3.1 Introduction

The subject of this chapter is a diagnosis of the basic characteristics of the productive system of the Region of Central Macedonia. Our particular interest lies in identifying the major economic and industrial sectors promoting development in this Region. To this end we have proceeded to explore, analyse and qualify the strengths and weaknesses of the regional productive system from the point of view of the production and transfer of technological and organisational innovations. More specifically, this exploration was designed to:

Present the basic characteristics of the productive system, noting its most significant sectors and branches, and

Formulate a framework of priorities for regional innovation and competitiveness promotion strategies.

The objective of this effort is to help the RTP select and focus on specific sectors, branches and companies which are of particular interest from the point of view of the introduction, adaptation and dissemination of technological innovation.

3.2. Basic characteristics of the productive system

The next step, before proceeding to an analytical presentation of the individual components of the regional productive system, is to identify certain general features of Central Macedonia's regional productive system and compare them to the corresponding figures for the country as a whole.

Table 1 tabulates recent comparative figures for population, employment and GDP. The Region of Central Macedonia is compared to the whole country, while certain basic figures are also given for the Prefecture of Thessaloniki, the second most important centre in Greece after Attiki. Its importance is due to the fact that it is a transport hub, that most of the Region's industrial activity is concentrated here, and that its port and airport handle a substantial percentage of the country's imports and exports. The area immediately surrounding the city contains most of the Region's manufacturing and processing industry, while banking, commerce and services are concentrated in the city centre.

Table 3.1. Basic economic figures for the Region of Central Macedonia.

	GREECE	CENTRAL MACEDONIA		PREFECTURE OF THESSALONIKI
			% in GREECE		% in C. MACEDONIA
SURFACE *
	13.195.741,3	1.914.616	14,5	368.273,6	19,2
POPULATION *
Total	10.259.900 100%	1.710.513 100%	16,7	946.864 100%	55,4
Active	3.886.157 37,9%	675.288 39,5%	17,4	372.652 39,4%	55,2
EMPLOYMENT *
Total	3.571.957 100%	623.909 100%	17,5	344.214 100%	55,2
Primary sector	668.766 18,7	130.670 20,9	19,5	22.175 6,4	17,0
Secondary sector	852.946 23,9	172.333 27,6	20,2	109.988 31,9	63,8
Tertiary sector	1.843.612 51,6	289.869 46,5	15,7	190.322 55,3	65,7
UNEMPLOYMENT*
Total	314.200	51.376	16,4	28.438	55,4
% of Active	8,1	7,6		7,6
GDP **
Total	14.422.533 100	2.326.649 100	16,1	1.362.409 100	58,6
Primary sector	1.982.789 13,7	393.747 16,9	19,9	83.543 6,1	21,2
Secondary sector	3.714.774 25,8	640.966 27,5	17,3	409.269 30,0	63,9
Tertiary sector	8.724.970 60,5	1.291.936 55,5	14,8	869.597 63,8	67,3

* Source: NSSG, Population Census 1991.
**Source: NSSG, National Accounts, current prices, million GRDs, estimations 1993.

Size and structure of employment

Distribution of employment among the three basic economic sectors is as follows: 20.9% in the primary sector, 27.6% in the secondary sector, and 46.5% in the tertiary sector. If we ignore the Prefecture of Thessaloniki, which accounts for most of the employment in the tertiary sector, we find that two thirds of the active population of this Region are employed in the primary and secondary sectors.

Central Macedonia accounts for 20.2% of industrial employment in Greece, with 63.8% of this number being concentrated in the Prefecture of Thessaloniki.

Unemployment is lower than the national average (7.6% and 8.1% respectively in 1991).

According to the 1991 census, 16.7% of the country's population live in the Region of Central Macedonia, more than half of which (55.4%) in the Prefecture of Thessaloniki. The active population of the Region corresponds to 39.5% of its total population.

Size and structure of production

The Region of Central Macedonia accounts for 19.9% of the country's GNP in the primary sector, 17.3% in the secondary sector and 14.8% in the tertiary sector.

In all the prefectures in this Region (with the exception of the Greater Thessaloniki Area) the principal occupation is in agriculture, with a wide variety of crops and fairly healthy prospects for growth. Industry has developed around the urban centres, and is chiefly devoted to the manufacture and processing of agricultural products (foodstuffs), textiles, furniture and non-metallic minerals.

With the exception of the Prefecture of Thessaloniki, the level of services in the Region is fairly low compared to the national average. The same is true of the level of technical and social infrastructures.

Tourism is developed only in certain areas (Chalkidiki and Pieria), while the Region as a whole lags behind in the enhancement and exploitation of its natural and cultural wealth and in the development of alternative forms of tourism.

The Region accounts for 19.9% of GNP in agricultural production (fishing, farming and forestry), 8.6% in mining, 20% in manufacturing/processing, 17.2% in commerce, 14.9% in construction and 14.5% of housing. The primary sector provides 16.9% of the GNP of the Region, the secondary 27.5% and the tertiary 55.5%.

58,6% of the Region's GNP is produced in the Prefecture of Thessaloniki. This is followed by the Prefectures of Serres, Pella and Imathia with between 8.3% and 8.9% each, and finally Kilkis with 4.1%.

The Region of Central Macedonia accounts for a disproportionately high percentage (greater that is than its share of total GNP, or 16.1%) of total production in fishing and farming (19.7%), manufacturing/processing (20%), health and education (20.7%) and trade and commerce (17.2%). Within the Region the most important sectors are those of manufacturing/processing (19.1% of total regional GNP), agriculture (16.9%) and trade and commerce (14.6%).

Characteristics of sectorial structure

With respect to manufacturing/processing, the bulk of employment in the Region is in the sectors: clothing and footwear (26.3%), foodstuffs (16.3%), furniture (5%) and tobacco (4.5%), all of which are above the national figures (17%, 14%, 4.4% and 1.8% respectively). Production in these sectors is concentrated in small units, especially in the Prefectures of Pella, Imathia, Pieria and Kilkis, where industrial employment in SMEs, as a percentage of the Regional total varies between 60% and 80%. While these sectors are, in most instances, labour intensive, the high rates of investment being effected in them (especially in the food and textile sectors) indicates a trend towards the transformation of these traditional sectors into capital-intensive industries.

The SMEs that dominate the Region's productive system - as indeed of the country as a whole - generally display low levels of organisation and considerable management deficiencies, giving the Region a particularly low average figure for employees per company (6.5 employees per unit), even in comparison with nation-wide figures. Small and medium-sized units account for 98% of all manufacturing companies and absorb 72% of total industrial employment.

Three sectors accounted for 50% of all industrial capital in the Region in 1988: the food industry with 22.5% of industrial capital, textiles with 14% and beverages with 13.9%. These were followed by chemicals and basic metallurgy with around 7% each. The distribution of fixed assets was similar (as a percentage of Regional totals): food (19.2%), textiles (17.8%), beverages (12.3%), basic metallurgy (9.8%) and chemicals (7.8%).

R&D and social expenditure

Indicators for education, productivity and specialisation are fairly low for the population of the Region of Central Macedonia as a whole, with the exception of the Prefecture of Thessaloniki.

In the period 1987-1990, the Region absorbed 17% of annual state expenditure on research: this is an extremely low fraction, especially considering that total state expenditures on research and development accounted for only 1% of total state funding of industry (the EU average was 10%).

As for the level of social infrastructures, the indicators show water supply problems in the Prefecture of Chalkidiki and sewerage problems in the Prefectures of Pella, Kilkis and Pieria, while transport and communications are satisfactory only in the Prefectures of Thessaloniki, Imathia and Pieria. With respect to health and education, indicators throughout the Region are low for the latter and extremely low for the former. Exceptions to this are the Prefectures of Thessaloniki where indicators are high for both, and Pieria, where the indicators for health are higher than those for education.

3.3. Framework of priorities for the strengthening of the productive system

Having noted the general characteristics of the Region's productive system, we identified three vital problem areas with a view to defining a framework for the essential strategic choices and priorities necessary to build them up.

Priorities for the regional productive system

Reinforcing cohesion within the productive system. While dependence on a single economic activity facilitates specialisation, creating significant external economies, it also leaves the Region in question exceptionally vulnerable to circumstance. The objective must be to achieve, as far as possible, a balanced distribution of development among the three economic sectors. This will ensure a stronger, less vulnerable and more effective system. Other sectors (besides the industrial) must be selected which promote or are capable of promoting a transfer of technology to industry. The emphasis is on "integration" of the Region's productive system.

Creating "poles of development", in both the geographical and the industrial activity senses. This will lead to development spreading beyond the initially selected boundaries, in the first instance to the rest of the Northern Greece and in the second to the other less innovative companies.

Increasing employment and/or increasing exports and/or promoting import substitution. There is no point in focusing on one or other of these goals: the sole solution viable in the long term is to render the productive system internationally competitive and oriented towards the middle to upper range of the market, at least for certain products.

Preserving the equilibrium of the natural environment (sustainable development).

Emphasising up-grading of human resources not only with regard to professional know-how but also with respect to cultural perceptions and attitudes towards work.

Creating new competitive advantages (well structured advantages) rather than insisting on the Region's existing comparative advantages.

Priorities for individual sectors, companies, networks and sectoral systems

Emphasis on flexibility, on just-in-time production, on production of quality and specialty products, on re-engineering, on company networking, and not simply on up-grading mechanical equipment.

Promoting the creation of networks. The co-existence of large and small enterprises within a specific sector or complementary sectors in specific areas facilitates the creation of "networks" or "concentrations" of enterprises which according to both recent theory and international experience are particularly important.

Strengthening specific types of enterprises. on the basis of their visible dynamism, which may serve as an example for other companies.

Emphasis on product quality, rapid delivery, production of specialty products addressed to specific market niches, etc.

Priorities for market support and development structures

Market expansion. This concerns the demand in various markets (domestic, European, Balkan, etc.), as well as the strategies still open to Greek companies to improve their competitiveness. The opening of the Central and Eastern European markets is a major challenge for Greece. Nor should already developed markets be ignored, especially those favoured by geographical proximity. Finally, there should be emphasis on capturing the domestic market as a base, by the production of internationally competitive products, of course, not by imposition of protectionist measures.

Channelling of monetary flows. This option concerns sectors, enterprises and time scale of return.

Market specialisation. Determining which market to aim at (up-market segment , quality products, etc.).

Re-thinking incentives. The type of incentives offered to enterprises is extremely important. The incentives offered to date have had three major weaknesses: that is, a) there has been no stable incentives policy, which has a negative effect on investments, b) they create "abnormalities" in the market, because they are accorded as an emergency solution which in the final analysis only serves to regenerate the problem, and c) they are supplied in the form of subsidies or grants for buildings, equipment and personnel.

Encouragement and attraction of investment. The origin of investment capital (local or external sources) should not be a problem, but should depend in each instance on the terms on which the investment is effected by the domestic or "foreign" investor and especially on how it fits into the global regional development strategy.

3.4. Conclusion

The fundamental element which must be noted is the need to design a framework programme for the development of the Region which can accommodate and embrace all the various above-mentioned goals. Only with such a framework will it be possible to pursue, dynamically and convincingly, a new and more privileged position for this Region within the national and international division of labour.