Athens , 13 July 2007

11+2 comparative advantages

Over the course of the last few years, a dramatic structural transformation has permeated the international economic field. The globalization of markets and the growing economic interdependence, the use of new technologies and the economic integration of groups of countries have all resulted in a new international economic environment.

This new environment has led to the transformation of our foreign policy, which is no longer simply based on the traditional pillar of political diplomacy-as in the Cold War era-but also on two new pillars: a) economic diplomacy and b) international development cooperation and humanitarian aid.

The liberalization of markets, privatization of antiquated state enterprises, the use of new technologies and the development of entrepreneurship comprise a new framework for economic policies. Businesses that are aware of the benefits offered by an open, productive, flexible and socially responsible economic system will inevitably become the vehicles which will transport us toward a remarkable growth rate.

We all recognize both the political and the economic importance of Southeast Europe. We imagine Greece as being at the centre of a circle which stretches around a large market of more than 340 million people with great business opportunities. Over the last two years, almost all countries of this region – including the countries of the Western Balkans - displayed a high growth rate, amounting to approximately between 5 percent and 6 percent per annum.

Acknowledging the geostrategic significance of our immediate neighborhood, Greece has consistently encouraged the European perspective of all countries of the region, namely the recent accession of Bulgaria and Romania and the rapprochement of the Western Balkans with the EU. In 2003, during Greece’s presidency of the EU, we took the initiative to foster closer links between the Western Balkans and the EU, promoting the ‘Thessaloniki Agenda’. As far as the Former Yugoslav Republic of Macedonia (FYROM) is concerned, we are encouraging our neighbor’s Euro-Atlantic perspective, on condition of course that the pending issue of the name of that country will by then have been resolved. Regarding Turkey, Greece has taken the historical step of advocating this country’s future entry into the European Union, when all criteria that apply for all have been fulfilled by Ankara.

It is our firm belief that the European perspective of the Western Balkan countries constitutes a very strong incentive that can help guarantee the promotion of democratic and economic reforms, leading to the development and stability of our neighborhood.

The huge potential in the markets of SE Europe is linked directly to the wider Black Sea region and the rising markets of these countries. According to the Black Sea Trade and Development Bank data, the real gross domestic product growth in the region reached 6.1 percent in 2005. In this context, Greece has been actively supportive of the Organization of the Black Sea Economic Cooperation (BSEC).

We consider this organization as the most credible and comprehensive institutional expression of multilateral cooperation in the area in important fields such as transport, energy, good governance, science and technology and combating organised crime and human trafficking. During our chairmanship-in-office, which took place between November 2004 and April 2005, we managed to reinvigorate the organization by holding six ministerial conferences, a success which was later capitalized upon with the unanimous election of the new BSEC secretary-general, Leonidas Chryssanthopoulos.

At this point, I wish to point out two of the most significant regional projects undertaken by BSEC, namely the extension of the ‘EU Motorways of the Sea’ to the regions of the Black Sea and the Caspian and the construction of the ‘Black Sea Ring Highway’, which we proposed be named the ‘Road of the Argonauts’, in accordance with the ancient legend.

These are large-scale construction projects, from which almost all sectors of the economies of the respective countries will benefit. The idea is to link all the Black Sea countries with a road corridor, starting from Alexandroupolis in northern Greece, circling all the Black Sea countries and returning to Alexandroupolis.

Moreover, we support all similar initiatives promoting regional cooperation through our participation in the Stability Pact and Southeast European Cooperative Initiative and in the Southeast European Cooperation Process.

Comparative advantages

In this regard, the following regional and national factors create natural comparative advantages for foreign companies considering doing business in the Balkans:

1.       Greece is a full member of the eurozone with the highest growth rate (4.3 percent) in 2006 and reaching 4.6 percent in the first quarter of 2007.

2.       The Greek government is working in a determined manner to attract direct foreign investments. Through recent initiatives such as the tax reform, the new investment law, the law concerning public-private partnerships (PPPs), privatizations and the liberalization of the energy market, the Greek Government is transforming the business landscape and offering new investment opportunities.

3.       I would like to refer especially to the important projects that are being implemented in the infrastructure sector in Greece which will lead to the transformation of the broader SE Europe and enhance its connection with Central and Western Europe.

We are completing the construction of the Egnatia Highway, one of the biggest road projects in Europe, along the route of the old Roman Via Egnatia, which will link the Greek-Turkish border with the port of Igoumenitsa, traversing northern Greece. Furthermore, nine vertical corridors will provide links to Bulgaria, FYROM and Albania.

We are also promoting and financing the infrastructure upgrading of the major Greek ports as well as the construction of Corridor X, connecting the upgraded port of Thessaloniki with Skopje and Belgrade as well as with Central and Eastern Europe. This corridor will play a very important role in the economic relations of our countries, both bilaterally as well as at a regional level.

1.       Although Greece is a relatively small market of 11 million customers, it is strategically located close to sizable emerging markets. Within a radius of 800 kilometres there is a market of more than 150 million people. The very concept of our policy and the consistency in following it have borne fruit. Our exports to the countries of SE Europe increased by 28.5 percent in 2006.

2.       Greek businesspeople have the culture and the mentality to understand the people of Southeast Europe, as well as the practical experience of doing business there. They are familiar with this business environment, a key element when doing business in the region. For example, Greeks originating from the Black Sea area have in many cases built a good business network in the market of their origin. The Muslim minority of Thrace provides a stable bridge of cooperation with the Turkish market. Nowadays, Greek universities have faculties specialized in Balkan, Black Sea, Turkish and Mediterranean studies. The graduate students of these institutions acquire a very deep understanding of the region, proving themselves extremely useful to foreign investors who wish to do business in these complex markets.

3.       More than 3,500 Greek firms actively participate in the economies of the region, creating more than 200,000 jobs. Greece is the leading investor in Albania, FYROM, Serbia and Montenegro, second in Bulgaria and third in Romania. In less than 10 years, Greece has invested over 8 billion euros in Southeast Europe. Greek business activities in the region are focused on wholesale and retail trade, retail systems of distribution, light industry, banking and financial services, as well as on big industrial investments in the sectors of food processing, telecommunications, energy and mines.

4.       Greek financial institutions have built a network of almost 1,200 branches in the region, increasing their market share to 20 percent. Last year, the National Bank of Greece bought the majority of the shares of Turkey’s Finansbank, whereas EFG Eurobank and Alpha Bank bought out the majority of the shares of Tekfenbank and Alternatifbank, also of Turkey, respectively.

5.       The city of Thessaloniki, on the threshold of the Balkans, is Greece’s second-largest city. It is home to the headquarters of the Black Sea Trade and Development Bank as well as of the Balkan Trade Center. Τhe city is developing into an economic and trade center, as well as a hub of combined transports for the emerging markets of the entire Balkan Peninsula. Τhe Thessaloniki Stock Exchange Center, which has an online connection with the Athens Stock Exchange, is expected to develop into a source of capital for the wider region.

6.       Apart from the development assistance offered to eligible countries, we have revitalized the Hellenic Plan for the Economic Reconstruction of the Balkans (HiPERB/ESOAV), established in March 2002 for an initial five-year period (2002-2006) so as to boost economic, social and institutional reconstruction of the countries in Southeast Europe, namely Albania, Bosnia & Herzegovina, Bulgaria, FYROM, Romania, Serbia and Montenegro. Through the HiPERB, which has now been extended to 2011, the Greek state provides financial support to these countries. The total amount allocated is 550 million euros and it is entirely financed through Greece’s national budget. Over the last 20 months, we have managed to increase the absorption rate of the budget from 2.4 percent to almost 11 percent.

7.       Apart from the great significance of Southeast Europe and the wider Black Sea area, the broader region of the Middle East also represents a very challenging market for Greece. Greeks who used to live in these countries until the 1970s have become an important link between the two regions. Prime Minister Costas Karamanlis chose Egypt as the first country to visit after his election, thus giving the signal to both the domestic market and the Arab world that this region would again become a top priority for Greece’s political and economic foreign policy.

Since November 2004, when the official visit of the prime minister to Egypt took place, we have visited Libya, Egypt (again), Lebanon, Saudi Arabia, Jordan, Morocco, Israel and all the Gulf States (Oman, Qatar, the United Arab Emirates, Bahrain and Kuwait). Last February, Foreign Minister Dora Bakoyannis and myself visited Abu Dhabi and Dubai, accompanied by representatives of 100 large Greek companies, to further promote our relations and, of course, to multiply business opportunities for Greek companies and to attract more investments into Greece. Furthermore we are scheduled to visit Algeria, Tunisia, Saudi Arabia, countries with which we are already negotiating to sign bilateral economic agreements.

Again, this policy has borne fruit. Greek exports have grown considerably - by 31.3 percent in 2006 - and many important trade agreements are under way. Statistics also confirm that our policy, both in the economic and the development fields vis-a-vis the region of SE Europe, has also had positive results. In particular, our frequent visits to this region and the intensification of commercial and business relations led to a 48.9 percent increase in Greek exports in 2006.

I wish now to briefly focus on another sector where Greece has developed strong cooperation with the countries of the SE European and Black Sea regions, namely energy. For its part, Greece is in the process of transforming itself from an energy consumer market into an energy producer and an energy transit country through the development of a new oil and natural gas pipelines network.

Our energy diplomacy, which is being carried out by the Foreign Ministry together with the Ministry of Development, is based on three pillars: alternative sources, alternative suppliers and alternative routes.

Based on the above, and in terms of concrete projects, we are completing the works of the Interconnector natural gas pipeline called to bring natural gas from the Azeri natural gas fields of Shah Deniz to Italy, through Turkey and Greece. At the same time, we are importing liquefied natural gas (LNG) from Algeria and Egypt and storing it in the special LNG storage tanks in Greece. With the expansion of the existing LNG storage tanks and the creation of two others, Greece will hold 25 percent of the LNG storage capacity in the whole Mediterranean region.

Three months ago, Greece, Russia and Bulgaria signed an intergovernmental agreement on the construction of the Burgas-Alexandroupolis oil pipeline. This pipeline, an environmentally friendly project and complementary to the main oil transport channel – the Bosporus Straits - puts Greece on the world oil map, providing another strategic exit to the large quantities of oil now coming into the Black Sea.

The liberalization of the energy market and the transformation of Greece into an energy hub encourage our cooperation in this sector and provide for important large-scale investment opportunities.

It is also worth mentioning the signing in Athens (October 2005) of the Energy Community and Cooperation Treaty between the EU and nine countries of Southeast Europe, which paves the way toward a unified energy market at a Pan-European level.

Tourism & shipping

Lastly, let me mention two important sectors of the Greek economy which play a key role in our development process:

a.             Greece is one of the most attractive tourist destinations in the world, combining rich cultural heritage and unique scenery with an ideal climate. Greece has a long tradition in tourism and hosts more than 12 million visitors per year. After the success of the Athens 2004 Olympic Games and the completion of the construction of major infrastructure projects, Greece gained the trust of big international businessmen. The country is gradually establishing itself as the ideal destination for organizing conventions, international exhibitions and other events, as well as year-round activities such as golf, spa therapy, and skiing. By capitalizing on the Olympic Games, Greece is currently running an international advertising campaign, aiming to give a significant boost to the tourism industry.

b.             Greece has one of the biggest and most prosperous commercial fleets in the world. Shipping is the most dynamic sector of the Greek economy and constitutes a strategic advantage for the country. With a population of just 11 million, Greece controls 25 percent of the global maritime trade. Spurred by increasing demand for oil and other commodities in fast-growing economies such as China and India has led shipping companies to high profits in recent years.

It is therefore evident that today’s Greece is a leader in terms of business events, offering a stable economic and political environment, competitive human resources, generous investment incentives, modern and reliable infrastructure, research and development support and strong business penetration in the broader region of Southeast Europe and the Black Sea. Greece can thus be a gateway for all businessmen wishing to invest in this region.