Foreign Direct Investment

Despite the severe economic crisis Greece is facing since 2010, the country’s performance in attracting foreign investment in 2010 was satisfactory in comparison with the previous year.The total (gross) capital inflows to the country in 2010 amounted to 4 billion Euros, while net inflows exceeded 1.6 billion Euros.

Despite the severe economic crisis Greece is facing since 2010, the country’s performance in attracting foreign investment in 2010 was satisfactory in comparison with the previous year.The total (gross) capital inflows to the country in 2010 amounted to 4 billion Euros, while net inflows exceeded 1.6 billion Euros.

Inflows of FDI in Greece during the period 2003-2010 (in million Euros)

Source: Bank of Greece 2011

Key features

• Total (gross) inflows of foreign investment capital, which reflect the actual performance of the country in attracting investment, increased in 2010 by 4.96%.
• Net inflows of foreign investment capitals during the same year decreased by 5.82%, which is considered low, based on the particular fiscal circumstances and the economic crisis of that year.
• Inflows of foreign direct investment in Greece fell in years 2009 and 2010, but nevertheless remain higher than during 2003-2005, despite some fluctuations.
• In 2010 the ratio of foreign investments oriented in productive categories, founding and increase of share capital (2,124.5 million Euros) compared with the amounts invested in mergers and acquisitions (413.9 million Euros) improved significantly.
• The inflow of capital in the form of loans, which amounted in 2010 to 1,725 million Euros, indicates the confidence of foreign investors for investment in Greece as well as their willingness to commit funds to the country for future income and growth.
• The difference between total and net FDI inflows to Greece in 2010 relates primarily to repayments of loans to parent companies, as well as expansion capital and/or to subsidiaries in Southeast Europe, which highlights the country’s role as an investment “springboard” to the region of the Balkans.
• The rapid promotion of reforms and the reduction of costs of production, which was the result of the economic crisis in the country, create significant investment opportunities.

Investment capital by country of origin

Countries with strong investment presence in Greece in recent years include ‘traditional’ capital exporting countries such as Germany, France, the United Kingdom, Belgium, Luxembourg and the Netherlands.

Total FDI inflows by country of origin of capital during the period 2003-2010 (in million Euros)

Total Value: 36.265.8 billion Euros

Source: Bank of Greece 2011

Key features

• Investment activity in Greece originates primarily from companies in important markets such as the EU
• Although significant, the U.S. presence is still relatively low, suggesting the existence of significant investment potential which can be realised
• Promising prospects exist in the near future to attract FDI from Russia and Eastern Europe, the Middle East, Arab countries and Asia, particularly China, who are mainly interested in the energy, telecommunications, tourism, transport and logistics sectors.

Sectoral Breakdown of Foreign Investment

FDI inflows by sector of economic activity in Greece in recent years focus primarily in the tertiary sector, followed, with a significant gap, by the secondary sector. The majority of developed countries show a similar structure of FDI.

Total FDI inflows by sector of economic activity for the period 2003-2010

Total value: 36,265.8 billion Euros

Source: Bank of Greece 2011

Key features

• Concentration of FDI in services. This trend was dictated primarily by the development of the country’s financial system, the liberalisation of telecommunications, and the stimulation of trade.
• The proportion of secondary sector is relatively low compared with the potential of the country, a trend that suggests considerable scope for investment.
• Investing in energy (electricity, natural gas) amounted to 5.1% of total investment in the secondary sector and represents a typical investor interest growth during this period. The search for hydrocarbons in Greek territory is expected to play an important role in investment activity

Specifically:

A. Manufacturing

The sectors of manufacturing with significant investor interest over the period 2003-2010 include chemicals, food & beverage, machinery and metal products.

Structure of total FDI inflows in manufacturing in the period 2003-2010

Total Value: 8,746.5 billion Euros

Source: Bank of Greece 2011

Key features

The concentration of business in these areas favors the establishment of new businesses (Greenfield investments) in Greece, and the investment cooperation of foreign companies with Greek companies to produce end products that meet the needs of domestic and international markets.

B. Services

The service sectors with significant investor interest over the period 2003-2010 include telecommunications, financial institutions, trade and tourism.

Structure of total FDI inflows in services during the period 2003-2010

Total value: 25,496 billion Euros

Source: Bank of Greece 2011

Key features

• Growing investment trends in education and health sectors.
•  A low percentage (7%) of foreign investment focused on the least productive class of “real estate”, whereas the majority of foreign capital went into productive activities with high value added.