Thursday, 27 January 2011

Isn't Greece attractive...?

Yesterday, if I’m not mistaken, the reduction of the corporate tax rate to 20% was announced (really what’s the corporate tax rate if one-off taxing like last year’s is taken into account). Of course this was good news for troubled Greece.

This is a step in the right direction, something that can potentially enhance the country’s competitiveness. But this measure alone seems negligible if we consider the overall business environment that our country has to offer…

 I really don’t know where to start. Union members’ not allowing cruise ships to moor in the ports of Piraeus or Korinthos, farmers closing down highways preventing passenger cars and trucks to reach their destinations and the subsequent shortages of certain goods in super markets? I’m not even getting into commenting upon the all-notorious Greek public servants efficiency. Or should I mention the fact that right now, most days of the week there are protests in downtown Athens and the city’s more busy business and commercial district is all but closed down?  It really is not a pretty picture.

I tried to find some indicators that even remotely attest to these facts that every Greek citizens is deeply aware off. Unfortunately so are foreign investors who are rushing to the exit all these years leaving Greece and selling their businesses.

source: World Bank

This is the number of procedures required to start-up a business. As you can see Greece is the undisputed champion of all the countries pictured in the graph. It really is embarrassing, but not surprising to me.

source: World Bank

Of all the indicators that I will include in this post the only one that Greece is not lagging almost all other countries in the relevant graph is the number of days required to start a business. Greece, actually improved in this count, since the days required were cut down to half. The problem here appears to be common among many European countries. Emerging Economies in Europe and northern European countries seem to be ahead of the curve in that respect.

Another area that Greece desperately needs to improve is logistics. Repeated strikes from port-workers and farmers’ protests disrupted smooth delivery of goods in Greek businesses and consumers many times these past few years. But I’m not sure the picture that the index is portraying can be blamed solely to that, I believe there are surely other factors in play here (like the condition of our country’s infrastructure). Of course I don’t know how the index is constructed, so I’m just guessing here. This particular index's reading worsened since 2006. It seems that our country is not doing much to take advantage of its favourable geographical position.

source: World Bank

I want to be fair here, so I have to say that the Greek public sector is not the only one that has to become more efficient, the private sector has to improve too. The lack of competitiveness of Greek products in the internationally attests to that. Also, the migration of skilled Greek workers abroad in large numbers long before the current crisis broke out, surely means something.

The following graph, shows R&D (research and Development) expenditures as a % of GDP. Here too the figures for Greece are depressing.

source: World Bank

For Greece to become an attractive investment proposal a lot of things have to change. The reduction of wages is helping in the competitiveness front (but it is really painful for Greek people until consumer products prices adjust downwards too, of course VAT hikes don't help in that respect) as is the corporate tax rate reduction.

But deeper and more structural changes need to happen. Changes in people's mentality and attitude towards certain things. Popular perceptions so well engraved into people's minds that only a shock can shake them out. This deep and unprecedented crisis that our country is living through at the moment besides all the pain that is causing us, is offering Greece a chance to escape from all these remnants of the past that are holding all of us back.

Well, I got a bit carried away here. A whole lot of things have to happen for these changes to materialize and I’m probably not the right person to point them out, nor have I the appropriate knowledge . I was just browsing through these data and I became depressed…


  1. I totally agree Nick! This crisis causes (probably) unavoidable pain in many households. I was hoping though that it could change beliefs and social and economic behaviour of individuals. But lately i am rather pessimistic on that...I am impressed though by the fact that the protests and social reactions (except from some well protected professions - aka pharmacists, engineers etc) are not analogous to the austerity measures taken, which shows that much or less we all feel responsible for this mess! I hope some of the reforms like one stop shops will speed up procedures and business start-ups.

  2. I agree with you Michael...I am pessimistic on the changes in attitudes front too...You are absolutely right...Maybe the high unemployment that I think wil become the norm for the next 8-10 years will help change attitudes.....
    I am just more pessimistic on the riots front...I think that public discontent will rise as poverty and unemployment rise and are prolonged...