port of Igoumenitsa on the Ionian Sea with Alexandroupolis, near the Turkish border.
The PATHE highway system has also been substantially upgraded and connects the southern port of Patras withAthens and Thessaloniki and continues north to the border with FYROM. The third major highway system in Greece is the Ionian Highway that connects Patras with Igoumenitsa.
Within the greater Athens area, the new Attica Highway Ring Road has substantially changed road transport in the capital region and is an important logistics route, connecting the airport with logistics centres, sea ports, and rail stations.
These main arteries are of a high standard and many of Greece’s secondary roads have been constructed and improved to provide business and citizens with the best possible connections.
Airports
Greece has 45 airports—15 international state airports, 26 domestic state airports, and 4 municipal airports. Many of these airports, especially on the islands, primarily serve tourists and handle charter flights. In 2001, the Athens International Airport opened and is considered to be one of the best airports in Europe. For a map and list of airports in Greece visit the Hellenic Aviation Authority site at http://www.ypa.gr/
Currently, many of Greece’s airports are undergoing significant infrastructure and facility upgrades, and there are provisions for the construction of new airports.
Ports
With hundreds of islands, Greece has many seaports, 12 of which are international. The port of Piraeus is one of the busiest in Europe and is the main cargo port of the country, followed by the ports of Thessaloniki, Patras, and Igoumenitsa. Greece has more than 140 ports that serve passengers and cargo.
Greece’s port infrastructure is being constantly upgraded and improved to meet the needs of cargo shipping, security concerns, and the country’s visitors, that totalled 15.5 million in 2012.
In November 2008, China’s Cosco signed an agreement to run a part of the Port of Piraeus in a 35-year, 4.5 billion-Euro deal that is slated to significantly increase the port’s cargo capacity and efficiency. In addition, this agreement, along with the strategic collaboration between Cosco and Hewlett Packard, will position Piraeus as a leading point of entry for goods from Asia destined for the European market.
Railway
The Greek railway system has been placing emphasis on upgrading its infrastructure. The improvement of the rail bed and the laying of new track to improve transport times have been the main priorities.
The rail system is essentially north to south and connects Patra-Athens-Thessaloniki. In recent years travel time between Athens and Thessaloniki has been reduced considerably, from six hours to approximately five.
The suburban railway connecting Athens Airport with the capital of Athens, and Corinth and Kiato, is fast and efficient. In addition, the Athens Metro system, the first in the city, has been extremely successful and has had a major impact on improving urban transport. The Athens Metro is expanding its lines and network by operating new stations in 2013 to meet the mobility needs of the labour force in this major business center. In addition, the construction of a new metro system in Thessaloniki has begun.
Waterways
The shipping lanes serving Greece’s mainland and islands are, for the most part, highly efficient and transport large quantities of passengers and cargo every year. In addition to passenger and cargo ferries, a large number of high-speed catamarans introduced in recent years have reduced travel times considerably.
Power and Energy
Greece relies on lignite for the majority of its electricity production. In recent years the energy market has been liberalised, providing the private sector with new investment opportunities. In wind and solar, major progress is being made as Greece has committed to a minimum 29% of energy from RES by 2020.
The capacity of Greece to handle increased petroleum and natural gas transportation is transforming the country into an energy hub in Southeast Europe, and surveys for hydrocarbons are progressing rapidly.
Telecommunications
As in energy, the liberalisation of the telecommunications market has taken place during the last decade, resulting in a large number of telecom suppliers in landline, cellular, and Internet services. The market is now highly competitive and services are of a high standard.
Cellular phone penetration in Greece is one of the highest in the EU. Since 2007 Greece has been making good progress in adopting digital technologies, and the creation of a nationwide fibre optic network is being promoted. The penetration of broadband in Greece reached 23.8% in 2012, and the increase of broadband penetration in the country during 2012 (2 lines per 100 residents) is higher than the previous year (1.8 lines per 100 residents).
Water and Sewage Systems
As international concerns about climate change mount, Greece has managed to avoid serious problems to date in its water supply.Concerns are greatest on some islands that have limited fresh water resources and must rely on transported water. Innovative desalination projects using RES technologies are currently being planned for implementation.
Almost 100% of households have continuous access to water supply and almost 95% are connected to the sewage system. Relatively new sewage treatment plants serving Athens and Thessaloniki have dramatically improved the water quality in the Saronic Gulf in Athens and the Thermaicos Gulf in Thessaloniki.
Human Capital
During the last three decades in Greece, demographic shifts, EU integration, and global trends have been reshaping the economic landscape so that Greece’s human resources are meeting the needs of today’s service and knowledge-based economy. There is a good supply of highly qualified labour in Greece.
A Shift to Services
The economic focus of Greece has witnessed significant shifts so that as of the fourth quarter in 2011 roughly 70.1% of the workforce is involved in the service sector, 17.3% in industry, and 12.6% in agriculture. Contemporary trends have resulted in a vastly different workforce than that of 20 years ago, and training and education increasingly reflect the needs of today's globalised economy.
Languages
The tourism sector, accounting for 15.3% of GDP (2010), has absorbed the largest increase in human resources. Many of the country's post-secondary educational institutions offer specialised courses in tourism studies, with an emphasis on language training. As a result, Greece ranks favourably in the EU for its number of speakers of a second language. English is by far the most widely spoken second language in Greece.
English is the language of business on a daily basis, especially in international companies. Professionals in the workplace are well educated and the level of university degrees in management is by far the highest in Southeast Europe.
Intellectual Capital
Education has been long recognised as the most valuable asset a person can have to advance and Greeks are eager to invest in training their sons and daughters. In fact, Greece sends more students abroad to study, per capita, than most countries. Universities in the United Kingdom, Germany, Italy, France, and the United States boast large numbers of students from Greece, many of whom achieve high academic success.
There are roughly 178,000 students enrolled in post-secondary educational institutions in Greece. During the past years the number of graduate students has increased significantly, reaching 35,570 enrolled in graduate programmes, and 23,853 enrolled in doctoral programmes in the academic year 2010/2011. Greek students have always shown a strong interest in medicine, the sciences, engineering and electronics. In recent years, technology and business administration have become more popular, as new programmes are offered and more opportunities exist to pursue studies outside Greece.
Greece's "intellectual capital" will continue to be a strong national asset and investors who are seeking special skills will have a host of competitive advantages when choosing Greece as an investment location.
Access to Financing
Investors have a wide selection of alternatives for their financing needs to implement their projects.
1. The Investment Incentives Law provides strong financial incentives to realize projects in numerous sectors throughout the country.
2. The NSRF (National Strategic Reference Framework) 2007–2013 is the reference document for the programming of European Union Funds at national level until 2013.
3. Public Private Partnerships (PPPs) are valuable tool leading to the construction of public infrastructure and the provision of qualitative services to citizens. Via the implementation of PPPs, the public sector is making make use of contemporary finance tools to provide services to citizens, enhancing the existing framework of public procurement.
4. Venture Capital and Private Equity financing are at a quite mature stage of development in Greece and have enabled many investors to realize their plans.
5. Financial Institutions, namely Banks, offer to the entrepreneur a wide selection of customised financial instruments and complement the above mentioned financial tools to cover financing needs which cannot be met from other sources or shareholder capital.
Venture Capital in Greece
Greece has a favourable position in the upper part of the European VC ranking and is among the countries performing better than the European average, thanks to a good balance between the tax and legal environments for private equity and venture capital investors, managers and investee companies.
Greece operates a dedicated domestic fund structure, called AKES, for private equity and venture capital, (a closed-end venture capital fund, formed as a partnership).
AKES is tax transparent for domestic and non-domestic limited partners, and offers non-domestic limited partners the ability to avoid having a permanent establishment in the country. Furthermore, management fees are exempt from VAT in Greek companies.
Greece provides tax incentives for private equity and venture capital when investing through the AKES. For example, the establishment and management contract of AKES, as well as the payment of the unit holders’ participation, are not subject to any kind of tax, fee, stamp duty, contribution right or any other charge imposed by the State or other third parties.
The overall environment for retaining talent in investee companies and fund management companies in Greece is favourable. Gains from the sale of shares as well as stock options are tax exempt.
Overall, there are 17 venture capital funds active in Greece with approximately 900 million Euro under management. The funds are all members of the Hellenic Venture Capital Association (http://www.hvca.gr/), established in 2003 in Athens.
TANEO – Fund of Funds
Most funds have been incorporated with the participation of TANEO. TANEO is the first and only “fund of funds” in Greece that aims at the competitive development of venture capital funds oriented towards supporting SMEs. Through the 11 TANEO funds, more than 280 million Euro have been directed to Greek SMEs.
Through the collaboration of private and institutional investors, TANEO creates new funds, tailor-made to address the needs of small businesses with a vision and a well-developed business plan.
For more info http://www.taneo.gr/