Vous êtes sur la page 1sur 32

EY's attractiveness survey

Europe 2014
An extract on emerging markets

Playing catch-up

Attractiveness extract

EYsattractivenesssurvey
Playing catch-up

EYs 2014 European attractiveness survey: back in the game


is the latest survey in EYs attractiveness program, which
has now been running for over a decade. The study follows a
two-step methodology: it analyzes both the reality of foreign
direct investment (FDI) in Europe, and the international investor
communitys perception of the continents attractiveness.
The findings are based on EYs European Investment Monitor
(EIM) which tracks FDI projects that have created new
facilities and new jobs and on the views of over 800business
leaders from across the globe.
In Playing catch-up, we take a close look at the role that
emerging markets have played in Europes FDI story. We
compare data from before and after the crisis up to the past
year on both the reality of investment and the perceived
attractiveness of Europes emerging markets. We also examine
how rapidly growing economies are evolving into strong
investors themselves, which represents an important shift in the
global investment landscape.

Emerging Markets Center


The Emerging Markets Center is an EY Center of Excellence
that quickly and effectively connects you to the worlds fastestgrowing economies. Our continuous investment in them allows
us to share the breadth of our knowledge through a wide range
of initiatives, tools and applications, thus offering businesses
in both mature and emerging markets an in-depth and
cross-border approach, supported by our leading and highly
integrated global structure.

For further information on emerging markets, please visit:


emergingmarkets.ey.com

Follow us on Twitter @EY_EmergingMkts

www.ey.com/attractiveness

EY's attractiveness survey Europe 2014


An extract on emerging markets
A mixed picture

Contents

02 03

Foreword Marc Lhermitte and Rajiv Memani


04 05

Executive summary
06 19

A mixed picture

07 The global backdrop


08 Crisis reshapes Europes FDI maps
09 CEE bears the brunt of the crisis
10 Shifts and new hot spots
12 Poland ahead on attractiveness
14 The emergence of Eastern Europes new powerhouses
18 Eastern Europes cities lag behind

20 25

Emerging investors

Emerging investors

21 Investment from the BRICs at an all-time high, although


uneven
25 Emerging market companies rush to capitalize on Europes
R&D strength

EYs attractiveness survey Europe 2014 An extract on emerging markets Playing catch-up

Foreword

New European powerhouses


Marc Lhermitte

Rajiv Memani,

Partner, Global

Chairman of the

Lead

Global Emerging

Attractiveness and

Markets Committee,

Competitiveness, EY

EY

Welcome to Playing catch-up, an


extract from our 2014 European
attractiveness survey.
EY's attractiveness surveys look into
the changing dynamics of global FDI.
They aim to update business leaders on
structural changes in FDI patterns and
to equip them to make key investment
decisions.

The shift in the balance of power from


the developed world to the developing
world is not new, and FDI inflows have
mirrored this broad economic change.
In 2012, developing economies, for the
first time, received greater levels of FDI
than the developed world. This trend
continued in 2013, when developing
economies received more than half of
global FDI inflows.
However, when looking more closely at
the reality of the FDI situation within
Europe, we find that the economic
downturn has resulted in somechanges
in the investment appeal of the
continents emerging investment
destinations. At varying levels of
maturity in terms of investment and
reform, in this extract we focus primarily
on the countries in Central and Eastern
Europe (CEE) within the EU, as well as
Russia, Ukraine and Turkey.

EYs attractiveness survey Europe 2014 An extract on emerging markets Playing catch-up

www.ey.com/attractiveness

Countries in CEE that emerged as FDI


hot spots in the early 2000s such
as Poland and the Czech Republic
fell behind their Western European
counterparts after the crisis. In 2013,
high exposure to Western European
countries and a weak banking sector
made CEE economies vulnerable to
changes in FDI flows, resulting in a
slowdown in FDI activity.
The changing landscape also led to
the emergence of new powerhouses in
Eastern Europe. For example, Turkey
became the 10th most attractive
FDI destination in Europe, and it
developed into a manufacturing hot
spot, particularly for the automotive
sector. The survey also highlights how
Russia has grown into a leading FDI
destination. However, it must be pointed
out that the survey was conducted
before the current geopolitical tensions

had arisen from the situation in Ukraine.


The outcome of these events and their
impact on Russias attractiveness are
yet to be seen.
The report highlights the stark
difference between the perception and
reality of FDI. When questioned about
the most attractive global regions
in which to establish operations, the
majority of the respondents to our
2014 European attractiveness survey
voted for Western Europe, followed by
CEE and North America.
The report also highlights the fact that
rapid-growth economies particularly
the BRICs are producing many fastgrowing multinationals. And many
of these companies are extensively
expanding their footprint in European
markets.

In 2014, global events have continued


to shape the economic landscape.
The changing economic situation in
CEE is particularly notable. We have
found that, for these as well as other
countries, regulatory reforms and other
government initiatives are vital for
improving the business environment.
Such improvement will help CEE
countries attract further FDI and so
move toward a path of sustainable
growth.
We invite you to explore this extract,
in the hope that it provides insight
for companies' investment plans,
particularly directed toward Europe's
emerging markets.

EYs attractiveness survey Europe 2014 An extract on emerging markets Playing catch-up

Executive
summary

The extract's scope

BRICs

In this extract, we discuss Europes


emerging investment destinations,
particularly the CEE countries within
the EU, as well as Russia, Ukraine and
Turkey. Europes emerging markets are
at different maturity levels in terms of
investment and reforms. But their success
in attracting FDI has primarily mirrored
their economicgrowth.
Europes investor profile has also
changed. FDI activity from the BRIC
countries into Europe has continuously
increased, reaching an all-time high in
2013. Companies from these markets
represent the next big set of investors
for the continent, so this is an important
development.

CEE (EU)

Russia
Ukraine
Turkey

China

BRICs

BRICs

India

BRICs

Brazil

Note: CEE (EU) includes Bulgaria, Croatia, Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia,
Slovenia.

CEE countries bear the brunt of the crisis


The crisis had a significant impact on the FDI map of Europe.
Following the crisis, the number of FDI projects in CEE declined by
12% this compares with a 19% increase in Western Europe for
the same period. This slowdown in FDI activity can be attributed
to CEEs high exposure to European countries, a fragile banking
sector and heavy dependence on consumer credit.

Differences in the impact of


the crisis
The impact of the crisis on FDI was felt more in the CEE region
FDI projects

200408

200913

WE*

12,164

14,299

CEE

4,774

4,208

FDI job
creation**

200408

Change
+17.6%
-11.9%

200913

Change

WE

449.0

401.7

-10.5%

CEE

526.1

364.8

-30.7%

* Western Europe
**in thousands. Source: EY's European Investment Monitor (EIM) 2014.

EYs attractiveness survey Europe 2014 An extract on emerging markets Playing catch-up

www.ey.com/attractiveness

New powerhouses in Eastern Europe

Low attractiveness scores for CEE

Turkey and Russia are growing into preferred destinations for


FDI in CEE, owing to their enormous market potential, skilled
workforces and improving business conditions. Between 2009
and 2013, the number of projects in Turkey increased by 129%,
and this was accompanied by a 162% increase in job creation.
However, the survey was conducted before the current geopolitical
tensions had arisen from the situation in Ukraine. The outcome of
these events and their impact on Russias attractiveness are yet
to be seen.

There has been a divergence in the perceived attractiveness of


individual countries within CEE. Although Poland and the Czech
Republic were voted the most attractive CEE countries, their overall
attractiveness scores declined by six and four percentage points
respectively. They are losing out to economies further east, such as
Turkey (which is up four points) and Romania (up two points).

FDI projects by countries

The crisis changed the FDI landscape of Europes emerging markets

200408

200913

Most attractive locations for


establishing operations in CEE
2014 survey share of responses (excluding Russia)
Poland

Difference

Russia

596

743

Poland

802

622

Turkey

180

418

Czech Republic 512

321

191

Romania

612

311

301

Hungary

597

308

289

Serbia

164

284

Slovakia

305

201

104

Bulgaria

287

148

139

31%

+147
180

11%

Romania

Hungary

6 pts

4 pts

+2 pts

+3 pts

Ukraine

Turkey

6%

Latvia

Slovakia

+4 pts

+1 pt

1 pt

+238
Change from

2013*

7%

+120

Source: EY's EIM 2014.


Note: for Europe's full FDI landcape by number of projects, please go to p.10.

Rising interest from BRIC investors


In 2013, BRIC investment in Europe reached an all-time high
with 313 projects creating a total of 16,900 jobs. The majority
of these investments were concentrated in the UK and Germany.
BRIC investors are expanding their presence in the continent
through a number of different routes, including:
Making greenfield investments
Conducting M&A
Establishing new headquarters or R&D centers
China, the leading BRIC investor, has been the source of a wide
range of acquisitions made with the aim of gaining access to
European consumer brands and technology.

Change from

2013*

Czech
Republic

+2 pts

9%

3%

8%

2%

* pts = % points.
Source: EYs 2014 European attractiveness survey (total respondents: 808).

BRICs footprint in Europe

China
153 projects

India

103 projects

Russia

44 projects
Brazil

13 projects
Source: EYs EIM 2014.

EYs attractiveness survey Europe 2014 An extract on emerging markets Playing catch-up

A mixed
picture

EYs attractiveness survey Europe 2014 An extract on emerging markets Playing catch-up

www.ey.com/attractiveness

The global backdrop


Since 2008, FDI trends have echoed the
broader economic shift toward developing
and transition economies. In 2012,
developing Asia overtook Europe for the
first time, and became the worlds leading
FDI destination.

Emerging
markets
pulled in

54%
of inflows in
2013.

In 2013, while developed economies


attracted a historically low 39% (426b)
share of global investment, emerging
markets pulled in 54% (586b) of inflows. The United Nations
Conference on Trade and Development (UNCTAD) remains
optimistic about FDI prospects and estimates that global FDI inflows
will reach 1.2t in 2014 and 1.3t in 2015.
At a regional level, developing Asia attracted the highest volume
of FDI inflows in 2013. However, its share in global FDI inflows was
slightly below its 2012 level. Latin America and the Caribbean
registered a sharp rise of 14.1% in FDI inflows during2013.
When it comes to individual countries, in 2013, the US (141.2b)
and China (93.4b) continued to be the largest recipients of FDI
inflows.1
In terms of perceived attractiveness, developing markets, excluding
China, witnessed a decline, compared with last year, while
developed markets were viewed as more attractive, as a result of
their low-risk profiles.
For the first time since 2009, Western Europe (45%) overtook
China(44%) as the worlds most attractive FDI destination in our

FDI inows by region


Share of global FDI inows

2012

2013

Developing Asia

31%

29%

Europe

16%

17%

Latin America and the Caribbean 19%

20%

15%

17%

North America
Africa

4%

4%

Transition economies

6%

7%

Others

9%

6%

Source: UNCTAD.

respondents perceptions albeit only by a small margin. CEE


continued to rank fourth (31%), but its rating rose for the second
year in a row (+1 percentage point this year and +7 points in 2013).
In this years survey, the cumulative attractiveness score of the
BRIC countries declined by 15 percentage points. However, a
13-point decline in Brazil was largely responsible for this steep
fall. A look at the two-year picture provides a more realistic view.
Since our 2012 European attractiveness survey, Brazil and Indias
perceived attractiveness score is down by five points and four
points respectively; China and Russias scores remain intact.
Rapid economic growth in the BRICs in the previous few years
overshadowed some of their structural imbalances. Capital flight,
depreciating currencies and financial implosion are immediate
concerns in these economies. If the markets continue to be
lukewarm, growth prospects could diminishfurther.

The worlds most attractive regions to establish operations


2006

2010

2014

Western Europe

68%

38%

45%

CEE

52%

24%

29%
31%

North America

48%

22%

India

18%

22%

17%

China

41%

39%

44%

Brazil

5%

12%

13%

Russia

5%

14%

19%

Source: EYs 2014 European attractiveness survey (total respondents: 808).


1. World Investment Report 2014, UNCTAD, 11 June 2014; Currency converter, Oanda website,
www.oanda.com, accessed 24 September 2014, exchange rate used US$1 = 0.7532 as per weekly
average for 2013. And, for the first time ever, Russia became the third most attractive destination for
FDI, receiving inflows of 59.7b, up 56.6% from 2012.

EYs attractiveness survey Europe 2014 An extract on emerging markets Playing catch-up

Crisis reshapes Europes FDI maps


Between 2004
and 2008,
approximately
75% of the FDI
projects in CEE
originated from
Europe itself.

The FDI maps of Europe before and after


the downturn of the last five years are very
different. The impact of the economic and
financial turmoil on FDI was most severe in
CEE, where FDI projects declined by 12%,
compared with a 19% increase in Western
Europe. The divergence is all the more
apparent in job creation, which fell by 30%
in CEE, compared with a decline of 13% in
WesternEurope.

There are two reasons for this decline. First, the crisis exposed
the weaknesses in the economic fundamentals of CEE, which
was heavily dependent on consumption and its banking system.
CEE countries were characterized by a higher level of consumer
credit, and the stock of consumer loans was growing at double
the pace of the stock of savings. Second, between 2004 and
2008, approximately 75% of the FDI projects in the CEE region
originated from Europe itself. As a result, when the crisis hit, FDI

Differences in the impact of the crisis


The impact of the crisis on FDI was felt more in the CEE region
FDI projects
WE

200408

200913

12,164

14,299

4,774

4,208

CEE
FDI job
creation*

200408

Change
+17.6%
-11.9%

200913

Change

WE

449.0

401.7

-10.5%

CEE

526.1

364.8

-30.7%

* in thousands. Source: EY's EIM 2014.

projects declined substantially, hitting a record low in 2009. While


Western European countries were also mired in crisis, some of the
economies were relatively safe, others were too big to ignore, and
others managed to implement the right reforms at the right time.

EYs attractiveness survey Europe 2014 An extract on emerging markets Playing catch-up

www.ey.com/attractiveness

CEE bears the brunt of the crisis


Poland saw a
22% drop in FDI
projects during
the crisis
years.

In the early 2000s, many CEE countries


emerged as solid growth stories, anchored
by an affordable and skilled labor force,
a favorable business environment, an
advantageous location on the periphery of
Europe, and the promise of EU accession.
This led to a flood of foreign investments
in the region, which increased steadily
throughout the pre-crisis period. However,
as the crisis spread and underlying
weaknesses in some CEE countries came

to the fore, the momentum of FDI slowed in some countries,


including Poland, the Czech Republic, Hungary, Slovakia, Romania
and Bulgaria. For instance, with a 22% drop in FDI projects during
the crisis years, Poland lost its leading position among Europe's
emerging investment destinations to Russia and slipped to fifth
position in terms of FDI job creation in Europe between 2009
and 2013. This trend was all the more surprising given that, until
2013, Poland was the only EU Member State to witness positive
growth during the crisis. Similarly, the Czech Republic, another
key economy in the region, saw a marked decline of 37% in inward
investment projects between 2009 and2013.

FDI projects by countries


The crisis changed Europes FDI landscape

200408
United Kingdom 3,206

200913

Difference

3,524

+318
+1525

Germany

1,326

2,851

France

2,656

2,499

Spain

947

1,111

Belgium

817

808

Russia

596

743

+147
+237

157
+164
9

Netherlands

472

709

Poland

802

622

Ireland

405

535

+130

180

Turkey

180

418

+238

Italy

321

395

+74

Switzerland

522

394

128

Sweden

471

323

148

Czech Republic

512

321

191
301

Romania

612

311

Hungary

597

308

Serbia

164

284

289
+120

Denmark

297

225

72

Slovakia

305

201

104

Bulgaria

287

148

139

Source: EY's EIM 2014.


Note:
UNCTAD data in EY's 2014 European attractiveness survey is based on the January 2014 edition of UNCTADs Global Investment Trends Monitor,
January 2014 edition. Thedata in this extract has been updated to reflect the UNCTAD World Investment Report 2014, published in June 2014.

EYs attractiveness survey Europe 2014 An extract on emerging markets Playing catch-up

A mixed picture

Shifts and new hot spots


Suffering from sluggish growth and unstable economic conditions,
many of CEEs leading FDI destinations saw a decline in 2013. On
the whole, FDI projects in CEE declined by nearly 5%, while job
creation fell by 4%. The CEE region witnessed a decline in its key
investment engine, the automotive sector, losing nearly 8% of its
market share in 2013. Yet overall, manufacturing projects retained
their prime position in CEE with 410 projects (+3% compared with
2012). The region also recorded a 55% increase in R&D operations,
confirming a slow shift up the global value chain.
Turkey was a clear exception to this decline. The country had a
successful year, with 98 projects started (up from 95 in 2012).
Affirming itself as Europes new hot spot for large manufacturing
projects, the country drew several large investments in the
automotive sector. The US and Germany remain the two largest
investors in Turkey, accounting for 24% and 16% respectively.

Top 15 countries by FDI projects


2012

2013

Share
(2013)

Change

United Kingdom

697

799

20%

15%

Germany

624

701

18%

12%

France

471

514

13%

9%

Spain

274

221

6%

-19%

Belgium

169

175

4%

4%

Netherlands

161

161

4%

0%

Russia

128

114

3%

-11%

Ireland

123

111

3%

-10%

Finland

75

108

3%

44%

Poland

148

107

3%

-28%

Turkey

95

98

2%

3%

Switzerland

61

76

2%

25%

Serbia

78

63

2%

-19%

Czech Republic

64

60

2%

-6%

Denmark
Others
Total
Source: EY's EIM 2014.

10

57

58

1%

2%

572

589

15%

3%

3,797

3,955

100%

4%

CEE vs. WE
2012

FDI projects
CEE
WE

2013

835

796

2,962

3,159

2012

FDI job creation

2013

CEE

85,634

82,181

WE

84,800

84,162

Source: EY's EIM 2014.

Russia received 114 FDI projects, down 11% from the previous
year. Still, it managed to regain its position as the top emerging
destination in the CEE region, after falling behind Poland in 2012,
which saw an even steeper decline this year. Although the total
number of projects fell, Russia attracted several key investment
projects in the automotive and heavy industry sectors, such as
chemicals and large transport equipment. In terms of its clients,
Russia saw a 17% decline in investments originating in the US.
Japanese companies, by contrast, invested in 14 projects during
2013, up from just 9 in 2012.
However, the geopolitical tensions arising from the situation in
Ukraine will affect Russias attractiveness. The exact outcome of
these events and their impact are yet to be seen.
The top two Central European destinations for FDI are Poland
and the Czech Republic. Poland attracted 107 projects in 2013,
making for a year-on-year decline of 28%. FDI job creation,
however, increased by 6%. More than a half of the projects were
manufacturing operations, with automotive and plastics and rubber
as leading sectors. Poland was also the number one destination
in the CEE region in terms of R&D projects, driven essentially
by international software companies. In the Czech Republic, FDI
projects were down 6% from 2012, while job creation remained
stable (2%). Driven by geographic proximity, German companies
were the largest investor in the Czech Republic, accounting for
over a third of investment projects. With 23 projects altogether,
automotive and other transport equipment industries remain key
drivers of FDI.

EYs attractiveness survey Europe 2014 An extract on emerging markets Playing catch-up

www.ey.com/attractiveness

Shoring or reshoring a tricky balance


Over the past few decades, the offshoring of production has
been an important supply chain strategy for manufacturers in
the West. However, some of the conditions that made offshore
supply chains attractive such as the level of flexibility, risk
and cost benefit appear to have become less favorable.

As a result, industry is experiencing a fundamental shift across


the globe: the reshoring of manufacturing. An increasing
number of companies are planning to carry out reshoring. If
this trend continues to gather pace over the coming decade, it
will provide a substantial boost to Western manufacturing.

The wage gap between advanced economies and China the


country that accounts for the majority of manufacturing
outsourcing is rapidly closing. This is reducing some of the
cost advantages of offshoring there. And, for some companies,
advances in labor-saving technologies, such as robotics, are
reducing the share that wages make up of total costs. This
means that, when looking at costs, differences in wage levels
do not make such a difference.

However, the importance of production in emerging markets


cannot be overstated. Wages in emerging economies are still
far lower than those in advanced economies. And emerging
market demand for final products is also rising considerably.

Over the last decade, oil prices have risen dramatically. This
has reversed some of the earlier reductions in transport costs.
Companies now are also more cautious. They are paying
more attention to factors such as market proximity, quality
control and supply-chain management. And as governments
increasingly recognize the value of having a strong
manufacturing base, the policy environment in the West has
become more favorable to industry.

Location strategy, therefore, will become trickier for


companies. To be successful, they will need to strike the right
balance between offshoring and reshoring, optimizing their
production footprint to best serve different markets. And to
achieve this, they will have to re-evaluate their global supply
chains continually.

Look out for EY's Reshoring manufacturing:


myth or reality? report - Release date:
January 2015.

EYs attractiveness survey Europe 2014 An extract on emerging markets Playing catch-up

11

Poland ahead on attractiveness


In CEE (excluding Russia) divergence in the perception of
individual countries is evident. Poland was again voted the most
attractive CEE country, by 31% of the respondents this year. The
Czech Republic is a distant second with 11% of votes. The overall
attractiveness score of both the countries has declined by six and
four percentage points respectively. These mature countries are
losing out to economies in the East, with the main winners being
Turkey (+4 points) and Romania (+2 points).

Most attractive locations for establishing


operations in CEE
(Excluding Russia)

2014

CEE

Change from

2013*

Poland

31%

6 pts

Czech Republic

11%

4 pts

9%

+2 pts

Hungary

8%

+3 pts

Ukraine

7%

+2 pts

Turkey

6%

+4 pts

Latvia

3%

+1 pt

Slovakia

2%

1 pt

Romania

* pts = % points.
Source: EYs 2014 European attractiveness survey (total respondents: 808).

12

EYs attractiveness survey Europe 2014 An extract on emerging markets Playing catch-up

www.ey.com/attractiveness

Case study

Poland technology
and telecom
Poland has become an important European
technology and IT hub. The IT industry
in Poland has grown quickly, thanks
to the countrys robust supply of wellqualified professionals particularly IT
engineers and its competitiveness on
costs.2 Between 2009 and 2013, 50 FDI
projects were initiated in Polands software
and telecommunications sector. Companies
from the US and the UK were the main
investors.
Poland has also increasingly been attracting
investments in the R&D sector. Some of
the worlds leading organizations have
established R&D centers in the country,
leveraging its scientific and engineering
workforce.3

2. Do IT with Poland Polish IT sector is gradually improving, The


Polish Agency for Enterprise Development website, www.web.gov.
pl/en, accessed 15 September 2014; IT/ICT sector in Poland its
good and its going to get even better, Ministry of Treasury
Republic of Poland website, www.msp.gov.pl/en, accessed 15
September 2014.
3. The Global Competitiveness Report 20132014, World
Economic Forum, p. 317; The EU Structural Funds in Poland for
R&D in 20142020, European Commission website, www.
erawatch.jrc.ec.europa.eu/, accessed 15 September 2014.

On the ground
InOctober 2013, South Koreas Samsung
Electronics announced the opening of
its fourth Polish R&D center in Krakow.
The other three are located in Warsaw,
Lodz and Poznan. The work at this new
R&D center will focus on developing
software and technology for mobile
operators across Europe, with the aim
of strengthening Samsungs European
telecommunication networks business.4

support includes seed-funding, co-working


space, mentoring services and access
to Deutsche Telekoms customer base.
Deutsche Telekom plans to collaborate
with these start-ups in order to drive
innovation.5

In April 2013, Deutsche Telekom, a


German-based telecommunications
company, opened a new innovation center
in Krakow. The center provides support to
start-ups from Poland and other countries
in Southern and Central Europe. This

In February 2013, UK-based Delcam,


a supplier of software for the
manufacturing industry, opened a new
sales office in Bydgoszcz.6 In 2013, other
UK software companies that expanded
their presence in Poland included Kainos
Software and Innovation Group. US-based
corporations similarly expanding their
Polish presence included Boost Software
and JDA SoftwareGroup.7

4. Samsung R&D Institute Poland opens a new office in Cracow,


Poland, Samsung website, www.samsung.com, 31 October 2013.

5. hub:raum goes east: Deutsche Telekom is opening innovation


hub for southern and central Europe, Deutsche Telekom website,
www.telekom.com, accessed 15 September 2014.
6. Delcam opens new office in Bydgoszcz, Poland, MarketLine (a
Datamonitor Company), Company News, 20 February 2013, via
Dow Jones Factiva 2013 MarketLine an Informa plc business.
7. EY's EIM 2014.

EYs attractiveness survey Europe 2014 An extract on emerging markets Playing catch-up

13

A mixed picture

The emergence of Eastern Europes new


powerhouses
Over the last five years, Turkey and
Russia have become highly attractive
Turkey becomes
destinations for FDI. With their
the 10th most
significant market potential, skilled
attractive
workforces and improving business
destination for
conditions, they have drawn significant
FDI in Europe.
numbers of new projects. Turkey did not
appear in the top 15 FDI destinations in
Europe prior to the crisis. However, between 2009 and 2013, it saw
FDI projects surge by 129%, accompanied by a 162% increase in
job creation, making it the 10th most attractive destination for FDI
inEurope.

Changes in FDI patterns

Meanwhile, Russia took the leading position for FDI projects


among non-Western European destinations during the crisis years.
The automotive sector stood out as a star performer, due to its
potential for expansion in the country. For the same reasons, food,
chemicals, and machinery and equipment were also at the top of
the FDI rankings. However, continued FDI growth in both Turkey
and Russia remains fragile and contingent on limiting political risk,
particularly in the case ofRussia.

CEE economies, including Hungary, the Czech Republic,


Romania and Bulgaria, saw a steep decline in ICT projects.

The survey was conducted before the current geopolitical tensions


had arisen from the situation in Ukraine. The outcome of these
events and their impact on Russias attractiveness are yet to be seen.

If we extract Russia and Turkey, job creation in the automotive


sectors of CEE countries has seen a decline of30%.

14

Between 20092013:
While job creation in countries such as Poland, Romania and
the Czech Republic fell by more than 50%, it increased in Turkey
and Serbia by 143% and 157% respectively.
FDI projects in the business services sector more than doubled
in Russia, and increased by more than three times in Turkey,
albeit from a low base.

Poland, Romania and the Czech Republic recorded a substantial


decline in automotive sector projects.
Russia and Turkey in CEE have been the key recipients of FDI
projects in the automotive sector.

EYs attractiveness survey Europe 2014 An extract on emerging markets Playing catch-up

www.ey.com/attractiveness

Case study

Turkey automotive
Thanks, in part, to its proximity to the
EU, Turkey has become a prominent
manufacturing hub for global automakers.
And rising per capita income and a low car
density both promise prospective growth
for automotive companies in Turkey itself.
Companies are drawn by the availability
of a skilled workforce, low labor costs
and a highly developed technological
infrastructure, including technology parks
and organized industrial zones.8
Between 2009 and 2013, Turkey attracted
41 automotive FDI projects. Automotive
companies have established manufacturing
facilities and assembly plants in Turkey
in order to serve both the domestic and
export markets (in 2013, over 70% of total
automotive production in the country was
exported). And the Governments special
incentive schemes, which offer tax and
duties exemptions for investments in R&D,
have helped establish Turkey as a promising
location for new R&D centers.9

8. The Central and Eastern European automotive market: Turkey,


EY website, www.ey.com, accessed 11 September 2014.
9. Automotive Industry Monthly Report, Automotive Manufacturers
Association, Turkey, 2013; Ernst & Youngs 2013 Turkey
attractiveness survey: the shift, the growth and the promise, May
2013; The Central and Eastern European automotive market:
Turkey, EY website, www.ey.com, accessed 11 September 2014;
Turkey's Investment Incentives System, Invest in Turkey website,
www.invest.gov.tr, accessed 15 September 2014

On the ground
Ford Otosan, a joint venture between Ford
Motor Company of the US and Turkeybased Ko Holding A.., is one of the
largest players in the countrys automotive
market.10 In July 2013, the company
established an auto engineering research
center in Istanbul. Built with an initial
investment of US$28m (20m), the new
center will employ 1,300 engineers.
In the last five years, Ford Otosan has
invested close to US$1.3b (0.9b) in R&D
spending in Turkey. In 2014, the company
also opened a new US$511m (375m)
facility in Yenikoy, Turkey, which has
the capacity to build 110,000 vehicles
peryear.11

10. Ernst & Youngs 2013 Turkey attractiveness survey: the shift,
the growth and the promise, May2013.
11. Currency converter, Oanda website, www.oanda.com,
accessed 12 September 2014, exchange rate used US$1 =
0.7348 and TRY1 = US$0.4636 as per average for 2014YTD
(January 2014 September 2014); Ernst & Youngs 2013 Turkey
attractiveness survey: the shift, the growth and the promise, May
2013; Turkey's chances of auto expansion, The Economist
Intelligence Unit website, www.eiu.com, accessed 11 September
2014; Ford Otosan opens new $511 million facility in Yenikoy,
Turkey, MarketLine (a Datamonitor Company), 26 May 2014, via
Dow Jones Factiva, 2014 MarketLine an Informa plc business;
Ford Otosan Breaks Ground On New Engineering Centre, Ford
Online website, www.at.ford.com, accessed 12 September 2014.

Hyundai Assan Otomotiv Sanayi (HAOS),


a subsidiary of Korean automaker Hyundai
Motor Company, was formed as a joint
venture with Turkeys Kibar Holding
A.. HAOSs assembly plant in Izmit
was established in 1997. It currently
manufactures a number of different
small cars, including Hyundais i10 and
i20 models, mainly for the European
market. In July 2013, HAOS made a
further US$609m (447m) investment
inthe plant, which created approximately
2,800new jobs and doubled the
facilitys annual production capacity to
200,000units.12

12. Turkey auto module manufacturing plant in full operation,


Hyundai Mobis website, www.mobis.co.kr, accessed 12 September
2014; Hyundai Motor Manufacturing Plant in Turkey Prepares to
Boost Economy with New Investment, Hyundai Motors website,
www.hyundai.com, 24 May 2013; Hyundai Mobis completes
construction of manufacturing unit in Turkey, IHS Global Insight
Daily Analysis, 10 September 2013, via Dow Jones Factiva,
2013, IHS Global Insight Limited.

EYs attractiveness survey Europe 2014 An extract on emerging markets Playing catch-up

15

EY viewpoint

Despite the challenges,


FDI can drive automotive
growth

Sales are recovering in CEE


After the recession in 2012, the Central
European car market bottomed out in
mid-2013, and sales then grew during the
fourth quarter. In Eastern Europe, sentiment
is improving, and so are sales: light vehicle
sales grew by 1.6% in 2013.
Some European countries still face weak
consumer spending and record levels of
unemployment. However, over the next few
years, Europe is expected to witness higher
production growth than in the years 2009
to 2013. Production growth of 2% per year
is forecast for Central Europe and 5% for
Eastern Europe.
The recent market decline forced producers
to operate at sub-optimal utilization levels.
This put a strain on cost structures, which
led to some plant closures. And it also had
a direct impact on suppliers. However, in
the past decade, automakers have shifted
threemillion units of production capacity to
Eastern Europe and Turkey in order to gain
a cost advantage.

16

Andrey Tomyshev
Head of the Automotive Group in the CIS

Patches of growth in a difficult Russian


market
Russia is the second-largest car market in
Europe. In 2012, sales peaked in Russia
at 2.9 million cars and light commercial
vehicles. This compares with 3.2 million sales
in Germany for the same period.
After steady growth between 2009 and
2012, car sales in Russia started to contract
as a result of a slowdown in the Russian
economy, which recorded negative growth
of -5.5% in 2013. The further deterioration
of consumer confidence and the
depreciation of the ruble (12% for the first
eight months of 2014) meant the decline in
sales continued into 2014.

Despite this decline, sales of premium


brands, Chinese brands, SUVs and pickups
(both budget and premium models) are
continuing togrow.
How soon exactly growth in car sales will
return will depend on the amount and
efficiency of government support measures.
We expect that sales growth may restart
after 2015.
Help from the Russian Government
The Government has launched a US$260m
scrappage scheme. This scheme could
lead to the replacement of 170,000 cars,
light commercial vehicles and commercial

EYs attractiveness survey Europe 2014 An extract on emerging markets Playing catch-up

www.ey.com/attractiveness

Auto companies considering a


move into the Russian market
should consider focusing
on the business segment,
because it is less subject to
market fluctuations; and on
the used-car sector, which is
demonstrating steady growth.
Andrey Tomyshev, head of the
Automotive Group in the CIS

vehicles in 2014. Such a figure would be


equivalent to 6% of the total sales for 2013.
The Government has discussed a number
of possible further measures for 2015
and 2016, to help the automotive sector,
including:
Introducing an age limit for cars
Replacing vehicle tax with an ecological
tax
Encouraging government-controlled
companies to buy locally produced
vehicles
As the cost of car ownership in Russia
is higher than that in many developed
countries, the Government should also
consider the following measures to
encourage demand:
Reduce taxes and fees, including the
utilization fee, fines and parking fees
Encourage the manufacture of more fuelefficient vehicles
Subsidize financing for car purchases (car
loan interest rates)
Develop scrappage facilities
Provide incentives to encourage the
manufacturing of spare parts from
recycled materials
Opportunities in Russia for foreign
automakers
Many automotive companies believe that
there is considerable market potential in

Russia. They expect long-term growth to


come from:
The rise of the middle class
The replacement of outdated vehicles
(the average age of cars in the country is
about 12 years)
An increase in car density in the country
The development of transport
infrastructure
During the downturn, many major
automotive players avoided cutting principal
development or localization programs. And
more recently, a number of automotive
companies and suppliers have announced
their intentions to expand capacity and build
new plants in Russia. Chinese automotive
companies, in particular, are looking to
expand.
For automakers trying to develop their
business in Russia, the biggest challenge is
sourcing capable lower-tier local component
suppliers. The majority of local suppliers
do not meet global quality, cost or delivery
standards. Given the time it will take
for Russian companies to meet relevant
quality standards, foreign automakers
should consider localizing their existing
suppliers. This is something that should
be considered, in particular, by Chinese
companies, because they currently have low
localization levels in Russia. Localization is
also a crucial strategy for hedging against
currencyrisk.

Auto companies considering a move into the


Russian market should consider focusing
on the business segment, because it is less
subject to market fluctuations; and on the
used-car sector, which is demonstrating
steady growth.
New producers should enter into
partnerships with several large dealership
networks. And automakers will need to
establish stringent dealer review and
monitoring systems in order to manage
dealer insolvency risks.
We forecast car sales growth in Russia of
around 5% annually from 2016.
Russian suppliers must improve
To become attractive prospective partners
for foreign manufacturers, Russian suppliers
need both to improve their performance and
to consolidate capacities to reach necessary
economies of scale. To do this, they will need
the Government to support them by:
Providing financial support for
modernization and training programs
Making land available and improving
infrastructure
Enabling a dialogue between global and
local companies, toidentify possible areas
for capacity consolidation

EYs attractiveness survey Europe 2014 An extract on emerging markets Playing catch-up

17

Eastern Europes cities lag behind


As with country attractiveness, the perceived attractiveness of
many cities in the CEE region has fallen. When asked to name the
three most attractive cities in Europe, only 17% of respondents
named CEE cities. This compares with 82% who named a city in
Western Europe and 19% who named a city in Southern Europe.

In line with previous years results, investors chose London, Paris,


Berlin, Frankfurt and Munich as the top five investment destinations
in Europe. Moscow slipped from 8th to 10th on the list. Prague and
Warsaw have dropped to 12th and 14th places respectively.

The next Google


Cities in the US and Asia continued to be the top choices of
investors, when asked from which cities it is most likely that
the next Google will emerge. Seven emerging market cities in
total Shanghai, Beijing, Mumbai, New Delhi, Bangalore, Hong
Kong and Moscow made the top 15.

Next Google

Which three cities in the world offer the best chance of producing
the next Google?

2014
San Francisco and Silicon Valley

26%

Shanghai

22%

New York

18%

Beijing

16%

London

12%

Mumbai

7%

Los Angeles

7%

Tokyo

6%

New Delhi

6%

Singapore

6%

Berlin

5%

Bangalore

5%

Hong Kong

5%

Moscow

4%

Paris

4%

Source: EYs 2014 European attractiveness survey (total respondents: 808).

18

EYs attractiveness survey Europe 2014 An extract on emerging markets Playing catch-up

www.ey.com/attractiveness

Case study

Russias services sector


As Russia tries to move away from its
economic reliance on the oil and gas sector,
its services sector has come to the fore.
Anumber of factors have driven FDI in
thissector:
Russias accession to the World Trade
Organization
The conclusion of bilateral agreements
for increasing market access in services
Accelerated business activity in the
country
Russias skilled workforce 
In the years 2009 to 2013, Russia drew
60 projects in the business services sector
and 45 projects in the technology sector,
primarily from the US and the UK. The
majority of these projects involved foreign
companies setting up sales and marketing
offices in the country. However, there
is currently some slowdown and loss of
investor confidence in Russias services
sector due to the effects of the geopolitical
tensions from the situation in Ukraine.13

13. Russia Service Sector Shrinkage Heralds Imminent


Recession, The Moscow Times website, www.themoscowtimes.
com, accessed 15 September 2014.

On the ground
US-based global e-commerce player
Digital River was among the major
investors in Russias business services
sector in 2013. The company has been
serving the Russian software market
since 1998. It opened a new sales and
marketing office in Moscow in 2013.14 By
increasing its presence in Russia and its
local client support, Digital River aims to
improve online sales and risk management
support for its multinational clients. The
company expects its new office to support
the growth of the Russian e-commerce
industry, which is expected to triple
by2015. 15

14. Digital River Opens Office in Moscow, Russia, Digital River,


Inc. website, www.digitalriver.com/company/newsroom, 28 May
2013.
15. DIGITAL RIVER PREPARES FOR RUSSIAN ECOMMERCE
GROWTH, 29 May 2013, PYMNTS.com website, www.pymnts.
com, accessed 15 September 2014; Digital River Opens Office in
Moscow, Russia, Business Wire website, www.businesswire.com/
news, 28 May 2013.

Similarly, in 2013, Israeli-based global


broadcasting solutions provider RRsat
Global Communications Network opened
a local marketing office in Moscow.
This office was set up to serve the
companys expanding customer base
in Russia and the Commonwealth of
Independent States (CIS). RRsat has also
assembled a supporting infrastructure
there including premium platforms and
strategic partnerships and alliances
and it has recruited a local team, so that
it can provide end-to-end broadcasting
solutions to itsclients.16

16. RRsat expands globally, creates local presence in Russia,


World Teleport Association website, www.worldteleport.org/news,
25 June 2014.

EYs attractiveness survey Europe 2014 An extract on emerging markets Playing catch-up

19

Emerging
investors

20

EYs attractiveness survey Europe 2014 An extract on emerging markets Playing catch-up

www.ey.com/attractiveness

Investment from the BRICs at an all-time


high, although uneven
In 2013, Europe attracted 313 projects from companies based in
the BRICs, up 28% from 245 projects in 2012. The job creation
from BRIC companies also increased by 37%, to reach 16,900 jobs.
As a result, investment (both FDI projects and jobs creation)
from these countries reached an all-time high in 2013. Rapidgrowth economies generate an increasing number of fast-growing
multinationals. As a result, the investment-promotion agencies of
many European countries have increased their efforts to pull in
investments from these companies.

218
114

217

257

266

However, the increase in BRIC investments in Europe has not been


evenly spread across the continent. Investment from BRICs remains
highly concentrated in the UK and Germany, which together capture
62% of all investment from these countries.

BRICs footprint in Europe

FDI from the BRICs into Europe


FDI projects

China is a clear leader among BRIC investors, with 153 FDI projects
(49%) creating 7,135 jobs. In 2013, FDI projects from China
increased by 25%, while job creation was up by 55%. India ranked
second, with 103 projects (33%) creating nearly 7,000 jobs. FDI
projects from India increased by 39% and job creation by 8%.

313
245

China
153 projects

India

156

103 projects
2004

2007

2008

2009

2010

2011

2012

Job creation

5,106

2004

6,885

2007

9,124

2008

8,672

2009

44 projects

16,900

13 projects

12,309

12,232

2010

2012

Brazil

Source: EY's EIM 2014.

9,385

2011

Russia

2013

2013

Source: EY's EIM 2014.

EYs attractiveness survey Europe 2014 An extract on emerging markets Playing catch-up

21

EY viewpoint

Investment incentive:
how Europe can capitalize
on change in China

By Qinghua Xu-pionchon, Partner, Head of EMEIA Chinese


Business Service-China Overseas Investment Network

In 2013, FDI projects in Europe from


China increased by 25%. What are
your expectations for future Chinese
investment inEurope?
The momentum of Chinas outbound
investment growth is likely to continue
and even accelerate, driven by Chinas
reinforced go global strategy under
President Xi. China is transforming its
economy. It is changing from the worlds
biggest factory to the worlds largest
consumer market. This has brought
about a significant shift. A number of
Chinese megacompanies are looking
outward, particularly to Europe, for growth
opportunities. In 2013, Chinese outbound
acquisitions by privately owned enterprises
(POEs) doubled in Europe, compared with
2012. This trend of increasing investment
in Europe should gain further momentum
in the years to come. For the middle market
segment in particular, investment will be
dictated by Chinas internal market needs.

22

Loletta Chow
Global Leader, China Overseas Investment Network

Which sectors attract the most attention


from Chinese businesses that are looking
to invest in Europe?
Financial services: banking, insurance and
asset management
Agri-food: ranging from animal feeding
and seeding technologies to food
processing and packaging, food safety
and security control procedures to
consumer products such as dairy,
processed meats, precooked dishes,
frozen foods
Clean tech and energy conservation
technologies
Pharmaceuticals and health services
Advanced manufacturing technology
Consumer products and services related
to lifestyle

In the past couple of years, we have seen


Chinese banks spread across Europe.
Financial services overall may see a lift,
following the accelerated building up of the
renminbi, overseas settlement and clearing
platforms in major European countries.
Chinese buyers are moving up the value
chain and a second wave of Chinese people
is migrating to Europe, seeking to escape
pollution and high-pressure jobs. As a
result, interest is also growing in real estate
and tourism, especially luxury residence
complexes, commercial centers, high-end
office buildings and 45 star hotels.
The burgeoning Chinese middle class will
continue to grow and consume. Therefore,
demand for lifestyle and luxury-related

EYs attractiveness survey Europe 2014 An extract on emerging markets Playing catch-up

www.ey.com/attractiveness

Many of the emerging


markets in Eastern Europe
are transforming from
planned economies to
market economies. This
creates opportunities for
investors, such as privatization,
particularly in the power,
utilities, infrastructure and
renewable energy sectors.
Loletta Chow, Global Leader, China
Overseas Investment Network

products and services will only accelerate.


By 2020, Chinese tourists worldwide
are expected to amount to 200 million,
compared with 100 million in 2013. This
growth will bring a range of opportunities
for potential investors.
We have also seen Chinese technology
companies take leading positions in new
technologies, including telecoms and
IT-related services, new technology IP,
e-commerce, mobile communications, social
media and e-platforms.
How can emerging economies in Europe
make themselves more attractive to
investors?
Many of the emerging markets in Eastern
Europe are transforming from planned
economies to market economies. This
creates opportunities for investors, such
as privatization, particularly in the power,
utilities, infrastructure and renewable
energy sectors. For the Chinese investor
with the strategic goal to move into new
markets, such opportunities are a great
draw. Government policies to help facilitate
investment, such as tax breaks and other
incentives, can enhance the appeal of these
countries.
My advice for emerging economies in Europe
is to do their research, find out what Chinese
investors are seeking, explore their needs
and connect at a government-to-government
level to discuss how best to cater for these

needs and offer relevant incentives. And to


partner with people who have local insight,
connections and experience.
How do you think emerging economies
in Europe can increase awareness about
their FDI appeal?
I believe that they should focus on the
particular appeal of their countries or
cities. In Bulgaria, for example, we have
seen Chinese businesses looking to invest
into solar energy and wind farm projects.
Hungary and Poland provide grounds for a
logistics and manufacturing hub in Europe.
The more fundamental question is how to
create sustained and positive awareness.
This requires them to have their house in
order. Increased transparency, an improved
regulatory environment and a strong legal
framework can set a welcoming tone to
draw in investment.
What barriers do Chinese companies face
when they invest in Europe?
In Europes developed markets, the Chinese
do not face many barriers. Over the past
three years, these European countries have
competed to attract investors from China.
Chinese companies may struggle with
Europes management culture. When
companies from an emerging market such as
China invest in a developed market, Chinese
investors tend to be in an apprenticeship

during the early years following a merger


or an acquisition. It is not easy, and there
are no straightforward solutions. My advice
would be to focus heavily on attracting and
retaining key talent.
What advice would you give to Chinese
investors considering CEE as an
investment destination?
I would advise investors to be ready to
grasp the opportunity, but also do to their
homework. They should seek the help of a
trusted advisor, who is able to provide local
insight, raise awareness on processes and
options, prioritize advantages, and provide
a solid assessment and mitigation of risks.
When bidding to invest in an asset that is
being privatized, Chinese investors need to
understand the auction process fully, and
adapt their internal processes accordingly.
Moving a step further, after an acquisition
by a state-owned Chinese company, the key
questions are how to continue to incentivize
and empower people, and how to deliver
sustainable growth. A key task here is
to create an appropriate management
structure, with the right talent in place.
Securing top talent and tapping in to these
countries educated workforces should be
a top priority for Chinese investors who
embark on projects in CEE.

EYs attractiveness survey Europe 2014 An extract on emerging markets Playing catch-up

23

Emerging investors

Case study

Major Indian investment in Europe


Indian companies are actively seeking
investment opportunities in Europe.
They are doing so in order to access
new technology and to diversify their
investments beyond Asian countries. In
the last five years (2009 to 2013), Indian
companies invested in 419 FDI projects in
Europe. The technology, automotive and
business services sectors have received the
majority of Indian investment into Europe.
And the UK, Germany and France have been
the top investment destinations.

On the ground
The Tata group is by far the largest Indian
investor in Europe. Its first investment
in Europe dates back to 1907, when
it established Tata Limited in the UK.
Since then, the group has expanded
across sectors. It currently operates
through more than 19 companies, and
employs around 60,000 people across
Europe.17 In 2013 alone, it invested in
12 projects in the UK, Germany, France
and the Netherlands, mostly through its
subsidiaries Jaguar Land Rover and Tata
Consultancy Services (TCS).
Jaguar Land Rover is creating a stateof-the-art engine manufacturing center
in Wolverhampton in the UK, which is
expected to be fully operational by 2015.
The center will manufacture advanced
low-emission diesel and petrol engines, for
exclusive use in the companys future

17. Tata in Europe: November 2013, Tata Limited, 19 November


2013, p.2.

24

vehicles.18 The center will use cuttingedge heating and lighting systems to
minimize energy requirements. The site
is being built with a total investment
of more than US$836m (500m).19
When it reaches full capacity, the
center is expected to employ around
1,400people.20
Tatas IT services subsidiary TCS
opened a delivery center in Liverpool in
2013. This center will provide services
to the Home Office in support of the
UKs Disclosure and Barring Service
(DBS), which allows employers to check
the suitability of applicants for work
with children or vulnerable adults.
Through this new facility, TCS will help
to transform the DBS by introducing
electronic applications and online
services. This new facility will create
more than 300jobs.21

18. Jaguar Land Rover create 700 jobs at Wolverhampton


factory, The Independent website, www.independent.co.uk/news,
accessed 9 September 2014.
19. Currency converter, Oanda website, www.oanda.com,
accessed 12 September 2014, exchange rate used US$1 =
1.6715 as per average for 2014YTD (January 2014 September
2014).
20. Jaguar Land Rover Installs The UKs Largest Rooftop Solar
Panel Array At Its Engine Manufacturing Centre, The official Media
Centre for Jaguar Land Rover website, www.newsroom.
jaguarlandrover.com/en-in/jlr-corp/news, 3 April 2014.
21. TCS expands UK operations in Liverpool, Tata Consultancy
Services website, www.tcs.com/news_events, 18 February 2013.

EYs attractiveness survey Europe 2014 An extract on emerging markets Playing catch-up

www.ey.com/attractiveness

Emerging market companies rush to


capitalize on Europes R&D strength
In 2013, R&D was one of the hottest areas for foreign investment in
Europe. FDI projects in the R&D function increased by a solid 23%.
Investors see Europe as a center for their research and innovation
activities: 45% of respondents to our survey think R&D will drive
Europes FDI activities in the coming years.

Companies from emerging markets are increasingly investing in


Europe to exploit the continents strength in scientific development.
R&D-oriented FDI projects in Europe from India and China more
than doubled in 2013, reaching 13 and 20 projects respectively.
Chinas Huawei Technologies was one of the largest investors in
R&D in Europe overall.

Preferred European gateways


BRIC investors and entrepreneurs are showing extensive interest
in European markets. Their preferred European gateways are the
UK, Germany and France. And the majority of their investment has
gone to the manufacturing, finance and business services sectors.

themselves from domestic competition and to enhance their


appeal to increasingly urbanized Chinese consumers. Such deals
will also allow them to improve their manufacturing capabilities by
getting access to advanced technology.

Rapidly growing BRIC multinationals especially those from China


and India are taking a range of different approaches to entering
and expanding operations in Europe.

A number of BRIC investors are setting up European


headquarters in order to meet the demands of the continents
large market better. And many are investing in R&D centers in
Europe to leverage its technological strength. In 2013, Brazilbased investment bank Itau Unibanco expanded its European
headquarters in London.24 Indian companies such as Infosys
and Dr. Reddys have also recently expanded their European
presence.25

A number of Chinese investors are using M&A to obtain


undervalued assets and to gain access to European consumer
brands and technology.22
Recent Chinese investments in Europe include Bright Foods
acquisition of Italian olive oil company Salov Group, and China
Haidian Holdings Limiteds acquisition of watch company Dreyfuss
Group.23 These deals will help Chinese brands to differentiate

22. Chinese investors surged into EU at height of debt crisis, The Financial Times website, www.
ft.com, accessed 14 October 2014.
23. Chinas Bright Food Buys Majority Stake in Italian Olive Oil Maker Salov, The Wall Street Journal
website, www.online.wsj.com, accessed 14 October 2014; China Haidian Acquires UK Watch
Company Dreyfuss, ACN newswire website, www.en.acnnewswire.com/press-release, 14 April 2014.

24. EY's EIM 2014.


25. Dr Reddys to buy Dutch firm OctoPlus, The Hindu business line website,
www.thehindubusinessline.com, accessed 17 October 14.

EYs attractiveness survey Europe 2014 An extract on emerging markets Playing catch-up

25

Publications
2014 European attractiveness survey
EYs European attractiveness survey,
published in May 2014, shows that
Europe is still the top global foreign
direct investment location. Despite
tough economic conditions, the
continents appeal has increased.
Europe set an FDI record in 2013.
Foreign investment decisions reached
an all-time high of 3,955 projects, up
4% from the previous year and 17%
from the pre-economic crisis average.
Furthermore, business leaders are
more optimistic than last year. At the same time, they are realistic.
The majority believe it will take between three and five years for
Europe to overcome the crisis completely. Investors understand
that recovery is not an invitation to be complacent. They stress
that competitiveness remains the key to sustainable growth and a
more attractive investment climate for Europe.

EY Rapid-Growth Markets Forecast July 2014


Over the medium term, fast-growing
populations and increasing
productivity will lift growth in rapidgrowth markets to close to 5.5%.
Cities will be the powerhouses of this
growth, with Asia dominating the
global landscape. Read EYs latest
Rapid-Growth Markets Forecast to
explore the opportunities created by
urbanization in the emerging world.

2014 Kazakhstan attractiveness survey


Kazakhstans brand is at its strongest.
Among both established and nonestablished investors, awareness of
Kazakhstan has increased. And the
global investment communitys
confidence in the countrys potential is
at an all-time high. Kazakhstans
international integration, innovation
agenda and focus on green energy are
poised to enhance its appeal among
investors and enable growth. Find out
more in EYs 2014 Kazakhstan
attractiveness survey: the brand paves the way at
emergingmarkets.ey.com.

26

2014 Africa attractiveness survey


Despite a decline in the number of new
FDI projects into Africa in 2013,
largely caused by a significant decline
in North Africa, the continents share
of global FDI projects reached the
highest level in a decade, with the
number of new projects in sub-Saharan
Africa continuing to grow. Africas
perceived attractiveness relative
toother regions has also exhibited
remarkable progress, showcasing
howthe image of Africa has begun
tochange. To go beyond the headlines, read EYs 2014 Africa
attractiveness survey: executing growth at
emergingmarkets.ey.com.

2014 India attractiveness survey


Even through headwinds, India remains
one of the top global destinations for
FDI, on account of its solid domestic
market, educated workforce and
competitive labor costs. New business
partners, particularly from the Middle
East and Southeast Asia, are ramping
up efforts to tap the countrys
underlying potential, while
international investors are expecting a
significant spike in infrastructure
opportunities in the near future. To go
beyond the headlines, read EYs 2014 India attractiveness survey:
enabling the prospects at emergingmarkets.ey.com.

Differentiating for success:


securing top talent in the BRICs
The lack of critical skills in emerging
markets has resulted in a significant
human capital problem, which is
negatively affecting firms
competitiveness and strategic growth.
In this report, we seek solutions
through the five strategies for talent
attraction and retention, based on a
survey of over 1,000 professionals in
the BRIC countries. Download the
report at emergingmarkets.ey.com.

EYs attractiveness survey Europe 2014 An extract on emerging markets Playing catch-up

EY | Assurance | Tax | Transactions | Advisory


About EY
EY is a global leader in assurance, tax, transaction and advisory services.
The insights and quality services we deliver help build trust and confidence
in the capital markets and in economies the world over. We develop
outstanding leaders who team to deliver on our promises to all of our
stakeholders. In so doing, we play a critical role in building a better
working world for our people, for our clients and for our communities.
EY refers to the global organization, and may refer to one or more,
of the member firms of Ernst & Young Global Limited, each of which
is a separate legal entity. Ernst & Young Global Limited, a UK company
limited by guarantee, does not provide services to clients. For more
information about our organization, please visit ey.com.
2014 EYGM Limited.
All Rights Reserved.

Contacts
Marc Lhermitte
Partner, EY Advisory
+ 33 1 46 93 72 76
marc.lhermitte@fr.ey.com
Ilse Blank
Global Economic Programs Leader
+ 27 11 772 5063
ilse.blank@za.ey.com
Raffaella Santarsiere
Global Press Relations
+ 39 027 221 2944
raffaella.santarsiere@it.ey.com

EYG no. AU2751


EMEIA MAS 1001459
ED None
In line with EYs commitment to minimize its impact on the
environment, this document has been printed on paper with a high
recycled content.
This material has been prepared for general informational purposes only and is not intended to
be relied upon as accounting, tax, or other professional advice. Please refer to your advisors for
specific advice.
The opinions of third parties set out in this publication are not necessarily the opinions of the global
EY organization or its member firms. Moreover, they should be seen in the context of the time they
were expressed.

ey.com

Follow us on Twitter @EY_EmergingMkts