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Wednesday, December 1, 2021

 “SMEs’ growth means wealth distribution, jobs, opportunities and prosperity”

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Greece is looking for the ideal balance between a significant economic recovery, the risks that lurk in the post-Covid era, but also the looming energy and consequent inflationary crisis, as became clear during Prime Minister Kyriakos Mitsotakis’ recent trip to London. Questions such as “how can current growth be made viable and sustainable,” or “how can it be spread to all citizens,” or “in which areas are urgent interventions needed and in which direction, so that the country becomes an investment-friendly destination,” or even “which sectors should the country target in order to gain a comparative advantage,” are at the core of the government’s policy in a volatile international environment.

The Athens-Macedonian News Agency (ANA) was in the British capital and sought answers to the above questions, with the assistance of one of the leading Greek investors based in London: the co-founder and CEO of the International Investment House, Brookstreet Equity Partners LLP, Omiros Sarikas. An award-winning Harvard graduate with nearly 20 years of experience as an advisor to investment banks, governments, shareholders and investors, including KKR and Morgan Stanley, Sarikas focuses on outward-oriented and dynamic businesses in Southeast Europe, and Greece in particular. In fact, Sarikas specialises in small and medium-sized enterprises and underlines that structural programmes must focus on them, in order to enable wider distribution of wealth, job creation, prosperity and opportunities. He also considers the National Recovery Plan “Greece 2.0” a useful tool for consolidating sustainable growth in the country and estimates that Greece is about to experience a golden U-curve recovery.

The full interview given to the ANA’s Spyros Mourelatos follows:

Q: How would you describe the economic perspective of the country for the coming years? Is it possible to maintain the current, very high growth rates for a long time? Do you share the optimism of the Greek government for an economic leap in the next 5 years?

AN: In our view, Greece is about to face its golden U-curve (that we forecasted and hence we invested in the country).  Greece currently experiences relative stability, a friendly investment climate, and the system is being restructured to attract talent and capital.  Greece will face post-covid effects such as disruption to its supply chain and inflation above target, like every other country.  After regaining its pre-crisis level, we anticipate output is likely to converge with its pre-pandemic trend going forward.  Moody’s recently argued that Greece will exhibit the highest reduction of its debt to GDP ratio in 2022 among its peers.

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Q: On what areas shall our country focus, to gain a significant competitive advantage and therefore enhance the positive economic perspective that it lately presents?

AN: Our updates from National Statistical Agency and Equity Research Reports point out that the 3Q21 turnover of all Greek enterprises rose 26.9% YoY reaching EUR 91.5bn.  The EY report on Investments in Greece points that the country is gaining ground in Foreign Direct Investment (NB:  the staggering 77% increase in 2020 and 2021 results should be in similar direction).  In addition to the Hospitality, Food and Beverage sectors, we see increased activities in Real Estate, Infrastructure, Energy, Logistics, Manufacturing, Healthcare, Neobanking and IP and all the permutations with Technology such as 4IR (automation), 5G (connections), ESG, NanoTech, Internet of Things (IOT) and Artificial Intelligence (AI). We invested in exactly these areas (intelligent coatings, robotic automation, IOT/AI/ESG software for management of people, energy, buildings, fleet etc).  Greece has one the highest MSc/PhD-per capita ratios, so the digital skills of our workforce, combined with geo location, climate, euro zone protections and accessible travel hubs, have recognised Greece as one of the best destinations for digital nomads.

Q: Investments are a main priority of the current government. How can the country increase the competitiveness of its economy to become a global investments destination? Is there room for the Greek economy to benefit from the recent Brexit and if so, under what conditions?

AN: Political and Economic Stability are necessary to attract not only foreign direct investment but also the right type of growth investors.  We also need a Book and System of Law that work fast and offers security.  We need to provide Incentives for Talent and Investors to repatriate or establish presence.  I would also argue that we need a system that celebrates Entrepreneurship in our Education system and Society which also includes tolerance for risk taking so one could fail but be able to try again without being ostracized by the system.  Last but not least, an Exit and Trading platform that produces liquidity (e.g. a Stock Market that is a viable lPO and trading route).  The continued reform of the legal system across corporate and investment law should be prioritised for all investment and exits to follow smoothly.

Q: Do you identify parts of the domestic economic activity, where there are large and to date unexploited growth opportunities and which are they?

AN: As businesses evolve, they need to institutionalise Governance, and this is often unpalatable.  The second point is about being able to attract, train and retain Professional Management not just family, friends or familiar faces.  Third, urgent efforts on Rebranding Greece.  What comes to mind when you hear “ Silicon Valley” (tech?), “ London” (banking?), “ German” (engineering?), “ French” (wine?) or “ Monaco” (luxury?). We need to provide Best-in-Class education, products and services and pay attention to international standards, from IFRS to ESG, Diversity and Inclusion.

Q: I understand that you are lately focusing, among other things, on investing in small and medium enterprises in our country, the backbone as it has been called of the Greek Economy. In what areas of the operation of these companies do you consider that improvement interventions are urgent?

AN: Brookstreet is a professional international investor and equity partner which works with owners and managers to increase value for its underlying investments, providing both financial and intellectual capital as well as an international (ecosystem) platform of best-in-class people, processes, suppliers and systems.  SMEs face myriad of challenges.  Founders think about business model validation and sales, then liquidity to support aspirations and endless funding rounds between banks, funds and grants. Professional investors on the other hand value governance, management talent, IP protections, recognition of risk management and a path to sustainable growth and exit route.

Q: How do you envision the development of small and medium enterprises in our country? How can the development of this sector contribute to further economic growth?

AN: SMEs play an important role in the ‘non-financial business economy’ of Greece.  European stats point out that SMEs generate 63.5% of total value add (EU average 56.4%) and an exceptionally high employment share of 87.9% (EU average 66.6%).  Yet, Greek SMEs employ an average of 2.6 people, about one third less than the EU average of 3.9.  We need to support them to understand their potential, adopting Institutional Governance, Professional Management, Best-in-Class practices and International Standards.

Q: The central motto of the pre-election announcements of Kyriakos Mitsotakis was “investments – new, well-paid jobs – giving back to the citizens”. How can it be ensured that economic growth has a clear social sign, so that it does not ultimately lead to citizens of different speeds?

AN: Growth is asymmetric by definition.  To even out the inequalities, the structural programs have to give emphasis on SMEs for a broader distribution of wealth, job creation, prosperity and opportunity.  The country is not just start-ups, food, holidays, and incumbent legacy firms.
The Greek Recovery and Resilience Plan “ Greece 2.0” is an ambitious plan which fascinates us.  This includes a fundamental economic and reform transition that combines economic efficiency with entrepreneurial cohesion and a digital transformation of the economy and the administration.  Government, Corporates, Banks, Funds and Citizens; must all work in harmony, hand-in-hand, to pave the way to the successful implement of the «Greece 2.0» plan.  Brookstreet is committed to Greece, and we are excited about the results to date and the road ahead!

SOURCE: AMNA

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