Greece under Reform for long term growth

Named Best Foreign Investment Practice, Greece by World Finance for a second consecutive year, Papapolitis & Papapolitis represents major financial institutions and multinational corporations investing in various sectors of the Greek market.

Today Papapolitis & Papapolitis is at the forefront of the legal market in major foreign direct investment transactions in Greece. It has witnessed the development of corporations and projects in Greece, from the early days of penetrating the market, up to today where these corporations owned by foreign investors play a major role in their respective industries within the Greek market. As such the firm can offer a key insight into the highly rewarding venture of investing within the Greek market.

In early 2010 the company argued in a similar article that the new structural reforms and incentives laws that were among the most competitive in the EU would make Greece a big attraction for foreign investors.

For the last year the Greek economy has been in the global spotlight – primarily because of its sovereign debt crisis – and has found itself in the centre of the financial crisis along with other countries of the EU.

During 2010 Greece has also demonstrated that it has become a reform-oriented, outward looking economy that is focused on long-term and sustainable growth. In 2010 a vast number of structural reforms have taken place, amending the fundamental pillars the Greek economy and society have been based on.

These major reforms have impacted taxation, employment laws, trade unions, licensing procedures and the way many industries operate today in Greece. Among these major reforms the Greek government has also made significant efforts to amend the structural framework for foreign investment in an attempt to entice investors to the country.

Although the structural framework for investment support in Greece still revolves around three institutional pillars – the Investment Incentives Law, the National Strategic Reference Framework 2007-13, and Public Private Partnerships – new laws will soon come into force that will further eliminate bureaucratic procedures and provide new types of incentives including government grants and tax holidays.

As the (soon to be amended) structural framework stands, the following incentives are offered (currently some of the most competitive incentives in the EU):
1) cash grants that can reach up to 60 percent, covering part of the expenses of the investment project by the Greek State;
2) leasing subsidies that can reach up to 60 percent, that cover part of the payable instalments by the Greek State relating to a lease that has been entered into for the use of new mechanical or other equipment;
3) wage subsidies that can reach up to 60 percent, provided for employment created by the investment;
4) tax benefit that can reach up to 60 percent, which allows income tax exemption on non-distributed gains. This benefit is effective upon completion of the investment for the first ten years of operation and is created through a tax-exempt reserve.

The government has also introduced the ‘fast track’ procedure – a new method of accelerating the licensing procedure for major strategic investments in Greece. This fast track is applicable in energy, tourism, industry, advanced technologies and other innovation projects including those strategic investments which come under the investment law.

The fast track attempts to tackle the most major impediment that foreign investors face when penetrating the Greek market – Greek bureaucracy and licensing procedures.

As such fast track works as a mechanism for accelerating and enhancing the licensing procedures for implementing investments, whether these are based on the private sector or are obtained through public private partnerships.

The Greek prime minister has also stated that a foreign direct investment taskforce will be created under his personal control in order to speed up decision-making processes and overcome bureaucratic hurdles.

In addition Invest in Greece – the country’s official Investment Promotion Agency – is tasked with identifying market opportunities; providing investors with general assistance, analysis and advice; assisting in negotiations with public authorities; and providing aftercare support. This is a highly successful, free of charge tool for foreign investors seeking to penetrate the Greek market.

Bureaucracy still remains the biggest hurdle that foreign investors face when entering the Greek market, and it is precisely this obstacle that the new reforms are attempting to overcome, especially for foreign investments.

At the time of penetrating the market, a legal advisor with local nous as well as expertise in international business practice and foreign investors’ corporate goals and mentality can be most valuable.

The combination of new major opportunities and the new framework offered by the government’s reforms have placed Greece as a country of great interest for foreign investors in 2010.

In 2010 there were a number of notable foreign agreements and investments. The Qatar government signed a memorandum with the Greek government expressing interest in investing as much as $5bn in areas of the Greek economy such as tourism and real estate. The shipbuilding group Abu Dhabi Mar announced its decision to invest in Greek shipbuilding through the acquisition of a majority stake in Hellenic Shipyards.

During the visit of the Chinese prime minister in October 2010, Greece and China signed a memorandum to boost cooperation between the two nations and announced 14 deals which amounted to the biggest single investment by China in Europe. Under one of the agreements, Cosco Pacific will extend its reach with the construction of up to 15 dry bulk carriers in Greece. Cosco Pacific also took over cargo management at the Piraeus port – the largest in Greece – on a 35-year concession worth $1bn last year.

The Chinese construction company BCEGI also signed an agreement to develop a hotel and shopping mall complex in Pireaus.

In October 2010 Greece and Uruguay also signed two bilateral agreements on economic and tourism cooperation.

Finally, in the banking sector the National Bank of Greece successfully raised €1.8bn through the combined issue of new shares and convertible equity notes – an offer that was oversubscribed by 1.8 times.

Approximately 208,000 shareholders from 77 countries got involved in the rights issue.

In conclusion, 2010 was a year of major reforms and some significant foreign investments in Greece. Certainly reforms aim for Greece to attract even more foreign investment in 2011. These necessary reforms that the Greek government is undertaking will hopefully take Greece to a next stage that will allow for long term and sustainable growth, while offering very competitive incentives to foreign investors.

As featured in World Finance magazine on the 21st Feb 2011