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Introduction to INVgr's special section on South-East Europe <<< Back to INVgr's Special Section on South-East Europe The Balkan market consists of approximately 60 million consumers, of which 30 million people live outside Greece's borders yet within 300 kilometres of Thessaloniki. This market in Albania, Kosovo, the Former Yugoslav Republic of Macedonia (FYROM), Bulgaria, Romania, Serbia and Montenegro, at a distance from Thessaloniki equal to that between Thessaloniki and Lamia, is easily within the transportation scope of many Greek products, yet due to tariff agreements is seemingly far away. (Read the article by Nikos Philippou, Chairman and Managing Director, Philippiou Domika Erga SA, entitled Tax Free Zone For Balkan Countries on INVgr [premium content].) Greek SMEs led the drive to penetrate Balkan markets in the early 1990s, following the collapse of communism. The Balkans are the natural hinterland and the Greek presence in the region is very significant and constantly growing. Venture capital firms have provided the resources for green- and brown-field operations as well as joint-ventures, while service companies, particularly banks, have followed close in their wake to offer advice and financing. "Antenna TV's investment in Bulgaria is a significant first step in our international expansion into the neighbouring Balkan countries. We are excited by the prospect of investing in the Bulgarian broadcasting market, with its potential for robust growth in advertising and the presence of recognised international advertisers as well as major Greek advertisers. We expect to reposition Nova to become a leading producer and broadcaster of top-quality programming. Antenna will also transfer broadcasting know-how to Nova Television." -- Theodore Kyriakou, Vice Chairman, Antenna TV SA, which in August 2000 made its first move outside Greece, acquiring radio and television assets in Bulgaria for USD 3.7 million: Nova Televizia SA (Nova Television; 100%), the second privately-owned national TV station in Bulgaria, and Radio Express SA (100%), a Sofia radio station. Antenna TV is a leading Greek media group that is listed on New York's Nasdaq exchange. The Antenna Group owns and operates Antenna TV, the leading television broadcast network and producer of television programming in Greece. Antenna TV's network has the number-one position in terms of ratings and audience share as well as -- according to the company -- television advertising revenue in Greece. The network enjoys strong brand recognition, which has been achieved through emphasising quality and innovative programming that appeals to a variety of audience segments representing a broad cross-section of the Greek population. On July 18, 2003, Bulgaria's Communications Regulation Committee (CRC) granted Sofia-based Nova Television a communications licence, allowing it to broadcast nationwide. Nova Television was launched in 1995 as Bulgaria's first commercial TV broadcaster, initially covering Sofia and its surrounding regions. Over the past 15 years, Greek companies have become the biggest investors in the region with approximately USD 7 billion invested to date, mainly in the telecommunications, manufacturing, energy, banking, services, trade, transportation and tourism sectors. The bulk of investments have taken place in the past five to six years (1999-2004), as political stability in the region improved and growth turned positive across South-East Europe. According to data released by the Hellenic Ministry of National Economy, Greece is the largest foreign investor in FYROM, the second-biggest in Albania and Bulgaria, third in Romania and fourth-largest in Serbia and Montenegro. Today, an estimated 3,500 Greek entrepreneurs and investors are active in the region. "Probably the most compelling reason for investing in Greece and partnering with Greek companies and entrepreneurs is to gain access to the emergence of the neighbouring Balkan markets. Strong Greek companies are active in the region in construction, property development, cement, import/export and consumer products, among others. Greek companies will be the partners of choice for many in these difficult but potentially rewarding countries, which include the next wave of accession countries, with interesting investment opportunities in the Balkan region more likely to emerge from Athens than from London or Frankfurt." -- Gryphon Emerging Markets Ltd., a specialist investment banking boutique focused on the main emerging economies of Europe and the Middle East, which, in addition to Greece, offers investment banking services in Bulgaria, Romania and Ukraine Titan's success story In an interview with the Athens News published on May 27, 2005, the Managing Director of Titan Cement Company SA, Dimitris Papalexopoulos, a fourth-generation member of the family that founded and still controls the Titan Group, said during the EBRD Annual Meeting 2005 in Belgrade: "In the early '90s two things happened at the same time. The Greek economy opened up to the outside world as a result of European entry. At the same time communism was collapsing to long-term commitments. It was helped both sides and it is a win-win situation." Titan is one of Greece's success stories in the Balkans. "We are a 100-year-old company in a capital-intensive industry," continues Papalexopoulos, "so we tend to look at the long-term perspective and we clearly believe we have done the right thing. Having said that, the most important challenge for the region is the political one: the strengthening of democracy and state institutions, the improvement of the legal framework and the development of a functioning market economy... We are actively looking at further opportunities in the region. Of course, that is a far cry from saying we are going to buy a specific target, but we are looking... A few years ago we were a purely Greek company. We had a strategy to become a multi-regional cement producer. We are not a global company but have chosen certain geographical areas in each of which we aim to acquire a cluster of activities. South-East Europe is one of the regions where we continue to invest and expand into. This is the case for organic growth as well as possible acquisitions. The other key regions for us are the U.S. east coast and the Middle East. At this point, Greece is roughly one-third of our turnover and we predict that this year [2005] our activities in the U.S. will surpass that percentage." Some 12% of Titan's turnover comes from the group's Balkan cement interests. This includes plants in Bulgaria and the Former Yugoslav Republic of Macedonia (FYROM) since 1998, and Serbia since 2002. Titan has invested around EUR 150 million in the region and is making a healthy return on that investment. "We’re making a good return and we are unabashedly bullish to invest more." When it comes to the Balkans, Papalexopoulos told the EBRD Annual Meeting 2005 delegates in Belgrade, “the world has been focused on the wrong thing" such as The Hague trials. "We have to ask, is South-East Europe becoming the new central Europe for foreign direct investment?” Papalexopoulos noted the region has "obstinate bureaucracy, petty corruption and legal voids -- but not worse than in developing countries in Asia or the Middle East." Forming strategic alliances in the region "Our development strategy is to focus on Central and Eastern Europe and, as such, Greece forms a bridgehead for further development in that area." -- Lorrie Morgan, Group Director of Corporate Communications, Eureko BV, Zeist, The Netherlands. In South-East Europe, Eureko is the parent company of Greece's Interamerican Group and owns and operates three clinics in Athens -- Euroclinic Athens, Athens Clinic and Children's Euroclinic -- among other activities. Headquartered in Athens, the Interamerican Group has been active in Bulgaria (since 1998) and Romania (since 1995), through start-up operations, as well as in Cyprus (Interlife, originally founded in 1999). Eureko is the majority shareholder in Interamerican Romania with the European Bank for Reconstruction and Development (EBRD) holding a 20% share. Interamerican also owns Euroclinic Bucharest, the first private hospital in Romania. In a media release dated December 20, 2005, Eureko announced that it "views its Greek operation as the springboard for its development in the Balkans, and has fully supported the measures taken by [Interamerican's] management, and is impressed by the determination of the management team to make 2006 a defining year in the company's success story." [more...] An increasing number of non-Greek multinationals do business in the Balkans by forming strategic alliances and establishing joint-ventures with Greek companies, since Greek firms have been much more aggressive and much more open to taking risk in the region, particularly over the last six to seven years. Greeks are well received in the Balkans because they are perceived as partners who will not subsume local interests as multinationals are prone to do. In an interview published in the September 2000 issue of Oikonomiki Viomichaniki Epitheorisi, Nicholas Burns, former USA Ambassador to Greece, said, "In the mid-1990s, there were a lot of multinationals that seemed to think that they could make it on their own in the Balkans and could ignore Greece. And now we see a number of them starting to look for Greek partners... American companies have a multitude of options these days as to where to put their investment capital. The Balkans, because of the four wars over the last 10 years, is sometimes a difficult sell for certain types of American companies. They also understand that in order to participate in some of the economic ventures here it does make sense from time to time to have a Greek partner... I know that some of the American companies that are interested in Albania and the Former Yugoslav Republic of Macedonia also feel that, given the experience of the Greek firms and the exposure that, for instance, the Greek banking industry has in those countries, it does make sense to partner. It's not always true. There are some companies who obviously believe they can make it on their own. But Greece's exposure is quite pervasive as you know in the southern Balkan tier of countries, and so people want to take advantage of that." Investors from many OECD countries at first thought they could go it alone, but are increasingly realising that Greeks are good joint-venture partners because they understand the Balkan mentality and, in most cases, are sympathetically received in the region. Several European and U.S. multinationals have chosen Greece as their regional hub for the South-East European region. Here are three examples of U.S. companies that use Athens as their regional headquarters:
"Greece is the natural staging point for exploring and developing trade, business, investment and partnership opportunities with the countries of South-East Europe and the Black Sea area. This is a very important strategic advantage. I am talking about an emerging economic area of nearly 326 million people and a GDP exceeding USD 1.5 trillion." -- Kenneth Matziorinis, one of Canada's pre-eminent economic experts on Greece and founder of Hellas Capital, Canada If one looks at another example of a multinational with headquarters in Athens and a major presence in the region, Coca-Cola Hellenic Bottling Company SA (CCHBC) is one of the world's largest bottlers of The Coca-Cola Company products. With over 37,000 employees, CCHBC groups its countries into three segments. The countries included in each segment share similar levels of political and economic stability and development, regulatory environments, growth opportunities, customers and distribution infrastructures. CCHBC's presence in established, developing and emerging markets is as follows (countries are listed in alphabetical order):
Atlanta, Georgia-based The Coca-Cola Company (TCCC) owns 24% of CCHBC, the world's third-largest bottler of TCCC products. CCHBC's product portfolio comprises 145 carbonated and 240 non-carbonated soft drink varieties. The company operates 78 plants, offers its products to approximately 540 million people, refreshes consumers in 26 countries (including Croatia), sells over 1.4 billion unit cases of beverages per year, serves its customers through a network of 271 distribution centres, and sells its products through more than 1.1 million cooler doors. To name just one example of a European multinational with regional offices in Athens:
"Together we have a presence in 28 countries with a total population of 1,000,000,000." -- Spyros Theodoropoulos, Chairman, Chipita International SA, commenting on the merger between his ATHEX-listed firm, Delta Holding SA, Goody's SA and General Foods SA (aka Uncle Stathis). Officially announced and presented on December 19, 2005, the merger is creating the largest food company in Greece and becoming the 35th-largest European food processor. The four-year flirt between Delta Holding and Chipita International has concluded in a union that could swallow up rivals. Adopting a transitional brand identity, the Chipita-Delta union has chosen BrandCo to be its interim name. [more...] Greek banks in the Balkans Greek banks have a particularly dynamic presence in Bulgaria, FYROM, Romania, Albania and Serbia. If one calculates the percentage of total assets of all the banks operating in each of these Balkan countries, Greek banks currently have a market share of 33.5% in FYROM, 25-30% in Bulgaria, 10.1% in Romania, 9.2% in Albania and 1.5% in Serbia. Foreign banks, including Greek ones, control 67% of total assets of all the banks in the Balkans, excluding Greece. Through their bank relationships, Greek companies active in South-East Europe can reduce search and due-diligence costs in the region. The special relationship between Greek banks and their Greek clients have also created synergies in the region. Particularly the five Greek banking groups that are active in the neighbouring Balkan markets -- National Bank of Greece (NBG), Emporiki Bank, Piraeus Bank, Alpha Bank and EFG Eurobank Ergasias -- have helped many Greek companies expand or set up shop in the region. For example, NBG is the largest financial institution in South-East Europe with a market capitalisation of EUR 9.2 billion and total assets of approximately EUR 55 billion. Founded in 1841 as a commercial bank, NBG has always been the largest bank operating in Greece, playing a pivotal role in the development and growth of the Greek economy. With over 9 million deposit accounts, more than a million lending accounts, 588 branches, and the largest ATM and POS networks, NBG is the 'national champion' and leader in most segments of its domestic market. For the year ending December 31, 2004, NBG reported consolidated net profit of EUR 386.4 million and had excess core capital of approximately EUR 600 million. NBG has been listed on the Athens Exchange (ATHEX) since 1880, while NBG's American Depository Receipts (ADRs) have been traded on the New York Stock Exchange (NYSE) since October 1999. In addition to its leading position in the Greek market, NBG has operations in more than 15 countries abroad, including a significant presence in the Balkan region and the New York metropolitan area. Banking markets in South-East Europe represent a key area for NBG's international expansion. NBG has invested approximately EUR 500 million during the last five years in the region and currently operates a network of more than 220 branches throughout Bulgaria, Romania, FYROM, Albania, and Serbia and Montenegro. NBG intends to continue its expansion in South-East Europe through organic growth and acquisitions, aiming to become the leading international Group in the region by offering customer-driven solutions, fully exploiting synergies and cross-selling, boosting accountability and efficiency, and gearing NBG's portfolio towards higher value businesses. Alpha Bank, one of NBG's main competitors in Greece and a dynamic player in the region, plans to build up a network of 150 branches in Romania, 135 in Serbia and 80-90 in Bulgaria plus add 5-10 more in Albania and FYROM by 2008, reaching a total of 400 branches in South-East Europe. Long term, the bank aims to secure at least 10% market share in every market it operates. "Greece was one of the first and is still one of the most important investors in Romania. As far as I know, the country's major players have plans to expand this. Greeks have also supported us by sharing memories of the experience of accession into the EU. Greek banks were also among the first to show confidence in our banking sector and we may well see the National Bank of Greece among bidders for BCR, Romania's biggest bank." -- Ionel Popescu, Minister of Public Finance, Romania. Greece is a major commercial partner for Romania and among the three most active foreign investors. Greek investments in Romania have exceeded EUR 2 billion. Almost 500 Greek entrepreneurs and Greek-owned businesses operate in Romania, while this number is expected to increase significantly.
Greece-Turkey In January 2002, INVgr launched a new section on Greece-Turkey, which aims to promote and strengthen the bilateral business, trade, tourism and investment relations between the two neighbouring countries. According to Greek Prime Minister Costas Karamanlis, 77 Greek companies are currently operating in Turkey with Greek investments in the neighbouring country representing 3.2% of total foreign direct investment (FDI) there. Business between Greece and Turkey has gained impetus due to an improvement in political ties over the last five years, bringing a fivefold increase in the volume of two-way trade. A total of 25 bilateral agreements have been signed between the two countries over the past five years. Greece's trade deficit with Turkey jumped 71.7% in 2003 compared with the previous year, totalling USD 477.19 million. Turkey's exports to Greece rose by 52.8% last year to USD 902.64 million, while Greek exports to Turkey rose 36.16% to USD 425.45 million. Bilateral trade exceeded USD 1.3 billion in 2003, up 47.1% from the previous year and sharply up from EUR 200 million in 1999. "We can soon raise this to EUR 5 billion," Recep Tayyip Erdogan, the Turkish Prime Minister, said at a luncheon hosted by the Greek-Turkish Business Forum in Athens on May 7, 2004. It was the first official visit by a Turkish Prime Minister since 1988. [more...]
Greece's five-year economic reconstruction plan for the Balkans In this special section on South-East Europe, INVgr also takes a closer look at the Hellenic Plan for the Economic Reconstruction of the Balkans (HiPERB), a five-year (2002-2006), EUR 550 million development aid programme. Serbia, Montenegro, Bulgaria, Romania, the Former Yugoslav Republic of Macedonia (FYROM), Albania, and Bosnia and Herzegovina are the benefiting states of Greece's development aid programme for the economic reconstruction of the Balkans. Greece is the first EU country to have presented a comprehensive National Action Plan for the Reconstruction of the Balkans, which serves as a tool for the consolidation of conditions of stability in the region. It is worth underlining that approximately 50% of the Plan's funding, EUR 265 million, is directed to Serbia, including Kosovo, and Montenegro. Along with other bilateral donors -- the European Commission and international financial institutions, whom Greece seeks to liaise with in co-funding projects -- Greece aims at creating and consolidating conditions for stability in South-East Europe by improving infrastructure, tackling energy problems and building sound and democratic institutions. Greece has granted development aid a total of 46 countries, with the annual associated spending "approaching 0.23% of GDP [or EUR 464 million per year]," according to Deputy Foreign Minister Evripidis Stylianidis. "By announcing an ambitious EUR-500-million Balkan reconstruction assistance package, Greece bought itself enormous access. Greece has further leverage over its neighbours through Greek private investments, its lax visa/immigration policy, and its advocacy inside the European Union" -- John Brady Kiesling, former political counsellor at the Embassy of the United States of America in Athens. His book book Diplomacy Lessons: Realism for Unloved Superpower will come out in spring 2006. The plan has been facing some serious implementation problems, delays and set-backs. It is important that the Greek government will ensure that HiPERB will not just remain a "Hellenic Plan," but that it will effectively be turned into a serious, viable and strategic development aid programme that will help speed up, enhance and financially assist the region's economic reconstruction in a sustainable, positive and constructive way. Greece has committed itself to allocate 0.20% of its GDP annually to international development aid. <<< Back to INVgr's Special Section on South-East Europe
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