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Greece Infrastructure Report Q3 2009Published by: Business Monitor International Published: Jul. 17, 2009 - 78 Pages Table of Contents
AbstractThis quarter we reiterate our concerns regarding the health of Greek finances, the problems of which havecascaded into infrastructure-sector investments. A growing budget deficit and burdensome public debt aresevere threats to the Greek economy. Not only is the government’s ability to finance large publicinfrastructure projects constrained by its aim to bring down the GDP deficit to 3.7% by the end of theyear, to be in line with the 3% GDP deficit clause of the Maastricht Treaty, but in addition public financesare so dire that they would simply be unable to take any further strain.Greece’s deficit malaise has been chronic, and thus the concept of utilising public private partnerships(PPPs) for infrastructure projects has gained traction in recent years. Greenfield PPP projects have beenwelcomed by the public - though there remains opposition to the idea of the private sector owning andoperating infrastructure assets. The perceptions about concessions operating existing assets remainslargely negative, bordering on hostile in some cases. A case in point is the opposition to the privitisationof part of the container operations at Pireaus Port, which has come not only from trade unions - whichhave a vested interest in seeing the port remain in public hands - but also from a large part of thepopulation, who oppose the idea of private ownership of infrastructure assets. Public opinion is not the only hurdle to PPPs. The burdensome bureaucratic edifice of Greece is costly toinvestors and is a major obstacle to doing business in the country. This is reflected in BMI’sInfrastructure Business Environment Ratings and Project Finance Ratings for Western Europe. On a positive note, we can start talking about a maturing PPP market. Though the largest number ofprojects take place in the social infrastructure domain (schools, hospitals, courts, etc.), transport PPPshave by far had the largest investment volumes in recent years. Successful PPPs include the AthensMetro, the new International Airport in Athens, the Eleusina-Tsakwna motorway and Egnatia Odos. Inthe pipeline are many regional airport concessions, more motorway and urban railway concessions. In BMI’s Q309 Greece Infrastructure Report, we forecast that construction sector real growth willcontinue along the downward trend it embarked on in 2008 as revised data from the national statisticsagency revealed. First-quarter data came in negative, broadly in line with our expectations, through thefall was not as abrupt as we had expected. Accordingly, gross fixed capital formation for non-residentialconstruction (including infrastructure) declined by 0.7% compared with Q408, while seasonally adjustedconstruction industry value registered real growth of -4.5% compared with Q408, but positive 1.4%compared with the corresponding quarter of the previous year. The latter figure is a very positive sign forour forecasts for 2009, which show that we expect to see a contraction, albeit one that is less steep thanlast year. Indeed, the first forecasts for the year seem to validate this view, with the year-on-year growthfigure in positive territory. Major players in the Greek infrastructure industry include locals Elliniki Technodomiki-Aktor-TEBGroup, J&P-AVAX, Terna, Mytilineos, Aegek and Athena, some of which also have significantoperations abroad, mainly in the Balkans and Middle East. We anticipate that expansion abroad willbecome an even greater of part of the corporate strategy of these firms in the coming years, as it will helpoffset the downturn in Greece. However, it should be noted that, with the possible exception of SaudiArabia and Qatar, the Middle East and the entire Balkan region do not look too promising for 2009-2010either. It is worth noting that at least for 2008, their strategy of internationalisation paid dividends, as thethree companies reviewed in this report (Terna, J&P-Avax and Aktor) showed robust revenue growth for2008, beating the downward trend set by many of their European rivals. Get Full Details About This Report >> |
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