Greece’s government and its lenders should stop focusing on cuts to labor costs as the main avenue to attract foreign investment and redouble efforts to improve the country’s infrastructure and bureaucracy, according to speakers at a United Nations Conference on Trade and Development press conference in Athens today.
“Labor-cost cuts is not a sustainable policy to attract foreign investment to the country,” Marina Papanastasiou, an UNCTAD representative for Greece said during a presentation of the Switzerland-based organization’s world investment report for 2011. Greece needs a “targeted, integrated policy that will focus on exports, foreign investment, small and medium size businesses and privatizations,” she said.
Frequent changes to laws and tax policies, in part under pressure from international lenders to implement structural reforms since the country’s first bailout in May 2010 have created an unattractive and unstable environment for foreign investors, speakers at the press conference said. Greece’s potential to attract foreign investment lies in a high quality labor force at a relatively low cost along with natural resources.
Greece’s investment attraction ranked 142 out of 181 countries, according to UNCTAD’s report, below that of Pakistan and Macedonia. Its potential boosted it to 59th place of 177, based on the country’s combination of market attractiveness, labor force cost and skills ratio, natural resources and infrastructure.
The country attracted just $1.8 million in foreign direct investment last year, most of which came from recapitalizations of companies based in Greece through their parent companies abroad, from $373 million in 2010, according to UNCTAD. Foreign direct investment deposits fell to $27.4 million in 2011, from $35 million the year before.
The United Nations Conference on Trade and Development, founded in 1964, is an institution which works together with the governments of 194 member-countries to promote the integration of developing countries into the world economy.