Eys 2014 European Attractiveness Survey Extract On Emerging Markets

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.
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.
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.
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.
A mixed
picture
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%

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.
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.
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

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.
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
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
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.
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.
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.
12
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.
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.
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.
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
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
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%
18
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.
19
Emerging
investors
20
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
9,385
2011
Russia
2013
2013
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
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.
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.
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.
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.
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

Eys 2014 European Attractiveness Survey Extract On Emerging Markets

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Eys 2014 European Attractiveness Survey Extract On Emerging Markets

Uploaded by

Copyright:

Available Formats

EY's attractiveness survey

EYs 2014 European attractiveness survey: back in the game

Emerging Markets Center

For further information on emerging markets, please visit:

Follow us on Twitter @EY_EmergingMkts

EY's attractiveness survey Europe 2014

Foreword Marc Lhermitte and Rajiv Memani

07 The global backdrop

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

New European powerhouses

Welcome to Playing catch-up, an

The shift in the balance of power from

Countries in CEE that emerged as FDI

had arisen from the situation in Ukraine.

In 2014, global events have continued

The extract's scope

In this extract, we discuss Europes

CEE countries bear the brunt of the crisis

Differences in the impact of

New powerhouses in Eastern Europe

Low attractiveness scores for CEE

Turkey and Russia are growing into preferred destinations for

There has been a divergence in the perceived attractiveness of

FDI projects by countries

The crisis changed the FDI landscape of Europes emerging markets

Most attractive locations for

Czech Republic 512

Source: EY's EIM 2014.

Rising interest from BRIC investors

BRICs footprint in Europe

The global backdrop

In 2013, while developed economies

FDI inows by region

Latin America and the Caribbean 19%

respondents perceptions albeit only by a small margin. CEE

The worlds most attractive regions to establish operations

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

Crisis reshapes Europes FDI maps

The FDI maps of Europe before and after

Differences in the impact of the crisis

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

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

CEE bears the brunt of the crisis

In the early 2000s, many CEE countries

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

FDI projects by countries

Source: EY's EIM 2014.

Shifts and new hot spots

Top 15 countries by FDI projects

FDI job creation

Source: EY's EIM 2014.

Shoring or reshoring a tricky balance

As a result, industry is experiencing a fundamental shift across

The wage gap between advanced economies and China the

However, the importance of production in emerging markets

Location strategy, therefore, will become trickier for

Look out for EY's Reshoring manufacturing:

Poland ahead on attractiveness

Most attractive locations for establishing

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

support includes seed-funding, co-working

In April 2013, Deutsche Telekom, a

In February 2013, UK-based Delcam,

Russias services sector

Major Indian investment in Europe