Monday, 30 December 2013

Greece and foreign direct investment: not that fond of each other...?

There is a lot of talk about how Greece needs to attract foreign direct investment. It is one of the few things talked about in (part of) the mainstream media that is probably right. Of course it’s easy to talk the talk but when it comes to walk the walk… 

Greece is the only peripheral country where the stock of foreign direct investment has decreased since the onset of the current depression in 2008.

source: Eurostat, own calculations

What I find equally impressive is the fact that Greece’s FDI stock in 2012, after the massive drop since 2008, almost matches that of Cyprus. A country whose GDP, after the dress down in the Greek figure in the past few years, accounts for less than 1/10 of that of Greece.

source: Eurostat

Despite highlighting some remarkable points the charts above don’t do justice to our beloved country. Take a look at the chart below.

source: Eurostat, own calculations

Yeap, it is true. Greece stands bang at the end of the table when FDI stocks are concerned.

It appears that instead of getting better, situation in Greece is getting worse, as far as FDI is concerned. I won’t go into the merits of FDI, there is plenty of painstakingly detailed literature on the subject out there.

It also appears that the current (a word pertinent to the ever-changing Greek tax laws) framework to attract foreign investors fails miserably to do so. Of course the fact that the FDI stock decreased also means the claim that “foreigners use the crisis as an excuse to grab assets out of local hands” fails the numbers test as well for the time being. And the country of course finds itself stuck in the middle…