Scorecard and highlights
Foreign direct Investment – European slowdown
Global foreign direct investment (FDI) slumped by 39% in 2009,1 with a 36% slide in FDI inflows to Europe2 as economic uncertainty caused hesitation among investors. In Europe, the number of projects fell 11%, to 3,303, while FDI job creation maintained a three-year downtrend, falling another 16% to 124,923.
Where the investment is going: FDI created 18% fewer jobs in Western Europe. Almost half of the shortfall was in the service sector, but industry suffered heavily too. In Central and Eastern Europe, the precipitous slide in job creation slowed in 2009. Overall, new FDI projects declined 23%, but there were 76,629 new FDI jobs, down only 14% on 2008 – outpacing FDI job creation in Western Europe.
Origins of investment: a majority of FDI in Europe still comes from the USA, Germany, France and the UK. But collectively, the BRICs are now the third largest investor in Europe. China is Europe’s eigth largest inward investor and Chinese FDI is the third largest creator of jobs in Europe, Indian the eighth-largest.
Recovery – slower than some
Western Europe is still perceived as the second most popular destination for FDI but, in 2010 investors again rank China the world’s most attractive FDI destination. After a flight to European "safety" in 2009, in 2010, investors look at forecast global growth of 4%,3 see that only 1%4 is likely in Europe and turn their eyes to high-growth markets.
China has proved that political stability, advancing infrastructure and a vast internal market co-exist with rapid growth, earning it an attractiveness rating of 39%, a point ahead of Western Europe. India, with 22%, equals USA/Canada in attractiveness perceptions, although both trail Eastern Europe by two points.
Geography becomes a relative concept: old illusions about East and West have crumbled. Sophisticated economic centers, stability and attractive markets are found worldwide, by global corporations originating in both developed economies and fast-growth markets.
Europe’s growth hot spots – entrepreneurs and innovation
Executives offer up-beat views on a variety of European business sectors. Information and communication technologies keep the limelight, followed by energy and utilities, financial services and cleantech. Technology and innovation, as well as a green commitment, spread also across many existing areas of European industrial and business strength, will drive tomorrow’s European economy.
Europe needs policies that remove barriers to its undoubted business and innovation talent, enabling Europe-based businesses to make the rapidly growing economies and their consumers the purchasers of Europe’s products, services and ideas.
Tomorrow’s Europe will be created by its entrepreneurs, not its policy-makers, investors believe. Confusion has given way to clarity: the best way for states to stimulate future European attractiveness is to support small and medium enterprises, high-tech industries and innovation, reduce taxation and increase flexibility, investors say. Investors expect governments to guarantee security, stability and – in times of economic crisis – to provide aid and growth through public initiatives. As conditions normalize, investors believe private business and entrepreneurship are the drivers of Europe’s economic future.
-----------1. “Global and Regional FDI Trends in 2009,” The Global Investment Trends Monitor, 19 January 2010, UNCTAD, Geneva, Switzerland
2. “Global and Regional FDI Trends in 2009,” The Global Investment Trends Monitor, 19 January 2010, UNCTAD, Geneva, Switzerland
3. World Economic Outlook Update, International Monetary Fund, 26 January 2010, Washington DC, USA
4. World Economic Outlook Update, International Monetary Fund, 26 January 2010, Washington DC, USA