The Greek government and its EU/IMF creditors want Greece to attract investment (especially from abroad) and boost exports in order to bring about economic recovery. But Greece has traditionally been a relatively closed economy that is only slowly opening up. On a positive note, the country is making progress on improving its export competitiveness, particularly through a steep fall in unit labour costs, but also through reforms to simplify export procedures. Obstacles to trade finance are also being tackled, while an export-oriented culture among companies is slowly emerging.
Closed economy opening up
In 2012 exports of goods and services from Greece amounted to just 27% of nominal GDP. This was the lowest share of all EU countries (where the average was 44.7% of nominal GDP, according to Eurostat). But Greece's exports of goods are rising sharply--by 8.9% in 2012 (although this was down from growth of 18.4% in 2011) and 10.5% year on year in the first quarter of 2013. Services exports have fared worse, falling by 5.2% in 2012 as tourists were deterred by the political crisis and transport was weighed down by weak global trade. Services exports continued to contract in the first quarter of 2013, by 12.2%, but the outlook is improving as tourism recovers.
More broadly, a reduction in unit labour costs (which lowers the cost of exporting from a country) as well as government reforms are raising Greece's export competitiveness. Eurostat data shows that Greece's nominal unit labour costs fell by 8% between 2009 and 2012, while they rose by 2% in the euro area on average, amid major wage reductions across the public and private sectors in Greece (including a cut in the minimum wage by 22%).
National trade facilitation strategy
The government has also made export facilitation a priority. Its October 2012 National Trade Facilitation Strategy and Roadmap has three key objectives: to reduce the number of days needed to export by 50% by 2015; to reduce the cost to export by 20% by 2015 and to establish a National Single Window for Exports.
An action plan is intended to help meet these objectives. Actions planned for 2013 include steps towards e-customs, enabling the electronic submission of all data/documents related to the declaration procedure, and a pilot programme in selected customs offices to expedite export procedures.
Trade finance challenges being addressed
One of the most important obstacles to Greek companies boosting their exports has been the difficulty in obtaining trade finance at a time when many banks in Greece and elsewhere in Europe remain reluctant to lend in the wake of the global financial crisis and subsequent euro zone debt crisis.
Since 2011 letters of credit from Greek banks have often not been accepted by foreign buyers. But this problem is being addressed by the authorities and the EU. On June 12th the Greek government and the European Investment Bank (EIB) agreed a €500m (US$664m) trade finance facility to support export-oriented SMEs in Greece; under the facility, the EIB will provide foreign banks with guarantees in favour of Greek banks for letters of credit and other trade finance instruments.
An emerging export culture?
For Greece as a relatively closed, domestic demand-oriented economy, the economic depression since 2008 has come as a shock, but also as an opportunity. The PEA estimates that there are 12,000 export businesses in Greece (just 1.6% of the total number of companies in Greece). But according to the PEA, many Greek enterprises dealt with the collapse in domestic demand since 2008 by attempting--often for the first time--to export their goods abroad, instead of compiling stocks. It is therefore understandable that it will take some time for Greece to become an export-oriented economy. To that effect, a vocational programme for internationalisation, co-organised by the PEA, aims to foster a new export culture among entrepreneurs and export managers.
Since 2009 the globally oriented Greek bank, Eurobank, has worked with the three main export agencies of Greece--the PEA, the Greek International Business Association (SEVE) and the Exporters Association of Crete (EAC)--on the so-called Go International initiative aimed at promoting Greek products in the eastern Mediterranean and south-eastern Europe on a business-to-business level, for example at networking events; a recent example is the Greek-Russian Go International forum that took place in Moscow in late May.
More focus on value added
According to the PEA, Greek companies' stronger international orientation is leading them to switch their export focus from agricultural products to industrial goods. This is highlighted by the sharp increase of export values as opposed to export volumes (which actually fell in 2012); that means more Greek companies export fewer bulk products, but more products of higher added value.Suggest a correction