Balkan odyssey

Greece is looking in all directions to expand its influence and markets abroad. Not only pursuing the goal of being at the heart of Europe, in the last few years Greece has also turned its attention to its Balkan neighbours and eastward into the former Soviet Union. These areas present tremendous potential for Greek businesses as the markets are largely undeveloped or served by outmoded local providers. Romania alone has a population of 23 million and is often cited by business leaders as the most promising new market.

"It is a logical ambition for Greece to be the leader in the Balkans," says Jeremy Downward, executive director at Alpha Finance. "Greek Emu membership will be the pole of stability for the rest of the region, little by little the security issues in the Balkans will be resolved," says Ben Ghalmi at Alliance Capital in the US.

Many international companies are beginning to invest in this region - banks from Daiwa to Pictet are setting up country funds - but Greek firms have geographical and cultural advantages when it comes to exploiting these markets. Spyros Papanicolau at Bank of Greece points to the good relations and unique historical links with the area, the centuries of trading and investment between Greece and other Balkan countries, and a common understanding on the way they conduct business. "Since the end of communism Greek businesses have re-established their Balkan links," says Papanicolau. "This will be the natural backyard for Greece in which they can play an important role. Greeks are better than others at operating in areas where everything is not very neat." Angelos Seferiades at Alpha Finance agrees: "The main competitive advantage for Greek businesses in the Balkans is that they have a much higher tolerance of political risk."

The Greek populations already living in many of the Balkan countries lead many Greek businesses to be the first to enter these markets. Northern Greece has been an important centre for pan-Balkan trade and investment, with regions such as Epiros, Macedonia and Thrace bordering on Bulgaria, Albania and the Former Yugoslav Republic of Macedonia. When the Bank of Pireus bought Bank of Macedonia and Thrace at the end of April, it gave them a northern base from which to widen their national distribution and launch the bank abroad.

Many Greek banks have already expanded their activities into these areas. National Bank of Greece has branches in Romania and is about to bid for the Bulgarian Post Bank. Of the private banks, Alpha Credit Bank along with its sister company Alpha Finance have been operating in the region for a number of years. "We were early entrants into Romania," says Alpha Finance's Downward, citing the fact that Greece and Romania don't share a common border (and therefore have never had territorial disputes) as one reason for their good business relations.

The Alpha group owns part of the Danube Fund, a venture capital fund with a budget of $90 million focusing on Balkan countries. It also has a strong presence in Romanian retail and investment banking. In 1993 it helped to set up Bank Bucharest, of which it owns 75%, and which now has 10 branches throughout the country. "Bank Bucharest is a free-standing bank and not just a subsidiary, and it operates well, considering the constraints the economy has placed upon it and the difficulty of penetrating this entrenched market," says Downward.

The Bucharest Investment Group was set up by Alpha Credit Bank at the end of 1994, and is now mainly controlled by Alpha Finance. It was first established as a brokerage firm but because there was not sufficient capital markets activity (at the time fewer than 10 companies were listed on the nascent Romanian stock exchange), the group diversified into advising on privatizations and handling cross-border transactions. But the brokerage side of the business now seems to be taking off. "In the second quarter of 1997 there was a huge inflow of foreign capital through share purchases," says Downward. "It's very exciting. The capital markets have suddenly come alive and we are well positioned to take advantage of this."

Asked about Alpha Finance's expansion into other Balkan markets, Downward replies that it has "dabbled in certain other markets," for example the Former Yugoslav Republic of Macedonia, Albania, Bulgaria and some former Soviet republics. "We are hoping to replicate the success of Bucharest Investment Group in other countries," he says, "but this would probably not be for another 12 to 18 months in the case of a country like Bulgaria."

Corporate expansion

Greek corporates have also been taking advantage of the opportunities in the Balkans, and none more so than the Hellenic Bottling company, estimated by Alpha Finance to be the largest single Greek investor in the region. They hold the Coca-Cola franchise for most of Romania, and were one of the first corporates to enter the country. Alpha Finance says that there are a lot of Greek businesses in the Romanian market, but they operate on a small scale. "Ninety per cent of the investments are probably under $50,000. There is just a handful of big players," says Downward.

The Greek telephone operator, OTE, is one of these big players. The company has bid in Romania's flagship privatization of RomTel telecoms firm, with Morgan Stanley and SBC Warburg Dillon Read as advisers. The government will sell up to 49% and make its decision on the winner by the end of the year. The stakes are high; the deal is rumoured to be worth over $2 billion. OTE also owns 90% of Armenian telecoms and 20% of Serbian telecoms (in partnership with Telecom Italia).

The flow of Greek firms into the Balkans shows no sign of abating. Antenna, Greece's top-rated television company, provides much of the area's programming. Paint manufacturers, cement companies and electronics firms are finding the markets receptive. Greek cigarette manufacturers are moving into Albania, and Chipita bakeries and the Athenian Brewery have operations in Bulgaria. Potential growth markets for the next few years include the former Yugoslav republics. Croatia, for example, has a sophisticated economy with around 80% already in private hands, and a series of major privatizations are lined up for the rest of this year and 1999.