The attraction of foreign direct investment in a rather small economy of the European South, like Greece, can constitute a vital tool for boosting its economic development and also increasing its productivity. In addition to the above, the establishment of foreign subsidiaries in the subnational Greek market can play a role of greater importance, since foreign firms pay attention to locational specificities when they decide where to locate.
FDI can be helpful: for instance, it seems to me that Greece could have much higher potential as a tourist destination, especailly in autumn, winter and spring (e.g. cultural tourism, agricultural tourism, cooking classes, language classes, art history classes etc for tourists...), and it would benefit from investments to hotels etc.
Tiia is quite right in mentioning tourism as a driving force in Greece. Unfortunately, tourism although brings in foreign exchange, is still a nontradable activity. On the other hand, most FDI in developed world is horizontal and export-platform thus making tourism not such an attractive activity area. So Greece needs to develop its tradable sector to both attract more FDI and to increase development.
Tiia and Saime have raised a good discussion points. FDI may work well for Greece. However, still Good governance is needed. Thanks.
Suppose foreign direct investment (FDI) in manufacturing contribute positively to the economic growth of Greece (I think this is affirmative in most cases). Suppose the products are exportable and the share of domestic consumption is rather small. The next question is how to invite FDI.
Greece is an EU country and uses Euro. When a firm in Germany, France or USA consider FDI, i.e. establishing a manufacturing plant, managers must think of several possibilities: where to build a new plant. In that case, Greece is not situated in a good position.
Here is a list of minimum wages for various countries in EU.
Minimum wage (EUR per month, as of 2013, cited from Wikipedia.en)
Greece 684
Higher than Greece
Netherlands1502
Belgium 1502
Germany 1473
France 1458
Spain 753
Lower than Greece
Portugal 589
Poland* 413
Croatia 400
Estonia 390
Slovakia 380
Latviva 360
Lituania 350
Hungary* 338
Czeck Republic 340
Romania* 237
(starred countries uses different currencies than EURO)
Investing firm in manufacturing has a rather good control of manufacturing processes and the difference of productivity (in labor and material inputs) does not change very much depending on host countries. Then we can say that Greece is facing a fierce competition.
I wonder if FDI is one of the best strategies for Greece.
Very interesting points Yoshinori. Thank you for sharing your thoughts with us. Minimum wage is another concern. I would have to agree with Tia that Tourism can be a driving force. There is a number of FDI's currently in the Greek tourism sector as the number of people visiting the country has been booming for the last two years.
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