One of the most impressive achievements of the significant reforms carried out by the Greek government since 2004 has been the dynamic increase in Foreign Direct Investment.  For instance, gross FDI inflows in 2006 totaled more than 6.29 billion Euro, a 100% increase over 2005. More significantly, net inflows reached 4.275 billion Euro, up from 487 million Euro in 2005, a noteworthy 10-fold increase.

Although net FDI inflows in 2007 show a certain decline, FDI inflows for the 11 month period, Jan-Nov 2008, have increased substantialy. It is noteworthy, however,  that gross FDI inflows, which reflect the real performance of a country’s FDI attractiveness, have sustained high levels for 2007.

It is important to underline that a large share—about 60%—of the FDI total was directed toward new business establishment, mergers, and acquisitions, and the remainder toward loans and the purchase of real estate. In addition, 700 million Euro of this total represents reinvested earnings, a sure sign of confidence among investors and a strong message of their intent to remain in Greece for the long term. Of the total, the amount of loans, at 1.899 billion Euro, is a positive sign of investor confidence, indicating a strong willingness to commit funds for projected revenues and growth.

During this period, outflows totaled 2.719 billion Euro, leaving an impressive 4.27 billion net flow. A significant share of this amount was for development and working capital in Greek subsidiary companies in Southeast Europe, in which case Greece is fulfilling its important objective of a "bridge function" role.

Investor Confidence
Investor confidence in Greece is demonstrated from the all-important markets of the EU and the U.S. Recent initiatives by Greece in Russia and Eastern Europe, the Middle East, and Asia bode well for FDI in the near future from these regions, which are showing a strong interest in energy, telecommunications, tourism, transportation and manufacturing.

The significant increases in FDI over the last three years clearly demonstrate that reforms have met with the approval of the global investor community. And the role of Greece as a regional hub, in energy, commerce, and transit, is one of the most positive features that investors recognize today.

FDI Inflows in Greece

FDI Inflows in Greece 2003-2007 (in million EURO).

Graph 1
Data:
                           2003    2004    2005    2006    2007    2008
Gross Inflows      3994    3430    3163    6995    4612    6483
Net Inflows         1130     1692    502     4275     1401   3477

Source: Bank of Greece 2008

The progression of FDI in Greece, as shown in graph 1, registers significant fluctuations, which do not allow a clear charting of increasing or decreasing trends, yet it is clear that FDI volume demonstrates a substantial growth following 2005. A noteworthy characteristic in the trends is that gross capital inflows (which better show the country’s FDI performance) have a much lower fluctuation than net inflows and have substantially increased in volume from 2006 to 2008. Hence, foreign investors have a relatively more stable position regarding capital inflows in the country, whereas, on the contrary, their capital exports (for instance, the repayment of loans, investment abroad) have a much more diverse character. Nevertheless, it is significant that the highest gross FDI inflows during the previous five years took place in the last three years (2006, 2007, 2008).

Gross FDI Inflows for 2005-2007 according to country of origin (in million EURO)

Total value: 14,769 million EURO  
Graph 11

Data:

France	UK	Germany	Netherlands	Belg.Lux.	Italy	Spain	Cyprus	USA	Other
3787	2011	3432	740	1145	839	330	466	434	1585

      
Source: Bank of Greece 2008

The distribution of gross FDI inflows in Greece by country of origin in the three-year period (2005 - 2007) demonstrates the importance of EU countries (especially ΕU-15) in Greece’s investment environment. In this group is found the “traditional” capital exporting countries such as France, Germany, U.K the Netherlands, Italy, Belgium and Luxemburg. Cyprus has a notable presence while Spain shows important increasing trends during this period.

Gross FDI Inflows according to domestic sector of economic activity 2005-2007
(in %)                                                               

 

Total value: 14,769 million EURO                                    
Graph 111
Data:
Primary   Secondary   Tertiary
69.5         3553.2       11146.7

Source: Bank of Greece 2008

During the past three years FDI in Greece has been oriented mainly toward the services sector. This trend evolved mostly due to the development of the financial system and trade. The secondary sector has a relatively small share compared with the country’s capabilities. It is important to note that investment in energy (electricity, natural gas) amounted to 5% of total investment in the secondary sector and exemplify a growth trend for this period.

Breakdown of Gross FDI Inflows in manufacturing   2005-2007  (in %)

 

Total Value: 3,010 million Euro
Graph 1V

Data:

Food Products	Oil Derivates	Chemical Products	Metal Products	Office machinery	Radio,TV,Commun.	Motor Vehicles	Other
322,3	45,2	1012,5	597,4	222,1	279,3	70,6	461,2

                                         

Source: Bank of Greece  2008

The manufacturing sectors in which foreign investors have focused their interest in Greece during the last three years are chemicals (excluding the petrochemical industry), followed by the metallic products sector, machinery, and food and beverage.
Greece has significant clusters in these sectors, which can substantially support foreign investment interest, in both Greenfield and in the form of cooperation with Greek businesses, and with enterprises for the production of end products directed to the domestic and international markets.

Structure of Gross FDI-Inflows in services 2005-2007 (in %)

Total Value: 11,147 million Euro
Graph V

Data:

Real Estate	Tourism	Trade	Post-Telecom	Financial Intermediation	Education & Health	Other
390,2	574,3	534,6	2763,7	4462,2	374,4	2047.2

                                                                                         

Source: Bank of Greece  2008

In the services sector foreign investor interest during the last three years focused on finance institutions (bank acquisitions), telecommunications, (mainly mobile telephony) and tourism.

There is also a significant interest in education and health. It is noteworthy that only approximately 5% of investment was oriented toward the less productive sector of real estate. To the contrary, the majority of foreign capital inflows was oriented toward productive economic activity of high added value.