Videos and viewpoints
Nederlands attractiveness survey 2015
Op 17 juni 2015 is de Barometer Nederlands Vestigingsklimaat 2015 gelanceerd tijdens een bijeenkomst met het thema 'Hoe blijft Nederland aantrekkelijk voor (internationale) bedrijven?'. Bekijk hier een samenvatting van deze middag.
Netherlands attractiveness survey 2015
Despite setbacks, Africa is still rising
Visiting Fellow, Africa Center at The Atlantic Council.Aubrey Hruby is a long-time advisor to companies and funds investing in African markets, co-author of the forthcoming The Next Africa (Macmillan, June 2015), and Visiting Fellow at the Africa Center at the Atlantic Council.
Africa attractiveness survey 2015
Jeremy Jennings - EY EMEIA Regulatory and Public Policy Leader
UK companies need to have realistic expectations for the Exit Treaty negotiations. The process will be intensely political. UK Prime Minister Theresa May will seek outcomes that achieve her objectives. Yet the goals of EU negotiators will be to achieve what they believe best for the EU. That includes ensuring that club membership remains attractive. They must avoid a crisis for the EU itself, so the European Commission’s goal will be to keep the 27 member states aligned. But for purely domestic reasons, the member states are likely to have divergent priorities. Given the UK red line on regaining control over its borders, continuing UK access to the EU Internal Market, as it stands today, is looking far from certain. Companies need to plan accordingly.
Alessandro Cenderello - EY EU Institutions Leader
Make the EU relevant again
Brexit is a national democratic choice. From now on, the actions of the UK authorities and the EU member states need to be developed with a strict respect for the popular will. The Brexit process needs to be framed within a clear and positive plan of action in the context of representative democracy. From a European perspective, despite growing Euroskepticism, we must guard against the idea that Brexit is the start of an unraveling of the EU. Brexit is primarily an additional political challenge for the EU, alongside the migration crisis, the Eurozone troubles, unemployment, among others. National and European authorities need to focus more than ever on these pressing challenges, by stressing why we are stronger together.
What are the priority EU policies needed to enhance the attractiveness of EU member states in the next three to five years?
- Improving the investment climate, expanding the existing “Juncker Plan”
- Securing banking and capital market union
- Creating a digital single market
- Enhancing common migration, security and defense policies
Even without the UK, the EU will be home to 6% of the world’s population. European leaders and institutions need to move away from their current fire-fighting mode to better respond to their citizens’ and businesses’ needs and to stay relevant in this globalized world.
Marcel Van Loo - EY EMEIA Financial Services, Regional Managing Partner
Financial Services: Preparation time
London is currently the center of financial services in Europe and we expect that to continue in the foreseeable future. However many firms may need a physical EU27 nexus for some of their activities if they are to retain EU clients after a Brexit.
Obtaining regulatory authorizations can be a slow process. Firms with a large EU27 clientele are already exploring possible locations to set up an EU27 subsidiary and are in discussions with regulatory authorities on obtaining the approvals necessary to continue serving clients within the single market. Recently, the European Commission proposed that banks headquartered in non-EU countries will be required to set up an intermediate holding company for their subsidiaries in the EU. As the UK is expected to become a non-EU country, this has increased the urgency for banks to address the consequences of Brexit.
Many large investment banks fear that Euro clearing operations and derivative transactions worth over US$500 billion may shift from London to other EU countries.
In expectation of the increased investment, EU countries including Ireland, France, Germany and Spain are simplifying regulatory application procedures and wooing London-based financial services firms. Frankfurt is considering relaxing labor laws. The extent of any moves may ultimately depend upon the terms of any exit agreement between the EU and the UK, but companies must plan for the worst and hope for the best.
Jean-Benoit Berty - EY UK Technology, Media and Telecommunications Sector Leader
Technology: Digital agility
The digital economy accounts for over 10% of Britain’s GDP. And it is growing fast, both in the UK and across the EU. Investment in tech start-ups now tops US$13.6b in the UK and Europe — up fivefold in five years. But since the referendum, financial technology (FinTech) investments have slumped 26% to US$532m in the third quarter of 2016 — running at almost half the pace seen during 2015.
The UK has Europe’s strongest start-up ecosystem, centered in the London district of Shoreditch, but spilling out into high-tech centers around the university cities of Oxford and Cambridge. European cities — notably Dublin, Paris and Berlin — see the referendum result as a chance to promote themselves as alternative technology hubs.
Key issues for tech entrepreneurs and investors revolve around talent and mobility, data flow and data privacy regulation, tax and trade rules, and access to finance.
The EU is a leading source of funds for UK research, innovation and SME projects through programs such as Horizon 2020, which aims to achieve nearly €80 billion of investments by 2020. Fears that funding may be harder to obtain may be making venture capital firms more cautious. However, US global technology giants have continued to demonstrate their confidence in London as a digital technology powerhouse.
- "UK's digital economy is world leading in terms of proportion of GDP" TechUK.org website (accessed 12 December 2016)
- "Action is needed now to stem the flow of vital technology talent" The Times website (accessed 9 December 2016)
- "Brexit depression casts dark cloud over UK fintech investment" Finextra website (accessed 9 December 2016)
- "European Social Fund 2014–2020" European Commission website (accessed 9 December 2016)
Jörg Hönemann - EY Germany, Austria and Switzerland (GSA), Automotive team Leader
Automotive: Sustaining performance
As we do not know yet when, how and under what conditions a Brexit will be executed, it will remain important to think in scenarios and to build maximum flexibility and agility in any strategic programs. The automotive industry faces significant uncertainty as Brexit unfolds.
The UK is the fourth-largest light vehicle manufacturer in Western Europe. In the first half of 2016, UK output was 897,157 cars, up 13% year-onyear. The UK industry is closely integrated with that of the Eurozone both in terms of component supply and sales. EU customers are big buyers of British-made cars, and the UK is a leading market for vehicles imported from Germany, Spain, France, the Czech Republic, and elsewhere.
Supplies of components flow back and forth across the Channel. Now Brexit hangs over a European car industry that already has excess vehicle-manufacturing capacity, and is reshaping itself in search of lower costs and in order to adapt to new technology and changes, such as the spread of electric cars and the emergence of ride-sharing business models.
The devaluation of the sterling has already undermined the margins of car-makers selling into the UK. Several companies have raised prices and begun cost-control measures. Higher prices are likely to cut demand in the UK.
We believe that uncertainty does not mean "wait and see." Companies that fail to act will cede a strategic advantage. We recommend that carmakers increase scenario planning and develop agility.
Mark Gregory - Chief Economist, EY UK & Ireland
UK attractiveness survey - An attractive future
Our 2016 UK attractiveness survey, published in May 2016, confirmed another strong year attracting FDI to the UK. It did, however, also identify increased investor nervousness about the UK’s future attractiveness, mainly concerning potential changes to its trade relationship with the EU.
In response, we’ve updated our investor perceptions survey to compare the mood now with that before the referendum. The results of this, together with a detailed analysis of FDI in Europe over the last decade, provide the basis for our updated UK attractiveness report.
The results are mixed. On the plus side, there is no sign of any deterioration in investment intentions over the next 12 months. In fact, there has been an improvement in short-term sentiment since our last survey.
However, the medium-term outlook has worsened across a number of metrics and investors are concerned about how the UK’s attractiveness will develop over the next three years. The respite offered by the stable immediate outlook offers the UK Government the chance to implement policies that will maintain and grow the UK’s longer-term attractiveness.
A sector strategy is essential for shaping the UK’s approach to FDI, and to trade more generally. Once sector priorities have been identified, our discussions with investors indicate that there are five priority action areas for trade, which should form the basis for an integrated UK attractiveness strategy:
- Developing a comprehensive approach to skills
- Delivering improved infrastructure
- Signing trade deals to preserve and grow the UK’s market access
- Introducing incentives to encourage investment
- The creation of a digital platform
All these initiatives should be developed at both national and city or region levels to ensure trade continues to support UK economic performance and that the benefits of FDI are felt across the whole economy.
This integrated strategy must be communicated to investors as soon as possible, with a focus on making certain they are aware of the UK’s vision for the economy beyond 2019.
The current environment is challenging, but there are opportunities as well as threats. The UK has the chance to move decisively and to position itself for an attractive future.
Helmar Klink - Partner, International Tax Services, Ernst & Young LLP (The Netherlands)
Tax impact: Doing what makes sense
Does the UK need a FTA with the EU? Arguably not. Three of the biggest economies of the world, the US, China and Japan, do not have an FTA with the EU, yet trade very successfully with the bloc. For the UK, trade with the EU will remain far more important than trade with other economies, with or without an EU FTA. If there is no FTA, UK exporters will review their options. They will look for the least disruptive point of entry into the EU in terms of certainty on custom duties, custom procedures, import quotas and payment of VAT, and route most of their trade through this point (rather than selling directly to the individual countries). UK exporters will deal with this new reality and move on. If they can make changes to their supply chain, to further reduce costs, they will consider their options and do what is necessary.
Non-UK groups that have preferred the UK as their stepping stone into the EU market may reconsider the size and activities of their UK operations. If there is a benefit in moving operations to the continent, they will do what makes most economic sense.
UK-based foreign-owned holding companies with EU headquarters, research centers and other activities will go through a similar process.
They will ask themselves whether it continues to make sense to service the EU market from the UK, considering issues including any difficulty in finding and hiring EU talent; availability of relevant financial services; access to EU regulators and government agents; and license to operate issues.
From a tax perspective, all of this creates much uncertainty. Clearly, custom duties and VAT are key issues that are likely to impact UK exporters. Some of the higher costs may be mitigated by changes to the business structure (new EU point of entry). After Brexit, UK companies may face higher withholding taxes on passive income flows (dividends, interest and royalties) from certain EU sources. Whether corporate income tax will end up with a race to the bottom is uncertain, but lower rates and a broader tax base are certainly more than a possibility.
We expect tax policy to be high on the political agenda on both sides of the Channel.
Andrew Caveney - EY Global Leader Supply Chain & Operations
Supply chains: understand and optimize
Given that the nature of any post-Brexit trading structure between the UK and EU is still unclear, it is difficult for companies to fully evaluate the impact Brexit will have on their supply chains. For those with sales or manufacturing operations in the UK, the biggest issue will be potential increases in trade tariffs, changing product regulatory requirements and greater export administration costs and logistics delays — both for raw materials and finished goods. In addition, UK manufacturing cost inflation arising from the declining value of the pound will continue to impact operations. Furthermore, the loss of EU R&D grants and other investment grants, unless replaced by the UK government, will also increase the cost of operating in the UK. However, there are opportunities as well. Companies with centralised supply chain operating models and trading hubs, may see continued advantages to UK locations if the UK government continues to lower corporate tax rates. In addition the devaluation of the pound also brings growth opportunities for companies with exporting operations.
Once the UK begins to negotiate its withdrawal from the EU, companies can start to assess the likely trading model and implications on their operations. It is very unlikely that the UK and EU will be able to conclude a full agreement within the two year exit timeframe envisaged.
Understanding any transitional trading agreement will be critical for companies as they evaluate the impact on their supply chains.
In addition to Brexit, other external factors will also influence European supply chains. First is the accelerating adoption of digital and disruptive technologies driving new business models, channels to markets and automation opportunities throughout the supply chain, commonly referred to as Industry 4.0. Global trade volumes and the continued move east will also affect the structure of manufacturing networks.
Governments will also influence the use of centralised supply chain operating models designed to optimise tax structures; tariffs may rise as governments become more protectionist; and economic volatility will remain.
These factors will drive significant changes in European supply chains, so companies need to urgently factor in both Brexit and these other external trends into their European supply chain strategies. Given the lack of clarity on Brexit and some of these other external factors, companies should run likely scenarios to understand how to mitigaterisks and future-proof their supply chain designs to continue to drive a competitive advantage from their operations. Those with UK operations should now be modelling the impact of the UK moving to WTO trade tariffs for finished goods and raw materials. This is the worst-case scenario that could be enforced in two years time, when the UK may exit the EU. Hopefully, more favourable trade terms within a transitional agreement will exist.
Olivier Macard - EY Global Retail Sector Leader
Retail: Reconsidering strategies*
Consumer confidence declined in the UK after the referendum, but is now higher than before the vote and consumer spending has been growing. However, the fall in sterling makes imported products, including those from mainland Europe or that include significant EU-made components more expensive for Britons. It also pushes up inflation, and encourages manufacturers to reduce the size of everyday treats, such as confectionery to avoid raising prices.
In the short term, UK supermarkets will be hit, because they source much of their fresh produce from the EU. For example, much of the butter and cheese sold in UK stores is made from milk produced elsewhere in the Europe. However, as supply chains are readjusted, UK stores may place emphasis on local buying or on procuring supplies from non-EU producers. Outside the framework of the Common Agricultural Policy, retailers may increase purchases from efficient global producers at world market prices. For example, New Zealand farmers may gain market share: EU farmers may lose out, and be forced to either improve efficiency or find new markets for their produce.
Top-end retailers in the UK may draw clear benefits from Brexit. Sterling weakness may encourage customers from China and the Middle East to buy luxury products in the UK, squeezing rival continental retailers as well as EU luxury suppliers.
Sterling devaluation also makes buying online from the UK more attractive. But UK-based online retailers may ultimately face more obstacles in selling to EU27 countries. For retailers, Brexit may prove an opportunity to rethink many supply chain strategies, offering opportunities to expand global sourcing and bring new, more affordable and perhaps innovative brands to the UK market. That will put pressure on existing EU suppliers. So retailers may need to reconsider a range of core strategies, from sourcing and supply chain to digital data management.
Retailers putting livelihoods at risk by delaying post-Brexit investments warns Worldpay” - World Pay website (accessed 15 December 2016).
“Brexit’s Impact on the British FMCG Retail Landscape” - Kantar Retail website (accessed 6 January 2016).
Mats Persson - EY Executive Director, Performance Improvement
Trade and supply chain: Understanding the trade-offs
From a trade and supply chain standpoint, the vote in favor of Brexit involves potential changes for European businesses.
Currently, as part of the EU, the UK enjoys unfettered access to the bloc’s single market without tariffs or quotas, and vice versa for EU countries.
The EU is a large trade partner for the UK, accounting for 44% of exports and 53% of imports in 2015. The central scenario remains that the UK and EU strikes a Free Trade Agreement of some sort, which would involve no or limited tariffs. However, if the UK leaves the single market without a trade deal with the EU, trade between the UK and the EU would be subject to average most favored nation tariffs applied by the EU on other WTO members. These range from: cars 9.8%, chemicals 4.5%, textiles 6.5%, beverages and tobacco 19.4% and transport equipment 4.3%. Even with an FTA, exporters and importers would still be subject to new rules and customs procedures, such as rules of origin.
From an EU perspective, the UK is an important part of the European supply chain, both for manufacturing goods and services such as finance and media. The Netherlands, Ireland, Belgium, Germany and France are likely to be most impacted in trade terms by a UK departure from the EU.
In case of the Netherlands and Belgium, both are major trade hubs with a high degree of exposure to the UK market. For Ireland, the UK is an important export destination.
For European boardrooms, Brexit raises question not just over the future UK-EU trade relationship but also those with other trade partners.
Following Brexit, the UK will lose its preferential trade relationships with over 50 countries with which the EU currently has FTAs, though it will almost certainly seek to grandfather many of these. Britain leaving could also trigger calls for compensatory measures from countries with whom the EU currently has FTAs with, given that the EU market will shrink.
However, the UK will also be able to run its own trade policy, which offers the chance to strike quicker FTAs with countries such as the US, New Zealand, Australia and emerging economies. This could open up new markets for UK-based businesses.
- “Beyond Britain: The global implications of Brexit” HSBC Global Research, 24 June 2016, via Thomson Research
- “Brexit: What does it mean for Europe?” - Euler Hermes (May 2016)
- “Economic Analysis — Brexit: Export Opportunities, Not Just Risks” - BMI Research (18 July 2016)
- “Brexportgeddon?” - Oxford Economics (March 2016)
- “World Tariff Profiles 2016”, World Trade Organization, 2016.
Dernières nouvelles du front de l’emploi : 2015 laisse entrevoir les signaux faibles d’une reprise
David Cousquer, Président de l'Observatoire de l'emploi et de l'investissement Trendeo
Depuis 2009, l’Observatoire de l’emploi et de l’investissement Trendeo prend le pouls de l’économie française en temps réel grâce à la collecte et à l’agrégation des annonces de créations et de suppressions d’emplois collectives sur l’ensemble du territoire, avant de les recouper à d’autres indicateurs statistiques.
2015 laisse enfin poindre les signaux faibles d’une reprise, qui reste cependant fragile et invite à la prudence. La dernière note de conjoncture de l’Observatoire Trendeo révèle 3 bonnes nouvelles … et 3 moins bonnes.
Commençons par les moins bonnes nouvelles :
1. Hors secteur public, le solde net des annonces de créations et suppressions d’emplois collectées à travers l’observatoire Trendeo est inférieur à ceux de 2010 et 2011. La reprise qui a suivi immédiatement la crise de 2008-2009 a été plus forte que celle que nous connaissons actuellement.
2. L’industrie manufacturière reste le principal foyer de pertes nettes d’emplois. Les créations d’emplois y ont d’ailleurs reculé de 5% en 2015, à rebours de la tendance générale. S’agissant d’un secteur à forte valeur ajoutée, qui représente de plus la part principale de nos exportations, cela reste un point noir de l’économie française.
3. Le mois de janvier 2016 n’a pas été bon, avec une baisse de 34% des créations d’emplois annoncées, et une hausse de 37% des suppressions annoncées. Les variations mensuelles sont peu significatives, mais ce résultat s’inscrit dans un contexte international toujours perturbé, et des replis boursiers importants.
Et finissons par les meilleures nouvelles :
1. Les annonces de créations d’emploi augmentent de 30% par rapport à 2014. Cela marque la fin d’une tendance continue à la baisse des créations d’emplois, que nous constations depuis 2010. Jusqu’ici l’amélioration du solde net des emplois créés et supprimés provenait entièrement de la baisse des suppressions d’emplois. Cela relevait d’une économie de résilience plus que de croissance. En 2015, les créations d’emplois annoncées sont enfin à la hausse, que l’on prenne ou non en compte les annonces du secteur public et des administrations.
2. Les annonces de suppressions d’emplois collectées diminuent de 16%, comme en 2014. C’est une tendance qui n’a été interrompue qu’en 2012. C’est dans les activités industrielles que la réduction est la plus forte en valeur absolue (6 500 suppressions d’emplois en moins), et dans les points de vente que la baisse est la plus forte en valeur relative (baisse de 40% des suppressions d’emplois).
3. Le solde net des annonces de créations et suppressions d’emplois est le meilleur depuis 2009, avec près de 46 000 emplois nets créés, créations et suppressions d’emplois évoluant toutes les deux dans le bon sens. Une situation inédite qui ne s’était produite qu’en 2010.
Amitabh Kant, Secretary, Department of Industrial Policy & Promotion (DIPP), Ministry of Commerce and Industry, Government of India
India is set to become a nation of job creators rather than job seekers.
There is a new vibrancy in India, a new energy. We have opened up all the major sectors to FDI and are the world's most open economy. Every sector, except for multibrand retailing, is now open. This has contributed to a 48% upsurge in FDI this year in dollar terms.1 I expect this to double next year.
The Government is determined to make India an extremely easy and simple place to do business. Our first priority is to do away with the many procedures, rules, regulations and red tape built up over the last 60 years. Secondly, we need to introduce consistency, predictability, transparency and clarity in all our policies. This is especially urgent for taxation matters — although, in cases where the tax department has been aggressive, the judiciary has set things right. On several occasions, the Government has emphasized the need for furthering a non-adversarial tax regime. A special memorandum has also been issued by the Central Board of Direct Taxation in this regard. Today, I find the tax department far more receptive and positive. Thirdly, India needs to develop world-class infrastructure.
In terms of growth areas, infrastructure is a sector with immense potential. Others include defense and aerospace manufacturing. There are also huge opportunities in automotive design, assembly and, pharmaceuticals and food processing. We also need to focus on labor-intensive sectors such as textiles, leather, gems and jewelry.
Our Make in India initiative sets out to help India become a hub for design, innovation and manufacturing. We have identified 25 sectors where India has core competencies to become a global champion. We are driving one- and three-year action plans across ministries so that we all work as a team to make India a manufacturing destination.
Aided by measures taken in this year's budget, we will see India become a nation of young innovators. I believe that India will see a huge number of start-ups in both digital and manufacturing in the years ahead, and that India will become a nation of job creators rather than job seekers.
India has been a reluctant "urbanizer" but, over the next three decades, 350 million Indians are likely to move into cities. The Government, with its 100 Smart Cities Program, has a unique plan to create 100 planned, sustainable and innovative smart cities, driving growth and India's ability to become a technology leader. This will facilitate growth in both manufacturing and services in urban areas.
Simultaneously, India needs a second green revolution in agriculture, achievable by adopting global best practices. Only by developing the services, manufacturing and agriculture sectors will India be able to achieve the 9%–10% growth it is preparing for. In my view, this will bring terrific opportunities for foreign investors across the board.
1 "48% growth in FDI equity inflows after Make in India," The Department of Industrial Policy & Promotion, Government of India website, dipp.nic.in/English, 15 July 2015.
Dr. S. Jaishankar, Foreign Secretary, Ministry of External Affairs, Government of India
Administrative reforms and a simplification of approval processes have contributed to improved business sentiment.
In an environment where global growth has been modest, India today stands as a bright spot among the global economies. The impact of global developments on the Indian stock market has been “transient and temporary,” and the fundamentals of the Indian economy remain strong. The International Monetary Fund (IMF) has projected a growth of 7.3% for India in 2015.
The results of the EY’s 2015 India attractiveness survey are a strong endorsement of the Indian growth story and the policy initiatives of the Government.
Administrative reforms, a simplification of approval processes including online project approval and easier environmental clearance procedures have already contributed to improved business sentiment in India and an increase in the ease of doing business.
The manufacturing sector is showing signs of revival, aided by the Government’s Make in India initiative, which was launched globally on 25 September 2014. Policy initiatives towards unlocking coal and other mining activity, and the liberalization of FDI limits in the railways, insurance and defense sectors have improved India’s medium-term growth prospects. FDI flows for fiscal year 2014–15 have already topped US$44b.
The Ministry of External Affairs, through its 183 Indian Embassies, High Commissions and Consulates, has been at the forefront of promoting India as a business and investment destination. Our diplomatic missions and posts are engaging with potential investors and will continue to proactively assist the investor community through briefings and seminars on the Indian economy, provide updates on government policies and initiatives aimed at increasing the ease of doing business.
We hope that readers will find the results of the EY’s 2015 India attractiveness survey useful in making their assessment of India and in firming up their investment decisions. The results of the survey clearly underline both the strong economic fundamentals of the Indian economy and India’s position as the most attractive investment destination in the world
Mark Otty, Area Managing Partner, Europe, Middle East, India and Africa (EMEIA), EY
Think about what India might add to your global business
- How has India evolved as an attractive investment destination and what do you notice when talking to global investors about India as an emerging market?
- What do you believe are India’s key strengths that drive investment?
- What should be the focus areas for India to become a top manufacturing hub in the coming years?
- What would you advise foreign companies about succeeding in India?
There’s no doubt that interest in India has increased. In part, this is due to challenges in some of the other BRICs and high-growth markets. More significantly, investors increasingly see the potential and understand the fundamentals. The new Government has both generated interest and improved the investment climate.
Many commentators focus on the size of the population. This is clearly a great asset, but it does not reflect the true potential. The people I meet in India are well educated, ambitious and entrepreneurial. Yes, there is a rapidly growing middle-class, but it is the quality of the people that is even more impressive than the quantity. In addition to the talent pool and size of the consumer market, India’s many world-class businesses that are adept at creating markets and innovating industries greatly contribute to its appeal.
I would suggest investment in infrastructure is a key priority. Alongside this would be accessing technology through acquisitions and partnerships.
It is important to have a good advisor; somebody who really understands the market, including the legal and regulatory environment. Spend time in India, absorb the energy and the culture. Think about your business in the Indian market as well as what India might add to your global business.
Keval Doshi, Partner — India Region, Ernst & Young LLP
Make in India set to be a game changer
- How are global investors responding to the Make in India program?
- Which sectors are best placed to benefit?
- What reforms should the Government consider to strengthen Make in India?
- The introduction of GST will make Indian manufacturing more competitive. What should the Government keep in mind when designing it?
The program, designed to make India a global manufacturing leader, has stirred interest among global investors, witnessing agreements with China, the US, Germany and other countries during the Prime Minister’s visits. But success will stem from a comprehensive manufacturing strategy that focuses on import substitution and exports, as well as on meeting domestic consumption.
All manufacturing-led sectors, including automotive, technology, pharmaceuticals, telecommunications and defense, can expect to benefit. But the broader aim is to drive the economy to the next level of growth, so extractive industries and services should also flourish in the years ahead, driven by manufacturing demand. Infrastructure and financial services will need to develop in tandem, making these sectors ones global investors should watch out for.
The Government has announced several measures to facilitate manufacturing. Cutting corporate tax rates and deferring the General Anti-Avoidance Rules (GAAR) are helpful, and enhanced fiscal incentives for building big modern plants will make manufacturing in India competitive. Reducing logistics time and cost through port modernization, building dedicated freight corridors, introducing business-friendly labor policies, and providing land and power at competitive prices will enhance India’s competitiveness. Steps taken toward a stable, non-adversarial tax regime can also help attract and retain businesses in India.
Success can only be achieved if execution is tightly monitored. Due importance also needs to be given to the role of the private sector. Fostering entrepreneurship and backing investment in technology and innovation with a business-friendly regime would help ensure sustained long-term success.
Reducing the cascading effect of taxes by providing seamless credit for input taxes is essential to cut product costs and enhance India’s manufacturing competitiveness.
Philipp von Sahr, President, BMW India
India can compete with the best global players when it comes to quality and cost efficiency.
The BMW Group has always looked towards India with a long-term perspective, and our strategy is based on an inclusive approach. If you want to benefit from the dynamics of the Indian market, you need to act today.
According to our "Production follows the Market" approach, we took a bold step in our Asia strategy. We established the BMW India headquarters in Gurgaon, the BMW plant in Chennai, a training center in Gurgaon and a parts warehouse in Mumbai. We have continued to build our operations in India in a systematic way. To date, the BMW Group has invested over INR4.9b (US$82m) in BMW India.
BMW Group India has constantly increased the number of its locally produced car models. Presently, the plant locally produces eight car models and has an annual capacity of
14,000 units. BMW India has a network of 39 sales outlets in the Indian market, and this will be increased to 50 outlets.
The BMW Group has further strengthened its commitment to the Indian market by participating in the Make in India initiative. The level of localization at the BMW plant in Chennai has been increased to as much as 50%. Strong localization benefits BMW in terms of cost optimization and value addition. At the same time, it creates business and profitability for our suppliers, resulting in a win-win situation. Additionally, the International Purchasing Office (IPO) in Gurgaon identifies and assesses potential suppliers in India for sourcing production material (components) as well as IT and engineering services to the BMW Group International Production Network.
In my experience, India can compete with the best global players when it comes to quality and cost efficiency. The Make in India initiative is a very positive step by the Government toward encouraging business in India. India is a growth market and presents huge opportunities both in terms of demand and supply. The initiative has created a certain positive vibe in the business environment. Businesses are ready to take this forward and now need to be supported with on-ground facilitation. The availability of the right resources, manpower and skills is present. We believe that policies promoting ease of doing business will further enhance India’s viability as a global business destination and will attract new investors toward setting up operations here. At the same time, existing investors will rethink before shifting and outsourcing operations to other countries.
A stable, consistent and transparent tax regime and policy framework helps businesses to create and implement a long-term strategy leading to sustainable and profitable growth.
The Indian market has witnessed tremendous growth in the last decade. Though the Indian luxury market is still at a nascent stage, it has immense potential with rising purchasing power, growing aspiration for luxury brands and evolving lifestyles. Considering that India has a population of over one billion, there is more potential for growth.
Hugo Barra, Vice President, Xiaomi Global
Digital India makes doing business in India much more convenient and opens up a whole new world of possibilities.
India is a thriving country with a large population that is still very young and adopting smartphones at a fast pace, which leads to amazing opportunities for innovation in mobile internet. IDC predicts that, by 2017, India will overtake the US to become the second-largest smartphone market globally. The start-up scene is also growing rapidly, and venture capitalists are starting to take note of the immense potential in the country. Xiaomi wants to be an important player in this process as a hardware and software technology vendor, an internet services provider, an e-commerce business and a major investor in the local start-up ecosystem.
Digital India makes doing business in India much more convenient and opens up a whole new world of possibilities. India is an extremely important market for us, and manufacturing is just one of the ways of showing our commitment. We plan to have a whole suite of Mi services available to fans in India, and have already started to invest time and manpower to make this happen. India is the first global market outside of China to enjoy our Visual IVR feature on the Mi user interface, saving time for users when navigating interactive voice response systems during customer service calls. Xiaomi launched Mi 4i, which was customized for Indian consumers, and also announced features on our MIUI software that specifically cater to local needs.
The Make in India program has played a critical role in kick-starting local manufacturing. It has given rise to initiatives that are designed to facilitate investment, foster innovation, enhance skill development, protect intellectual property and build best-in-class manufacturing infrastructure. This means that the various government departments respond even faster, making the process of kick-starting local manufacturing much easier. This has helped to motivate companies like ours to invest in India with local R&D and local manufacturing, among other efforts.
By responding to the Make in India program and manufacturing in India, we will reap the benefits of streamlining our supply chain, resulting in working capital savings. It also means that we are woven into the fabric of India and can come closer to consumers in India.
We are already assembling handsets locally in Andhra Pradesh, with components being imported as the mobile component manufacturing ecosystem does not currently exist in India. We do believe that this will change over time as the mobile handset component manufacturing ecosystem here evolves. When that happens, Xiaomi will certainly be open to sourcing components locally. It is our long-term plan to have all phones sold in India to be made in India.
Susanto Banerjee, Head Finance — Global Operations, Mylan
The pharmaceutical market is intensely competitive, but has huge potential.
The pharmaceutical industry is a step ahead when it comes to adopting India as a research and manufacturing base. Foreign investment can help our industry become more efficient and cost-effective with improved technology and processes, enabling better quality and cheaper drugs. FDI and portfolio investment in pharmaceutical businesses in India require prior approval by the FIPB and are subject to conditions. But, in my view, this has never hindered investment in the sector.
For an international company seeking to maintain global quality standards, the ease of doing business in any market depends on the strength of the regulatory framework in that market. A robust regulatory framework can give better access to world-class medicines to the consumer and, at the same time, ensure higher competitiveness.
The pharmaceutical market in India is big, and it is growing fast. The future growth potential is significant, so the business opportunities are sizable. And India’s competent and scalable workforce is a definite advantage. Leadership talent has developed over the years, and investors worldwide have realized that India produces efficient global leaders in good numbers. English is a common business language in India, and that helps in integrating Indian operations with global platforms.
Further simplification of taxes will attract and retain more investment. In particular, clarity on supply chain taxation, tax relief on clinical research, simplification of transfer pricing taxes, rationalization of reinvestment of profits by local entities and simpler profit repatriation procedures, will encourage global investors. India needs better dispute resolution and judicial systems.
Investors should be careful to retain local leadership talent and must introduce global policies with a local flavor. It is time for investors to recognize that the local business environment has vastly improved. The pharmaceutical market is intensely competitive, but has huge potential.
Raju Narisetti, Senior Vice President — Strategy, News Corp
Investors must choose partners with the right values, ethics and business fit.
I think the scale works in India’s favor when compared with a lot of other countries. India is attractive from an investment point of view because there are a lot of factors that are going right. There is a stable Government, a Government that is generally perceived as being friendly to business.
Anybody believing in the fundamentals of India is going to be bullish over the next decade or so.
The Government has articulated consistent, transparent, steady and non-retroactive tax as a key priority. That and reducing the paperwork burden on businesses are the two areas where the Government can actually follow through on making it easier to do business in India.
The fact that there are now tens of millions of Indians who will live their lives on mobile is opening up a lot of opportunities that were not there before. Digital information can actually be a level playing field between India’s haves and have-nots, between rural and urban. Transparent, accurate and accessible information enables individuals to make better decisions, and there is an appreciation of the social impact that digital can have. However, India’s digital ambitions run far ahead of its current digital infrastructure, and private-sector support will be needed.
When you think about India, you still have to think of it being a hybrid digital model, with strong online and offline connections. The entire business model has to be thought through and tweaked a bit to work in India. I think that long-term macro digital conditions in India are great, and that those who have a well-thought-out long-term strategy will find success in the country.
As with any other country, India comes with its set of challenges. In the technology sector, people with the higher-level skills sets critical for digital business, such as in design and user experience, do not come cheap.
Investors need to spend a fair amount of time in the country, really understanding it. And they must choose the right partners with the right values, ethics and business fit. No matter how good the business model is, execution remains the most important differentiator between hope and reality.
Dinesh Malkani, President, Cisco India & SAARC
India offers huge potential for technology innovation.
India's domestic market is picking up and there's a marked improvement in our investment climate. We have to give credit to the Government for its engagement with industry, as well as for actively addressing structural challenges.
For the IT industry, India offers a large and growing market, a young technical workforce and globalizing companies. Cisco's deep presence in India is testimony to the country's attractiveness. We came here for the skills, stayed for the innovation, and now we are enabling transformation. We are betting big on India and we want to help contribute to the country's transformation.
The Indian IT market stands at US$73b and is expected to grow at 10% to become the second-largest market in the Asia-Pacific region by 2018. Indian firms have a huge opportunity to deepen their competiveness as they digitize themselves.
The nation is at a digitization inflection point thanks to the Digital India vision. We have a massive ecosystem of IT development and production in our backyard. About 10 million Indians work in the IT industry, and it is central to the social and economic transformation in the country. India is the fourth-largest base for start-ups worldwide and, with 1.5 million engineers graduating annually, there is huge potential for technology innovation. We can leapfrog to digital infrastructure. As smartphone penetration rises, we expect around nine billion mobile app downloads in 2015. There are more than two million app developers in India — reaching three million by 2017.
Foreign investors can leverage this steadily growing industry and ecosystem. The Government has rightly recognized the need for a simple and transparent tax regime. Furthermore, efforts in this direction will only boost investor confidence.
Dr. R. Seetharaman, Chief Executive Officer, Doha Bank
India has a wide range of opportunities for international banks.
Government reforms are likely to have a big impact on financial services in India. International banks can now reinforce their presence in the country and, as India's businesses develop, international banks can profit from the growing economy and infrastructure construction, and help develop international trade. International banks should find opportunities in trade finance, export financing and financing for long-term projects, as well as in treasury management and investments.
India also has a surging population of high-net-worth individuals, so there are opportunities in wealth management. And as middle-class consumers spend more, they will want loans to support their spending. International banks should be able to benefit by offering a wider range of banking products to both retail and business clients in India.
Meanwhile, raising the limit on foreign ownership of insurance businesses to 49% should also attract more FDI to financial services. As the Indian insurance industry expands, it will need additional capital — and the new regulations will give us the much-needed flexibility to raise this capital. International insurance companies are expected to take advantage of the changes, which should result in up to US$10b of international capital inflows.
Inward investors will also benefit from reforms, making it easier to do business, creating a "single window” for administrative procedures and providing clarity in government policy. The Government has already reduced the number of documents needed for foreign trade and enabled online applications for environmental clearances. More clarity and better coordination between national and state governments can further stimulate investments.
Meanwhile, wider economic initiatives, including the recent benchmark interest rate cut by the Reserve Bank of India, should help stimulate growth. Lower rates are being passed on to borrowers. The ending of state control of diesel prices and the mining amendment bill should help draw in more FDI, and Indian banks will benefit from all of these developments.
So overall, I think the prospects for rising FDI in India are good, and that it is important to attract more investment into financial services to help finance India's economic growth.
Dong Seok Choi, Regional Chief Director General for South Asia, Korea Trade-Investment Promotion Agency (KOTRA)
The timing is right for the Make in India program to attract foreign investment into India.
Apart from the positive economic indicators — India is one of the fastest-growing major economies in the world today and the third-largest economy on purchasing power parity terms — India's big strategic advantage is its geography.
India is placed as a strategic bridge for Africa, the Middle East, SAARC and ASEAN Emerging Markets. To the west lies the huge Middle East and Africa market of 1.2 billion people; to the east, the market of 1.4 billion people in China. And, as we know well, India itself offers a huge domestic market of 1.26 billion. For Korean investors, this means that India can be a springboard into new emerging markets across the globe.
Furthermore, India is working to transform itself into a major manufacturing hub. The Make in India program ushers a new wave of entrepreneurship, resurging India and accelerating economic growth to attract foreign investment into India.
The Government's initiatives aimed at improving India's ease of doing business, with the states competing against each other, is an important step for attracting foreign investors. Along with this, the Skill India campaign and 100 Smart Cities project to enhance infrastructure will improve the country's manufacturing capacity. With stable government policies and the proactive approach of the Modi Government, I see India building a foothold as a manufacturing hub within 10 years. But competition will come from other emerging markets, in particular Vietnam, Indonesia, Mexico and Brazil.
To make the most of opportunities in India, Korean investors should broaden their focus in India beyond logistics, marketing, sales and services. They should seek to build their global supply chains through joint ventures, M&A, technological alliances and upstream investments.
The most important sectors for Korean investors include automotive, energy and transport, and it is necessary to move up the value proposition in sectors such as defense, aerospace, liquefied natural gas (LNG), shipbuilding, smart cities, high-speed railways and nuclear power generation. It is also essential to have a heavy focus on capital-intensive projects and medium and high technology.
India is a very promising market as a whole and offers remarkable opportunities. It is important to localize your business model and be aware of the specific needs, tastes and preferences of Indian consumers. To succeed, Korean businesses must overcome the culture gap and develop an understanding of the Indian mindset.
Gaurav Taneja, Partner & National Leader — Government & Public Sector — India Region, Ernst & Young LLP
States race to improve their attractiveness
- In the first year of a new national Government, what have India’s states done to become more investor friendly?
- Historically, the economically advanced states in west and south India have attracted the most FDI. Are others starting to catch up?
- Location choices can make or break mega investments. How do you help clients find the right location for their business when setting up or expanding in India?
With the pro-reform Government at the center, the state governments have also embarked on adopting policies and processes to attract investments. To help improve India’s ranking in the World Bank’s Doing Business report, the DIPP has recently issued a state-by-state report ranking the states on their implementation of business reforms. Some of the top-performing states, such as Rajasthan and Madhya Pradesh, are among those taking the lead in reforming labor laws by simplifying and reducing registers and returns. Maharashtra, Chhattisgarh and Jharkhand have moved to improve “single window” clearance, online compliance, investor support, land availability, construction permit delivery, environmental and labor compliance, and so on. In the south, Andhra Pradesh and Karnataka have new industrial policies, while Telangana has launched its Telangana State Industrial Project Approval and Self Certification System (TS-IPASS).
Changes in attractiveness can take three to five years to deliver results in the form of foreign-owned businesses trading in a particular state. States such as Madhya Pradesh, Rajasthan, Chattisgarh, Jharkhand, Uttar Pradesh and Odisha feature in the top 10 states in ease of doing business rankings and are actively seeking investors.
Every industry and operation has its own location needs. But choices hinge upon
access to three elements:
- Inputs (land, water, power, raw materials, skilled manpower and suppliers)
- The target market (domestic consumers, logistics and distribution networks)
- The business ecosystem (industrial policy, permits, labor relations, incentives, industrial infrastructure, ports, roads, etc.)
The Government wants everyone to benefit from growth, so it has started the Skill India initiative to provide technical training, and has set up a Ministry of Skill Development and Entrepreneurship to coordinate training nationwide and reduce the gap between skilled labor demand and supply. It is aided in these initiatives by three government bodies: the National Skill Development Agency, the National Skill Development Corporation (NSDC) and the National Skill Development Fund, and it is working closely with 33 sector skill councils and 187 training partners registered with the NSDC.
Sudhir Soni, Partner in an Indian member firm of Ernst & Young Global
New accounting standards will aid investors
- Do you believe that India’s revised Accounting Standards (Ind AS) will help cross-border investment flows?
- Is Ind AS identical to IFRS?
- Do Indian subsidiaries of foreign companies now need to draw up their accounts using Ind AS? And what needs to be kept in mind when switching to Ind AS?
- How does the new Companies Act 2013, which came into force last year, help foster investments?
Yes. The notification of Ind AS aligns with International Financial Reporting Standards (IFRS) and is a big leap forward. Indian accounts will now provide transparent and reliable financial information in a way that is familiar to international investors. This will facilitate cross-border capital flows, cut the cost of capital, and help establish equal and trusted international business relationships because foreign firms will feel more comfortable dealing with Indian companies.
Ind AS is an accounting framework based upon IFRS, but there are some variations. One important difference is that Ind AS allows companies to carry property, plant and equipment at existing carrying value under Indian generally accepted accounting principles (GAAP). Further, Ind AS provides the option to continue the capitalization of foreign exchange differences arising from long-term foreign currency monetary items recognized immediately, before Ind AS becomes effective. So it is vital for accounting policies to be evaluated effectively, both under the transition standard (Ind AS 101) and under other accounting standards, to ensure that corporate financial reporting is closer to IFRS.
Indian subsidiaries of foreign companies covered in the “road map” also need to
present their financial statements under Ind AS. This gives them opportunities to reduce differences in accounting when reporting to parent companies producing consolidated accounts and eliminate duplicated effort. However, implementation of Ind AS 115 (on revenue from contracts with customers) and Ind AS 109 (on financial instruments) in India earlier than the rest of the world may call for added adjustments in group reporting.
Strengthening corporate governance, enabling financial reporting under IFRS-converged accounting standards, and reporting by board and auditors on internal financial controls, which are required by the Companies Act 2013, should all add to investor confidence. Companies now have to appoint independent directors, rotate directors and auditors, and face tough punishments and penalties for fraud. Further changes, yet to be implemented, will simplify restructuring, including mergers and demergers, cross-border mergers and fast-track mergers — another plus for investors.
Anant Maheshwari, President, Honeywell India
ASEAN countries can offer strong competition to India in terms of attracting investment.
Investment flows into India this year are higher than in the previous year and, hopefully, this trend will continue. However, how does India compare with other regions, such as ASEAN or China, in attracting investment flows? That is the benchmark that India should look at when considering the quantum of FDI inflows.
Collectively, ASEAN countries form an economy similar in size and growth rate to India. Given the speed at which they are moving — and their proximity to China — these countries could be a strong competition to India in terms of attracting investment flows.
Make in India is a great initiative and necessary for India to grow. Honeywell is already "making in India," with seven manufacturing facilities and five technology development centers. Around the time Prime Minister Modi rolled out the Make in India program, Honeywell announced its tie-up with Tata Power SED to coproduce our TALIN inertial land navigation technology to offer the Indian Armed Forces a new choice for locally produced, inertial navigation for the first time.
Partnerships such as ours with Tata Power SED will be critical for the success of Make in India, and we are encouraged by the Government's efforts to attract foreign investment into the country. This will need to continue in order for Indian companies to gain access to the technology, skills and international markets required for sustainable defense growth.
There are two ways to drive Make in India: one for all goods and products for domestic consumption, and the other for exports. We have a large market to drive Make in India for goods and products to be consumed within India. I think that is much more sustainable, and that's what China is also moving toward now. It will also then allow us to do the right kind of manufacturing, rather than getting into anything and everything that may come to India. The China model of primarily driving manufacturing for export is something that India should strongly reconsider before replicating.
When you look at the Government's reforms process, it is clear that GST could have a much larger lift into the economy than what is perceived out of it. Over time, it will truly make India one integrated market. It is, therefore, among the biggest reforms that the Government can put through. It is important to have clarity and consistency around India's tax laws. Finally, all supporting laws that are required for infrastructure development also need to be looked into.
Amit Khandelwal, Partner and National Leader — Transaction Advisory Services — India Region, Ernst & Young LLP
M&A and alliances can help manage India's complexities
- Why would a global corporation consider an acquisitive growth strategy in India?
- What must a company bear in mind when seeking to enter India via an acquisition or joint venture?
- Which sectors are seeing most inbound transactions and how will that evolve?
Build versus buy is the classic dilemma facing any decision-maker moving into a new market or expanding operations in an existing one. Global corporations tell us it is India's domestic demand potential that drives them to consider operations here. But they also recognize India's tremendous diversity and resulting complexities. Buying an established business or brand, or joint ventures, can help manage these complexities. Setting up a pan-India distribution network or establishing a consumer brand in multiple states can be slow and very costly. Also, in India, you need to scale up very rapidly, whether in consumer or business-tobusiness. In technology, for example, that requires speedy regulatory approvals and a lot of employees with the right skills. An acquisition or joint venture may be the appropriate strategic choice.
It is vital to have the "mindset for a true partnership," regardless of the form of relationship with any local entity. Too often, we have seen transactions fall through when global investors are not mindful of this aspect. Detailed and independent due diligence from several experts is essential too to avoid surprises later. Valuation takes up considerable mind space, but regulatory and tax treatment of M&A and joint ventures can have significant repercussions. We also believe India's unique nuances make it essential to have a local team supporting entry and managing post-merger integration.
Pharmaceuticals as well as media and entertainment are leaders in disclosed deal value. But by volume, retail and consumer products and technology are the champions. We are seeing interest emerging in areas such as e-retail and social media analytics. Expect more deals here, and in digital marketing and publishing. Reduction of FDI restrictions has led to a sudden upsurge in insurance and medical equipment and, if the reform momentum builds, then defense, railways and real estate should be next on the radars of foreign investors.
Harishanker Subramaniam, Partner and National Leader — Indirect Tax Services — India Region, Ernst & Young LLP
Companies must plan carefully for GST introduction
- Why is the introduction of GST important for FDI?
- What steps can foreign companies take to be GST-ready by 1 April 2016?
- What are businesses' concerns about the proposed GST and how could these be addressed?
The proposed introduction of GST supports the aims of the Make in India program. GST is expected to simplify the existing multiple indirect tax structure, improve tax efficiency and make compliance simpler. That will encourage global companies to explore manufacturing in India for both domestic consumption and export markets, creating a significant opportunity for FDI inflows.
The GST tax reform will have an enormous impact on foreign companies in India across indirect taxes, supply chain, technology, compliance, accounting and reporting, and change management.
Companies will need to understand how their GST liabilities will compare with today's indirect taxes comprising customs and excise duties, VAT and service tax. They need to make an indirect tax impact assessment and model such impact on their supply chain to see how pricing, margins, working capital and cash flow across procurement and sales. GST will force companies to review their supply chains and identify optimal solutions for the GST regime. The business impact assessment would also identify potential areas of concern, such as tax rates, place-of-supply rules and compliance.
Global companies will also need to modify their Enterprise Resource Planning (ERP) systems to handle tax or business processes change and compliance under GST. Though ERP solution providers will update their systems to handle GST, companies will have to adapt them to their business models, and test to ensure they work smoothly.
Companies must manage this massive change across many internal stakeholders, including areas such as accounting, reporting and controls, to be GST compliant.
The non-creditable levy of 1% origin tax on interstate supplies of goods (including transfers of stock) outside the GST chain in the proposed GST design needs to be reconsidered. Latest indications suggest that the Government has recognized the concern of the industry, and it is expected that the cascading impact of this levy will be mitigated in the law.
A wider tax base and subsuming of all levies will help eliminate cascading taxes and result in a moderate GST revenue neutral rate. The exclusion of petroleum products, real estate and power needs to be reconsidered. Exclusion of electricity duty and various levies is another area of concern.
Prashanth Nayak, CEO, Yazaki India
Incomers will have to learn new ways of doing new things in India.
I feel very bullish about India. Investors have started to feel that India will become an easier, more promising and more profitable country in the next two years or so.
I think that India will be among the top three markets worldwide in almost every sector over the next 6 to 10 years. The struggle for India is that we don't have enough visibility. There is much caution, and there are limitations and constraints. But in the next 6 to 10 years, India can fundamentally transform its global market share. It is important that companies start preparing for this now, in order to be among the early birds participating in this growth story.
In automotive, Tata Motors, Mahindra, Bajaj Auto, Hero Motors and TVS Motor Company have established engineering capabilities and are offering products far below the prices at which multinational automotive manufacturers will do business in India. Incomers will have to learn new ways of doing new things in India — and that will reinforce the attractions of using India as a global hub. Similarly, car assemblers or component makers cannot ignore India.
India is a market that will decide whether you continue to be number one, because large market shares are unlikely to be achievable in Europe, the US or Japan.
The Government has earnestly started on a Make in India program. However, greater clarity on policies and increasedfocus on infrastructure will go a long way in giving investorsthe right ecosystem to thrive. Also, I think labor reformsand skill development are other areas to consider.
Foreign investors should be clear that India is not another China, so I think it is very important to come here with a particular long-term vision. Also, to understand India, you need to be "in" India. Opportunities cannot be judged with presentations and spreadsheets.
Henri Malosse, President, European Economic and Social Committee (EESC)
I’m convinced that if Europe wants a future, it must regain the confidence of its citizens. And there’s only one way to do that: by making Europe work for its people, responsive to their needs and made real by its attention to their concerns. That’s the policy I’ve been pursuing throughout my presidency of the EESC. We’ve re-energized our issue-monitoring groups (observatories) by developing impact assessments, by “going local” and also thanks to support from European Citizens’ Initiative (ECI), particularly in the battle against mobile phone roaming charges.
Support for these initiatives is critical, because they provide the voice of citizens in shaping European policy. They can help rebuild Europe’s popularity.
One of the issues on which citizens most want EU action is immigration. Illegal immigration and especially the development of mafia networks and the appalling human dramas they bring about are challenges EU member states must unite to confront. It is plain wrong to leave Italy and Greece to deal with this alone: their borders are those of all of Europe.
We must find effective, compassionate solutions that respect European values. That is our responsibility. What’s missing is a coherent immigration policy at European level: today, policies are decided piecemeal by member states.
The other great concern is unemployment. The EU has endured one of the harshest crises in its history, which has destroyed entire employment pools in every member state, with some especially hard-hit. The great scandal is youth unemployment. More than half of young people are jobless in some southern countries, and many are now obliged to migrate in search of a future. I’ve met people in many of these areas, and they feel utterly abandoned. Austerity policies that cut budgets critical to building a new future, such as education, only make things worse. Here too, Europe needs to demonstrate solidarity. The EU’s Youth Guarantee, intended to ensure a job, apprenticeship, training or continuing education for all under-25s was originally a good idea. But the effects of administrative complexity have left it ineffective — as so often happens with Europe’s good ideas. We need to create measures quickly which are effective locally. We need to involve local players, including companies and labor unions, chambers of commerce and voluntary associations that can provide considerable added value in improving the job market and cutting unemployment levels.
It’s only by restoring the confidence of citizens and companies that we can relaunch job creation, and that confidence must be built upon concrete measures and reforms.
Cindy Miller, President, UPS Europé
Recent economic turmoil exposed Europe’s challenges, but to an even greater degree, it also showed the European economy’s underlying strengths.
Many European products — born of the ingenuity and skill of millions of smalland medium-sized enterprises — are in demand all over the world. They’re part of an infrastructure that makes the European economy uniquely flexible and robust.
What’s more, the Trans-Atlantic Trade and Investment Partnership (TTIP), which is currently being negotiated, has the potential to usher in a new era of vibrant trade between Europe and its trading partners around the world. We’re confident that lowering trade barriers and enhancing cross-border infrastructure will continue to position the continent as a strategic player in a global economy.
For those reasons and more, Europe is on a continued trajectory to attract the attention and investment dollars of the world’s economic powerhouses. Since 2000, more than half of total US global investment has gone to Europe; Chinese investment in the continent doubled last year.
In 2014, my own company, UPS, announced that we will invest US$1b in our European network over the next several years to increase the capacity and efficiency of our facilities and infrastructure, and bolster our alternative fuel fleet. We’ve been a partner and supply chain logistics provider to European businesses of all sizes for nearly 40 years. From our ground-level vantage point, we see vast potential for Europe’s trade, goods and services network to continue performing well in the world economy. Our investment underscores that confidence.
Europe must continue to find solutions and resolve its internal differences so that people and goods move unencumbered through the continent. In a globalizing world, trade deals should be a priority so that Europe can capitalize on its huge potential. An integrated Europe, open to the world for business, is one that we’re confident will continue to attract worldwide investment.
Councillor Gordon Matheson, Leader of Glasgow City Council
Through a sustained program of regeneration, Glasgow has reinvented itself as the economic, cultural, sporting and academic heart of Scotland and one of Europe’s most vibrant and cosmopolitan cities.
Scotland’s largest city has invested over £8b in housing, retail, health, education, hotels, offices and leisure since 2011. We have built a modern, mixed economy in which finance, tourism, conventions, retail and hospitality play a leading role. And we have centered our efforts on our 600,000 citizens.
Secondary school attainment is at an all-time high. With five higher education institutions and ground-breaking vocational colleges, Glasgow hosts 130,000 students drawn worldwide and, increasingly, they chose to work here when they graduate. Our business support program includes the £50m
Glasgow Guarantee, which assures every young person aged 16-24 of a job, apprenticeship or training. That’s helped us develop one of the most highly skilled and flexible workforces in Europe. From 2013 to 2015, the city attracted 4,572 new jobs.
Located in the north-west of Europe, Glasgow was built upon ship-building and North Atlantic trade, but economic shifts have forced us to seek new avenues of prosperity. Good connections are vital: we are developing our airport to enhance links with London and key European destinations. We welcome investors and build on our strengths, such as our International Financial Services District, and a life-sciences cluster, the Glasgow BioCorridor, which we plan to complement with a clean-tech engineering cluster.
Last August, the Scottish and UK Governments committed £1.13b of pumppriming investment to the Glasgow & Clyde Valley Region City Deal, a package of infrastructure, labor market and innovation funding that will unlock £3.3b of private investment and create 28,000 permanent jobs. Glasgow has been transformed. We need to spread the message. Last year we hosted the Commonwealth Games and the MTV European Music Awards. This year, we will host the World Gymnastics Championships and in 2018 we will cohost the inaugural European Sports Championships with Berlin. Our challenge
now is to continue attracting events and visitors who can create a “halo effect” around the city’s brand as a FDI location.
Xavier Trias, Mayor of Barcelona
Barcelona is the capital of Catalonia, an economic capital of southern Europe and, we believe, the European capital of the Mediterranean. It’s an industrious city, open to international trade, with a diverse economy, a clear commitment to creativity and innovation and a global outlook.
In recent years we have worked hard to position Barcelona internationally as the center of a metropolitan area of 3.5 million people and to promote confidence and credibility worldwide, while improving our economic solvency. Barcelona now has a sound financial situation with a zero deficit budget. We are reducing debt without raising taxes and we are paying our suppliers within 30 days.
According to a recent study by IESE Business School, FDI created more than 20,000 jobs in Barcelona in the period 2011-October 2013. That’s an achievement surpassed in Europe by only two other cities: London and Dublin. Barcelona is also attracting significant investment from China and we want to reinforce this trend, to become a major center of Chinese business operations in Europe. Our city branding is already strong, and has great recognition among investors.
Cities and metropolitan areas, achieve the highest levels of economic activity, competitiveness, employment, innovation and education. Two-thirds of the EU population lives in urban areas and high-growth economic models for the 21st century are increasingly based on new economic sectors developing in our cities.
Barcelona was selected as Mobile World Capital 2012–18 and hosts the annual Mobile World Congress. The European Commission last year made Barcelona European Capital of Innovation for using new technologies to get closer to citizens, and Barcelona has become an international benchmark for would-be smart cities, developing strategic economic sectors for the future including smart city and mobile technology, electric vehicles, clean energy, biomedicine and maritime activities. And we are doing this through collaboration between public and private institutions.
A city of culture, knowledge, creativity, innovation and wellbeing, Barcelona wants to be an international benchmark for attracting the best economic opportunities, so as to improve the wellbeing and quality of life of all who live here.
Philip Dunne, President Europe, Prologis
Logistics real estate in Europe is in vogue. Demand in many markets is very strong both from occupiers, who want to lease space and from investors, who want to buy the leased facilities.
A study published in January by INREV,10 one of the most important European real estate bodies, confirmed that logistics continued to be popular among investors: 52% had the intention to invest in this sector this year, double the number recorded in 2012. And cross-regional and cross-border investment flows are up everywhere in all regions; in 2014 they increased 40% to US$125b.
Europe is still the main beneficiary, driven by money coming in from North America. Asian and Middle Eastern investors are maintaining steady levels of investment in Europe at about US$10b a year.
Investors now understand the long-term benefits of logistics real estate, which have been sharpened by the significant rise in e-commerce.
In my viewpoint in last year’s survey, I argued that inadequate distribution networks slow Europe down, and that we needed to develop an integrated intermodal infrastructure network that would drive competitiveness through more efficient movement of goods, products and services, both in and out of Europe and within Europe to consumers.
So I was encouraged to see two key initiatives from the European Commission take shape this year. In January, the European Commission identified the infrastructure priorities and investment needs for the Trans-European Transport Network until 2030. The new Commission President, Jean-Claude Juncker, has identified jobs, growth and investment, and a connected digital single market as the most pressing priorities for EU policy. This was followed in April by the creation of the Digital Transport and Logistics Forum to help optimize the use of digital technologies in freight transport and logistics.
Both the transport and digital initiatives must be implemented if we are to continue to see the much-needed development of European supply chains — and continued strong inflows of capital into logistics real estate to support that longsought development.
10, INREV is the European Association for Investors in Non-Listed Real Estate Vehicles.
Šimon Vostrý, Founder & CEO, ZOOM International
People in the software business often say that the US market is a graveyard of European companies — by which they mean that companies that have achieved some cross-border success in Europe then try to expand in the US, imagining it is just another national market. They often fail. But the hazards are just as great in the other direction.
For established US vendors keen to expand overseas, Europe is one of the logical places to look at. But treating Europe like one big country is a big mistake of course. Opening an office in the UK or Ireland because people there speak the same language (and because it is closest for a round-trip flight from the US) is a good first step, but understanding how to do business in Europe means going
local country by country, and learning about local culture and the way of doing business as well as showing commitment by translating your product — and providing customer services — in many different languages.
That adds up to a lot of work and financial investment. And then as soon as you start opening branch offices you face a lot of compliance issues, from adhering to local book-keeping standards to respecting ever-changing laws and regulations. Of course, there are countries where these things are very stable, such as the Netherlands — and that is why you see many companies setting up their holding companies there.
So what is my dream for Europe? A stable operating environment with minimal corruption and functioning institutions. Software entrepreneurs do not need subsidies, tax holidays or other support to create jobs. We need a predictable operating environment with reasonable taxes and laws that do not change all the time. We need fewer regulations, less paperwork and the opportunity to do
things predictably, online and fast.
And we need a lot of software engineers. There is a worldwide shortage of software talent and this will only get worse as software takes over the world. If Europe wants to be competitive in this space, it has a lot of catching-up to do.
Nick Thompson, Chief Executive Officer, Tony Blair Africa Governance Initiative
Nigeria has achieved a smooth democratic change of power
This year’s Africa attractiveness survey picks up on a new mood among investors. There’s still strong consensus around the potential in the markets emerging across Africa but optimism is tempered by concerns over political stability, security and the outbreak of Ebola in West Africa.
So are investors right to be more cautious over Africa’s prospects in 2015? I’m not so sure. There are challenges of course, but already this year, Nigeria, Africa’s biggest economy, has confounded the skeptics, holding a successful and peaceful election leading to a smooth transition of power. With a number of other elections on the horizon, Nigeria’s example of democracy at work should serve as an inspiration and confidence boost both within and beyond the continent.
Ebola, meanwhile, has taken a serious toll on the countries at the heart of the outbreak. But with the virus now coming under control, attention will turn to rebuilding. My team have worked alongside the governments of Liberia, Guinea and Sierra Leone through the crisis, and we’ve seen a new sense of unity, purpose and leadership in the affected countries as they set out on the road to recovery. Investors should remember that just 12 months ago, each of the affected countries was expected to record strong growth. The same opportunities to invest in their economic development in areas like agriculture and infrastructure are still there today.
The road to prosperity is never smooth. Many African economies still face major challenges but where committed local leadership meets smart, patient investment, real progress can be made. The Africa Governance Initiative is working with leaders across the continent who are committed to development and reform. We encourage you all to do the same.
Mo Ibrahim, Founder and Chair of the Mo Ibrahim Foundation
There is an inextricable link between governance and doing business
Creating an environment conducive to sound investment and sustainable business is a core governance issue. This is why it is one of the four pillars of the Ibrahim Index of African
Governance (IIAG), produced by the Mo Ibrahim Foundation (MIF). Last year’s IIAG results, published in October, challenged perceptions about the state of African governance, specifically with regard to the prevalent “Africa rising” narrative. It stated that the conditions for pursuit of economic opportunity were stalling, in contrast to their previously impressive positive trends. Specifically, the indicators measuring the environment for business in Africa showed recent decline. The IIAG findings are reinforced by EY’s 2015 Africa attractiveness survey.
Respondents to the survey recognize the inextricable link between governance and doing business. Only governance progress will further Africa’s prospects as an investment or business destination. A data-driven approach to monitoring this progress is vital, with the IIAG and the EY survey as two key resources that are pivotal to decision-making.
MIF has promoted the concept of Afro-realism in recent years. Afro-realism means adopting an honest outlook on our continent, celebrating its achievements but also making an informed assessment of the challenges that lie ahead. Neither Afro-optimism, a prevalent mind-set of recent years, nor Afro-pessimism, does justice to modern Africa. Enormous potential exists, but a balanced appreciation of Africa’s many assets in conjunction with its challenges is required, alongside a more granular approach to analysis of the continent. The most recent EY survey consolidates the growing importance of an Afro-realist perspective.
Aubrey Hruby, Visiting Fellow, Africa Center at The Atlantic Council
Rapid economic growth is neither linear nor smooth, and there will be many detours and bumps on the continent’s road to prosperity
Despite all the excitement about the Africa Leaders Summit hosted by President Obama last summer, 2014 ended in a smattering of negative headlines for Africa. Plummeting commodity prices, increasing insecurity in regional hubs (Nigeria and Kenya) and a popular uprising in Burkina Faso all significantly dampened the exuberance of the “Africa rising” narrative. In addition, the humanitarian crisis of the Ebola outbreak also affected investors’ confidence. The fall in the perceived attractiveness of Africa in 2015 reported in this survey reflects these setbacks, in addition to concerns about political uncertainty, given the elections this year in 10 African countries.
Companies already working in the continent, as well as those looking to explore African opportunities for the first time, should resist the swing of the pundit’s pendulum between “Afro-optimism” and “Afro-apocalypse.” Instead they should take a realistic, medium-term view. Rapid economic growth is neither linear nor smooth, and there will be many detours and bumps on the continent’s road to prosperity.
In making business decisions in African markets, it is best to gain a deep understanding of the broad trends — demographic, socioeconomic, technological and political — shaping specific subregions, and combine that with access to the best real-time, on-the-ground data available. Thankfully, there are now far more resources available for companies looking to do smart business in the region than there were a decade ago.
Also critical for success is an appreciation of the “soft” along with the more traditional “hard” skills required for doing deals in Africa. Complex financial models will rarely come close to assessing the real cost of regulatory uncertainty and underdeveloped governance systems. Companies will gain competitive advantage in Africa by integrating directly into commercial and deal teams, people with the ability to manage stakeholders, engage government officials, develop partnerships, and navigate emerging market realities.
Amadou Sy, Director, Africa Growth Initiative Senior Fellow, Global Economy and Development, Africa Growth Initiative at Brookings Institution
It is not difficult to imagine the collective sigh of relief from both African and foreign investors on seeing the ongoing peaceful power transition in Nigeria
The 2015 survey results indicate that perceptions of political instability or uncertainty are a major barrier to investment and doing business in Africa. Surprisingly, such perceptions are stronger for respondents already doing business in Africa than for those that do not. Two possible scenarios can help explain the results:
The “Nigerian Effect”: The number of scheduled elections in 2015 in SSA is more than twice the number in 2014 and includes the Nigerian elections, creating political uncertainty.
According to the National Democratic Institute at least 23 elections, including some constitutional referenda, are scheduled to take place in SSA in 2015, compared with 10 in 2014. More importantly, Nigeria, the continent’s largest economy, most populous country, and one of its largest recipients of FDI, held legislative and presidential elections in early 2015. It is not difficult to imagine the collective sigh of relief from both African and foreign investors on seeing the ongoing peaceful power transition in Nigeria, though other major countries still have elections this year. While the other African economic powerhouse, South Africa, held elections in 2014, expectations of post-election violence and increased political policy uncertainty were much lower than prior to the Nigerian elections, creating less worry for investors.
The Fragile State Effect: Investors perceive a broad set of risks as “political risks” in SSA.
Not surprisingly, geopolitical risks — such as failure of national governance (shown by corruption, impunity, and political deadlock), interstate conflict, state collapse and terrorist attacks are high in fragile states that are already poor, vulnerable to shocks, prone to violence, and lack effective, accountable and inclusive institutions.
The still-volatile situation in the Sahel and the current crisis in the Central African Republic are stark reminders that SSA is still home to a number of fragile countries. In addition, non-state actors (such as Boko Haram and al-Shabab) can easily cross borders, creating fragility within more robust countries too. The spread of infectious disease (e.g., Ebola) and social instability compound these risks. In this way, increased fragility in SSA may be increasing investors’ perception of risk.
As far as foreign investors are concerned, however, the long-term trend shows that SSA has democratized progressively and that political and economic governance has improved. For instance, our African Leadership Transitions Tracker shows that the number of multiparty elections has been increasing consistently. In the short term, however, elections in the region are likely to be associated with higher political risk. However, different African countries have different risks associated with elections. In some, unfortunately, the risk of post-electoral violence and the risk of policy reversal will be significant, but in others, it will be lower. In sum, when it comes to political risk analysis, it should pay to discriminate among countries. But that would be just the first step. The three tenets of risk management: identifying, measuring, and managing risk would pay even more.
Real risks must be identified, measured and managed
Presidential and legislative elections in Africa in 2015
TBD: To be declared
Note: Tanzania will also hold a constitutional referendum in April 2015 and Burundi was due to hold its parliamentary elections in May, and presidential elections in June.
This map reflects all confirmed elections as of December 22, 2014 according to the National Democratic Institute, https://www.ndi.org/electionscalendar.
Source: Foresight Africa, Top Priorities for the Continent in 2015, Africa Growth Initiative, Brooking Institution, January 2015
Kuseni Dlamini, Chair, Massmart
A philosophy of shared value is fundamental to this win-win growth equation
Shared value has always been an indispensable part of my beliefs and my business philosophy. Massmart operates in 12 African countries and, wherever we go, we believe that the only way of sustaining our business is to make sure that we build and maintain partnerships that are mutually beneficial.
In South Africa, for example, Massmart has established a fund to provide capital and technical expertise for developing local suppliers. We have supported 193 of these entrepreneurs to become part of our supply chain, and an increasing number of locally manufactured products are now listed on Walmart’s global supply list.
It is because of this kind of long-term commitment that when we face challenges in, for instance, Northern Nigeria, we will not pull out. We are focused on building sustainable local sources of supply close to the market. This not only makes economic sense for us, but also ensures that we are helping to create economic opportunities down the supply chain as well as greater numbers of economically active citizens, who will ultimately become our customers.
The concept of shared value is more for us than a nice-sounding buzzword: it is a strategic business imperative. We believe that it is important for the countries and communities where we operate to be economically viable and sustainable in order for our businesses in turn to be commercially viable and sustainable. The notion of pursuing profit with purpose is very much inherent to our business.
When Sam Walton founded Walmart over 50 years ago, he was driven by the purpose of helping people to save money so that they could live better lives. As we open more stores around Africa, we are really going there with the purpose of helping people to save money.
We believe that if you have a purpose that resonates well with your customers you will be rewarded with loyalty. And our customers, are showing us loyalty. We are now the largest wholesaler in Africa and hence a trusted and committed partner to thousands of small and medium enterprises throughout SSA.
Jon Shepard, Director, EY Enterprise Growth Services
A key element of the win-win growth equation will be the promotion of entrepreneurship across Africa
Enterprise Growth Services (EGS) is a “shared value” adaptation of EY’s core business model: a corporate social enterprise charging low fees to operate sustainably on a not-for-profit, not-for-loss basis.
We work with impact investors, foundations, nongovernmental organizations (NGOs) and multinational corporations to find high-potential SGBs and social entrepreneurs who are changing lives in low-income communities. EY teams work hands-on for three to six months on projects designed to help these new clients overcome obstacles to growth. We help them improve cash flows, enter markets, retain and develop staff; whatever’s needed to accelerate our clients into the next stage of growth.
Some examples of EGS in action:
- Invest in Africa’s African Partner Pool (APP) initiative, accredits and connects local small businesses as suppliers for multinational companies. An EGS team drawn from Ghana, the UK and Sweden worked with a local management team to design, set up and launch the operation. Growing quickly, the APP is helping local entrepreneurs expand their businesses, and multinational corporations invest in local economies.
- Every minute, a child dies somewhere in the world from the effects of drinking dirty water. Jibu works with local entrepreneurs in Rwanda and Uganda to set up profitable franchises that solar-sterilize water and then sell it to low-income customers at a fraction of normal prices. An EGS team from Switzerland and Uganda is helping Jibu develop the financial and operational infrastructure it needs to grow quickly and sustainably across the region.
- Stamp Out Sleeping Sickness is a public private consortium that has built a network of veterinary businesses across Uganda. Lacking business skills, several were failing. An EGS team spent seven months turning these businesses around. They now create jobs, help subsistence farmers improve their livelihoods, and provide an essential part of the solution to a tropical disease that causes immense social and economic damage.
The entrepreneurs we support through EGS have incredible vision and work immensely hard. They are the lifeblood of Africa’s economies and it is a privilege for us to help them.
Xolelwa Mlumbi-Peter, Chief Director, Africa Multilateral Economic Relations, Department of Trade & Industry, South Africa
We can promote higher value addition and diversification
Achieving greater regional integration is an important objective for the South African Government, but it is a complex undertaking. We have realized that a linear integration model — where we look at establishing free trade areas, then move to customs unions and common markets — does not address the fundamental constraints that affect why we are unable to trade with each other or build the necessary economies of scale. These constraints have more to do with a lack of productive capacity and supply-side constraints.
As a result, we have adopted a development integration approach that is based on three pillars:
1. Market integration: addressing trade barriers as well as non-tariff barriers.
2. Industrial development: looking at how we can develop regional economic value chains, so that we can promote higher-value addition and diversification that will enable African countries to move up the global value chain, as well as promoting intra-regional sourcing that will increase intra-African trade.
3. Infrastructure development: focused on connecting Africa with itself.
A critical issue is how we work together as African governments on the three pillars of developmental integration. There is widespread appreciation of the need to accelerate this process through effective cooperation at a regional level. It also requires the development of capacity-building programs in view of the differences in the levels of development of member states to, among others, improve quality and standards of products.
The work program also aims to foster economic transformation of member states to ensure that Africa is able to move away from exports of primary commodities. More than 60% of world trade is in intermediate products. Industrial development is therefore key to the growth and diversification efforts of member states. This is the trajectory that is required to address the key socio-economic challenges facing African economies. In addition, intra-Africa trade and real integration can only take place through improved interconnectivity between member states, and this necessitates a targeted effort to address the infrastructure bottlenecks and reduce the costs of trade.
Progress is being made on the ground. More specifically, good progress is being made with the Tripartite Free Trade Agreement (TFTA). The negotiations are already well advanced and we expect to launch the legal framework for the free trade area in June 2015. This will be followed by finalization of the tariff and rules of origin negotiations as part of the built-in agenda. The TFTA will combine a market of 26 countries with a population of over 600 million and GDP of US$1t. Building on the progress achieved at regional levels and the TFTA, we are also scheduled to launch the Continental Free Trade Area (CFTA) negotiations in 2015, which will create a market of one billion people and approximately US$2.6t GDP. These efforts are aimed at expanding market access and creating economies of scale necessary to attract investment. On industrial development, we welcome the development of the SADC regional industrial strategy. The key objective of the industrial strategy is to promote the development of value chains and production network linkages across borders. It recognizes that an integrated regional market is critical in generating economies of scale necessary to unlock the region’s industrial potential and enhancing the competitiveness of domestic firms.
Anne Kabagambe, Chief of Staff & Director of Cabinet, African Development Bank
The key objective is to create viable, bankable projects
At the African Development Bank, we believe that we have a US$50b annual infrastructure deficit. The financial resources needed are well above what can be financed from Oversea Development Aid flows and other current development financial flows. It requires innovative financing instruments to channel the required additional resources. It is also clear that we cannot wait for somebody else to solve this problem for us: we need African initiatives and African solutions.
The AfDB has deployed a variety of targeted approaches to address specific investment gaps, as illustrated by various initiatives including the Africa50 Fund, risk mitigation instruments and co-financing facilities. The AfDB also amended its credit policy, creating opportunities to increase access of African Development Fund (ADF)-only countries to the bank’s non-concessional resources, since its lending and risk-bearing capacity for sovereign operations remains strong, where it is underexposed.
Recognizing project preparation, prioritization and design as some of the main impediments to Africa’s transformation, a notable initiative by the AfDB has been the establishment of the Africa50 Fund to finance transformational infrastructure projects in Africa, including a project preparation and project finance facility.
Africa50 aims to mobilize private financing in order to accelerate the speed of infrastructure delivery in Africa. It will focus on transformational national and regional projects in energy, transport, ICT, and water. It is complementary to, but legally independent from, the bank. It is not business as usual. The key objective is to create viable, bankable projects (shortening the time between project idea and financial close) from a current average of seven years, to less than three years. This will deliver a critical mass of infrastructure in Africa in the short to medium term. Among other things, this entails substantially increased funding of early-stage project development activities and making skilled legal, technical and financial experts available to projects from an early stage of development.
Although these initiatives do not provide all the answers, it will make a real difference in addressing the infrastructure deficit, and is one way that we can make sure our children and grandchildren do not inherit our burden.
Mawuena Trebarh, CEO, Ghana Investment Promotion Centre
The Prosperity Partner for investment in Ghana
Productive partnerships between business, government and the community are a cornerstone of our approach to investment promotion in Ghana. Key to this is getting the right balance between prosperity for both the business community and the nation. We do not think that the two are mutually exclusive; we firmly believe that they should go hand in hand.
As an Investment Promotion Agency, we have positioned ourselves, especially for the year 2015, as “The Prosperity Partner” for investment in Ghana. This placed in context means that we are encouraging and promoting a partnership with investors, both Ghanaian and foreign, to ease them into the Ghanaian business environment, to fulfill their objectives and, in the long run, achieve the prosperity they require.
Our current approach toward investment promotion has moved on from a broad-based strategy to a highly targeted one. This enables us to attract and identify the required and necessary partnerships that are a perfect fit and serve the needs of the country. The kind of partnerships promoted is not limited and is dependent on the project specifications. We are particularly excited about partnerships between local and foreign businesses where the Ghanaian partner initiates the process to expand their business and possibly works toward having an international identity.
Jean-Pierre Clamadieu, CEO of Solvay and President of Cefic, the European Chemical Industry Council
Policy changes are needed to reverse declining competitiveness
Europe is the cradle of the global chemical industry. We are an important contributor to economic development and wealth, providing modern products and materials and enabling technical solutions in virtually all sectors of the economy. With a workforce of 1.2 million and sales of €527b (2013), our industry is one of the largest European industrial sectors and an important source of employment.
Yet Europe’s leading position is not a given. Global chemical production has doubled in the past 20 years, but Europe’s share has shrunk from 32% in 1993 to 17% in 2013.European chemicals output was flat last year and still remains below its 2008 peak. A recent study by Oxford Economics showed why: our industry has undeniably experienced loss of competitiveness in the past decade.
Chemical investment is booming in markets such as China, where demand remains strong, and in the US and Middle East, where energy and raw materials are relatively cheap. But in Europe, it lags. At the same time, our industry has to adapt quickly to global challenges such as climate change and resource scarcity.
To restore the competitiveness of Europe as a chemical manufacturing location we need four significant policy shifts.
First, we rapidly need an ambitious global climate agreement to reduce greenhouse gas emissions effectively while ensuring a fair level-playing field between the concerned economic players across the globe. The reform of the European quota trading scheme should rapidly lead to a predictable long-term framework and ensure adequate protection for industries exposed to carbon leakage.
Second, we need reliable supplies of energy and feedstock at competitive prices. Even after the recent fall in oil prices, the production costs of the basic chemical building block, ethylene, remains twice as high in Europe as in the US. Ill-structured policies lead to high and unpredictable energy costs in Europe. Yet we need incentives that encourage European industry to invest and grow.
Third, we need better and more coherent regulation. Regulations that are too prescriptive and detailed stifle entrepreneurship, innovation and competitiveness, especially when it comes to SMEs.
Finally, we need more open competition and open markets. Europe’s net chemical exports last year were €44b, but the surplus is declining. Trade agreements with key partners such as the US and Japan would enable our industry to enhance efficiency and better exploit our technical strengths.
Our industry is highly innovative, yet innovation will not fall on fertile ground without investment. And the investment flow into Europe’s chemical industry will only regain its rightful size if the continent’s competiveness is restored.