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Ernst and Young’s Study: “In 2050 the BRIC Economies, Turkey and Indonesia Potential to Overtake G-7’s Economies

Istanbul, Turkey | August 12, 2007 by D-8 Secretariat

D-8's Turkey and Indonesia will leave behind G-7 countries by 2050

The Ernst and Young European Attractiveness Survey 2007 reports that the popularity of nations such as Turkey and Indonesia as future business destinations is increasing while the attractiveness of Europe and North America is on the decline.

"The seven new global powers by 2050 will comprise the so-called BRIC economies (Brazil, Russia, India and China) together with Indonesia, Mexico and Turkey," the survey by the global business consultancy company stated.

By that time, these seven countries will overtake the economies of the current G7 countries in terms of gross domestic product (GDP), the survey said further. Western Europe 's attractiveness for foreign investors declined significantly in 2007.

The survey said that the developing economies will outdo the G7 if they manages to mend the loopholes regarding transparency, fairness and infrastructure development.

Meanwhile, European areas lost 13 points in the report's ranking between 2006 and 2007. However Europe maintains its lead as the most attractive global investment region, placing five countries in the global top 10. At the same time, the European focus is shifting eastwards, with France and Spain dropping out of the top 10.

The attractiveness of the traditional top ranked regions of Europe and North America is giving way to a rise in popularity of India and China . The differences between the key global business regions are blurring in terms of their perceived attractiveness. The global business world has become increasingly multi-polar.

Asia showed a significant gain in investor confidence, closing the gap with Europe . China now lies in second place among the list of preferred regions, with only seven points separating it from Western Europe 's lead. India also gained significant ground, up by eight points, and is placed fifth by global investors. At a country level, the rise of China has resulted in a decline in popularity for the US with an 8 point fall, giving it an attractiveness rating of 33 percent in 2007.

Despite the gain in popularity of more dynamic foreign direct investment (FDI) destinations, business leaders express confidence in Europe 's future, with 56 percent believing its attractiveness will improve over the next three years. In order to improve Europe 's attractiveness, investors cite, above all, the need for reforms providing greater flexibility (47 percent), simpler administrative procedures (44 percent) and more support for innovation (35 percent). Over half (56 percent) of respondents believe that the adoption of new environmental regulations by European countries would provide a means of increasing its attractiveness. They are divided as to whether the European Union gives sufficient support to environmental issues.

In terms of number of projects, Europe attracted 3,531 foreign investments in 2006, compared with 3,065 in 2005, representing a 15 percent increase. A total of 71 percent of these were " greenfield projects" — industries and business built on previously undeveloped land — a further sign of investment intensity. The top two destinations for FDI were the United Kingdom and France , with 19 percent and 16 percent of the total projects, respectively. The UK 's lead became more pronounced in 2006. Investment in other European countries fell well behind these two market leaders.

The traditional strongholds have been forced to accept a reduced level of business interest, as China rises through the ranks. After maintaining a consistent second place in previous surveys, central and eastern Europe has ceded its second position to China in the ranks of regional attractiveness. The central and eastern European locations still appear to be having difficulty in convincing investors of its merits as an "all-round" business location. It fails to score first for any of the location factors for which it was surveyed. It comes second on potential productivity increases, corporate taxation level and financial incentives. The region shows little sign of consolidating its image. The increased level of interest identified by the survey in 2005 as a result of favourable labour costs has not been maintained. While 27 percent of respondents ranked Central and Eastern Europe top for this strategic location factor in 2005, it has fallen to 20 percent in 2007.

D-8 Secretariat expresses its optimism regarding the report, and underlined that the organisation vows to continue formulating consolidated efforts and concentrated measures by all the member states to develop harmonized economic and trade policies, in order to accentuate her emerging regional economic power.

To download the Ernst & Young's Attractiveness 2007 Survey titled "Wanted: A Renewable Europe", highlighting Europe's economic position relative to 13 world economic zones, please click here (right-click your mouse, and choose "Save Target As").

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