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Last Updated: Tuesday, 31 August, 2004, 07:10 GMT 08:10 UK
Greek hopes for Olympic windfall
By Nick Malkoutzis
In Athens

Athletes and spectators take in fireworks at the closing ceremony for the Summer Olympics in Athens
The Olympics closing ceremony signalled that Greece is open for business

Almost 3.5 million spectators flocked to the sparkling, newly built Olympic venues to see athletes straining every muscle.

The efforts were equally strenuous behind the scenes as officials tried to impress foreign investors.

Now, with the Olympic visitors having packed down their souvenirs and returned home, the Greek government is about to find out whether the games have convinced foreigners who want to invest in more than just a t-shirt that Greece is a country to do business with.

The government set up the Athens Business Club as a permanent forum throughout the games, bringing foreign and Greek businessmen together in the hope of increasing the country's investment potential.

Officials realised they had a unique opportunity to boost the profile of their country and to transform their somewhat insular economy.

"I urge you to view Greece as a top choice destination for new investment and business activity," Finance Minister Giorgos Alogoskoufis said in an address to the Club.

"Its future prospects, modern infrastructure and our declared resoluteness in changing things provide guarantees for successful performance."

Expensive games

Apart from being a successful sporting and cultural celebration, the Athens Olympics may have been the most expensive advertising campaign in history.

Construction work in front of the Greek parliament as workers rush to renovate Athens' main Syntagma Square before the Olympics.
Greece's infrastructure has been much improved

The government puts the cost of the games at over 6bn euros ($7.2bn; 4bn), with some experts suggesting costs soared above10bn euros.

Undoubtedly, it has left the country with a much improved infrastructure, but it also has a burgeoning public debt which rose 9.8% in the second quarter of 2004 to almost 200bn euros.

Much of the spending has been concentrated on facilities for the Olympics. Discussions are underway about what to do with these facilities now the Olympic party has left Athens.

If the aftermath is to match the success of the games themselves, then the influx of investment from abroad will be critical.

Foreign investment obstacles

Despite the recent liberalisation of some Greek markets, such as energy and telecommunications, Eurostat figures show that when it comes to foreign direct investment, Greece is well behind the leaders of the pack.

Greece actually received less investment from abroad than any other EU member state prior to the Union's enlargement in May.

Greece is infamous for its bureaucracy, which is often a stumbling block for foreign investors, and this is seen as a partial explanation.

Other factors also lead to Greece's poor showing, analysts say.

"The labour market is too heavily regulated, there is also a lack of stability in the tax regime and a fear that private agreements can be overturned by the government," said Giorgos Kalamatousakis, an economist and former New York University professor.

Greece could do more to encourage overseas investors, he said, citing the example of Cyprus which reduced its corporate tax rate to 10% in 2003 to facilitate foreign investment.

Greece does offers some tax breaks to investors, especially for regional development, but its corporate tax rate is about three times higher.

Finance Minister Alogoskoufis has already pledged to reduce company taxes to 25% over the next three years and he has vowed to cut red tape and pass new laws encouraging investment.

"Our big and difficult bet is to transform the Greek economy into one driven by capital and technology," he said.

"We must attract large and plentiful investment in order to be competitive because the era when Greece could compete based on low wages has gone."

New image

The Greek economy has been on an upward trend in recent years.

Since adopting the euro in 2001, its economy has grown at approximately double the EU average with traditionally volatile inflation and interest rates being brought under control by Brussels.

Bulldozers help with work at Syntagma Square - will there be work for them after the Olympics?
There is no real tradition of foreign investment in Greece

Greece's productivity rate is still almost 25% below the EU average while its unemployment rate is around 8%.

And there are also some examples of successful foreign investment in Greece.

Atmel Hellas, part of the US based electronics giant Atmel Corporation, has been operating in Greece since 1999. It is currently building its own factory in the port of Patras, 140 miles west of Athens.

It is a modern facility that would not look out of place in Silicon Valley and it is exactly the type of development the Greek government is looking to promote.

Workforce

However, changing the image and substance of the Greek economy from one associated with agriculture and light industry and replacing concrete and steel factories built in the sixties and seventies with new hi-tech units is a tall order.

The crumbling concrete monoliths, scattered around the country and particularly prevalent on the outskirts of major cities, are testament to an era when Greece tried to make the most of its low labour costs.

Now the country is looking to take advantage of other elements, such as its educated workers, approximately 25% of whom have university degrees.

"Greece has a great workforce that companies in similar fields to ours can take advantage of," says Stelios Koutroubinas, managing director of Atmel Hellas.

The masses of construction which turned Athens into a dust strewn building site for almost four years has already given companies from Australia to Germany the opportunity to do business in Greece.

However, Greece still faces a challenge of Olympic proportions to persuade foreign investors that their money has a long-term future here. The country's financial future may well depend on it.

"There's no real tradition of foreign investment in Greece, particularly in industries such as electronics," said Mr Koutroubinas.

"This is where other countries like Ireland have an advantage over us."


SEE ALSO:
Going for gold or bust?
22 Aug 04  |  Europe
Olympics 'may cost Greece dear'
02 Jun 04  |  Business
Olympic costs hit Greek deficit
04 Aug 04  |  Business
Did the Sydney Olympics pay off?
10 Aug 04  |  Business


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