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Newsletter February 2011


New Investment Law

Greece has introduced sweeping changes to its investment framework with a new Investment Law, responding to the challenges of today’s global, regional, and domestic environment, designed to boost investment, competitiveness, economic growth, and jobs.

On December 13, 2010, the Minister for Regional Growth and Competitiveness, Mihalis Chrysohoidis, presented Greece’s new Investment Development Law, saying: “the law responds to the present crisis, reduced public resources, the need for cash flow, and at the same time the need to look ahead and set the foundations for tomorrow.”

The Minister said: “The law is being implemented in combination with the National Fund for Entrepreneurship and Development (with 5 billion Euros within 2011), with 25 billion Euros of guarantees through the Central European Bank, with a 2-billion Euro loan from the European Investment Bank for SMEs, and the increase of GDP through the acceleration of the absorption of ESPA funds and the 22 billion Euros of ESPA funds we already have.”

The Minister referred to the characteristics of the new law as follows:
1. The new law, with the resources it channels towards healthy entrepreneurship, is a catalyst in the developmental promotion of the economy.
2. The “rules of the game” change with respect to public resources; for the first time there is a specific budget and an annual planning of reinforcements. There are incentives for quality investments.
3. Transparency and control at all levels of the procedure are promoted and businesses participate by taking on the responsibility to draw up documented investment schemes.
4. The new law is the product of careful deliberation and democratic dialogue.
5. The new law has a progressive identity, as investments, development and economic restructuring are the terms for the survival of the Greek economy in the crisis and factors of social cohesion.

The Law in Brief
The new law provides for three general and four special categories of investment schemes, which correspond to different investment regimes.
The general investment regimes:
1. Reinforce competitive and viable investment schemes with documented prospects of profit
2. Support investments in technological development and innovation
3. Promote regional cohesion and green development

The special investment regimes address specialised challenges of the developmental process and correspond to sectors where special emphasis is given. They deal with:
1. Young entrepreneurship
2. Major investment schemes
3. Integrated business plans for the technological and organisational modernisation of enterprises 
4. Investment in synergies and clusters.

The abovementioned regimes combine a series of reinforcement mechanisms:
1. Tax exemptions on profits, six years for existing businesses and eight years for new businesses
2. Targeted capital subsidisations
3. Leasing subsidies, depending on the developmental target
4. At the same time, ETEAN (National Fund for Entrepreneurship and Development), is activated to immediately ensure market cash flow with the granting of favourable and low interest loans to businesses that invest.

In practice the law will be applied as follows:
Every December the Ministry of Regional Development and Competitiveness will issue the budget of investment reinforcement for the following year. The budget will specify, in addition to the total amount of reinforcements, the percentage that corresponds to the various categories of investment schemes, the categories of economic activities that can be selected, the distribution of reinforcements to the regions, and every other relevant detail. Tax exemptions will be triple the sum of subsidies. At the same time the contracts of ETEAN with the banks will be implemented. The dates for submitting the investment schemes will be fixed: twice a year, every April and October. Expiry of the submission date will coincide with the last day of the corresponding month. Evaluation, initial approval, loan contract, final approval and implementation of investment will follow.

In commenting on the law the Minister stated: “The new Investment Law is innovative at many levels and radically changes the rules of the game in the developmental policy and in the procedure of reinforcing investments in the country.

The new Investment Law provides for:
• The setting up of Investor Service Offices, where all necessary information will be available and submission of applications and checking of all required documentation will be performed
• The setting up of a Unified Register of Evaluators for the whole country from which, using random selection, evaluators will be selected for each investment scheme
• The development of an Integrated IT System which will support procedures of evaluation, grading, and monitoring of the implementation of the investment schemes. There will be committees which will investigate the evaluator’s decisions.
• Inspection of the evaluators and also of the members of the above committees by special inspectors
• The right of the investor to appeal in case he believes his scheme’s evaluation was not objective.

Also, of great importance is the adoption of a specific time frame. With the new system the evaluation procedure will not only have a specific commencement date but also an expiration date. The whole procedure, regarding the obligations of the State at least, will not exceed six months. Before the new period for tenders begins, every April and October, the evaluations of the previous period will have been completed.

Furthermore, the new law, by using as the main reinforcement means, tax exemptions, boosts dynamic investment schemes with clear prospects of profit.

Regarding subsidies, they will continue to be available, combined with tax exemptions and low interest loans, but will apply only to targeted activities for exercising a developmental policy. In other words, the State will specify and adjust, depending on the circumstances, the priorities of the developmental policy regarding technological development and regional cohesion, and distribute subsidies accordingly.

Two important points regarding existing reinforcement regimes:
A. In the provision regarding investment schemes of Regional Cohesion, credit distribution as well as evaluation tables will be formed per Region. This ensures that total reinforcements per Region will be specific and there will be no room for deviations from the developmental planning at the time.

B. Very favourable regulations for new entrepreneurs. This is a strategic choice to encourage new, youthful and innovative entrepreneurship. The law assists new businesspeople under 40 years old for a period of five years, from the commencement of their business’s operation, for the sum of their expenses, even for their operating costs. Total reinforcement may reach up to 1 million Euros.

New Fast Track Legislation

Within the framework of its new investment framework, Greece has introduced a new Fast Track Law, to facilitate strategic investment projects and to accelerate their licensing process—a major benefit to investors and a significant boost to Greece’s New Investment Era.

In November, Greece announced a bold Fast Track Law—Acceleration and Transparency in the Implementation of Strategic Investments—designed to facilitate the licensing procedure for major investments. Fast Track identifies strategic investments—those with positive multiplier effects—to boost economic growth, build a green economy, advance R&D, and create new, sustainable jobs.

Fast Track focuses on the construction, reconstruction, or modernisation of projects in the energy, industrial, tourism, transportation, telecommunications, health, waste management, innovation and high tech sectors. Investments may either be Public, Private, or Public Private Partnerships, one of the most successful models to complete a wide variety of projects today.

Prerequisites for Fast Track projects
The value of the investment must exceed 200 million Euro
The value of the investment must exceed 75 million Euro and the investment must create at least 200 new employment contracts
At least 3 million Euro must be invested every three years, regardless of the investment value, in advanced technologies and innovation projects integrated into the strategic investment
 In projects that increase Greece’s value and enhance the environmental protection of the country
 In projects creating value for the country in the areas of education, research, technology and a qualitative or quantitative increase in knowledge
The investment creates 250 new employment contracts.

Fast Track includes a well-defined appraisal process for private investments that is coordinated by Invest in Greece and through the newly formed Interministerial Committee for Strategic Investments (ICSI).

The Interministerial Committee for Strategic Investments (ICSI) is responsible for the final decision on inclusion in Fast Track. Investment projects are screened and judged on a variety of criteria:
• Sustainability of the proposed investment
• Solvency of the investor
• Development and transfer of knowledge and know-how
• Regional development resulting from the investment
• Anticipated increase in employment
• Reinforcement of the national economic business activity and competitiveness
• Integration of innovation and high technology
• Increase in exports
• Environmental protection/sustainability
• Energy savings

The Fast Track Process
All applications of investment proposals are submitted to Invest in Greece. Files should include a complete and detailed business plan and an impact assessment study on the Greek economy. Both are binding. Under Fast Track, all relevant licenses are to be issued within two (2) months. If the 2-month limit expires, it is assumed that the requested license has been granted.

Invest in Greece, acting as a one-stop shop to facilitate Fast Track, has defined responsibilities:
• Receipt of the investor’s application
• Examination and evaluation of investment proposals
• Request additional data from investors
• Recommendation to the Interministerial Committee for Strategic Investments on including the investment proposal under the Fast Track process
• Supervising the licensing process

Invest in Greece likewise has the responsibility of informing the Interministerial Committee for Strategic Investments on possible inefficiencies in the Fast Track process and proposing solutions.

Fast Track relies on the cooperation of state authorities acting in concert on proposed projects.