3.1.1 The high cost of capital and high risk appear to be among the main disincentives to large investments in aquaculture. It is difficult at present to evaluate risks - known to be very high in new technologies. The ability to mobilize a large amount of capital in the coming years is necessary to aquaculture development in Greece.
3.1.2 The common procedure for the establishment of a fish-farm starts with a pre-feasibility study and a proposal for financing. This pre-project is then submitted to all authorities involved in the granting of permission for access to water resources and to secure the availability of the land and sea areas to be used. A minimum of ten years is generally requested. All documentation must then be submitted, with a detailed report on technical features of the project and a technico-economic analysis, to the local or national authorities responsible for grants. After the decision on granting, all documents are given to the Bank for a loan decision. The investor may decide not to apply for eligibility for grants and/or loans. He can also decide, on his exclusive responsibility, to start construction of the unit after the submission of the relevant applications.
The complete procedure from permission decisions to loan decisions requires a minimum of 8 to 10 months. Due to the new character of some investments, and/or delays in administrative procedures, it requires 2 to 2 1/2 years in some cases. In particular, the procedure involved in EEC granting schemes needs more time than national schemes.
3.1.3 The full use of granting schemes provides 40–60 % of the aquaculture investment, with a compulsory 15 % of the investor's own participation. The remaining funds can be borrowed from the Agricultural Bank under a long - term loan agreement at a basic interest rate of 17.5 % per annum.
3.2.1 Applications for grants can be submitted through two different routes. Grants under the national productive investment incentives law (1262/82), as well as grants under the Integrated Mediterranean Programme (PIM), can be applied for through the Ministry of National Economy. Grants under the European Agriculture Guidance and Guarantee Fund (EAGGF) regulation and the Ministry of Agriculture fund must be submitted to the Ministry of Agriculture.
3.2.2 In both cases applications can be submitted to the Ministries' offices in Athens or to their Regional Departments in the region where the investment is projected. The Ministry of Agriculture publishes a list of standards of production scale for the main types of culture practised. Projects of smaller size are usually considered by the regional authority. However, if the regional authority is not in a position to properly evaluate the projected investment, the decision is transferred to the national authority. All applications for EEC grants must go through the national authority.
3.2.3 Grants, in the form of capital aid, are available from the state for the purpose of promoting productive investments under the investment incentives law 1262/1982. The level of granting varies according to the nature of the investment, the area of localization (four areas are defined A, B, C, D) and special considerations such as cooperative involvement or import of foreign currency.
3.2.4 Investments in aquaculture in all cases are subject to the highest level of granting, i.e., criteria applied to area D, considering the difficulties and interest in developing aquaculture. This provides for a 20–50 % grant under the condition that the investor's own participation is not less than 15 %, reduced to 10 % in the case of cooperatives or of enterprises belonging to local government organizations. The latter are also eligible for an additional grant of up to 15 %, as are returning nationals and Greek seamen.
3.2.5 The application for any type of grant must contain a detailed description of the technical features of the project, a technico-economic feasibility study and all permissions requested to operate an aquaculture unit (see consultant's report dealing with aquaculture development planning). These documents are examined by technical experts, who may propose modifications in technical specifications or of economic evaluations. Investment grants are then supplied by the decision of the Minister of National Economy, following the recommendations of a consultative committee.
3.2.6 The payment of the state grant starts only after the investor's own participation at 50 % and the financing Bank's participation (if any) at 25 % have been paid up and spent on the project. The period allowed for the completion of the work and the payment of each instalment of the grant is fixed in the act of approval.
3.2.7 The reference level of granting for aquaculture is high, from 35 to 40 %, compared to a 25 % average in agriculture. This can reach 55 % in special cases referred to above. Regarding the delays in completing the work in most of the projects, the Minister decided from August 1987 to add a 5 % grant for projects completed within the planned period.
3.2.8 Grants are also available from the European Economic Community under the Integrated Mediterranean Programme (PIM). If the applicant so wishes, the project can be submitted to the EEC by the Ministry of National Economy. Projects funded under the PIM cannot receive a grant of more than 60 % of the total investment. To supplement the 40 % grant level under national regulations, the Ministry seeks from the EEC a complementary grant of 20 %. “Packages” of applications are to be submitted to the EEC at fixed dates in the year. The first “package” will be sent in March 1988. Presently there is only one project being proposed.
3.2.9 The Council Regulations (EEC) No. 101/76 and 2908/83 on “a common measure for restructuring, modernizing and developing the fishing industry, and for developing aquaculture” defines the participation by the European Agriculture Guidance and Guarantee Fund (EAGGF) in investment projects. Fund participation for investments in Greece is allowed to amount to 50 %. Aquaculture projects with a maximum of ECUs 1.8 million for cages and ECUs 3 million for hatcheries receive 30–40 %.
3.2.10 Applications for EAGGF grants must be submitted to the Ministry of Agriculture for examination and re-evaluation by the technical staff of the Ministry of Agriculture (Fisheries Department). They are then sent in an annual package to the EEC administration. The procedure is similar to that within the Ministry of National Economy. All the information to be submitted is listed in the Form AQUA/87 annexed to Commission Regulation (EEC) No. 970/87.
3.2.11 Since 1981 nine Greek projects have been funded by EAGGF, representing a total investment of Dr 577 million, and a total grant of Dr 231 million. In 1987, Dr 80 million had been paid for work already completed. Only one project (Cephalonia farm) has been fully completed and has received the total EEC grant of Dr 37 million, for a projected investment of Dr 93 million. The actual cost of the project in real terms has in fact been more than Dr 200 million.
3.2.12 Grants have been available from a fund in the Ministry of Agriculture for the fisheries sector since 1972. This fund presently has two financial sources: an annual provision by the Ministry of Agriculture and a contribution from the Programme for Public Investment (PDE). Its main use is for the transfer of national contributions to the EEC programmes and for granting of public investment. However, private projects can also be subsidized. Up to 1987 any investor in aquaculture could apply for a grant from this fund, independent of an application to the EEC. A new regulation to be enforced in 1988 will link grants from this fund to the previous acceptance of the project under the EAGGF programme. In practice, this fund has been used in aquaculture as a bridging-fund and as a complementary subsidy to EEC grants. According to the present level of granting of aquaculture projects by the EEC, i.e., up to 40%, this fund is planned to be used for 20% complementary aid. This would reach the 60% limit imposed by the EEC. For fishing and aquaculture, this fund represented a total of Dr 763 million in 1984, Dr, 677.5 million in 1985, Dr 278 million in 1986, and Dr 487.5 million in 1987 (which have been only partly used).
3.3.1 Until now the Agricultural Bank has been the only banking institution involved in the financing of aquaculture. This situation is mainly due to the monopoly it enjoys in providing low interest rates in the primary sector, and to the efforts it has made to develop competency in the field of aquaculture.
3.3.2 Long and middle term loans are available at a basic rate of 18.25%, including bank commission and insurance. In comparison, the basic rate fixed by the Central Bank of Greece is 22.5% for other industries. Generally, loans account for 25–50% of the total investment and they are 5–15 year loans. A delay until the full completion of the work is proposed for the first instalment.
3.3.3 The Agricultural Bank will consider requests for loans after submission to the grant schemes, should it have been approved or not. According to the scale of the project, it will be examined at the national level or in local branches for evaluation of the economic figures and of the capacity of the investor to repay the loan.
3.3.4 Since 1984 the total amount of middle and long term loans given for investments in aquaculture by the Agricultural Bank has been as follows:
|1984||Dr 30 million|
|1985||Dr 221 million|
|1986||Dr 152 million|
|1987||Dr 400 million (provisional)|
3.3.5 To cope with the high risk of investments in aquaculture the bank asks for a security of 150%. In most of the cases assets of the unit and animal stock cannot be considered as securities. Other private assets must be offered by the investor. The reasons for this high rate is the lack of experience in this field and difficulties of aquaculture activities to prove the profitability quoted by feasibility studies.
3.3.6 Short term loans to cover operational expenses can be obtained from the bank, as well as bridging loans until the payment of the grants. Due to the credit limitation policy of the Central Bank, there is a shortage of short term credit. This forces the investors to negotiate for small amounts of credit to cover their operation costs, resulting in the multiplication of credit accounts and complex book-keeping.
Investors met by the consultant quoted the above situation of permanent negotiations with their bankers as one of their main concerns. Limitations in the availability of credit led some investors to use commercial bank facilities, with an interest rate of 23%. This increased the burden of financial charges. According to Central Bank regulations, bridging loans for grants cannot be provided with low interest rates.
3.3.7 Extension or modernization work in existing aquaculture units can be done with loans subsidized by the state. The rate for these loans is 14.25%, with a maximum of Dr 600 000 for trout farming, Dr 400 000 for carp farming, and Dr 200 000 for other species. These figures are very low and have remained unchanged since 1980. They will probably be re-evaluated in 1988.
3.3.8 The Agricultural Bank's personnel specialized in aquaculture financing encounter many difficulties in securing loans for clients wishing to become involved in aquaculture activities. The Bank must offer long term support of aquaculture production units to enable them to realize a profit on their investments. This is a prerequisite for successful involvement of private investors and for the best financial return from a public grant.
Small projects are often left to the attention of local offices, resulting in delays due to lack of guidance.
3.3.9 Deregulation in the Common Market banking system is likely to result in other banks in Greece looking at the aquaculture industry. Under present conditions, the cost of lengthy procedures and troublesome negotiations of short term loans may affect the benefit of low interest rates and force investors to work more with commercial banks. Some of the big investors have already made contacts with commercial banks.
3.3.10 At present, there is little evidence of activity by investment companies, offering finance linked with equity stakes in the individual farms. Although financing for certain foreignmade equipment may be available, it is not widely used at this stage.
3.3.11 The agreement of an insurance company to provide cover for an aquaculture venture is strongly recommended for grants and loan applications. Until now no national insurance company provides insurance for the stock. Only foreign insurance companies have accepted to do so in some cases. The Agricultural Insurance is presently thinking about insurance cover and rates for aquaculture-related activities.
3.3.12 Banks can play a very important role in book-keeping. Reference documents prepared by FAO can be used to provide guidance to private farms (see e.g., FAO, 1983).
3.4.1 The grant-aid system for funding aquaculture projects has been formulated only in recent years. The establishment of efficient funding procedures has been difficult, due to administrative complexity. This results in delays, the discouraging of investors and an under-use of granting opportunities. Present regulations - with both granting routes (see 3.2.1) offering up to 60% support - could be restructured to allow for a simpler granting procedure based on common requirements.
3.4.2 Among the various institutions and authorities involved in funding aquaculture, some have considerable competence and others have little. There is thus a range in level of technical support available to potential investors.