Chinese capital goes to Greece

by Ta Paidia tis Gallarias (July 2013)

Slovenščina

Good friends are there to help when someone is in trouble. (Chinese Premier Wen Jiabao to Greek Premier G. Papandreou in Athens, summer of 2011)

While Chinese capital flows towards core Eurozone countries are mostly focused on taking over capital-intensive companies (hi-tech know-how and/or high added-value products), and while investments in Africa are primarily related to raw materials extraction/post-process and intensified agricultural cultivation, Chinese investments in Greece are channeled mainly to infrastructure, such as ports, container terminals and airports. By doing so, a desirable “gateway to Europe” for the fast-growing export-oriented Chinese manufacturing sector seems to be establishing.

The most well known Chinese investment in Greece is Cosco’s lease of the container pier No 2 at Piraeus’ port (until 2039 + 5 years), an investment that was delayed due to strikes by the dock-workers in 2009, but not cancelled.¹ Since 2010 Cosco has also been leasing and operating pier No 3 at Neo Ikonio (Perama) merchant port. Cosco is focusing on having this dock upgraded by July 2013 (e.g. improvement of handling equipment such as dockside cranes, capacity increase so that both terminals No 2 and 3 could simultaneously handle up to 3,7 million TEUs²).

Related to above mentioned investments is the recent agreement between Cosco, Hewlett-Packard and TRAINOSE³ that will enable Cosco to forward HP products from Piraeus to central and northern Europe (e.g. Czech Republic, Macedonia-FYROM, Bulgaria, Serbia, Romania, Croatia, Slovenia, Austria, Slovakia, Hungary), through OSE’s logistics centre in Thriasio Field, a huge logistics terminal that has been recently constructed and which includes container terminals, cargo and logistics facilities, customs offices etc. According to the media, similar agreements with giant companies such as Lenovo, LG, ZTE (telecommunications equipment), Huawei (telecommunications equipment) and Samsung are underway, while others (like IKEA, Dell, Sony and Hyundai) have also shown interest. The containers are to be transported by means of trains, as a new 17-km railway, connecting Ikonio to Thriasio Field, was inaugurated this February. These state investments signal a focus from transshipment to transit, turning Greece into a major transportation hub for the whole European area.⁴

Recent articles have revealed that Cosco is even considering taking over OLP (Piraeus Port Authority), increasing the total port handling capacity to 4.7 million TEUs (thus making it the biggest among all the Mediterranean ports). If this investment does take place then Cosco will not only control the whole Piraeus port, but will actually evade paying the annual lease, as according to the lease agreement the lease is to be collected by OLP and not the Greek state.

Cosco, in cooperation with the China Railway Corporation, is also interested in taking over TRAINOSE, which as was already discussed will bear the brunt of cargo transportation from the Greek ports to central and eastern European countries. Thessaloniki’s merchant marine is on the agenda too (see Hutchison Port Holdings), an investment that has already provoked strong public protests. Other investment plans include ports in Crete, like the one near Timbaki, where another container terminal is to be constructed.

If one is to assess the importance of those investments and the connections among them, one has to delve into the increased share over the last 20 years of maritime trade (especially via Mediterranean ports) involved in transporting big volumes of medium and low value products. Regarding China specifically, a major share of Chinese imports/exports (circa 50 percent) is put through the Greek-owned merchant fleet.⁵ Moreover, packing standardization has led to the construction of specific types of ships and the development of appropriate port infrastructure, thus resulting in the increased effectiveness of both commodity transportation and management beyond transport. It should be noted that global container traffic has increased from 6 percent of the total freight traffic to 16,5 percent by 2011 (or 160 million TEUs), while during the same period the average container size has doubled. These numbers, however, do not reveal the whole story. The actual traffic is even bigger, if loading, unloading, transshipping and returning empty containers are taken into account, reaching 600 million TEUs.⁶

Piraeus Container Terminal (PCT), Cosco’s subsidiary company plays a key role in that as handling commodities from Suez canal via Piraeus is substantially more cost-effective than routing the containers via Gibraltar to other major ports such as Rotterdam, Hamburg, or Antwerp.⁷ This is clearly illustrated by the 75 percent increase of container traffic, via PCT managed pier No 2, compared to 2011 (2.1 million TEUs compared to 1.2 million TEUs). It is no wonder that Piraeus port has shown the fastest annual growth rates, contributing to Cosco’s net profit of €15.5 million, compared to €5m. a year earlier.⁸

Similar trends were recorded at pier No 1, a newly constructed terminal by OLP after Cosco took over Pier No 2 and 3. According to OLP’s data a 27.5 percent increase in freight traffic was accomplished in 2012, compared to 2011 results. An increase of 12 percent in full spaces at N. Iconio was also noted. These increases are mostly due to the recent agreements that had been signed with giant Italian-Swiss shipping company MSC (Mediterranean Shipping Company). Overall container traffic at Piraeus port (corresponding to more than 90 percent of the Greek port traffic) has been increased from 0.85 million TEUs in 2010, to 2.7 million two years later (+218 percent), while at the same period freight traffic at all other major Mediterranean ports recorded a slowest increase of 20 percent. Thus in 2012 Greek ports grossed 5.5 percent of all Mediterranean freight traffic (from 4 percent in 2011 and 1.5 percent to 2 percent during the 2008-2010 period)⁹, which in turn accounts for 9 percent of global traffic. To make a comparison, northern European ports have seen their share falling from 20 percent in 1990 to 10 percent in 2011. Thus though the overall European share has been decreased by 10 percent, this has not affected the ports of Eastern Mediterranean area, which due to the rapid rise of Asian exports have seen their share of container traffic increasing from 27 percent in 1990 to 48 percent in 2011.¹⁰ It is important to stress that all these impressive figures have been accomplished despite the harsh shrinkage of Greek imports due to the large-scale recession policies that have been implemented over the last 3 years and the profitability problems of international carriers worldwide (e.g. freight rates decrease due to faster world fleet tonnage increases compared with seaborne trade increases, fuel-cost increases etc.).

But investment opportunities do not seem to be limited only to ports but also to other infrastructure, as two other Chinese companies (Shenzhen Airport and Friedmann Pacific Asset Management) are among those interested in purchasing Greece’s main airport, at Spata. Taking over or even constructing (see Kasteli, Crete) peripheral airports is on the agenda too, as the aim is to further develop the cargo and logistics services. Connected to the above mentioned plans and those initiated by Cosco, is the interest by various Chinese companies, such as AVIC, to move parts of their assembling lines to Greece. If these plans proceed, the separate components will be imported from China, then they will be stored and managed at the container terminal facilities (e.g. N. Ikonio, Thriasio Pedio etc.), before reaching the assembling lines, where the final product will be constructed. Thus, those products will be labelled as “assembled in EU” and will be eligible for EU legislation. This means that they will be protected from anti-dumping measures, as those recently implemented by EU and US authorities, while simultaneously improving their quality product-profile.

Another sector which seems to attract Chinese capitals is that of renewable energy sources, most notably those based on solar and wind technology. According to mass media companies such as Winsun and Hanergy Holding Group seem to be willing to install photovoltaic parks (ca. 1,2 GW of total installed power) in various Greek regions such as Ileia, Attica, Viotia, Macedonia, an approximately €2 bn investment. Dongfang Electric International Corporation, apart from a 250-MW photovoltaic project, is also interested in installing 750 MW of wind turbines, an agreement that has been announced in June 2011, but its progress remains unknown. Another company, Sky Solar Group, seemed willing to acquire licenses and construction permits for 194 solar projects, each capable of producing 350 to 500 KW of electricity, for a total investment of about €250 million. Having said that, it’s worth mentioning the significant share of Chinese photovoltaic modules in the Greek solar energy market, a market showing rapid growth since the early 2000s due to state subsidies. This share will be further increased if those investments are to be fulfilled, as the equipment will of course be imported from China.

It seems therefore that the strategy of the Chinese state is to promote its export-oriented companies by both developing an alternative gateway to Europe other than Naples, Marseille or Valencia, and even more an alternative to Hamburg, Rotterdam or Antwerp, and securing investment agreements according to which most of the equipment/technology has to be purchased from Chinese companies. At this point it is also important to note the role of state-owned banks, such as China Development Bank as mentioned before, in funding those projects.

The Sino-Greek “success story”

If in the next 40 years, in 2050, we manage to reach the level of the standard of living in Greece, we will be very happy. This is the target. (Du Quiwen, Chinese Ambassador in Greece, 2012)

We are all pleased to be working here and conditions are very good. (Greek workers at PCT’s facilities upon meeting with the Greek President of Democracy, Karolos Papoulias, 2013)

It was a wonderful visit and what I experienced was exactly the efficiency of Greek-Chinese cooperation. (Karolos Papoulias, the very same day)

The future of almost all of the above mentioned investment plans still remains unknown. What it is worth discussing, though, is whether such investments are compatible with the working relations that have already been shaped due to the long-term implementation of “internal depreciation” policies. In a nutshell, could the Chinese labor model, based on a mixture of poor salaries, miserable working conditions and mere authoritarianism, be imported to Greece/EU if the ground hasn’t already been prepared by the protracted class war against us? What if the Chinese Ambassador’s true meaning regarding Chinese people reaching the standard of living in Greece, is that of a simultaneous convergence? Before answering the above questions, we will first briefly present the working conditions at Cosco’s subsidiary PCT in order to understand what kind of work-positions are associated with the development policy the Greek politicians have been promising us.

PCT’s facilities are manned with ca. 950 workers,¹¹ most of whom are employed as unskilled workers with a 40 to 45-euro-per-day gross salary (45 to 55 euros net salaries for the skilled crane-men).¹² Most of the employees are outsourced from 6 subcontractors and thus are not eligible to form a union. They are also subject to flexible working schedules and constant job rotation (16 working-days per month resulting in 300 to 400-euro salaries), daily/individual contracts, 24-hour call for work (via sms), unpaid overtime and night-work or holiday allowances, safety regulations violations (e.g. improper lighting, lack of heating/cooling devices in the cranes, poor carriage and equipment maintenance), resulting in serious injuries. If the workers are not productive enough or if they dare to complain to the supervisors about the working conditions then they are “black-listed” and face lock-out for more than a week. The same is true in case of impeachment to local supervisory institutions, such as the Labor Inspectorate. The workers are also not allowed to take a lunch or WC break, let alone speak to each other, as various security men are hanging about the workplace.

Another notable side-effect of Cosco’s activity is the destruction of various, so far independent, small-scale entrepreneurs and self-employed professionals in areas such as freight transport and shipping, ship supplying, customs clearance etc. This should also be put into the more general context of the devaluation politics of insufficiently or non-productive capital (constant and variable alike) that has been implemented in Greece over the last three years, as it has already been discussed. To that end, we have to remind ourselves of the recent legislature promoting the “rationalization” and concentration/centralization of various closed shop professions, such as lorry drivers. In that sense, the influx of Chinese investments and the rush of the Greek
government to further promote such projects may be a sign of a strategic plan to intensify the “accumulation by dispossession” policy on Greek territory.

Such a development, however, may also be indicative of a more long-term strategy on a European level to establish zones of a cheap and disciplined – both qualified and unqualified – labor force in the peripheral EU countries, similar to the export-oriented SEZ (Special Economic Zones) already created in Poland and various Balkan and Baltic countries. This will also include further deregulation of the labor market and maybe a dual educational system, like the German one, which combines standardized practical education at a vocational school with an apprenticeship in the same field at a company. If this hypothesis, however, proves correct, one has to ask oneself: why does Greek capital and its state promote such a strategy? After all, isn’t it true that fiscal discipline and the reduction of public debt is of the “outmost importance”, the “ultimate goal” justifying the so-called “state-of-emergency” situation we are all living in, according to which salaries and pensions have to be slashed, social spending has to be further cut, strikers have to be mobilized on the grounds of martial law, immigrants, junkies and homeless people have to be sent to concentration camps? Isn’t this what state and troika officials, journalists and other scum keep on repeating day after day? Investments under the SEZ regime, however, are based on tax exemptions, VAT returns and labor market deregulation resulting in lower salaries and lower –if any– employers’ contributions regarding, for instance, social security, and therefore, in the final analysis, resulting in smaller tax revenues for the state from both capital and labor. Considering the above, it seems then that servicing the so-called “national debt” is not a goal in itself but a means to further promote the restructuring of labor relations and the production model, that is, to further promote the intensification of our exploitation.

Footnotes

1 There have been various fragmentary strikes by the dock-workers during the whole 2009 The last one lasted for more than a month and a half, including a 2-week truce. After that strike had been declared illegal by the Greek courts, the unions reached an agreement with the port management authority (OLP). The agreement provided for early retirement schemes and employees transfer to Pier No 1, a dock that was to be launched at the time of the agreement.

2 TEU, which stands for “twenty-foot equivalent unit”, is a unit of cargo capacity often used to describe the capacity of container ships and container terminals. It is based on the volume of an intermodal container (6.1m x  2,44m).

3 TRAINOSE is OSE’s (see Hellenic Railway Organization) ex-subsidiary and currently independent company that is operating the passenger and commercial transportation.

4 Trans-shipment procedures amount to 75 percent of the total cargo traffic in Piraeus port (international average: 70 percent) and by their nature allow smaller surplus value extraction. See National Bank of Greece, Container Ports: An engine of growth (Sectoral Report), 2013.

5 This Greek-Chinese cooperation goes even deeper: Greek ship-owners are among the top clients of Chinese shipbuilding companies (recently an agreement for the construction of 142 new ships –accounting for more than 60 percent of the recent global orders of Greek ship-owners and for 10 percent of the pending orders in the Chinese shipyards– was signed. This agreement was based on a €4 bn. loan fund, set up by the state-owned China Development Bank).

6 All data from National Bank of Greece, ibid.

7 It has been estimated that by forwarding cargo traffic via Piraeus port roughly 6-8 travel days are saved, thus resulting in saving $1.5 million per shipment.

8 According to data presented by Cosco to Singapore’s stock market, Piraeus has become the most dynamic container terminal out of all other the terminals that Cosco controls in Europe. While Piraeus has been registering a 75 percent increase, Naples posted a modest 19.1 percent rise, Antwerp an 11.6 percent decline, and Suez a 9.5 percent drop in container handling.

9 In terms of global traffic, Piraeus port grosses 1.5 percent (from 0.15 percent in 2008-2010).

10 See National Bank of Greece, ibid. It is important to note that the decreased share of north European and western Mediterranean ports does not correspond to an absolute decrease of the transacted freight volume, but to a percentage decrease. This is due to the increased penetration into the European and US markets of Asian products, and thus to the increased transportation needs towards those markets that favor trafficking containers via the eastern Mediterranean and western US ports. It is also important to note that Cosco does not directly contribute to the increased freight traffic at Piraeus port, as this is due to major shipping companies such as MSC. Cosco’s role is “limited” to efficiently handle, manage and forward the inbound containers.

11 According to PCT’s commercial director 270 of those are white-collar workers and are directly employed by PCT. The rest, who as we shall see are outsourced by subcontractors, work at the docks. Thus the total employment increase in the docks amounts to ca. 250 people (600-700 workers from 400-450 that used to work before Cosco’s arrival and who later either applied for early retirement or were transferred to OLP-managed Pier No 1). However this increase is fictitious as it corresponds to part-time employment (16-day employment per month).

12 According to ex-PCT’s crane-men the average net salary in Pier No 1 is almost double. It should be noted that before Cosco’s arrival dockworkers salaries could reach up to €100.000, if overtimes, various allowances etc. were to be taken into consideration. Since 2009, however, the salary gap between OLP-managed Pier 1 and PCT’s workers has decreased, since OLP managed to reduce its labor cost from 69 percent of the total cost in 2009 to 56 percent three years later. The average labor cost in the Mediterranean ports is 39 percent equal to PCT’s cost (40 percent of the total cost). See National Bank of Greece, ibid.