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Country Commercial Guides
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CHAPTER VII. INVESTMENT CLIMATE
Openness to Foreign Investment
The Greek government encourages private foreign investment as a matter of policy. Investments are screened only when the investor wants to take advantage of government provided tax and investment incentives. In such cases, foreign and domestic investors face the same screening criteria. Greece, which currently restricts foreign and domestic private investment in public utilities (with the exception of cellular telephony and energy from renewable sources), has deregulation plans for telecommunications and energy. As regards telecommunications, Greece has been granted a derogation until January 1, 2001 to open its voice telephony and the respective networks to other EU competitors. In the energy field, the Greek energy market will be gradually deregulated, starting in February 2001. There are also restrictions on land purchases in border regions and on certain islands (on national security grounds). U.S. and other non-EU investors receive less advantageous treatment than domestic or EU investors in the banking, mining, broadcasting, maritime, and air transport sectors.
Major investment laws are:
--Legislative Decree 2687 of 1953 which, in conjunction with Article 112 of the Constitution, gives approved foreign "productive investments" (basically manufacturing and tourism enterprises) property rights, preferential tax treatment, work permits for foreign managerial and technical staff, and permission for the export of capital, dividends, interest, and other current payments. The Decree also provides a constitutional guarantee against unilateral changes in the terms of a foreign investor's agreement with the Greek government. (Investors have learned through experience that this does not include taxation regime changes).
--Law 2601/98 revised the investment incentives regime replacing Law 1892/90 and its subsequent amendment 2234/94. Under the new law, new businesses (with less than five years of operation) may choose any of the following combinations of incentives: a) grants and interest subsidies as well as subsidies for leasing equipment, b) tax exemptions and interest subsidies. The emphasis of the new law is on assistance for large projects, mergers of small and medium size manufacturing companies and on the development of new products.
--Laws 89/67, 378/68, 27/75 and 814/78 provide special benefits (such as tax and import duty exemptions) for offshore operations of foreign companies established in Greece.
--Law 468/76 governs oil exploration and development in Greece. Law 2289/95, amending this legislation, allows private participation in oil exploration and development.
The Greek Government has a plan stretching until the end of 1999 to privatize or sell minority stakes in public sector enterprises and organizations including the Hellenic Telecommunications Organization (35 percent currently traded in domestic and international markets, the sale of another 14 percent is scheduled for July 1999), Hellenic Petroleum (23 percent currently traded in the market), the Hellenic Duty Free Shops, the Public Power Corporation, the Athens Water Company, the Athens Stock Exchange and the port operations in Piraeus and Thessaloniki. The stage at which foreign or domestic investors participate in privatization programs is not under any restrictions.
Conversion and Transfer Policies
Receipts from productive investments can be repatriated freely at market exchange rates. Remittance of investment returns is made without delays or limitations. Most of the remaining capital controls were abolished in August 1997.
On March 16, 1998, the Greek currency was included in the European Union's Exchange Rate Mechanism (ERM). This was preceded by a drachma devaluation of 12.3 percent on March 14. The drachma participates in the ERM-2 as of January 1, 1999. The drachma's central rate was set at 353.109 drachmas per EURO.
Expropriation and Compensation
Private property may be expropriated for public purposes, but only in a nondiscriminatory manner and with prompt, adequate and effective compensation. Due process and transparency are mandatory, and investors and lenders receive compensation in accordance with international norms. There have been no expropriatory actions involving the real property of foreign investments in recent history. However, a 1996 government decision to revoke a casino license for Athens has generated lawsuits in Greece and the United States, seeking compensation for the loss of the license.
Dispute Settlement
Investment disputes involving U.S. companies have been related to the Greek government's proclivity to change the terms of negotiated contracts (e.g., casino licenses). A dispute between the Greek Public Gas Corporation and GAZPROM, the Russian supplier of natural gas, over the price of gas is currently underway with the Russians threatening to invoke international arbitration. Greece accepts binding international arbitration of investment disputes between foreign investors and the Greek state. International arbitration as well as European Court of Justice judgments supersedes local court decisions. Greece has an independent judiciary. The court system is a highly time-consuming means for enforcing property and contractual rights. Foreign companies report their experience that Greek courts do not always provide unbiased and effective recourse. This is clearly the case regarding U.S. copyright holders, although this is not, strictly speaking, an investment. Although an investment agreement could be drafted subject to foreign legal jurisdiction, this is highly unlikely, particularly if one of the contracting parties is the Greek state. Foreign court judgments are accepted and enforced by the local courts.
Commercial and bankruptcy laws in Greece are in accordance with international norms. Under Greek bankruptcy law, private creditors receive compensation after claims from the state and insurance funds have been satisfied. Monetary judgments are usually made in local currency unless explicitly stipulated otherwise. Greece has a reliable system of recording security interests in property.
Greece is a member of the International Center for the Settlement of Investment Disputes, but no new cases have been forwarded to the Center for settlement since 1982. Greece is also a member of the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards.
Performance Requirements/Incentives
Greece is in compliance with WTO TRIMS Notification. Investment incentives are available on an equal basis for foreign and domestic investors in productive enterprises. The monetary value of an incentive is inversely proportional to the level of development of a given region; in other words, the less developed the region where the investment will occur, the more generous the incentive. Under the new Investment Incentives Law 2601/98, new businesses (with less than five years of operation) may choose any of the following combinations of incentives:
--Grants and interest subsidies, as well as subsidies for leasing equipment.
--Tax exemptions and interest subsidies.
Businesses with more than five years of operation qualify only for interest subsidies and tax exemptions. Additional tax incentives are extended to foreign investors if they establish export-oriented businesses, or if they save foreign exchange through import substitution (Law 2687/53). The Hellenic Center for Investment (ELKE) or "One-Stop Shop" is responsible for reviewing projects valued over 3 billion drachmas ($10 million), or 1.5 billion drachmas ($5 million) if there is foreign participation, for which government incentives are sought.
There are no performance requirements imposed as conditions for establishing, maintaining, or expanding an investment. However, performance requirements do exist when an investor wants to take advantage of tax and/or investment incentives. Local content, import substitution, export orientation, and technology transfers are taken into consideration by the Greek authorities in evaluating applications for investment incentives. Companies that fail to meet the specified performance requirements may be forced to give up the incentives they were initially granted. All information transmitted to the government for the approval process is treated confidentially.
U.S. and other foreign firms may participate in government-financed and/or subsidized research and development programs. Foreign investors do not face discriminatory or other de jure inhibiting requirements. However, many potential and actual foreign investors assert that the complexity of Greek regulations, the need to deal with many layers of bureaucracy, and the involvement of various government agencies discourage investment.
There are no restrictions on the entry of foreigners into Greece. Foreigners from EU countries may freely work in Greece. Foreigners from non-EU countries may work in Greece after receiving residence and work permits. There are no discriminatory or preferential export/import policies affecting foreign investors, as EU regulations govern import and export policy, and increasingly, many other aspects of investment in Greece.
Right to Private Ownership and Establishment
Foreign and domestic private entities have the right to establish and own business enterprises. They may engage in all forms of remunerative activity, including the right to establish, acquire, and dispose of interests in businesses. Greece restricts foreign as well as domestic private investment in public utilities. Recent privatization plans are limited to the sale of minority holdings in public utilities (e.g., Telecommunications Organization, Hellenic Petroleum, Athens and Thessaloniki Water and Sewage Companies). Private power production for sale to the national grid is currently limited to "non-traditional" energy sources (e.g., wind and solar). However, the Greek energy market will be gradually deregulated, starting in February 2001. As regards telecommunications, Greece has been granted a derogation until January 1, 2001 to open its voice telephony and the respective networks to other EU competitors. There are also restrictions on land purchases in border regions and certain islands (on national security grounds). Some restrictions exist for non-EU investors (including U.S.) in: (1) mining, (2) banking, (3) maritime and air transport, and (4) broadcasting.
Private enterprises enjoy the same treatment as public enterprises with respect to access to markets and other business operations, such as licenses and supplies. Access to credit has traditionally been easier for public enterprises, which could borrow easily from state-controlled banks. Liberalization of the banking system and increased compliance with EU norms, however, have gradually forced state banks to operate in a more market-oriented manner, making it easier for the private sector to obtain credit.
Protection of Property Rights
Greek laws extend protection of property rights to both foreign and Greek nationals. At least on paper, the Greek legal system protects and facilitates acquisition and disposition of all property rights. As for intellectual property, Greece is a member of the Paris Convention for the Protection of Industrial Property, the European Patent Convention, the World Intellectual Property Organization, the Washington Patent Cooperation Treaty, and the Berne Copyright Convention. As a member of the EU, Greece has harmonized its legislation with EU rules and regulations. The WTO-TRIPS agreement has been incorporated into Greek legislation as of February 28, 1995 (Law 2290/95).
Despite Greece's legal framework for (Law 2121 of 1993 on copyrights and Law 2328 of 1995 on media) and voiced commitment to copyright protection, piracy of copyrighted material, especially audio-visual works for television, remains significant. Greece has been on the Special 301 "Priority Watch List" since 1994. Just prior to an out-of-cycle review in December 1996, the Greek Government submitted an "Action Plan" laying out the steps it would take to reduce audio-visual piracy. While some of these steps were taken, the government lagged behind severely in licensing television stations in accordance with the provisions of the 1995 media law; the process, which only got underway after extremely long delays, was less than half-way through in mid-1999. As a result of slow movement in many areas of concern to U.S. companies, the U.S. Government launched a WTO TRIPS non-enforcement challenge and consultations under WTO auspices were started in June 1998. These are continuing.
Two other significant intellectual property protection problems are lack of effective protection of copyrighted software and of trademarked products in the apparel sector. Although Greek trademark legislation is fully harmonized with that of the EU, claims by U.S. companies of counterfeiting appear to be on the increase.
Intellectual property appears to be adequately protected in the field of patents. Patents are available for all areas of technology. Compulsory licensing is not used. The law protects patents and trade secrets for a period of twenty years. There is a potential problem concerning the protection of test data relating to non-patented products. Violations of trade secrets and semiconductor chip layout design are not problems in Greece.
As an EU member, Greece is required to have transparent policies and effective laws for fostering competition. In practice, however, the process is not transparent due to overlapping laws and confusion in their application. Foreign companies consider the complexity of government regulations and procedures -- and their inconsistent implementation by the Greek civil administration -- to be the greatest impediment to operating in Greece.
In order to simplify and expedite the investment process, a quasi-state investment promotion agency, the Hellenic Center for Investment (ELKE), was established in 1996. ELKE functions as a one-stop shop for assisting investors in cutting through red tape and acquiring the numerous permits needed to proceed with investments. It also advises the government on ways to streamline the investment process and generally to improve the investment climate in Greece.
Greek government laws and policies generally do not negatively affect the efficient mobilization and allocation of investment. However, labor laws remain quite restrictive regarding the dismissal of personnel. Under current regulations, both private and public companies are prohibited from firing or laying-off more than 2 percent of their total workforce per month without a special prior dispensation from the government.
Foreign investors often complain about frequent changes in tax policies (there is a new tax law practically every year). Tax laws sometimes include discriminatory provisions, e.g., the 1998 tax bill increased corporate tax rate from 35 to 40 percent for all corporations that have registered shares but do not trade them on the Athens Stock Exchange (ASE). Though in principle this change would not violate Most Favored Nation or National Treatment obligations, one practical result is to provide a tax subsidy to Greek firms based on their utilization of the ASE.
Efficient Capital Markets and Portfolio Investment
Greece has an efficient capital market and the private sector has access to a variety of credit instruments. Credit is allocated by private banks -- and increasingly by public ones too -- on market terms, and is equally accessible by private Greek and foreign investors. A number of American banks operate in Greece, serving both the local and international business communities.
An independent regulatory body, known as the Capital Market Committee, supervises the Athens Stock Exchange and encourages and facilitates portfolio investments. Both owner-registered, and bearer bonds and shares, are traded on the Athens Stock Exchange. It is mandatory for the shares of banking, insurance and public utility companies to be registered. Greek corporations listed on the Athens Stock Exchange that are also state contractors are required to have all their shares registered.
A few state-controlled banks dominate the Greek banking industry. Private Greek and foreign banks do, however, comprise an increasingly competitive and generally profitable private sector, holding about 45 percent of the banking system's assets. Private banks in Greece are in good financial health and are expanding their market share. State banks have a large exposure to public enterprises of questionable financial health. Total combined assets of the five largest banks are estimated at 90 billion dollars.
There are a limited number of cross-shareholding arrangements in the Greek market. To date, the objective of such arrangements has not been to restrict foreign investment. The same applies to hostile takeovers (although the practice is a brand new experience to the Greek market). Generally, in sectors open to private investment, foreign investment is not prohibited or restricted, by either law or regulation or by private sector efforts or practices.
Political Violence
Greece is a stable parliamentary democracy currently governed by a socialist government. There are, however, several indigenous terrorist groups that regularly denounce American capitalism and "imperialism." The most notorious are "17 November" and "ELA", which have a history of committing murders and bombings directed against American (including killing five U.S. government employees), Turkish and Greek government targets. There have been a number of terrorist attacks against the property of American and other foreign businesses in recent years but no private American businessperson has been the victim of a terrorist attack. American businesses keep a generally lower profile in Greece compared to other EU countries.
Corruption
Bribery is considered a criminal act and the law provides severe penalties for infractions. However, diligent implementation and enforcement of the law remains an issue. The problem is most acute in the area of government procurement. It is a widely held belief that political influence and other considerations, such as loyalty to old suppliers, plays a significant role in the evaluation of bids. Bribery cannot be deducted from taxes. As a signatory of the OECD Convention on Combating Bribery of Foreign Government Officials, the Greek Government is committed to penalizing those who commit bribery abroad. The Convention was ratified by the Greek Parliament on November 5, 1998 and implementation began as of February 15, 1999.
The judicial authorities are responsible for investigating and prosecuting corruption cases. In cases where politicians are involved, the Greek Parliament decides whether parliamentary immunity should be lifted to allow a special court action to follow. In recent years, there have been a number of investigations of alleged corruption; there was even a special court action against politicians, including the then-Prime Minister, in 1989. While private bankers were convicted, no government official has been convicted to date.
Bilateral Investment Agreements
Greece has bilateral investment protection agreements with Albania, Armenia, Bulgaria, Chile, China, Croatia, Cuba, Cyprus, Czech Republic, Egypt, Estonia, Georgia, Hungary, Korea, Latvia, Lebanon, Lithuania, Morocco, Poland, Romania, Russia, Serbia ("FRY"), Slovenia, Tunisia, Ukraine, Uzbekistan, and Zaire. Investments by EU member states are governed and protected by EU regulations.
Greece and the United States have the 1954 Treaty of Friendship, Commerce and Navigation, which covers a few investment protection issues, such as acquisition and protection of property and impairment of legally acquired rights or interests.
Also, Greece and the United States have the 1950 Treaty for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income. Despite the existence of this Treaty, which provides national treatment with respect to all taxes imposed on citizens and subjects of the other contracting state, Greek tax laws sometimes include discriminatory provisions.
OPIC and other Investment Insurance Programs
Full OPIC insurance coverage for U.S. investment in Greece is currently available only on an exceptional basis. OPIC and the Greek Export Credit Insurance Organization signed an agreement in April 1994 to exchange information relating to private investment, particularly in the Balkans. Other insurance programs that also offer coverage for investments in Greece include the German investment guarantee program HERMES, the French agency COFACE, the Swedish Export Credits Guarantee Board (EKN), the British Export Credits Guarantee Facility (ECGF), and the Austrian Kontrollbank (OKB). Greece became a member of the Multilateral Investment Guarantee Agency (MIGA) in 1989.
For the purposes of OPIC Currency Inconvertibility insurance, it should be noted that since the Greek drachma was included in the European Union's Exchange Rate Mechanism (ERM) on March 16, 1998, currency inconvertibility is no longer an issue.
Labor
There is an adequate supply of skilled, semi-skilled, and unskilled labor in Greece, although some highly technical skills may be lacking. Illegal workers predominate in the unskilled labor sector in many urban areas. Over 300,000 illegal workers took advantage of a recent government program to legalize their residence and work status. The current unemployment rate is about ten percent. Labor-management relations in the private sector are generally good, but difficulties exist in the public sector, as is evidenced by the higher level of strikes, labor stoppages, and related job actions by public sector employees.
Greece has ratified ILO Conventions protecting workers' rights. Specific legislation provides for the right of association and the rights to strike, organize, and bargain collectively. Greek labor laws prohibit forced or compulsory labor, set a minimum age (15) for the employment of children, regulate "family" employment practices, and determine acceptable work conditions and minimum occupational health and safety standards.
Foreign Trade Zones/Free Ports
Greece has three free-trade zones, located at Piraeus, Thessaloniki and Heraklion port areas. Goods of foreign origin may be brought into these zones without payment of customs duties or other taxes and remain free of all duties and taxes if subsequently transshipped or re-exported.
Similarly, documents pertaining to the receipt, storage, or transfer of goods within the zones are free from stamp taxes.
Handling operations are carried out according to EU regulations 2504/88 and 2562/90. Transit goods may be held in the zones free of bond. The zones also may be used for repacking, sorting and relabeling operations. Assembly and manufacture of goods are carried out on a small scale in the Thessaloniki Free Zone. Storage time is unlimited, as long as warehouse charges are promptly paid every six months.
Major Foreign Investors
Major U.S. investments in Greece:
(Based on 1997 total assets as reported by the companies. Source: 1999 ICAP - Greek Financial Directory)
NAME OF AMERICAN COMPANY TOTAL ASSETS (NAME OF GREEK COMPANY) (1997, US $ MILLIONS)
Mobil Oil/BP /1 347.1 Hyatt Hotels Corp. 135.7 Pepsico 97.3 Procter & Gamble 97.3 Philip Morris Group 94.9 (Jacobs-Suchard Pavlides) (Kraft Hellas) Bristol-Myers Squibb 85.3 Texaco 80.8 Abbott Laboratories 72.4 Searle (Vianex) 70.2 Hertz (Autohellas-Hertz) 58.9 Johnson & Johnson 49.4 Colgate Palmolive 46.8 IBM 46.1 General Dynamics/Lockheed (HBDIC) 43.5 Heinz (Copais) 38.9 Dow Chemicals 33.2 McDonald's 32.7 3M 26.4 Xerox 18.4 Marriott (Asty) 17.9 S.C. Johnson and Son 12.7 TOTAL 1,505.9 Major non-U.S. foreign investments in Greece are: NAME OF FOREIGN COMPANY TOTAL ASSETS (NAME OF GREEK COMPANY) (1997, US $ MILLIONS) FRENCH Pechiney (Aluminium de Greece) 381.3 Promode (Continent) 182.3 Alcatel (Alcatel Cables) 55.2 L'Oreal (Anelor) 47.1 Air Liquide 32.8 TOTAL 698.7 ITALIAN Concretum 513.7 (Heracles General Cement) (Halkis Cement) Fulgorcavi Halia 120.4 (Fulgor Greek Electric Cables) Italcimenti 70.4 (Halips Building Materials) Barilla (Misko) 28.2 Olivetti 9.9 TOTAL 742.6 GERMAN Siemens Tele Industrie A.G 64.4 Bayer 49.7 Praktiker 34.4 Beiersdorf 30.1 Schiesser(Schiesser-Pallas Ltd) 21.0 Triumph International 18.4 Stiebel Eltron 11.7 Kumpers & Co 10.4 Hoechst Marion Roussel 9.0 (Kortag Textilwerke) TOTAL 249.1 BRITISH Metal Box 120.2 (Hellas Can Packaging Mfrs) United Distillers and Vintners 88.2 Rothmans 51.3 Knorr 18.2 TOTAL 277.9 NETHERLANDS Amstel-Heineken 336.6 (Athenian Brewery) Shell 211.5 Unilever 196.6 (Elais Oleaginous Products) (Unilever Hellas) TOTAL 744.7/1 Due to the Mobil/BP merger, all or part of this investment could also be counted in the UK section.
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[end of document] Note* International Copyright, United States Government, 1998 (or other year of first publication). All rights under foreign copyright laws are reserved. All portions of this publication are protected against any type or form of reproduction, communications to the public and the preparation of adaptations, arrangement and alterations outside the United States. U. S. copyright is not asserted under the U.S. Copyright Law, Title 17, United States Code.
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