| China most attractive for investors |
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| Written by Adrie van der Luijt | |
| Thursday, 05 June 2008 | |
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China is seen as the most attractive country for foreign direct investment, but the reality is yet to match perception.
In a record year for investment flows globally, Western Europe still receives nearly 40 per cent of foreign direct investment. China has been ranked the most attractive destination for foreign direct investment, ahead of Eastern Europe and Western Europe, in a survey of business leaders released at the World Investment Conference in La Baule, France. World becoming a level playing field Ernst & Young’s fifth annual European attractiveness survey, An open world, shows that the world’s regions have become much more equal in terms of where businesses want to invest. These investor perceptions, however, are not yet backed up by the reality of investment flows. Although 41 per cent of survey respondents ranked China as the most attractive investment destination, it still draws less than 8 per cent of global foreign direct investment (FDI) inflows, according to the United Nations Commission for Trade and Development (UNCTAD). While only 33 per cent of respondents ranked Western Europe as their top choice investment location, the region still accounts for 37 per cent of global FDI inflows according to UNCTAD. Marc Lhermitte, Partner of Ernst & Young France, says that the world is becoming a level playing field when it comes to businesses’ perceptions of their cross-border investment options. “The developed markets of Western Europe and the US are being challenged by competing equals. As they look ahead, businesses are chasing growth through Asian consumers’ spending power, but Europe and the US still remain vastly diversified and powerful markets,” he adds. UK tops job-creation ranking The number of FDI projects across Europe was up by 5 per cent to 3,712 in 2007 (up from 3,531 in 2006), but FDI job creation fell by 18 per cent in 2007, with a total of 176,551 jobs created (down from 214,987 in 2006). The top five countries for number of projects in 2007 remained the same, but Central and Eastern Europe countries rose quickly. The UK, France and Germany remained first (713 projects attracted), second (541) and third (305) respectively. The UK topped the job-creation ranking as well. The Czech Republic maintained its place, despite attracting 27 per cent fewer projects. It moved from fourth to third place in the job creation table despite creating 14 per cent fewer jobs than last year. Russia leapt to fourth position for jobs created (+85 per cent) and moved from 13th to 8th for number of projects (+60 per cent). Poland and Romania maintained their position in terms of number of projects. In terms of job creation, Poland fell to second, creating 41 per cent fewer jobs than last year. Slovenia saw the biggest growth in terms of job creation (+458 per cent) and jumped to 15th position in the ranking. Political and legal stability “How to” invest is becoming more important than “how much” for investors considering sustainable location options. Survey respondents pay more attention to political and legal stability (54 per cent) and telecoms infrastructure (51 per cent) than labour costs (47 per cent). Russia, still an outsider FDI destination in previous surveys, scored this year’s sharpest climb up the attractiveness ladder (up nine points, to a 21 per cent rating). Russia has made notable progress in attracting investor interest over the last two years, rising from a 5 per cent rating in 2006 to gain the confidence of one-fifth of the global panel. The shift towards a knowledge economy in Western Europe is slower than the relocation of traditional industries from Europe. Western Europe is more active in services FDI (60 per cent of all FDI announcements in 2007, 43 per cent in 2006). It is, however, not yet snaring the large high-tech, high value-added services projects needed to replace its declining automotive, industrial and electrical industries. Thirty thousand fewer FDI jobs were created in 2007 than in 2006, a drop of 51 per cent. Innovation in education and supply chain When asked how to make Europe more attractive, respondents cited a combination of increased flexibility in European labour markets (42 per cent) and simplified regulations (39 per cent). Investors are also calling for innovation in education and the supply chain. Alongside high technology clustering and research and development, respondents also seek innovation in high-performance communication channels (48 per cent), and supply chains (27 per cent) that will also allow them to prosper in mature economies. According to investors, the improvement of European innovation capacity is primarily a matter of culture and education (34 per cent each), rather than financial and tax incentives (31 per cent). Related articles
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