Investing in Greece—From Reform to Opportunity

MAY-JUNE 2017|BY RAYMOND MATERA
Nicholas Papapolitis, Managing Partner at Papapolitis & Papapolitis and Chair of the Chamber’s Investment & Finance Committee, discusses Greece’s investment framework and the opportunities that Greece offers.

What are the most important elements of an attractive investment framework?

Attractive investment frameworks are those that combine a number of key elements. For Greece at this time I’d say the most important considerations would be related to the reduction of structural obstacles to market access and protection of foreign investment by way of execution of bilateral investment conventions with other countries. In addition, it is necessary to have incentives that include tax breaks and/or government grants and one of the most important is stability in taxation and a competitive corporate tax rate.

Taxation in Greece has attracted significant attention as corporate and dividend taxation have currently reached the highest brackets, and at the same time tax laws have been amended numerous times. Nevertheless, as part of the reform process that Greece is undergoing, efforts are being made for tax collection to become more effective and tax evasion to decrease, which on a macro level have proved to be one of the biggest challenges of the Greek economy recent years.

Other key elements include the ability to provide jurisdiction to international institutions such as the International Chamber of Commerce and the London Court of International Arbitration over contractual disputes, that are increasingly become more and more frequent.

Finally, I believe that Greece should follow the Irish and Portuguese example of marketing their country to international investors.

How can Greece be more pro-active in attracting investment interest?

What Greece needs for communication, marketing and assistance, is a very active Investment Promotion Agency and Investment Aid Agency that travel out of the country and present both macroeconomic and microeconomic data on the country and facilitate investments from international investors. Our view is that the Greek Investment Promotion Agency—Enterprise Greece— should set up offices in global financial centers as London, New York and Hong Kong and make its presence know to international investors who are located in these cities.

I would like to highlight that the Investment & Finance Committee of AmCham, and its members, have extensive knowledge and know-how of investment frameworks in many international jurisdictions and that knowledge and know-how can be utilized by Greek lawmakers to help improve the current Greek investment framework, that still requires a number of amendments and additions.

What are 5 things Greece can do to attract investment?

Greece needs to do more to attract investment. One thing is to continue to remove barriers. Another is communicate Greece’s opportunities more effectively, so that investors have a better picture of the potential here.

Nevertheless here are 5 main issues that could be put in place to attract more investment:

1) 1953 Markesinis Law Re-enactment of the 1953 Markesinis Law for foreign investors, that allows the Minister of Finance, following a petition from a foreign investor, to enact specific legislation for the specific investment including competitive corporate tax rates and issuance of licenses and simultaneous elimination of bureaucracy. Some of the largest, successful projects that have been developed in Greece have been based on this law, like the Athens International Airport and the Petrola Oil Refinery.

2) Well-developed Infrastructure We have made a lot of progress with the privatization of the Piraeus/Thessaloniki ports and the regional airports, but we need more, similar assets to be privatized.

3) Reform of the Judicial System We need to eliminate the risk of foreign investors being caught up in a very slow and unspecialized judicial system.

In practice this works to an extent by investors being able to contract using international arbitration clauses, but we need to create courts that have a jurisdiction over matters relating to contracts and have a specialized judiciary.

4) Red Tape One of the biggest barriers to entry is the fact that investors require a large number of approvals and licenses from various public authorities that are not able to officially communicate among them.

Our proposal is that for large-scale foreign investments you have one authority in charge of all the approvals and the licenses. There has been much discussion around this topic but still Greek red tape has proven very difficult to overcome.

5) Taxation It is very difficult to attract foreign investment when tax rates are so high. Currently Greece has the 3rd highest taxable bracket in the EU. We believe that now is the time, following austerity measures, to rationalize the taxation system so that investors are better off and State revenues increase.

Greece does offer opportunity. What key messages do investors need to know to capitalize on the many opportunities in Greece?

The key message is that the Greek economy has proven to be resilient enough to have sustained eight consecutive years of recession and to not have gone bankrupt.

There is no other country in the world that has sustained eight years of consecutive recession without defaulting. Greece has proven to be a key member of the Eurozone, that it is able to sustain the largest GDP decrease of any country in a time of peace, currently at 27%, and Grexit scenarios now belong in the past.

After these eight years of recession the Greek risk/reward analysis finally appears to be very much worth it, with a very significant upside.

Provided that predictions by international institutions are accurate, Greece is ready to return to growth. This is extremely important and if investors are able to see growth, and further stability in the country, combined with effective reform, then I believe that the many opportunities Greece offers will become realized investment projects.

What Greece needs now is to demonstrate its commitment to implementation of structural reforms and its commitment to a future of growth and job creation.

A lot of people have been talking about the crash in the Greek market all these years, but generally a crash is followed by a long bull market; that is what we might just see in Greece.

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