Record FDI Levels
Greece is changing. The country’s new growth trajectory reflects the transformation of the economy from the inward-looking, consumption- and debt-driven economy of the past, to one based on FDI and export trade.
For a third consecutive year, FDI in Greece has risen sharply, reflecting growing interest by overseas investors in Greek assets, ranging from renewable energy to hotels, to food manufacturers. According to the latest figures from the Bank of Greece, FDI inflows in 2018 reached pre-crisis levels at €3.3 billion, a 9.1% increase from 2017.
To be sure, Greece still has much lost ground to cover. For one thing, domestic investment virtually collapsed during the crisis and stood at 11% of GDP in 2018, compared with a European average of around 20%. Analysts say that Greece needs €100 billion worth of investment over the medium-term to return the economy to its pre-crisis levels. That will require FDI inflows to more than double: from about 2% of GDP in 2019 to the European average of 5%.
Over the medium term, Greece’s conservative government says it wants to raise FDI inflows even further. “We have to be ambitious about attracting foreign direct investment in Greece”, says Gregory Dimitriades, Chairman of Enterprise Greece – the country’s investment and export promotion body. “We aim to exceed the European average of FDI inflows to around 10-15% of GDP by pushing forward pro-business legislation,” he adds.
To do this, ambitious targets have been set to boost economic growth to 4% and attract investments worth €100 billion by 2023. “Greece has struggled to attract investments for several years,” says Georgia Stamatelou, Partner and Head of Tax and Legal at KPMG. “The latest reform on the Strategic Investments legal framework seems to be of major importance in attracting new investors in Greece. The new framework refers to more sectors of the economy being provided with fast track procedures,” she adds.
Aware of the need to reduce red-tape and simplify licensing procedures, Greece’s government approved a package of reforms in October 2019 aimed at speeding up investments and slashing taxes, with more measures expected over the course of 2020.
Gregory Dimitriadis & Georgios Filiopoulos Chairman & CEO of Enterprise Greece
Gregory Dimitriadis, Chairman of Enterprise Greece & Secretary General for International Economic Affairs of the Ministry of Foreign Affairs, and Georgios Filiopoulos, CEO of Enterprise Greece, say the national investment and trade promotion agency works as a partner to attract investments, boost exports, and support investors doing business in Greece.
Gregory Dimitriadis is the Chairman of Enterprise Greece and the Secretary General for International Economic Affairs of the Ministry of Foreign Affairs in the cabinet of Kyriakos Mitsotakis. Enterprise Greece, Greece’s investment and export promotion agency, was recently restructured and now operates under the auspices of the Ministry of Foreign Affairs. Besides being a one-stop-shop for investors, Enterprise Greece promotes Greek products in foreign markets, organises business missions abroad as well as Greek participation in major international trade fairs. As the head of the national investment and trade promotion agency of Greece, Mr. Dimitriadis aims to increase the FDI inflow ratio to 10-15% of GDP. Enterprise Greece works hand in hand with investors to find the best investment opportunities in Greece’s 13 regions.
“The Mitsotakis administration is changing the Greek economy as fast as we can,” says the Development and Investments Minister, Adonis Georgiadis. “We foster a new production and exports-led growth model, which is aligned with structural reforms in order to transform our economy into a business-friendly economy,” he adds.
The country’s banks are another work-in-progress. As they wrestle down the mountains of bad debt left behind by the crisis, bank lending is still anaemic. This, says Georgios Filiopoulos, CEO of Enterprise Greece – the country’s investment and export promotion body – constitutes the biggest challenge faced by investors due to difficulties in securing financing.
And on the fiscal front, Greece’s still-enormous sovereign debt – 181.2% of its GDP in 2018 – will take decades to repay, crimping government spending and keeping tax rates relatively high for the foreseeable future.
Fortunately, there are a lot of investment opportunities going, and foreign investors are responding. For one thing, Greece’s sunny climate and long cultural history draw tens of millions of tourists to the country each year. Its location at the crossroads of Europe, Asia, and Africa, means Greece is in the right place to serve as a trade, transport, and energy distribution hub for the region. Greek food and wine exports are riding high as consumers hunger for the world-famous Mediterranean diet. Asset prices are low, human capital is high.
There is a particular interest in Greek property assets, where prices remain well below their pre-crisis peak. Net capital inflows from foreign investors into domestic real estate increased by a staggering 55.1% in the first nine months of 2019, versus the same period in 2018. Investors are being lured by the country’s booming tourism sector. The industry has had five straight record years and in 2018 alone welcomed more than 33 million visitors. Just in Athens, some 5.5 million tourists visited the city in 2018, a 600% increase from five years prior.
“In the last four years more than 55,000 new 4- and 5-star hotel beds have been added in Greece, while in Athens alone more than 40 new hotel units opened their doors in the first half of 2019,” says Enterprise Greece’s Filiopoulos.
Over the next five years, Greece will need more than €5 billion worth of investment in hotel capacity to meet projected demand. Already, world leaders in tourism and hospitality (from German tour operator TUI to U.S. chain Wyndham Hotels) have been investing in the Greek tourism sector with dozens of major hotel and resort projects opening their doors or underway.
One recent survey, released at the International Hotel Investment Forum 2019 in Berlin, showed Greece was among the two most popular destinations in the Mediterranean – and among the top 10 in Europe – for hotel investors. For individual investors, the country’s Golden Visa programme has become a passport into the European Union, offering residency permits in exchange for a €250,000 investment. Since its inception in 2013, approximately 6,300 visa holders have invested €2 billion in the Greek property market, with Chinese investors leading the charge.
Riccardo Lambiris CEO of the Hellenic Republic Asset Development Fund (HRADF)
Investors focus on across-the-board assets, and public mood on state efforts to privatise assets has changed, says Riccardo Lambiris, CEO of the Hellenic Republic Asset Development Fund (HRADF).
Aris Xenofos is the Executive Chairman of the Hellenic Republic Asset Development Fund (HRADF), also known by its Greek acronym TAIPED. The HRADF was established in 2011 to promote and implement the Hellenic Republic’s privatisation programme, with the vision to deliver long-term, sustainable results for the economy and society. Mr. Xenofos focuses on the accomplishments of the privatisation programme and its positive impact on employment. The revenue target derived from privatisations for 2020 is €2.4 billion, according to the Greek state budget. Mr. Xenofos highlights numerous investment opportunities with a focus on energy, real estate and infrastructure.
And waiting in the wings: the redevelopment of the old Athens airport in Hellinikon, a seafront suburb south of Athens. Despite years of delays, once it gets underway sometime in 2020, the massive €8 billion project – covering a land area more than twice the size of Monaco – will be the largest urban redevelopment project in Europe. And it will radically upgrade the coastline south of the Greek capital, the so-called Athenian Riviera.
But investment interest extends to other sectors as well. Industries like energy, financial services, food, healthcare, technology, and logistics, have all seen direct foreign investment in the past two years. Likewise, an ambitious privatisation and public works programme, involving roads, ports, airports, railroads, and utilities, has drawn investment from companies in Europe, Asia, and the Middle East.
“There has been a shift in increased acceptance by the wider public for privatisations as assets have matured, and the increased level of service and efficiencies, more generally, are easier to demonstrate and understand. Furthermore, our strategy has evolved, and the experience we have gained has allowed us to revise and improve how we mature, develop, and actually privatise assets,” adds Lambiris.
According to Greece’s privatisation agency, more than €9 billion have gone into the Greek economy through the capitalisation of public assets. After adding in concession fees and planned private investments to those newly acquired assets, a total of €20 billion has been injected into the Greek economy.
One flagship energy project is the Trans Adriatic Pipeline (TAP) being built across northern Greece. The pipeline, which will bring natural gas from Azerbaijan to Europe in 2021, has brought €1.4 billion into Greece and is acting as a cornerstone in Greece’s new role as a regional natural gas hub. Apart from TAP, two other gas pipelines and two new natural gas processing facilities are either in the works or online. Those projects, complemented by a slew of energy privatisations in the oil, gas, and power sectors, are establishing Greece as an energy hub for southeastern Europe and the eastern Mediterranean.
Meanwhile, investments in renewable energy are also taking off, with some €9 billion expected to be invested in wind, solar, and other renewable energy projects over the next decade, and with a goal of installing 9,000 MW of capacity.
Altogether, Greece foresees total investments of €44 billion or more in its energy and environment sectors by 2030, according to the country’s new national energy plan.
Anastasios Tzikas President of TIF-Helexpo
Slated as one of Greece’s top five strategic projects, TIF-Helexpo’s masterplan foresees the completion of a new exhibition and conference centre in 2026, says the organisation’s President Anastasios Tzikas, while the 85th Thessaloniki International Fair (TIF), honouring Germany, is set to break the 300,000-visitor barrier.
Kyriakos Pozrikidis is the Managing Director of TIF-Helexpo, the national exhibition agency of Greece. He is also the President of the Central European Fairs Alliance – CEFA and a certified member of the International Association of Professional Exhibition Organisers (IAEM). TIF-Helexpo serves as the official advisor to the state on issues of exhibition policy; organises the Thessaloniki International Fair, major trade fairs, international conferences and regional exhibitions throughout Greece; participates in major international exhibitions with national pavilions; and has expanded its activities to the creation and operation of educational and recreational theme parks. Dr. Pozrikidis highlights the importance of events, conferences, and exhibitions in today’s world. He also comments on the new exhibition centre that is slated for development in Thessaloniki, and the expected socio-economic impact of the project.
In the last few years, Greece has also seen the emergence of a small but fast-growing hi-tech start-up scene that is increasingly attracting foreign investors. Some, like Korean conglomerate Samsung or German automaker Daimler, have bought up promising new Greek start-ups that have already been launched in the global market.
Others, like Abu Dhabi sovereign wealth fund Mubadala Partners, are investing at an earlier stage in innovative new companies. The Abu Dhabi-based firm has signed a cooperation agreement with the Greek government’s venture capital fund, the New Economy Development Fund SA (Taneo), to form a €400 million co-investment platform.
Mubadala Partners has also spotted potential in Greece’s fish farming business. It has teamed up with the U.S.-based Amerra Capital to buy Nireus, Selonda, and Andromeda, creating one of Europe’s largest fish-farming companies. The acquisition has been approved by EU antitrust regulators yet is subject to the sale of some of its production facilities.
All in all, everything points to a pipeline of investment plans in Greece that will keep construction cranes swinging.