Financial distress and political turmoil persists in Greece. And now a Greek exit from the euro is what everyone is buzzing about these days.You can click here to see McKinsey's strategy for Greece's future. There is, however, a lot more potential in Greece than just olive oil, feta and yoghourt. We just need to get over the next month and move beyond all the talk of Grexit killing the global recovery.
However, there are numerous actions Greece can take to help turnaround its desperate financial position.
Earlier this year, consulting firm McKinsey & Co. just published a study titled Greece 10 Years Ahead: Defining Greece's New Growth Model and Strategy. As its title would suggest, the report aims to lay out a new growth plan for the financially beleaguered country.
Among other things, McKinsey argues that Greece needs to be more involved in processing foods that currently leave its country as low margin unfinished goods. Greece has some of the most amazing food commodities in the world. However, it lacks the capacity to process it and sell it at high profit margins.
"Greece has significant potential to increase its output, boost exports and contain imports, especially in four major high-potential categories, namely oils & fats, fruits & vegetables, dairy, and bakery products," writes the studies authors.
More from McKinsey's report:
As an example, Greece is the 3rd largest olive oil producer worldwide and exports 60% of its output to Italy in bulk, yet in doing so allows Italy to capture an extra 50% premium on the price of the final packaged product. The fact that Greece holds only a 28% of the global 'Greek Feta' cheese market and 30% of the US 'Greek Style' yogurt markets, further reinforces a clear commercial opportunity for Greece.
As I've already reported, Greece, Israel and Cyprus are cooperating to exploit natural gas deposits in the Mediterranean, but this could take a decade. It's also a source of tension with Turkey which is warning that waters off the coast of war-divided Cyprus where Greek Cypriots plan to explore for natural gas lie within its continental shelf.
Apart from exploiting natural gas deposits, renewable energy must be a top priority of any Greek government. Bloomberg reported that Greece's Helios solar energy project could raise 15 billion euros ($19.65 billion) to go toward reducing the national debt. Solar has huge potential in many European peripheral economies.
Then there are established industries like tourism and shipping. Earlier this week, ekathimerini reported that Greek-owned merchant fleet remains dominant:
Greek ship owners do not pay taxes. A friend of mine explains:
Greek shipping retained its position as world leader in 2011, as it controlled 14.83 percent of the global capacity in deadweight tonnage despite the problems caused by the international crisis and reduced funding from banks, according to a report issued on Thursday by the Union of Greek Shipowners.
However, the slow cash flow and the oversupply of capacity, as well as high fuel prices, resulted in an 8.57 percent drop in profits for Greek shipowners to 14.1 billion euros, from 15.4 billion in 2010, the report said.
Greek-owned shipping companies controlled 3,325 vessels with a total capacity of 226.92 million dwt last year. The Greek-flagged fleet amounted to 2,014 vessels with a capacity of 43.39 million dwt, constituting 39.52 percent of the total European Union capacity.
The head of the shipowners’ union, Theodoros Veniamis, said that the positive results do not allow for complacency but require a constant redefinition of targets, before reiterating the sector’s demand for the re-establishment of the Merchant Marine Ministry.
The shipping sector is exempt from corporation tax. This exemption has been incorporated in the Greek constitution. The last time that the Greek government tried to impose taxes on the shipping sector, they all moved their operations to London. It took them 30 years to convince them to move back to Greece.The high cost of labor in Greece is what has basically killed the manufacturing sector there, and my friend is right, the problem isn't high salaries, the problem lies with the enormous social security costs imposed on employers.
If the Greek government decides to tax them again, they will move out of Greece for good. At the moment, these companies employ quite a few people who pay income tax and contribute to social security.
Additional taxes is not always the answer in Greece. The main contributor to low productivity in Greece is the high cost of labour. Labour is expensive not because Greeks earn high salaries. It is expensive because the Greek government imposes enormous social security costs on its employers.
There is absolutely no way for a Greek company to be competitive and overcome the tax burden associated with operating in Greece. What irks me is the false impressions that the media has created about Greeks (ie calling them lazy etc.). This simply not true.
The problem with Greece is simply poor governance. Until this improves, there will be little or no progress in the country. Everyone is to blame (not only the politicians).
To be sure, there are excellent manufacturers in Greece. My cousins run one of the most successful companies in Greece, Plastika Kritis, a well-known European plastics manufacturer based in Iraklio, Crete:
PLASTIKA KRITIS was established in 1970. It is one of the largest Greek plastics manufacturers and one of the leading European producers of masterbatches and agricultural films. It has a strong international orientation with affiliate companies in France, Romania, Poland, Russia, Turkey and China and exports to more than 50 countries around the world. It has been listed in the Athens Stock Exchange since May 1999.Their father founded that company with the help of my grandmother's brother who, at the age of 19, left to go study finance in Germany. He didn't speak a word of German but learned it there while working to pay his studies.
That generation of Greeks is long gone. They were tireless workers and extremely ethical. Their word was better than any written legal agreement. They didn't live on debt and if they borrowed, they always honored their debts. For them, their name and family honor meant everything.
There are a lot of hard-working Greeks in Greece today but they typically fall victim to a corrupt and grossly inefficient system that kills any entrepreneurial drive. This is why many young and intelligent Greeks decide to pack up and leave the country searching for opportunities elsewhere. This massive brain drain isn't good for the Greek economy.
Tourism is another staple industry in Greece which has gotten hit by the crisis. Ekathimerini reports that Greek Americans give ailing tourism another boost:
It is imperative that revenues from tourism increase, however, all the political uncertainty isn't helping. In terms of tourism, Greece also needs major investments to start developing casinos and I know the perfect spot, southern Crete. I say this with great trepidation as it's one of the last natural paradises in Greece, unscathed by commercial tourism.
After gracing New York City’s iconic Times Square with a giant billboard depicting images of classic Greek scenes -- the Acropolis, a cafe table with two wooden chairs -- in March and April, the Up Greek Tourism campaign has unveiled another -- this one featuring the classic blue dome of an island church with the sea in the background -- in central Washington DC.
The campaign comes at what is proving to be a difficult time for the country’s vital tourism sector, with the Hellenic Association of Travel and Tourism Agents (HATTA) on Friday sending a letter to the leaders of Greece’s main political parties warning of the negative effects that the prevailing political uncertainty is having on the industry. They asked that the political leadership make assurances to Greece’s partners that it is a stable and safe country in which to travel, arguing that “international tourism agents are freezing their bookings and withdrawing their associates from the country.”
Up Greek Tourism is an initiative started in 2009 by a group of Greek Americans in New York, spearheaded by Yorgos Kleivokiotis, Onic Palandjian and Stathis Haikalis, in response to the Greek crisis and the tarnishing of the country’s image in the international media. The group has grown since 2009 to include marketing, management and promotion experts who raise funds and design campaigns promoting the Greek destination.
“We are talking with Boston, Atlanta and Chicago,” said Jim Stoucker, a campaign member. “We hope to be able to expand to these cities soon and to help Greece, and especially the 20 percent of its citizens who work in the tourism industry.”
According to Art Dimopoulos, who coordinated the Washington initiative, the campaign has the support of the American Hellenic Educational Progressive Association (AHEPA) and the American Hellenic Institute (AHI).
“Our aim to increase tourism in Greece,” Dimopoulos said.
AHI President Nick Larigakis noted that “15 percent of Greek GDP comes from tourism. Given the situation, it is imperative that the country’s revenues from tourism increase.”
Love many islands and cities in Greece, but being a proud Cretan, I consider Crete to be another country from Greece. Even my Greek friends who visit agree with me that you simply can't beat Cretan hospitality. The beaches, the food and people truly stand apart.
Finally, Greece needs to find ways to attract financial firms to Athens. Specifically, I'm thinking of hedge funds and other large asset managers. The time difference, weather and untapped human capital are all factors that work in favor of developing the financial industry in Greece but labor costs, taxes and a corrupt bureaucracy all work against such a move.
Below, watch a beautiful video promoting Greek tourism 2012. I also embedded a video from my vacation last year taken on the morning of September 11th in Agios Nikolaos, my favorite city in Crete. There are many beautiful places to visit in the world but nothing compares to Greece. I recommend June and especially September to avoid the mad summer rush but anytime is beautiful in Greece. Take advantage of the 'Greek crisis' to book your vacation now and enjoy. Thank me later. :)