Authors: Vasiliki Charalampidou

Title: FDI’s role and profile in the Greek economy

Abstract

This proposal refers to the role of Foreign Direct Investment (FDI), as the main tool of economic growth and recovery in the case of Greece. The investigation of how far investment policy contributes to financial growth and expansion is sought here, both at the stages of their policies and implementation. The methodology that was used for this purpose is case study research for empirical conclusions to be drawn concerning the contemporary FDI's profile in Greece.

As a part of a wider PhD research, this article examines the concept of FDI as it is a key factor in the internationalisation of the economy, which also contributes to economic integration and mutual penetration between the economies of countries worldwide. According to OECD's definition, FDI is defined as a category of cross-border investments made by a resident of a country (origin), to acquire a lasting interest in a company, located in another country (destination).

On the European level, rapidly growing globalization and international trade have forced the EU to adapt its trade policy instruments to maintain its central role concerning global trade relations. As a result, the policies pursued, from its inception up to date, influence and to some extent shape the development levels of its country, setting a common framework for the principles of attracting FDI within the EU.

A decade of the deep economic crisis on the European continent is marked by variations and imbalances. There is a vertical decrease in FDI inflows, which is reflected in the economies and capital flows internationally in the period 2008–2019, worldwide, in the OECD and EU countries. Subsequently, the ensuing pandemic emergency led to a significant reduction of more than 30% of FDI flows to Europe by 2020, with the worst affected sectors being agri-food, transport and storage, and manufacturing versus sectors. health and information and communication, which increased.

Greece attempts to consolidate its position in Europe and on the international market and trade community. The "National Strategy for Sustainable and Equitable Development 2030", as a set of actions and policies that will enhance the productivity of Greek companies, places great emphasis on FDI, intending to turn the country into an attractive FDI destination, because are recognized as an important source of financing for economies and a valuable tool for improving overall productivity through technology transfer and modern management and corporate governance practices.

Taking a look at the profile of FDI in Greece, according to available data from the Bank of Greece, the OECD and other bodies, the sectors that are attracting investment interest and preferred over others, at least for the last decade, are business services, the agri-food sector, transport and logistics, digital technology and finance.  The countries of origin of these FDI for the three years 2017–2019 are the USA, the United Kingdom, Germany, Denmark and the Netherlands. The spatial distribution of these investments within the country strengthens regional imbalances, as more than 60% of the investments are located in the region of Attica and Central Greece, 24% in Central Macedonia, mainly in the metropolitan area of Thessaloniki. In total, these two areas absorb more than 90% of FDI, highlighting the need for even stronger incentives to decentralise investment activity.

Attracting FDI in Greece is mainly done through incentives institutionalised in the respective investment laws. The institutionalisation and modification of these in the last decade prove continuous efforts to attract FDI by using tax incentives. Nowadays, the current investment law in Greece speeds up and simplify licencing procedures enhance transparency and control over private investment, removing barriers and disincentives for strategic investors and improve liquidity and financial flexibility. Institutional initiatives and investment policy have achieved the goal of attracting investment, as foreign capital inflows have been on the rise, even in times of economic downturn. However, to further increase the attraction of FDI, economic sectors that could develop in the medium term, it is the health sector, the R&D, the digital transformation and smart technologies.