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Greece Manufacturing
https://photius.com/countries/greece/economy/greece_economy_manufacturing.html
Sources: The Library of Congress Country Studies; CIA World Factbook
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    Manufacturing provided almost 18 percent of GDP in 1991, making up the largest portion of the secondary sector's contribution to national production. In that year, fixed investment in manufacturing represented 16 percent of the nation's total fixed investment. In 1989 manufacturing provided about 19 percent of the country's employment, including 21 percent of jobs among males and 17 percent among females.

    For several years up to 1994, the contributions of manufacturing to the GDP, to employment, and to investment-- respectively, 18 percent, 13 percent, and 20 percent in 1985--have remained at approximately the same levels. In general, manufacturing production has stagnated since 1980. For example, given a base value of 100 for 1980 production, the values for ensuing years are 101 in 1985, 103 in 1988, and 101 in 1991.

    The manufacturing category includes a variety of subsectors and activities. In 1990 the four largest subsectors accounted for 43 percent of total value added in manufacturing; in order of importance, these were foodstuffs, textiles, chemicals, and processed nonmetallic minerals. The same four subsectors have been the leading contributors since 1977, when they totaled 45 percent of overall manufacturing value added. Computers, computer software, and motor vehicles are manufactured by a few smaller firms. Besides state-owned military equipment firms, two Athens-based private companies make armored fighting vehicles and helicopters for the military, as well as satellites and launch vehicles, and the Greek Arms Industry (Elliniki Viotekhnia Oplon--EVO) is by far the largest private military supplier (see Defense Enterprises , ch. 5).

    In terms of employment, the leading manufacturing subsectors are foodstuffs, textiles, clothing and footwear, and transportation equipment (including shipyards), which contributed a combined 51 percent of total manufacturing employment in 1988. The same four subsectors were the leading providers of employment in 1978, when they contributed 48 percent of total manufacturing employment. It is clear from both the structure of value added and the structure of employment that the manufacturing sector's composition has remained largely immobile over the last fifteen years.

    Between 1980 and 1991, the four subsectors showing the greatest growth in productivity rate, in order of growth performance over the whole period, were paper with 62 percent, beverages with 45 percent, rubber and plastics with 36 percent, and chemicals with 27 percent. The four subsectors showing the greatest declines in production over the period were leather and fur, down 41 percent; clothing and footwear, down 30 percent; metal products, down 26 percent; and wood and cork products, also down 26 percent. In general, the steepest declines are found in the more traditional industries, although growth has been distributed between traditional industries and those employing advanced technology.

    The statistical dominance of small- and medium-sized enterprises (SMEs) in Greek manufacturing actually increased in the 1980s. Between 1978 and 1988, the percentage of manufacturing employment in establishments employing fewer than five persons rose from 29 percent to 31 percent, and the share of establishments employing fewer than fifty persons rose from 60 percent to 64 percent. The relative weight of small firms in Greek manufacturing is among the highest in the EU. The average number of people in the work force in Greece's largest enterprises, 278 workers, is among the lowest in Europe; by comparison, Sweden's largest firms average 384, Portugal's 600. One disadvantage of this preponderance of small businesses is that small firms have fewer resources for the research and development activities that enhance a country's competitive position. In 1990 Greece and Portugal showed the smallest shares of total business enterprise research and development in the EC, each contributing only 0.1 percent compared with Germany's 35 percent and France's 22 percent.

    At the same time, the SMEs have made a major contribution to employment expansion in Greek manufacturing enterprises. Between 1978 and 1988, about 35,000 new jobs were created in manufacturing, but the contributions of SMEs and larger establishments were quite different. In that period, SMEs created 50,000 new jobs while those firms with more than fifty employees showed a net loss of 15,000 jobs.

    The overall contribution of manufacturing to Greek exports has been substantial. In the early 1990s, manufacturing's share in total foreign-exchange earnings from exports of goods has fluctuated between 48 and 54 percent. In 1992 manufactured products earned US$3.1 billion of Greece's total export income of US$6 billion, or 52 percent. The main categories of manufacturing exports are textiles, earning US$1.6 billion, metals and metal products earning US$595 million, chemicals and pharmaceuticals earning US$198 million, and cement earning US$182 million in 1992. Although there are yearly fluctuations in export earnings from one or the other product category, these products have been Greece's leading manufacturing exports since the mid-1980s.

    Despite the vital role of manufacturing in total Greek export performance, very few manufacturing subsectors sell a preponderance of their product abroad. In 1991 only the export of leather and fur products exceeded domestic sales; basic metals showed the second- highest ratio with 47 percent of sales outside Greece. Virtually all other subsectors achieved less than one-third of their sales income from exports. These statistics indicate clearly that in general Greek manufacturing firms depend on the domestic market and local demand for their livelihood. Because of this situation, the rapid import penetration that followed EC membership in the 1980s caused serious damage to Greek manufacturing's ability to respond to domestic demand. Between 1983 and 1992, the percentage of imported goods out of total manufactured goods purchased moved from 31 percent to 47 percent.

    In the 1970s and the 1980s, the prolonged crisis in Greek manufacturing led to acquisition by the public sector and by public-sector banks of a large number of ailing firms. By 1986 the state-owned Enterprise Reconstruction Organization had taken over forty-four such firms. In the ensuing years, a slow privatization and liquidation of these firms has taken place, and by 1994 almost none were left. Nevertheless, ownership of several ailing firms still remains with bank portfolios, especially in the Bank of Greece and the Industrial Development Bank of Greece.

    Foreign investment in Greek manufacturing has not been very large, despite strong incentives legislated by the Greek government as early as 1953 for the enhancement and protection of foreign investment. Total postwar foreign investment in Greece is estimated at about US$8 billion. Especially in the 1960s, a few large foreign investment projects were undertaken in new manufacturing sectors. The prime examples of such projects are the Pechiney Aluminum Plant, the Esso-Pappas petrochemical complex built by Standard Oil of America and Greek-American entrepreneur Thomas Pappas near Thessaloniki, and several shipyards. In more recent periods, foreign investment has concentrated on the acquisition of existing firms under the anticipated new conditions of a unified European market. Large acquisitions of this type have taken place in foodstuffs and beverages. When Greece's major cement company, AGET, was privatized in 1992, a large share of capital and the entire management were acquired by a large Italian concern. In 1988 an estimated 18 percent of total manufacturing employment was under foreign ownership.

    Public policy has taken a favorable stance toward manufacturing in the entire postwar era. Incentives that have been applied to encourage manufacturing production, investment, and exports include subsidies, tax breaks, tariff protection, and cheap loans. Greece's EC membership required elimination of direct and indirect protection to Greek firms, hence the phasing out of tariffs and export subsidies. Under EU conditions in the mid-1990s, any favorable treatment extended to Greek firms must also be available to firms from other member countries. In addition, the liberalization of Greece's financial system has eliminated the long-standing practice of regulating interest rates in favor of manufacturing (see Banking and Finance , this ch.).

    Incentives to manufacturing are now primarily in the form of grants and subsidies for new investment. Grants are outright capital contributions that can vary from 15 to 55 percent of a project's investment cost, depending on the sector, the export potential, the technology content, and the location of the investment venture. In assessing such investments, the Greek authorities seek to achieve both industrial modernization and geographic decentralization away from the chronic congestion and environmental pollution of Athens and Thessaloniki (see Pollution Problems , ch. 2). Subsidies take the form of interest-rate subsidies, fast depreciation schedules, and special tax allowances. To avoid the proliferation of very small enterprises, recent changes to the law have also encouraged ventures featuring economies of scale.

    In the early 1990s, some signs of manufacturing recovery emerged. Exports in sectors such as chemicals began to gain strength in 1993 and 1994. Between 1990 and 1992, manufacturing profits showed hefty annual gains of about 20 percent. The profits have improved the capital structure and raised the equity of manufacturing firms.

    Data as of December 1994


    NOTE: The information regarding Greece on this page is re-published from The Library of Congress Country Studies and the CIA World Factbook. No claims are made regarding the accuracy of Greece Manufacturing information contained here. All suggestions for corrections of any errors about Greece Manufacturing should be addressed to the Library of Congress and the CIA.

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