Thomas Mitsoulis’ interview at View Magazine (Ioannina, Greece) – October 2009

INTERVIEWED BY MARIA AVDIKOU – TRANSLATED INTO ENGLISH BY VICKY LORAS OF THE LORAS NETWORK

Q: To begin with, could you introduce yourself? What have you specialized in and what are you involved in?

My name is Thomas Mitsoulis, husband and father of two children, economist and my specialty is financial analyst. I have studied Business Administration at the University of Economics and Business in Athens (UEA) and I have attended the postgraduate programme in Financial and Banking Management at the same university.

I am working at a private company abroad, which focuses on two main business activities: the sales management and the licensing of a project in the Balkans and simultaneously we offer consultant services to companies mainly on international financing or support in the event of an expansion abroad. Also, via our co-operation with the company Protypi Ekonomiki SA (www.protypi.gr) we provide consultant services to Greek companies mainly on issues of funding, buy-outs and mergers & acquisitions.

Q: What is your philosophy as a professional?

Thank you for your question, for the reason that it is a ‘sensitive’ point in our relation with the clients.
I believe that every professional’ s philosophy must be the maximization of the value received from the services provided to the clients. The basic rule should be that the services we provide added value to social benefit and therefore to our clients as well. Suffice it to say that the money we earn is offered to us by the society and we must not forget that our clients have knowledge, experience and instinct.

Our basic principles should be: honesty-confidence-persistence to a goal and the basic element is working together with partners to create synergies.

Q: When does a business need to ask for the services of Protypi Ekonomiki?

The ideal situation would be for the businessman to ask consultant’s services on permanent basis from the conception of the business idea to the completion of the exit strategy. Such a strategy would lead to the increase in the investment’s intrinsic value, whereas at the same time it would decrease the cost of the consultant in the long term.

Certainly, a business may enlist the services of Protypi Ekonomiki at any business stage and especially with the present conditions of the market where finding a solution is necessary. Personally I believe that in the following years, due to the financial crisis the cases of mergers & acquisitions will increase. Protypi Ekonomiki has special experience in mergers & acquisitions and can support businesses in laying out strategic plans and in choosing the best policy in order to achieve goals.

Q: How should a business choose its consultant?

I believe that a Greek business must first of all learn how to be extroverted, to listen to the messages of the environment in order to accept the position of the partner-consultant as an inextricable part of the business. Certainly, for the present situation, are responsible the consultants themselves, who with their behavior keep the client ‘at a distance’. The State could play an institutional role in categorizing consultants depending on their formal qualifications and their professional experience.

While in the process of choosing, businesses should investigate the formal qualifications of the consultant-partner, but also the basic characteristics of their personality, it is substantially the same procedure like hiring an employee. I believe that special attention

needs to be paid to references and to the consultant’s past achievements – tracking record- whenever they are at disposal and not confidential.

I must additionally mention that Greek companies do not easily accept the position of the consultant in a business, resulting in the failure of creating synergies for both sides. For instance I will mention that in 2006 I received a proposal from a listed company about a financing issue that had come about. I suggested therefore to the businessman a solution that would bring him approximately €90mil which he rejected at that time and unfortunately we did not co-operate from then on. A few months ago the businessman had to apply the same proposal he had been offered, which brought to the company only €24mil.

However I believe that the financial crisis we are going through will lead several businessmen to planning strategies and finding solutions by the support of the consultants.

Q: How can companies create an exceptional working environment? What is the key to success?

By following the examples of Microsoft and Google: innovation- creativity-freedom to employees with clear and defined goals at the same time. Employees are the greatest capital for a business and must feel secure and be compensated depending on the work they offer and their contribution to the company’s income, especially in the event of offering innovation either in products or in the organization structure. Even the businessman should see himself as employee, since he offers his time.

Take into consideration that Microsoft is able to financially support employees for a year under any financial or other conditions, whereas the employees at Google ‘enjoy’ a working day of the week to do anything they wish to apart from their working duties.

Q: It seems as though one of the most favorite issues of the year that is drawing to a close is the financial recession. How much has it really affected your clients and who had more serious problems?

In fact, the issue of the financial recession is one of the economists’ favorite topics we are concerned about, mainly at the development of the economy, since our role is to predict economic phenomena and create the appropriate conditions in companies for their best possible adjustment.

The recession is an inextricable part of economic cycles and I believe that the present global crisis was predictable since 2004, when the interest rates started to increase and at the same time we observed the increase in all financial values (shares, bonds, commodities), facts which do not comply with investment logic and in fact were preparing us for a crisis with great dimensions.

Additionally, we should add that the economic cycles follow social cycles, since the economy is a result of human behavior. Therefore, we can predict the economy by observing social phenomena. Please take into account how much our consumer habits have changed and our social perceptions during the last decade. The Greek society transformed to an over-consuming from the traditionally saving.

At this point it is important to mention the causes of the crisis. In my opinion during the last years the market itself, due to its greediness and bad management, created a “virtual” market: The Derivatives Market.

Derivatives were created in order for professionals to manage financial risks and not for speculation, as it turned out to be. I will mention a few statistics so that we can realize the size of the derivatives market: in 1990 the size of the derivatives market was at approximately $5.7 trillion, in 2001 approximately $90 trillion, whereas in 2008 it reached $680 trillion. Only one type of products the CDS (Credit Default Swaps) from $900 billion in 2001 it reached $62 trillion in 2008 (source: http://www.bis.com). Think that the global GDP came up to $60.6 trillion in 2008 (source: http://www.worldbank.org), the currencies in circulation came up to about $50 trillion (source: http://www.dollardaze.org), whereas the global capitalization of the stock markets came up to $50 trillion on average in 2008. Therefore, you understand that the crisis we are going through is a systematic crisis and a lot of time will be needed so that the balance can come back to the market.

As far as our clients are concerned, they have been affected by the financial crisis mainly in the Greek market in which liquidity has been almost reduced to zero. I believe that during the last year a great opportunity was missed to support the market with the State’s market support measure of 25billion Euro. State guarantees could have been given, for instance, to small and middle sized companies as collateral for short-term bank finance (up to 1 year) at a percentage of 50% of their previous year’s revenues. I believe that this measure would comprise motivation for the increase in business competition, increase in GDP and therefore in state income with a simultaneous decrease in the deficit.

Q: According to your experience so far do you believe that the latest financial crisis has influenced the local economy?

It is obvious that a global financial crisis of a systemic type influences the total of markets, to a smaller or greater extent. However, I would like to clarify that the financial crisis our country is experiencing has different characteristic features than the global crisis. I consider that the Greek economy would go through a crisis regardless of the conditions of the global economy, for the reason that the crisis in our country is due to extensive borrowing, first of all on behalf of the State and then on behalf of the companies and the households.

Basing the drachma exchange against the euro on the level of 340,75 grd/€ at the end of the ’90s, led the State to extensive borrowing, personally I remember the issuing of up to two government bonds issue per week. Because borrowing was based mainly on 5-year and 7-year bonds, in order for the State to pay the interest and paying off the capital it is coerced into constant borrowing and as a result we have entered a vicious circle of borrowing. Certainly there are solutions and the State must show extroversion, asking for help from all potential sources and of course all the political parties must co-operate and step into the right direction, for the reason that whoever is in power, is substantially holding a “time bomb” about to explode.

On the other hand, companies entered a vicious circle of borrowing as well, which was based on trading credit in the form of ‘belated’ cheques, which I personally consider as “a piece of paper” which in my opinion, cannot be considered as securities, since their pay off is based on future events with unknown weighted factors; banks in turn supported the system by pre-paying the ‘belated’ cheques and in fact creating a “virtual” economy. For instance, if a trading company issues a cheques to Supplier A for invoices of a value of 5.000 € and Supplier A transfers the cheque to Supplier B and he does the same to the manufacturer, in fact with a “document” of 5.000 € we created revenues of 15.000 €. You can certainly understand that if someone is unable to pay, automatically a problem is created not only for the companies, but also for the State which does not receive the VAT. Today the number of issued cheques circulating in the market is undefined; the only data we have is the number of bouncing cheques which until November came up to the record amount of 2.83bil €, almost double than that of 2008 and over triple than that of 2007. In addition, comparing to the profits made by the largest Banks in our country which came up to 1.14billion Euro, we realize that the amount of bouncing cheques may cause great problems and upheaval.

The system created an economy, however, which from the 47th place in 2000 came up to the 23rd in 2008, based on the GDP index per capita (source: Worldbank), which should comprise a record, surpassing economies such as that of Italy, Israel, South Korea, New Zealand and approaching economies of Japan and Taiwan.

As far as your question about the local economy is concerned, I believe that the crisis has influenced it to a lesser extent than that of the country as a whole and I additionally consider that it has greater chances for rapid development and greater contribution to the GDP.

Q: What do you believe is necessary for investments to take place in fields which will provide new working places and a push for the development of Ioannina?

The geographical position of Ioannina, the rich natural environment, the history of the city , the university hospital and the university with the research work they produce, the high educational and living conditions and the high liquidity index, comprise important components for the development of the local economy.

In particular, Ioannina is placed in a commercial centre very near the international port of Igoumenitsa and close to neighboring Albania, which in turn is the entrance to the neighboring same-nation countries, Kosovo, Montenegro, FYROM and increases the target group of businesses, at about 10 million inhabitants. This influence has been felt during the last years, but could become even more substantial with the contribution of the State creating a free commercial zone and a special taxation and insurance status quo in combination with the developmental law. For instance, the taxation denominator for the direct Greek and foreign investments should be at the maximum 10%, so that we could automatically increase the investment returns by decreasing the risk, since our country is a member of the European Union.

I must also mention that several Chinese enterprises seek strategic positions in the Balkans in order to build some of their factories decreasing thus the transportation cost, since now the competitive advantage for most sectors is usually the low cost of automation- robotics- that they have and not the low working labor cost. Chinese enterprises are expected in the following years to be the greatest investors in the world with immediate disposable capital for investments which will reach $2 trillion. In 2008 alone $50 billion were invested abroad, doubled the amount for investments in 2007 (source: Fortune).

I believe that it will be a great opportunity for the development of our area and the creation of new working places.

Q: When are markets expected to progress and return to normal rhythms?

We mentioned before the factors which caused the financial crisis and I think that an important factor for the progress of the markets is the change of the regulation in the derivatives market, so that it returns to its institutional role which is the management of financial risks and not to be a factor for speculation. I should mention that in the crisis of 1929 the trade of derivatives had stopped for 10 years and even though it needed 25 years for the S&P index to reach its nominal historical highs.

As things are today for our country we have entered a crisis phase; I believe it will need 7-10 years based on 2006 for getting into a recovery stage, without excluding the possibility for more years to be needed in case we cannot re-engineer our debts (State-Enterprises- Individuals) and we are led to declare bankrupt. However, for the local economy I believe that recovery will come much earlier than for the rest of the country.

I also consider that for businessmen the duration of the crisis is not so important, but the possibility for taking advantage of the opportunities which come up during this period.

As far as the international stock markets are concerned, for a short term they show signs of an upside move, which are maintained due to the low interest rates in the money markets. I would mention as an advice to the readers of your magazine that they can predict the short- term trend of the market, by observing the 3-months LIBOR index.

For the mid-term period I believe that with the present data the markets will continue to move downwards-sideways whereas for the Greek market the tendency is downwards and we may see the General Index at a three-digit number (from app. 2,200 now) in the scenario of inadequate planning for the re-engineering of the public debt.

Q: How do businesses benefit and what do they expect at the prospect of the development granting laws?

Certainly companies benefit from the European Union granting programs and can significantly improve their competitiveness and the domestic and international market. The innovation of the new development law ESPA, is the number of businesses which can participate, as well as the number of the granted activities.
It is a great opportunity for businesses and should be taken advantage of. My permanent advice to businessmen for the total of the granted programs is that in no case should the grants be the ultimate goal, but a mean to develop businesses and for the reason that most of the times there are various difficulties in the provision of the grants the ideal thing would be for the company to have the capital needed for the investment, so that any problems can be avoided.

Q: What kind of projects can you organize for businesses without granting from programs of the development law?

As it is known, the grants refer to the funding of fixed assets. The businesses though show financial needs which refer to the funding of the working capital, which most of the time exceeds fixed assets in total and the estimation of the working capital is difficult factor at the preparation of business plans.

In this field, which is excluded from the granted programs, we can support the business on issues of strategic financial engineering and on more practical issues, such as the submission of complete propositions to banking and funding organizations for financing purposes, the development of clientele and the completion of commercial deals as well as the approach of strategic investors ( for buyouts-mergers). We can mainly support the businessperson in dealing with dangers, due to the fact that we regard the business holistically and we have accumulated experience from various businesses. I believe that is the advantage of the consultant over the businessman.

Q: Which are the greatest risks for a business?

In my opinion the greatest dangers for a business is its “introversion”, the lack of defined goals mainly of an exit strategy and as strange as it sounds its success itself. Statistically 80% of businesses fail due to over-trading, meaning more sales than the company itself can take on with the capital it has or “bad management” as it is known in the market.

Q: Which are in your opinion the “companies of the future”?

Undoubtedly we live in an era of “technological revolution” and I believe that the companies which will adjust to the new consumer

habits, based on the internet and technological innovations are going to be the most successful. We should just notice how many people in our country visit the local post office to pick up parcels from the internet, e.g. from Amazon.

In addition the field of preventative medicine which is related to diagnostic devices will have one of the top ranks in the future. Medicine is changing from therapeutic to preventative and this will absorb a series of fields which are immediately or not related to the protection and maintenance of our health such as a bio-diet, recycling and the handling of waste, ecological energy systems etc.

Q: What would you consult every new entrepreneur?

My advice to every new entrepreneur would be to define an exit strategy from the very beginning of the investment, for the reason that substantially every businessman invests time and money and must expect the proportionate money return. The exit strategy must refer to the success scenario and also to the scenario where the investment shows signs of failure. I would like to mention that failure should not intimidate us, in some instances it can become a great advantage. For instance in the US banks support financially investments more easily of businessmen who have failed in the past, for the reason that they think there is experience in dealing with risks as opposed to a businessman who has never failed, for the reason that statistically has more chances to fail. For instance I will mention Donald Trump, who had gone bankrupt in the past, banks financed him and today he is considered to be one of the most successful entrepreneurs and wealthiest people in the world.

In the process of planning this strategy the consultant can take on a substantial role, who will positively contribute to business planning.

I additionally think that every businessman should dare to innovate in order to acquire competitive advantages continuously and to adjust to the changes in the environment.

At this point, please allow me to expand your question and mention that the State should do the same, so as to find solutions to difficult problems. For instance today the usual solution for the increase in state income would be to increase taxation, which is an ineffective measure as experience shows, especially today that our country is an EU member and though companies and capital can move freely finding tax advantages, such as in Cyprus where the tax denominator reaches 10% and many companies in our country lately ‘emigrate’ to Cyprus.

In contrast, the State could implement innovative ideas: For instance we all know that in hospitals, patients and their relatives feel the need to express their thanks to the doctor and the nursing staff, which is in fact a social custom which is difficult to avoid. The State, instead of going on a “ghost chase”, could allow the doctor and the nursing staff to receive money as compensation by issuing invoices and being taxed as bonuses when they do fill their income taxes report. In this way, competition will increase and the level of services offered, their extortion towards the patients will be minimized, doctors will legalize their income which they will be allowed to make use of or invest it and will not look for ways to take money abroad.

If that sounds extreme and cannot be materialized, I could mention another example: The Olympic Games are undoubtedly a Greek piece of heritage from which the country does not earn money; in contrast we have lost a great amount of money from organizing them in Athens. We could declare ‘the Olympic Games’ trademark and receive money from the licensing. Imagine only the income from the shirts of the Olympic Games, as Disney does with comics’ heroes, or television and commercial rights and take into consideration that the owner of the licensing rights of Formula 1 is one of the wealthiest person in the UK and the world.

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