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The macroeconomic and socio-economic impact of the Hellenic Republic asset development programme

The macroeconomic and socio-economic impact of the Hellenic Republic asset development programme
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ΤΑΜΕΙΟ ΑΞΙΟΠΟΙΗΣΗΣ ΙΔΙΩΤΙΚΗΣ ΠΕΡΙΟΥΣΙΑΣ ΤΟΥ ΔΗΜΟΣΙΟΥ

The Hellenic Republic Asset Development Fund S.A. (HRADF) was established in 2011 according to its founding Law No. 3986/2011 with an initial mandate to leverage the State’s private property assigned to it by the Hellenic Republic. HRADF operates to serve the public interest, according to the rules of the private economy. The utilization development and utilization of public property are implemented in accordance with the prevailing market conditions and with guarantees of full transparency. HRADF adopts and implements the Asset Development Plan (ADP), which is reviewed every six months and is authorized by the Government Council for Economic Policy (KYSOIP).

HRADF’s philosophy is to act as a strategic partner for the Greek State to attract investments, enhance the Greek economy’s growth potential, strengthen its international credibility, and produce national wealth.

The Fund is a growth multiplier. Its mission is to maximize Hellenic Republic’s revenues by developing public assets and creating added value for the Greek economy, the people, investors, the local communities, the labor market, and the environment.



Objective Action

The purpose of this study was to identify the macroeconomic and socio-economic effects of the Hellenic Republic’s asset development program as a whole during the 2011–2019 period, as well as the socio-economic effects of certain integrated major projects, such as the Piraeus Port Authority, regional airports, Astir Palace Vouliagmeni and TRAINOSE. 

 

Target Audience

Documenting the effects of the Hellenic Republic asset development programme provides valuable information that concerns society as a whole. 

 

Duration

The study began in the summer of 2019 and was completed in July 2020. This study examines the macroeconomic effects of the privatisation program as a whole for the 2011–2019 period, as well as the socio-economic effects of certain major Greek State asset development transactions which were recently completed. 

 


Description

Developing the Hellenic Republic’s assets has been a key pillar in the effort to correct structural problems and macroeconomic imbalances in Greece. Revenues from agreements on concession of infrastructure development and sale of shares and immovables have created fiscal space which should otherwise have been covered by further cuts to public spending or tax hikes. Furthermore, the development programme being implemented by HRADF achieves the necessary improvements to and interventions in the regulatory framework, as well as commitments to make investments, which boost economic activity and increase the efficiency of inputs. The change in business model and corporate governance structures resulting from the entry of strategic investors in the leveraging of resources has also positively impacted productivity. Finally, the progress achieved in the Hellenic Republic asset development programme is evidence of the Greek State’s commitment to the effort to reform the Greek economy for the international investment community. 


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Impact on Society

  • Macroeconomic effects of the privatisation program 

The Hellenic Republic asset development programme has had strong positive effects on the Greek economy, with clear social benefits. Under the programme as a whole, it is estimated that privatisations boosted the country’s GDP by approximately €1 billion annually on average during the 2011–2019 period. During that same period, the average effect on employment was almost 20,000 full-time jobs. 

This effect was largely due to investments made in the overall economy as a result of the signalling effect of the implementation of major privatisations. Econometric analysis identified a positive and statistically significant correlation between gross fixed capital formation (excluding residences) and initial receivables from integrated privatisation projects. More specifically, it is estimated that fixed capital formation of approximately €5.6 billion that took place in Greece from 2011 until Q2 2019 inclusive can be attributed to the HRADF programme. This means that an average of €1.02 of fixed capital formation in the overall economy correspond to every €1 of initial privatisation revenue. 

  • Socio-economic Effects  

The effects of privatisations are not limited to the time when each transaction is completed, but extend into the future and, in many cases, are strengthened over time. Significant investments are being made by the new asset managers, while the management business model is changing, resulting in a significant boost to economic activity. Increased business activity leads to positive effects on employment and fiscal revenues, while the change in business model often entails adoption of environmental monitoring and management systems. Finally, through interconnections with other production processes at the local and national level, increased activities due to privatisation result in multiplier effects for the country’s GDP, employment and fiscal revenues. 

The effects of privatisations are not limited to the time when each transaction is completed, but extend into the future and, in many cases, are strengthened over time: 

  • Piraeus Port Authority: Increase in GDP by €384 million in 2027 and up to 5.8 thousand additional jobs during years with increased investment activity 
  • Regional airports: Impact on the GDP of over €1 billion and impact on employment of over 10k jobs from 2025 
  • Astir Palace Vouliagmeni: Increase in GDP by €50 million in the long term, with approximately 1,000 additional jobs throughout the economy 
  • TRAINOSE: Increase in GDP by up to €86 million, with 1.4 thousand additional jobs in 2027 
  • Regional ports: Need for injection of new funds and development of new business initiatives by far-sighted strategic investors 

Moreover, as regards the broader social benefits in terms of sustainability, the increased availability of capital for investments and the improved financial performance of assets often significantly improve efforts to limit the environmental footprint and increase costs leading to implementation of actions with a high positive social impact. There are numerous cases where an environmental impact monitoring programme is now implemented, in contrast to no such programme prior to privatisation. 



Initiative Location

The HRADF Asset Development Program is being widely implemented, as its assets are spread throughout the country, and its impact is not limited to the narrow area of project implementation.


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Working with Organization

HRADF collaborated with the Foundation for Economic and Industrial Research (IOVE) in preparing the study. 


Workers Participation

When preparing the study, the IOVE team worked closely with HRADF executives and external advisors, as well as executives of the Piraeus Port Authority, Fraport Greece and Astir Palace Vouliagmeni S.A., who provided data and information.  

 


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Benefits for Οrganization

Documenting the effects of the Hellenic Republic asset development programme on the economy, society and the environment with quantitative indicators demonstrates HRADF’s dedication to its mandate and enhances the social acceptance of its work. 




Connection with Global Goals







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