“Very good article by Michalis Iakovidis on strategic investments. The article points out that if some investments receive state subsidies, they should have significant positive consequences for the national economy, which the investor CANNOT reap. This is a basic principle of economic theory, but unfortunately does not apply to the state subsidy regime in Greece. The article cites two examples. The first is that the state will subsidize the Russian billionaire Rimbolovlev with 4.3 million euros to build a luxury hotel on the private island of Scorpio. The second, which we unfortunately know first hand, is that the state has approved tens of millions of euros for subsidies for tourism investments in Ios, which have already altered the Aegean character of the island (with fines imposed by public services) and privatized its beaches. . “Why spend money on Greek and European taxpayers in such an absurd way?”
MICHAEL G. IAKOVIDIS
19.09.2021 • 20:58
In the aftermath of the TIF, their honorary have references to the national and economic strategy. The invocation of strategy is undoubtedly tempting. In practice, however, it not only stays on paper, but is also used to conceal weaknesses and give a false sense of purpose. Working with executives on the strategy of their companies, I start with the question “what do we mean when we say that something is” strategic “?”. The most enthusiastic answer “what helps long-term success”. Others emphasize aligning organizational choices with a central goal. Mockers say that “strategic” is what can not be justified in any other way, or what the administration wants to go through without many questions. Unfortunately, they are all right.
The problem with strategy is that it can easily become an “empty shirt”, while if used properly, it can have a very significant effect. Also, its invocation seems to be inversely proportional to its correct application.
Let’s start with “strategic investments”. Indeed some investments, such as e.g. Elliniko, are of strategic importance, as their success will have multiplier effects, as they will attract new categories of consumers and create an ecosystem of new businesses that will improve the standard of living – such as investments in infrastructure, roads and telecommunications. The question is what kind of activities they will carry out. A bad version of Elliniko can degrade growth, while a careful version, with emphasis on both quality and sustainability will have positive externalities. Mere size is not enough to baptize an investment strategy. Many investments in tourism have more negative externalities than positive ones. It is worrying to premium investments that do not give multiplier results and at the same time consume resources of our natural environment. A private investment in a lonely Aegean beach that privatizes and radically alters something that was common, alienating themed tourists or digital nomads who would be interested in a more authentic experience, has negative externalities. The spots of EOT show Greek nature, not bad-tempered Dubai transplanted in the Aegean. Looking at e.g. on Ios (www.save-ios.gr) it is unbelievable that the state rewards investments that obviously consume and devalue the environment. The benefits ultimately go to those who have the surface and networking to take advantage of the perforated framework, as evidenced by the premium of Russian oligarch Rimbolovlev with 4.3 million euros for a luxury hotel in Scorpio.
Two weeks ago, Economic “K” was gossiping about how in many countries local and national governments are trying to tame, not indiscriminately, promote tourism development in the name of strategy. Infrastructure is at its limit and more and more places are feeling the weight of the lack of strategic thinking and our distorted strategic investment framework, which helps business priorities rather than the place. The proposed legal framework for strategic investments poses very serious environmental risks, without ensuring the strategic advantages of the investments, allowing, inter alia, the privatization of the coastline and encouraging off-site facilities, even in Natura areas. In other words, we invite Rimbolovlev to legally circumvent the rules for the environment in Scorpio…
Greece is at a critical crossroads. Despite the good intentions of the Prime Minister, the signs are worrying. Strategic investments in practice look at the size of economic activity, rather than the diffusion of benefits and the long-term direction they will give. The words about the environment sound desperately empty given the proposals being promoted. We need to set substantive criteria for strategies and other investments, as well as be serious about the environment. From a state point of view, we must take the strategy seriously and radically revise the proposed provisions. From a corporate point of view, investments that have benefited from the current framework such as that of Vroskopos in Kea have to do much more to show how they will give back to society. Voices of agony abound dangerously. The country is on its borders and investments alone are not enough. Will the Prime Minister listen as long as we can?
* Mr. Michael G. Iakovidis holds the Sir Donald Gordon Chair of Innovation and Entrepreneurship at the London Business School where he is Professor of Strategy.