The bet on development: €8.5 billion announced today for investments in industry-innovation

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This afternoon, Prime Minister Kyriakos Mitsotakis and Development Minister Takis Theodorikakos are expected to present the strategy, priorities, and a set of measures that will mobilize approximately €8.5 billion for investments aimed at the productive transformation of the economy.

Essentially, this is a comprehensive package of actions with a three-year implementation horizon, which will attempt to prioritize Industry—and Manufacturing in general, Research, and Innovation—while also acting as a critical bridge following the end of the Recovery Fund. Another key element will be further support for the border areas of the country. As sources from the Ministry of Development explained, “the new package of measures will complete the major cycle of interventions that the government started in 2019 with the aim of balanced development for the country.”

Secured resources

According to reliable information from Proto Thema, the set of measures for promoting investments and boosting entrepreneurship is expected to reach €3.3 billion over the next three years, with resources secured from the Public Investment Program and the Recovery Fund, among others. However, the Ministry of Development’s planning estimates that leveraging could mobilize an additional €5 billion for the investment projects that will be initiated.

According to sources from the Ministry of Development, the new program, combined with the current interventions and the fact that there are currently 61 investment plans totaling €12.5 billion in the process of being integrated into the Strategic Investment regime, can represent a turning point in changing the production model. They also assured that there will be developments soon regarding the inclusion of plans in the Strategic Investments regime, given that, despite various efforts, the latest projects were included in May 2023, before the national elections.

Three innovations

The announcements made today are expected to include three innovations that will now be introduced within the framework of investment plan incentives.

• The first concerns large investment projects. For the first time, it will be possible to classify them under the regimes of the Development Law, which has been a long-standing request from the market. The rationale behind this regulation is that a large investment can leave a bigger footprint and thus accelerate the effort to shift the production model. For this reason, as THEMA revealed last month, the Development Law will now prioritize manufacturing and production, with the main tool being support through tax incentives (exemptions, etc.).
• The second significant point of the program is the continuation of the regime for Landmark Investments of Exceptional Importance even after the completion of the Recovery Fund. Thus, the maintenance of the significant incentives provided is ensured. It should be noted that this specific regime, which was linked to the duration of the Recovery Fund, includes investments that promote the green economy, innovation, technology, low energy and environmental footprint economies, and generally significantly enhance the Greek economy and its international competitiveness.
• The third innovation that the new package of measures for the country’s development model will introduce concerns border areas. According to reliable information, every investment made in a border area will now be treated as a Strategic Investment. This means faster bureaucratic processes at the central level and enhanced incentives—tax incentives, subsidies, zoning, etc. A move deemed urgent for national reasons.

Priority for industry

Overall, the main strategy through the new actions will be prioritization in industry and production, either through the regimes of the Development Law or from other specialized programs. The goal is to connect Industry with Research and Innovation to produce innovative, competitive products that could capture a larger share of international markets, thereby increasing exports.

This framework can significantly contribute to achieving the national targets set by the government, aiming for the share of Manufacturing in GDP to reach 15% and the share of Industry to reach 20% (from 10.3% and 14.4%, respectively, in 2022).

For this reason, there will be further specification of the Industrial Strategy at both sectoral and regional levels, upon which the incentives and actions to be activated will be based. Consequently, there will be an effort to strengthen even more sectors of the Industry that have already shown their potential, such as the Pharmaceutical Industry, for which an investment clawback program is being promoted with €200 million, while also supporting the Research and Innovation produced by Greek pharmaceutical companies.

Additionally, among the sectors expected to receive significant support due to their prospects and dynamics are metals, minerals, the shipbuilding industry, the food industry in the direction of food security, and manufacturing in general, with an emphasis on innovative vertical integration actions.

Limitations

On the other hand, within the framework of the changes that will be announced regarding the Development Law, there will be a restriction of the incentive regimes, which currently nominally reach 12 but have only been implemented in 4 (Manufacturing two cycles, Tourism two cycles, Agri-food one cycle, 360 one cycle). And this has faced delays due to a lack of funds! It should be noted that to run the current Development Law as it stands requires €1.8 billion per year, in case at least one cycle of €150 million from each incentive regime was running.

In this context, the tourism incentive regime should be considered terminated after the completion of the two cycles that have been run so far. Sources from the Ministry of Development clarified, however, that the investment plans that were included in these specific cycles for tourism investments will be fully covered.