By Yiannis Kotofolos
The rumored entry of foreign investors — possibly France’s EDF — into the electrical energy market, of the Spanish in the natural gas sector by acquiring a stake in the Public Gas Corporation (DEPA), and of the French in Emporiki Bank, are indicative of some big changes looming in the competition landscape in Greece over the next few years. This comes as the state prepares to sell its remaining holdings and is planning to privatize the OTE Telecom group with the sale of a minority stake, plus concede company management to a large foreign telecoms group.
Significant European names with funds and know-how will undoubtedly control much of the Greek market and upgrade its competitiveness level, though domestic entrepreneurial forces, which have enjoyed special stature or wanted to do so, will find their influence diminished. Certainly, some of the latter will survive in the new economic map of the country, but the main part of the landscape will have definitely changed.
This expected shift, which the market has realized and is now debating, seems to result from a conscious choice of the present government. The slogan about creating “national champions,” so dear to the French, for example, does not appear to appeal to the current government, which prefers the entry of foreign entrepreneurs to bring in significant private capital, import new technology and management methods and increase productivity according to tried and tested European methods.
That way, the government will at the same time limit the state’s presence in production — which has not proved very constructive — collect significant amounts of money to support the state budget, and break free from the pressure to serve domestic business interests, as experience thus far has shown.
Of course certain domestic business groups will stay in the game and play a significant role, but mostly in cooperation with some stronger foreign partner. The business mentality of working on a European rather than national level seems to increasingly influence thinking at large EU companies. Investing in Greece, along with its neighboring and promising Southeastern Europe markets (Romania and Bulgaria, with a total population of 30 million, will in two years become EU members as well), is a sound and important move for Europe’s great business forces.
Large continental companies are led by the need to expand their activities beyond national borders, as well as by the threat of the swoop and competition by US giants in Europe. It is a game of survival, power and expansion which, thankfully, will also include the Greek economy.
The means of attracting foreign direct investment has recently been followed with success by Ireland, the Czech Republic, Hungary, Slovakia and others, where one large investment from abroad follows another, accelerating economic development. In Greece, unfortunately, foreign direct investment (not stock market portfolio investments) has virtually vanished over the past few years. Consequently, the country’s share of foreign investment attracted has fallen dramatically, leading international organizations to warn that within a few years Greece will have lost a major element of its former economic strength in the European environment, as it will fall behind the new and hitherto poorer EU members.
Historically, it has been proved that foreign capital influx, in the form of productive investments, contributes to economic growth more than any other form of capital, given that it incorporates organizational and technological knowledge that are critical for progress as it usually comes from economies that outperform Greece.
Foreign direct investment also expands the productive sector, tends to reduce costs and thus attracts further investment. Foreign investments also have the advantage of being “cold money,” an added boost from the outside, particularly in times of decline.
(Kathimerini)