-Manufacturers have ambitions to make Greece a regional economic centre-

Bridge to the Balkans

Greek entrepreneurs are looking to the Balkans for future business growth following their country's entry into the European Monetary Union (EMU) at the beginning of this year. Following a decade of reforms aimed at reducing state control of the economy and strengthening the private sector, business executives believe that Greece, having adopted the euro, is ideally placed to become the regional economic centre of the Balkans. They believe the country is the logical bridge between the mature economies of the EU and the emerging markets of the region. Greece is a gateway with considerable potential for opening up opportunities in the Middle East and the former Soviet republics of central Asia.

Thomas Lanaras, president of the Klonatex Group, makes no secret of his enthusiasm for Greek membership of EMU. Along with other business giants, he views the euro as the basis for solid growth in years to come, and a means of curbing the unpredictability that has plagued the economy in the past. "Membership will provide us with a more stable currency and predictable levels of interest rates. This will reduce operating costs because there will not be the difference in fees and bank charges caused by currency conversion," Mr Lanaras says. "This is a very positive development that will help us in the long run." Klonatex has already made significant inroads into the Balkans in recent years, even as Greece prepared for EMU membership.

The group has established itself as the leading textile producer in the Balkans, following several acquisitions in the region, and Mr Lanaras estimates that Klonatex currently accounts for about 10 per cent of textile manufacturing capacity in Europe. The move into the neighbouring region has played an important part in the group's growth plans in recent years. "Our products are produced mainly in the Balkan states to reduce the labour costs of our product, which is then exported to Europe, Asia and South America," says Mr Lanaras.

The group manufactures products for two well-known international sportswear brands, Nike and Adidas, and also produces under licence for the Jockey label. At present, Klonatex subsidiaries operate 26 plants in Greece and the Balkans. Mr Lanaras emphasises the need for the group to keep up with the times. "We are very up-to-date with the latest developments in manufacturing technology," he says. "We use all the latest equipment and have modern know-how." The group has had to adapt to the demands of an increasingly competitive business environment, which has involved bringing new investors into the formerly family-owned enterprise. "We have seen tremendous changes on the management side," he explains. "The firm has invested in training our people in terms of new skills, new ideas and new ways of thinking. We hire people who can bring innovative ideas and methodologies to the company."

After several years of rapid expansion, the group now faces the challenge of consolidating its existing and recently acquired operations without reducing the overall growth rate in future years, he adds. "We are trying to expand at 100 per cent a year, while improving the margins of the operations we have already acquired," says Mr Lanaras. "We have to produce value for our shareholders." Klonatex is branching out into other forms of business such as investments in tourism and property through another subsidiary, NSM Investments. The group set up a new branch, Lannet Communications, in 1999, in a bid to break into the telecommunications and multimedia markets.

The need to reconstruct the economies and infrastructure of several Balkan countries, in the wake of either war or decades of neglect under communist rule, has also provided Greek companies with more conventional business opportunities. Heracles General Cement Company, reputedly the biggest manufacturer of cement in Greece, is expected to make further investments in the Balkans, as is its main domestic competitor, Titan. Analysts predict that the two groups will bid for new business if the industry in the former Yugoslavia is privatised by governments in favour of free market reforms. Heracles, which produces nine million tonnes of cement a year, half of it at the largest plant of its kind in Europe, and also operates the second-biggest cement shipping terminal in the Mediterranean, is constantly on the lookout for potential exports.

"The opportunity is there to improve our competitiveness and operations, and this will make us extremely strong in the cement market in Europe," says a spokesman. With a relatively modest domestic market, Greek industrialists are keen to expand into overseas markets, especially the EU, now that the country has joined the euro.

The decision, combined with a determination to integrate its economy more closely with western Europe, should in turn help pave the way for developing business in the Balkans. "The opportunity for Greece to become a driving force in the Balkans is still very much in the forefront of the political ambitions of this country," says one analyst. With the emergence of stable governments in the Balkans, Greek entrepreneurs are being further encouraged in their hopes of establishing a strong presence in the region, where they believe they already have natural advantages over other competitors.

"We feel quite comfortable visiting those countries because we know the culture of the people and share similarities with them," says a spokesperson for Viohalco Holdings, one of the largest industrial conglomerates in the country. "There is mutual respect and cooperation, and we have competitive advantages not only in regard to the Balkans but also to the rest of Europe." Viohalco, a metallurgical and engineering group, which is heavily oriented towards export markets in over 70 countries around the world, operates plants in Romania and Bulgaria.

The group is well-established in the EU with subsidiaries in France, Germany and the UK. The spokesperson suggests the firm has already adapted to the realities of EMU, although he notes that joining the euro will bring further changes such as greater competition and cheaper financing. The group is intent on pursuing growth by acquiring firms in the region. "We believe that as a continuously innovative company, we can give value to Balkan companies," says the spokesperson. "We have our own engineering firm, which can undertake the task of modernising machinery. We can upgrade old plants in the Balkans and we will feel at home doing this. Our expansion will be based on finding companies where we can really give value as well as cooperation, or a merger with other businesses, to our mutual benefit."

The spokesperson emphasises the group is not merely on the takeover trail with an eye on snapping up rusting, old-fashioned former state firms in the Balkans. "We don't just buy and sell companies, we aim to invest at a world-class level," he says. "We might buy any factory or firm that we consider has a future, and it would surely be world class if we invest in it." Viohalco is interested in forming joint venture partnerships or alliances with other foreign investors, and the spokesperson says British firms have expressed an interest in teaming up with the group.

He suggests that Greece offers low management costs and is a nation with the necessary skills to develop the opportunities created by opening up the Balkan economies. "We believe that the flexibility and the energetic nature of the Mediterranean people - which were traditionally considered a negative factor in manufacturing - can be an advantage because they create flexible organisations with dynamic teams of people who can undertake big projects," he says.