The Ekthimerini writes in an editorial: "It will be particularly difficult, if not outright impossible, for
Greece to get back on the road to growth without foreign investment." I would like to explain, once again, why it will be impossible for Greece to get back on the road to growth without foreign investment.
A credible source informed me that the Geek economy, since Independence, ALWAYS needed finanical stimuli from abroad in order to function well or reasonably well. I cannot judge that but it sounds plausible. During the first 10 years of the Euro, the Greek economy received (net) 10-15% of GDP in foreign funds annually and yet, unemployment did not go significantly under 10%. This is evidence enough that the Greek economy, in its present structure, can only employ its people when there is net fund flow from abroad.
The following items are the most important instruments for foreign funds to enter the country:
1. Loans and other financial liabilities
2. EU grants and subsidies
3. Remittances by Greeks working abroad
4. Foreign investment
Item (1) has the disadvantage that it carries interest and needs to be repaid. Items (2)-(4) have the advantage that the don't carry interest and they don't need to be repaid.
EU grants and subsidies are, hopefully, already being used to the maximum. Remittances by Greeks working abroad were the most important source of foreign funding from 1950-74, but they have declined (and become very small) since then.
That leaves foreign investment. Full stop.
The trick with foreign investment is to find the 'right' foreign investor. Anything which only smacks of financial investments for short-term profit must be avoided. Multi-nationals which come and go are also unattractive in the long run.
The 'right' foreign investment comes from investors who have a long-term commitment to the country; who bring know-how in addition to capital and who want to grow their business in Greece (and perhaps through Greece in the region).
Anyone who is in a position of influencing public opinion and sentiment is, in my opinion, obligated to bring the above message across to Greeks; continually and convincingly!
A credible source informed me that the Geek economy, since Independence, ALWAYS needed finanical stimuli from abroad in order to function well or reasonably well. I cannot judge that but it sounds plausible. During the first 10 years of the Euro, the Greek economy received (net) 10-15% of GDP in foreign funds annually and yet, unemployment did not go significantly under 10%. This is evidence enough that the Greek economy, in its present structure, can only employ its people when there is net fund flow from abroad.
The following items are the most important instruments for foreign funds to enter the country:
1. Loans and other financial liabilities
2. EU grants and subsidies
3. Remittances by Greeks working abroad
4. Foreign investment
Item (1) has the disadvantage that it carries interest and needs to be repaid. Items (2)-(4) have the advantage that the don't carry interest and they don't need to be repaid.
EU grants and subsidies are, hopefully, already being used to the maximum. Remittances by Greeks working abroad were the most important source of foreign funding from 1950-74, but they have declined (and become very small) since then.
That leaves foreign investment. Full stop.
The trick with foreign investment is to find the 'right' foreign investor. Anything which only smacks of financial investments for short-term profit must be avoided. Multi-nationals which come and go are also unattractive in the long run.
The 'right' foreign investment comes from investors who have a long-term commitment to the country; who bring know-how in addition to capital and who want to grow their business in Greece (and perhaps through Greece in the region).
Anyone who is in a position of influencing public opinion and sentiment is, in my opinion, obligated to bring the above message across to Greeks; continually and convincingly!
Yes, the economy direly needs foreign investment. Unfortunately, the issue seems to have become very politicised. There does seem to be this automatic suspicion that foreigners are going to take the poor long-suffering greeks for a ride. (And in fact, not just foreigners, I suspect domestic entrepreneurs face the same difficulties - perhaps less so on the islands than on the mainland?)
ReplyDeleteThere's only so much that structural reforms to make the institutional landscape more business-friendly can do. Cultural attitudes matter, as to whether foreign investment works, or not.
To be clear, they matter anywhere, not just in Greece. An example: Walmart set up a subsidiary in Germany, back 12 years ago or so. And Walmart is an extremely efficient organisation.
It failed completely, and Walmart pulled out again after about five years. One of the big problems was high staff turnover and low morale. Those american-style morning pep-talks and insistence on being friendly to the customer just didn't go down at all well with the local workforce!