Friday, October 19, 2012

Doubling business volume in a depression?

This NYT article describes the development of that half of the Port of Piraeus which was taken over by a Chinese company, Cosco, about 2 years ago. Since I am not familiar with this situation, I have to take the article at face value. What lends credibility to it is that it was written by a Greek journalist who is residing in Greece. Key points:

* the cargo volume is now three times the level of two years ago
* the Greek state collected 500 BEUR as a sales price (*)
* the Greek state collects more income taxes as a result of the business pick-up
* Cosco now spends 388 BEUR to modernize the dock (*)
* Cosco allegedly receives 'thousands of applications' from Greeks interested to work for them

(*) I have gotten so used to talking in terms of billions that I overlooked the fact that sometimes there are still only millions. As readers have pointed out below, the numbers should obviously read 500 MEUR as a sales price and 388 MEUR to modernize the dock

The unions of the other half of the port which is still being owned by the state accuse Cosco of using employment subcontractors that hire temporary, unskilled, nonunion workers desperate for jobs and exploit them by paying low wages. Also, they accuse Cosco of saving money by cutting corners on worker safety. "They are bringing third-world labor standards to Europe", one comment says. “If you are a worker for Cosco, then you know suddenly how it is to work in the Chinese Republic", says another one. I cannot judge this.

This story reinforces two of the major points of my blog: Greece needs foreign investment and Special Economic Zones.

The primary aspect about foreign investment should not be the one-time financial gain on the sale. Instead, it should be about chosing the right foreign investor and getting know-how transfer in all areas, not only in technology (e. g. know-how transfer in management and corporate governance), as well as new investments.

Special Economic Zones serve to allow foreign investors to run their operations at internationally competitive terms. That may be a designated geographic zone where foreigners are invited to make new investments but it can also be, as Cosco shows, the case of an already existing individual company where the foreign investor is given the freedom to run the operation as he knows a successful operation must be run.

How the cargo volume at Cosco could be tripled in 2 years while the rest of the country was in depression is a mystery to me. However, it goes to show that the Greek economy does have potential if only it were tapped in appropriate fashion. Just imagine the result if there had been a few hundred foreign investments in the last 2 years! And one other thing: success stories rub off on others! It would be interesting to know if some of the 'thousands of applications' which Cosco gets come from the other half of the port which is still owned by the state, controlled by unions and where employees are paid more.

Last point: it would be good for national morale if one didn't have to go all the way to the NYT to read about such Greek success stories...


  1. this is good news, but 500 BEuro is slightly exaggerated :-)

    1. NYT link has

      Correction: October 10, 2012

      Because of an editing error, an earlier version of this article misstated the value of the 2010 deal for Cosco for lease half of the Port of Piraeus. The value of the deal was €500 million, or $645 million, not €500 billion.

    2. If you go all the way to China News you get it even earlier - even the NYT knows how to Copy/Paste :)

      It is to be hoped the increased traffic is due to trans-shipping operations rather than traffic decreases in other Greek ports. I read a few months ago that Piraeus #3 was becoming a preferred entrepot for Asia cars.

      At the top of the non resource based sovereign wealth funds list, you'll find China and Singapore

      Singapore is #2 container port (some say its #1) just behind Shanghai! Overall SNG is the biggest port on the planet, oil is big business in SNG.

      Singapore is a small island of 5M, with no natural resources - it even has to import its tap water!

      But hang on, how come the world's biggest container port (10 year average), second largest non resource SWF, third highest (IMF) per capita GDP (PPP), sits on a tiny swampy island with half the population of Greece and none of its natural beauty (apart from the pretty girls). Maybe because its run by people whose originate from China.

      Have a look at the Cosco management board

      Yes they are all members of the Party Committee, but 8 of the 9 are graduates from maritime universities. This probably results in them knowing a lot about shipping.

      The Chairman has a PhD in naval architecture, an MBA in Shipping and he's a former ship's master. He was President of Cosco (Singapore), when via acquisition, it was transformed into Cosco's first publicly listed subsidiary.

      10 years ago Piraeus was the 49th largest container port, its now somewhere off the bottom of the top 50 list.

      I cant think of a better company than Cosco to get Piraeus back into the top 50 container ports. They were wanting to build a warehousing centre, it was not next to the port - about 20kms away I think. Memory is that it was being blocked by the usual suspects - unions, red tape, NIH bigots etc.

      This success story supports my argument that you don't need SEZ's to attract foreign investment. Governments will always choose the wrong location (where there is no transport or energy, or workers) for the wrong reasons (helping their political party mates). Just send the wrecking balls into the administration maze.

      On the subject of consumer prices - it must cost extra money to ship food, fuel, energy etc to the islands, how is that paid for - by the islanders or cross subsidies from mainlanders.

      Austria has an excellent terrestrial transport network, you can send a refrigerated container load of milk from Salzburg to Vienna in a couple of hours. But from Koufalia to Naxos - more like a couple days (weeks) and a darn more expensive I suggest (I'm assuming there are not many cows on Naxos)

      I have a vested interest in shipping containers, I own some - nice little earner. But not as good as it was when Europeans & Yanks were doing what they're best at doing - shopping :lol:


      NIH - Not Invented Here

    3. My argument for SEZ is not based on intent but on default, instead. Obviously, if one could liberalize the entire Greek economy overnight, that would be best. I just don't think this is possible because it would disrupt so much of existing businesses who may be doing ok even in archaic Greek structures.

      I presume that Cosco must have made a few quite radical changes to record such success. If the entire economy had to undergo such radical changes, you might get a revolution.

      This is why I am focusing on NEW investments where you can start from scratch (and in the right way). The nearer-term objective must be to quickly find jobs for unemployed.

      Obviously, this should not exclude the option that things are done to existing businesses that Cosco did to the port. I find it fascinating to have Greece and China side by side, so that one can make comparisons which of the two systems works better for Greece. Perhaps the day will come where employees on the union-protected Greek side voluntarily apply to work on the "brutally liberalized" Chinese side because they think it's more fun to work in a growing company than in a dying company. That will be the day to celetrate!

    4. "Perhaps the day will come where employees on the union-protected Greek side voluntarily apply to work on the "brutally liberalized" Chinese side because they think it's more fun to work in a growing company than in a dying company. That will be the day to celetrate!"

      I assume that the word "celetrate" has to be "celebrate"....

      Lately I watched a documentary about the Chinese "success": many happy people. Rich.
      The people behind the camera went to places where nobody sent them, they went to what obviously needed to be hidden. The reason for their success is IN the factories, in the bodies of human beings working like slaves under circumstances that belong to the former century.

      Europe/Greece does not need this kind of new suppressors.
      Europe needs to connect all the intelligence of people living in Europe, people with the right skills to go together to Greece, to connect with the right people there, and to connect with the most important Greek "industry": the Greeks themselves. They have ALL the needed qualities and possibilities to start with something what is THERE. Greeks need people who know more about building up a small company in the RIGHT way, to find with that the love for work and life again, hope for the future, to go on, to grow, under the guidance of those who can give advice with the western European knowledge. Because there is a difference in thinking. The western European way of thinking and acting is constructive. The Greek way of thinking and acting appeared to be destructive.

      Dear Klaus Kastner. I am sure that you could do it. You impress me with your insight and knowledge. You cannot do this job alone however, so I would like to ask you to collect the right people from your network to go there with you, to Greece, and start.

      You can.

      The European banks should invest in you, and pay you for that job. It is good for entire Europe. For the future of ALL.

    5. The Dutch also know a thing or two about port operations, did they submit a bid for the Piraeus contract? Maybe not, they were probably too busy implementing the contracts they have to build & operate ports in China.

      I guess that's what the Brusseleir Sprouts mean by European solidarity - as solid as a bowl of Bologna Zuppa Inglese.

      At least the Chinese are not sending gunboats up the Rhine towing barges of opium, nor are they ripping 40,000 tonnes of silver out of the Pyrenees using local natives as slaves, they're not even turning the Ardennes forests into the worlds biggest slave operated rubber plantation.

      The Europeans don't like Chinese investment, but I bet they wouldn't say no to a trillion Chinese euros to bail out their zombie banks, so they can reinflate their old property bubbles and fire up the Ponzi schemes again and pay themselves gold plated pensions.

      A busy port generates a lot of spin off activity for small and medium size businesses. If cars are landing at Piraeus destined for the rest of the Balkans they will travel on Greek roads or trains. The importers will have to pay the road taxes and rail freight charges to the Greek government so they can pay pensions and buy medicines. The fuel for the car carriers will be purchased in Greece, hopefully it will even be refined in Greece, the car carrier drivers could even be Greeks.

      Instead of agonizing over one Chinese company that employs a few hundred Greek and a handful of Chinese workers - it might be better to agonize over those 4,000 Greek businesses that have decamped for neighboring countries. If they employed an average of 5 people - that's 20,000 jobs gone.

      If the Europeans are so intelligent - how come they need to borrow money from the rest of us. And how come when they start wars between themselves the rest of us have to go there to sort it out.

      The Greeks who know how to build and operate successful small businesses are busy doing it - but they're not doing it Greece. They're doing in places like Australia, alongside their Chinese, Vietnamese, Turkish, Indian etc mates.


  2. ... und wenn das dann geklappt hat, Herr Kastner, dann hätte ich noch einen thailändischen Elefanten, der einen Tanzkurs vertragen könnte.

    viele Grüße aus Singapore