Value of FDI inflows in 2018
Targeted value of investments by 2023
Value of Hellinikon urban development plan
Targeted privatisation revenues in 2020
Across Athens the construction cranes are once again swinging into action.
After almost 10 years of brutal economic recession that shaved off one quarter of the economy and left more than one in five Greeks without a job, Greece is now in recovery mode. The recovery is tangible and visible to the naked eye: new stores are replacing shuttered shopfronts, old buildings are being renovated, and new projects are being launched.
The Greek economy is growing again, economic confidence is rising, and unemployment is steadily declining.
Now, Greece is stepping up its privatisations drive. Foreign investments are at a record high. And following years of painful cutbacks, the Greek government budget is in surplus.
“Today Greece is in a significantly better place than it has been in recent years, demonstrating positive gross domestic product (GDP) growth, declining unemployment rates, and government bond spreads, etc. Greece has proven itself to be an attractive investment destination, creating significant investment opportunities across sectors,” says Ricardo Lambiris, CEO of the Hellenic Republic Asset Development Fund (HRADF).
In August 2018, Greece exited the last of three successive European financial assistance programmes, ending more than eight years of special oversight by its eurozone partners. According to the fourth Enhanced Surveillance Report published in November 2019, a sort of health check of the Greek economy, the European Commission now sees Greece on-track to deliver on agreed primary surplus levels.
International markets have reacted positively and driven Greek government bond yields to their lowest levels in a decade as international credit rating agencies lift their ratings on Greece.
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.
“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.
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.
In October 2019, Enel Green Power Hellas, the Greek subsidiary of Italian energy company Enel S.p.A., inaugurated a windfarm complex on the island of Evia with an overall capacity of more than 154 MW. The €300 million investment is the largest wind power facility in Greece.
Likewise, big investments are planned or already underway in Greek infrastructure projects that are transforming the country into a transport and logistics hub. According to a PricewaterhouseCoopers (PwC) study, some €7.4 billion worth of rail projects and €4.3 billion worth of highway projects are already in progress or ready to be launched. Another €2.2 billion is going into tourism infrastructure and waste management projects, the study says.
Add to that investments in recently privatised – or soon-to-be privatised – airports, ports, and marinas. Also, Greece’s medium-term, creditor-approved budget plan earmarks €7.3 billion per year for public works projects through 2022, combined with an additional €2 billion per year in funding from institutions like the European Investment Bank or the World Bank.
“It is therefore estimated that in the following five years, €45-50 billion will flow into the economy from the Public Investment Programme,” says the Greek government’s most recent growth strategy paper.
In infrastructure there are already some notable foreign investments. One success story is the Port of Piraeus near Athens. In 2009, Chinese shipping giant COSCO took over part of the container handling operations at the port and has since transformed it from a sleepy backwater into the second busiest container terminal in the Mediterranean. In 2016 the Chinese company took control of the rest of the port – including the remaining container facilities, ferry and cruise ship operations, and car terminal – and is planning more than €600 million worth of investments to upgrade the port.
Other notable examples include a €1.5 billion investment deal by German airport operator Fraport from late 2015 to operate and upgrade Greece’s 14 regional airports.
And, in the first half of 2019, Greece signed a contract with a joint venture of India’s GMR Infrastructure and Greek engineering firm GEK Terna for the construction of the new airport at Kasteli, Crete. The total cost of construction is estimated at €1.5 billion and is expected to create 1,500 jobs.
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.
Greece’s new National Development Plan will be delivered by the end of September, says Minister of Development and Investments Adonis Georgiadis. Set to be a lever for the country’s economic diversification and digitisation, the consolidation of micro-enterprises, and the attraction of green investments, the plan is the key to unlocking an estimated €32 billion earmarked for Greece through the EU Recovery Fund.
