INVESTMENT Athens 2004 puts the country in the spotlight

Euro zone status attracts interest of overseas firms

However familiar we may all be with Greece, there is no escaping the fact that the country is distanced from the centre of Europe. Resident in the only country within the European Union that doesn't share a land border with any other member, the Greeks have often felt isolated. Greece is the poorest member of the EU, partly as a result of its geographical remoteness and partly due to its shortcomings in infrastructure. Both factors have deterred foreign direct investment (FDI).

The Greeks watched in awe the huge volumes of FDI that have flowed into Ireland, for example, turning its economy into one of the great success stories of the late 20th century. They have also seen money pouring into their near neighbours within central Europe - Poland, Hungary and the Czech Republic - which are in the front line for EU membership. It had looked as if Greece, despite its ancient culture's civilising impact on the rest of Europe, was going to be marginalised for ever. But this is about to change.

The single event that has heightened Greece's profile everywhere has been the choice of Athens for the Olympic Games in 2004. From the first announcement, the Greeks went into overdrive to not only prepare for what must be the most symbolic of Olympic Games - back at the place where they first began - but to attract inward investment. Major new motorways are being built to link the east of the country to the west, and the north to the south, which will cut travel times considerably. Meanwhile the government has knuckled down to the serious business of improving legislation to match the high standards set by the EU, and it is speeding up the sale of state-owned enterprises.

The Greeks also set great store by their country's stability in a region that has witnessed civil unrest during the past decade. Southeast Europe is still recovering from the 1999 Kosovo crisis and Greece is promoting its location as a good base from which to launch business operations within the Balkan region. The Hellenic Centre for Investment (Elke) has been established to pursue and persuade foreign investors, as well as to smooth the way for development projects. General manager Haris Issaias believes that Greece will be far more competitive now that it has joined the euro zone.

Adopting the currency has "symbolic and practical aspects", he says. "The practical aspect is the fact that macro-economic variables in Greece, such as inflation, GDP, growth and so on, are now getting very close to their European equivalents," he explains. "Hence, the investor acquires a high degree of certainty about the development of macro-economic parameters. This assurance had been missing before because there were large fluctuations, which were not supportive of investment decisions. "The second factor is the Olympics, which are going to attract world attention. An entrepreneur who wants to get his business well known has a better chance of catching the public eye during the Games."

Mr Issaias agrees that labour costs have risen in Greece compared with its neighbouring states and eastern and central European countries, but he points out that they are still cheaper than western Europe. He also emphasises the high level of educational standards and the technically-skilled workforce. Then there are the generous investment incentives to consider. "Not many countries offer incentives such as grants and subsidies as high as 40 per cent, and there are tax allowances which are even higher than that," he adds. In the last two years there has been foreign investment in the chemical, metallurgical, food processing, textiles and energy sectors, particularly in environmentally-friendly methods of power generation. One of Elke's top priorities, tourism, has also seen increased funding.

Investment in IT has not been as high as anticipated, says Mr Issaias, but it is expected to rise as new infrastructure, hotels and other developments near completion in the run-up to the Olympics and new markets open up in the region. One of the biggest recent foreign investments in the hi-tech sector was made by US company Atmel, which is setting up an 18 million euro plant in Patras, employing about 200 people.

Last September Nova Bank, a joint venture between a Portuguese bank and the Greek InterAmerican Insurance Group, was the first company of its kind to be established in Greece for nearly a decade. Meanwhile, American IT giant Cisco has formed an alliance with Intracom, a Greek electronics manufacturer, and an Italian gas company has paid 64.4 billion drachmas for a 49 per cent share and management control of distribution companies in Thessaloniki and Thessaly. Much of the FDI has been as a result of privatisation, and the accelerated sell-off programme this year, comprising 10 major companies including the Public Power Corporation and Hellenic Petroleum, is set to increase this inflow.

Mr Issaias says Elke has established a taskforce to speed up the application process for investors. "There have been a number of cases where we cut down the application processing time, which resulted in cost reductions for investors." Elke has also drawn up an investment map, detailing suitable sites for a variety of developments. Foreigners can buy out-right, although Mr Issaias advises that in some sectors such as construction it would be advisable to opt for a joint venture with a Greek company instead.