An open-air cinema with a natural backdrop of twinkling city lights and the inky Aegean Sea is the latest attraction for shoppers at One Salonica, a mall in the Greek port of Thessaloniki. The new screen is the eighth that Cineplexx, an Austrian investor, has opened at the mall in a low-income neighbourhood since the company came to Greece two years ago. Christof Papousek, chief financial officer and a partner in Cineplexx, says the investment has worked out well.
“We’re profitable there, we feel in a very comfortable position and we’re ready to expand in the Greek market,” he says.
Such confidence might seem barely conceivable. Greece has been gripped by economic crisis for years: indeed Cineplexx arrived in mid-2015 just as the country was falling off Europe’s investment map. Capital controls had been imposed, the leftwing Syriza government was locked in a dispute with international creditors and Greeks were bracing for an involuntary exit from the euro.
But companies that are willing to embrace risk say that after years of shrinking investment and deep wage cuts, Greece offers opportunities rarely found in central and south-east European markets.
Despite falling back into recession in the first quarter, the economy is projected to expand this year by 1.8 per cent, and 2.4 per cent in 2018. And the International Monetary Fund and other Greek creditors are drawing closer to a deal over the country’s €86bn bailout programme, following parliament’s approval of additional pension and tax reforms.
Prinzhorn Holding, an Austrian recycling and packaging group, also arrived in 2015, buying Viokyt, a Greek family-owned packaging company as part of a regional expansion that included Romania and Turkey.
“We saw the opportunity in Greece and we liked it. It’s a challenging market but by potential I give it a chance of higher growth than any other market [we work in],” says Cord Prinzhorn, chief executive.
Special Report Greece wants tourists to stay longer Arrivals are up but overall revenues per head have fallen Viokyt this month completed an investment in a packaging unit to triple output at its plant near Athens. It will cater for local subsidiaries of multinationals as well as Greek companies that began to focus on exports when domestic consumption slumped in the crisis.
“As soon as people export they think of packaging,” Mr Prinzhorn says. “We see healthy demand . . . Our core market is food and beverages and Greece will continue to export olive oil, sesame seeds, honey and wine.”
Both companies have thick skins. Cineplexx is present in several western Balkan countries including Albania, Macedonia and Kosovo, and so has plenty of experience of a volatile business environment and frequent political upheavals.
Family-owned Prinzhorn takes decisions “with a 20-30 year horizon in mind”, Mr Prinzhorn says.
The largest recent investment by a multinational company is by Philip Morris International, which is spending €300m to transform Papastratos, its Greek subsidiary, from a traditional cigarette manufacturer into a producer of “smokeless” tobacco sticks that are heated in a handheld electronic device.
Christos Harpantidis, chief executive of Papastratos, says the project will create 400 jobs at its plant in Aspropyrgos, a town near Athens with an unemployment rate of more than 30 per cent.
The new product uses a higher percentage of strongly flavoured Oriental tobacco, produced in Greece, than traditional cigarettes, which is one reason PMI chose Papastratos for the venture. The company has a three-year deal to buy tobacco from 30,000 local growers.
Greece remains a risky proposition. Critical issues such as debt relief, Greece’s inclusion in the European Central Bank’s quantitative easing programme and the date of a return to the international capital markets have still to be settled with the EU and the IMF. Read more Greeks walk out in national strike over austerity Unions claim latest cuts aimed at unlocking EU bailout aid will hit the poor most.
And even the most bullish companies struggle with numerous other obstacles in Greece — which dropped another three places to 61st in the World Bank’s 2016 “ease of doing business” report.
Getting a permit is one issue. Mr Harpantidis recounts a difficult experience of chasing the official permits needed to upgrade the Papastratos plant. Another investor complaint is the slow enforcement of contracts through the Greek courts. Capital controls, though loosened, constrain business activity.
One recent high-profile case involves Eldorado Gold, a Canadian company developing a €1bn gold mine in northern Greece. The Syriza government revoked several permits issued to Eldorado, stalling progress for more than a year. Syriza officials also backed a vocal anti-mining campaign by local hard-left politicians.
The mining project is back on track following a policy reversal by Alexis Tsipras, the prime minister. Yet George Burns, Eldorado’s chief executive, says permits are still being approved “more slowly than we’d like.”
Mr Tsipras’s speeches stress that foreign investment will be critical to economic recovery. Privatisations have been part of recovery plans: a German-Russian consortium agreed to pay €230m for a majority stake in Thessaloniki’s port, while Fraport of Germany paid €1.2bn for a 40-year concession to run Thessaloniki airport and another 13 regional airports.
With Papastratos’s new plant set to begin operating in January, Mr Harpantidis is realistic about Greece’s problems but confident his company can still carve out a substantial regional market.
“The situation [in Greece] isn’t good. There are issues with bureaucracy, excessive taxation and the banking system. That’s the reality,” he says. “But the country has potential and comparative advantages we are building upon.”