Helmut Maukner
         Managing Partner, Ernst & Young Österreich,
                     Österreich/Austria

Die Attraktiv...
CEE Economic Forum 2007




Attractiveness
of South East
Europe
for foreign
investors
Helmut Maukner
Country Managing Part...
About Ernst & Young

The members of the global Ernst & Young organization help
companies in businesses across all industri...
About Ernst & Young

In Austria Ernst & Young is one of the leading professional
services firm with more than 400 people i...
South East
Europe
Attractiveness
Survey 2007
Objectives
         A survey combining reality and perceptions

   To measure the attractiveness of South East Europe
   ...
Methodology and Sources
          A two-fold methodology

   The Ernst & Young Attractiveness Survey is based on a two-fo...
Profile of respondents
                A sample offering a comprehensive picture
                of business models
      ...
Introduction:
the reality of FDI in Europe
(with a focus on South East Europe)
FDI in Europe – East and West –
                at a record pace
Split of FDI between Western Europe
and Central & Eastern...
South East Europe
                  6% of all FDI projects in SEE
     Top five European                                 ...
SE Europe’s Top 3 countries account
     for 85% of regional FDI 2001-2005

                                              ...
Job creation through FDI in Europe

        Investment projects in Central & Eastern Europe
             Central and Eas...
Heavy manufacturing projects are the
           source of job creation

   More than 25,000 jobs created by FDI in SE Eur...
Investors’ perception
of CEE and SEE versus
other European regions
Central and Eastern Europe finds
          new competition on a global level
    Central and Eastern Europe has ceded its...
Central and Eastern Europe has more
           of a local following

        39% of all voters identify CEE as top three ...
Most attractive European regions
           South East Europe is gradually
           building its attractiveness
        ...
Most attractive regions by location criteria
           A region primarily attractive for
           its cost competitiven...
Most attractive regions by location criteria
             …but presenting a challenge to Central
             Europe on qu...
Attractiveness within
South East Europe
FDI profile 2001-2005
                                                Leading FDI sector / function
                     ...
Most attractive countries in terms of perception
     Romania leads the way, ahead of 3
     competing challengers

      ...
Image vs. Reality: the big gap

    Romania:                                               Reality Image
      “What you...
Most attractive countries in terms of perception
                  Encouraging perspectives for Bulgaria

     Perception ...
SEE – Country preference
        The location sites considered :

         Romania                                       ...
Type of investments
                What type of direct investments is your group mainly planning?

        Establish sub...
South East Europe
            2007 Attractiveness scoreboard

                                                            ...
Romania
Romania leader of the region

        Opportunity
          Romania is perceived as the most attractive South East
     ...
Opportunities
                             Promising destination
                                                         ...
Threats
                            Doubts on high tech
                                                                  ...
Investors’ expectations for Romania
          Connectivity and stability

                                                ...
Bulgaria
Building Bulgaria´s international
      image
           Reality Image
           ranking ranking
Romania      1   =   1  ...
New Confidence, New
          Challenges
   Accession to the EU is
    building investors´
    confidence
               ...
Competitive advantages
                             Cost factors
                                                         ...
Investors’ expectations for Bulgaria
        Stability and quality

                                               Investo...
Future challenges
Investor monitor Europe at a crucial
             time of change – Eastern prospects
        Executive’s perception of Eu...
South East Europe future challenges


        Play together as a region, like Central and Eastern
         Europe
      ...
Thank you for your attention




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2007. Helmut Maukner. Attractiveness of South East Europe for foreign Investors. CEE-Wirtschaftsforum 2007. Forum Velden.

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2007. Helmut Maukner. Attractiveness of South East Europe for foreign Investors. CEE-Wirtschaftsforum 2007. Forum Velden.

  1. 1. Helmut Maukner Managing Partner, Ernst & Young Österreich, Österreich/Austria Die Attraktivität von Süd-Osteuropa für ausländische Investoren Attractiveness of South East Europe for foreign Investors
  2. 2. CEE Economic Forum 2007 Attractiveness of South East Europe for foreign investors Helmut Maukner Country Managing Partner Ernst & Young Austria
  3. 3. About Ernst & Young The members of the global Ernst & Young organization help companies in businesses across all industries — from emerging growth companies to global powerhouses — deal with a broad range of business issues. Our 114,000 people in 140 countries around the globe pursue the highest levels of integrity, quality and professionalism to provide clients with a broad array of services relating to audit and risk-related services, tax, and transactions. 3
  4. 4. About Ernst & Young In Austria Ernst & Young is one of the leading professional services firm with more than 400 people in our offices in Vienna, Linz, Salzburg and Klagenfurt. We closely cooperate with the Ernst & Young member firms in the Central Europe (CE) Area which comprises Austria, Croatia, Czech Repbulic, Estonia, Germany, Hungary, Latvia, Lithuania, Poland, Russia (including the member states of the CIS) Slovak Rebublic, Slovenia, Switzerland and The Netherlands and in the South East Europe (SEE) Sub-Area which comprises Albania, Bulgaria, Cyprus, Greece, (F.Y.R. of) Macedonia, Malta, Moldova, Romania, Serbia, Turkey. 4
  5. 5. South East Europe Attractiveness Survey 2007
  6. 6. Objectives A survey combining reality and perceptions  To measure the attractiveness of South East Europe versus other European regions  To measure the attractiveness within South East Europe  To compare the perception of 200 international executives with the reality of actual Foreign Direct Investments (FDI) in South East Europe provided by the Ernst & Young’s European Investment Monitor 6
  7. 7. Methodology and Sources A two-fold methodology  The Ernst & Young Attractiveness Survey is based on a two-fold approach: tracking actual investment project announcements in Europe, recorded in the Ernst & Young European Investment Monitor (EIM), and surveying the perceptions and expectations of international senior executives, with respect to Europe as a potential investment region.  Based on 200 interviews with decision makers across a range of industries, countries and business models, the 2007 edition of the South East Europe Attractiveness Survey provides an insight into today’s diverse and complex landscape for foreign direct investment in a increasingly attractive region. 7
  8. 8. Profile of respondents A sample offering a comprehensive picture of business models Asia 5% Telecom, high-tech Business services Central and Oceania 1% 12% 22% Eastern Europe Other 5% 6% Pharma, chemicals 9% North America Industry, 17% automotive, energy Western Europe Consumer 29% 23% 71% Sectors Country of origin > 150 €M < 1.5 €B 27% 200 international respondents  120 established in SE Europe < 150 €M 60%  80 not established in SE Europe > 1.5 €B 13% Size Sample 8
  9. 9. Introduction: the reality of FDI in Europe (with a focus on South East Europe)
  10. 10. FDI in Europe – East and West – at a record pace Split of FDI between Western Europe and Central & Eastern Europe (number of projects - 2002/2006)  3,500 investment decisions by foreign investors across Europe 2006  74% in Western Europe 26% in CEE 10
  11. 11. South East Europe 6% of all FDI projects in SEE  Top five European 96 investment 559 S 111 destinations situated in RUS Western Europe Irl 67 DK 55 UK 180 82 180  Growth is in Central, NL B PL Eastern and Southern 181 538 116 Europe D CZ SK 76 93 A 59 115  South East Europe F CH H RO 85 attracted the same 29 E 147 SB 19 BG 33 P I 49 number of projects as Germany and Poland TR 29 GR 8 *FDI: foreign direct investment Source: Ernst & Young European Investment Monitor 2006 in number of foreign direct investment projects in Europe in 2005 11
  12. 12. SE Europe’s Top 3 countries account for 85% of regional FDI 2001-2005 Number of projects 40% 25% 20% 285 174 9% 141 62 4% 29 Romania Bulgaria Turkey Serbia Greece Source: Ernst & Young European Investment Monitor 2001- 2005 Market share in number of projects – Top 5 12
  13. 13. Job creation through FDI in Europe  Investment projects in Central & Eastern Europe  Central and Eastern Europe attracted 26% of investment projects  BUT: benefited from 51% of new jobs created by foreign investors  217 jobs per project in Central and Eastern Europe vs 64 jobs per project in Western Europe Job creation by project Total job creation Market (average 2006) by region share Western Europe 64 102,578 49% Central & Eastern Europe 217 108,795 51% Total 101 211,373 100% Job creation split between Western Europe and Central & Eastern Europe - 2006 13
  14. 14. Heavy manufacturing projects are the source of job creation  More than 25,000 jobs created by FDI in SE Europe in 2006  Romania: 13.969 jobs  Serbia: 5.212 jobs  Bulgaria: 4.080 jobs  High average job creation per project  Serbia: 372 jobs / project  Romania: 191 jobs / project  Bulgaria: 128 jobs per project)  Domination of labour intensive projects  In the automotive sector  From Germany and USA 14
  15. 15. Investors’ perception of CEE and SEE versus other European regions
  16. 16. Central and Eastern Europe finds new competition on a global level  Central and Eastern Europe has ceded its second position to China in the ranks of regional attractiveness Evolution of interest in the most attractive areas (total superior to 100% - 3 possible choices) 16
  17. 17. Central and Eastern Europe has more of a local following  39% of all voters identify CEE as top three preferred location  BUT: only 30% of North American companies and 23% of Asian companies do  The main foreign investors in CEE come from Western Europe 17
  18. 18. Most attractive European regions South East Europe is gradually building its attractiveness Image  8% of international investors 11% (not established in SE Nordics 34% Europe) spontaneously 18% ranked South East Europe Central as the most attractive Europe European region in terms Western Europe of locations where to establish operations 8% South East Europe Source : Ernst & Young South East Europe Attractiveness Survey 2007- 80 international executives not established in SouthEast Europe – First quotations - Maket share in number of projects 18
  19. 19. Most attractive regions by location criteria A region primarily attractive for its cost competitiveness… Labour cost Image 40% 12% 9% 1 2 3 Productivity increase Central South East Western 31% Europe Europe Europe 20% 17% 1 2 3 Central South East Western Europe Europe Europe Source : Ernst & Young South East Europe Attractiveness Survey 2076- 200 international executives 19
  20. 20. Most attractive regions by location criteria …but presenting a challenge to Central Europe on quality and infrastructure  NOTE: undisputed domination South East Central of Western Europe on local Europe Europe environment and qualitative Labour cost 40% 12% criteria  South East Europe and Central Productivity increase 31% 20% Europe compete for 2nd rank: Labour skills level 22% 16%  South East Europe best for labour skills level and Social climate 14% = 14% telecom infrastructures Political stability 12% 14%  Central Europe best for Transport political stability and 17% 18% infrastructures transport infrastructures Telecommunication 16% 13% infrastructures Source : Ernst & Young South East Europe Attractiveness Survey 2006- 200 international executives 20
  21. 21. Attractiveness within South East Europe
  22. 22. FDI profile 2001-2005  Leading FDI sector / function  Relative competitive advantage within SEE o FDI job creation 2001-2005  Manufacturing,  Manufacturing, consumer goods Logistics, call  Labour skills center o 6,440 jobs Romania  Labour skills o 42,800 jobs Serbia Bulgaria  Energy and transportation  Manufacturing  Corporate Tax Turkey  Domestic market  Labour cost  Labour flexibility o 17,500 jobs o 28,400 jobs 22 Source : Ernst & Young South East Europe Attractiveness Survey 2007- 200 international executives Source : Ernst & Young European Investment Monitor 2006
  23. 23. Most attractive countries in terms of perception Romania leads the way, ahead of 3 competing challengers Image 58% 49% 48% 44% 26% Romania Turkey Greece Bulgaria Serbia Source: Ernst & Young South East Europe Attractiveness Survey 2007 200 international executives 23
  24. 24. Image vs. Reality: the big gap  Romania: Reality Image  “What you see is ranking ranking what you get” Romania 1 1 = Turkey 3 2  Turkey & Greece: Greece 5 3  “Overpromising?” Bulgaria 2 4  Bulgaria & Serbia: Serbia 4 5  “Deserving a better Source: Ernst & Young South East Europe Attractiveness Survey 2007 - image” 200 international executives Source: Ernst & Young European Investment Monitor 2006 24
  25. 25. Most attractive countries in terms of perception Encouraging perspectives for Bulgaria Perception 2007 3 year improvement Romania 58% Romania 68% Turkey 49% Bulgaria 62% Greece 48% Turkey 59% Bulgaria 44% Greece 56% Serbia 26% Serbia 50% 0% 10% 20% 30% 40% 50% 60% 70% 80% 0% 10% 20% 30% 40% 50% 60% 70% 80% Source : Ernst & Young South East Europe Attractiveness Survey 2007 - 200 international executives 25
  26. 26. SEE – Country preference  The location sites considered : Romania %28 Turkey %23 Bulgaria %14 Serbia %12 Greece %9 Moldova %8 Can’t say %7 Respondents : 65 considering establishing or developing activities in South East Europe 26
  27. 27. Type of investments  What type of direct investments is your group mainly planning? Establish subsidiaries 50% Extend existing locations 19% Purchase companies or plants 15% Provide local companies with 5% equipment and capital Other 3% Provide loans to local 2% companies Can't say 6% Respondents : 62 considering establishing or developing activities in South East Europe and quoting a location country 27
  28. 28. South East Europe 2007 Attractiveness scoreboard Romania Bulgaria “in line with first- “surprising and Romania wave rising” accession Bulgaria countries” Greece Greece Turkey Turkey “quality not “the sleeping transforming giant” into reality” Source : Ernst & Young South East Europe Attractiveness Survey 2007- 200 international executives 28
  29. 29. Romania
  30. 30. Romania leader of the region  Opportunity  Romania is perceived as the most attractive South East European country  International investors are confident in Romania’s future: 68% believe it will improve within 3 years (# 1 in the SE region)  Threats  Romania is not in a leading position in the SEE region on infrastructures (telecom and logistic), political environment stability, quality of life and R&D availability, which could be an issue when competing with Central European countries in the EU 27 30
  31. 31. Opportunities Promising destination Productivity increase  Romania is perceived as 27% 20% the most attractive 11% country for potential 9% productivity increase Romania Turkey Greece Serbia Site availability  Romania is perceived as 26% the most attractive 12% 12% 11% country for site availability Romania Bulgaria Turkey Greece Source : Ernst & Young South East Europe Attractiveness Survey 2007- 200 international executives 31
  32. 32. Threats Doubts on high tech R&D quality  Respondents perceive 22% 17% Romania as weaker than Greece and Turkey on R&D 13% 6% availability and quality Greece Turkey Romania Bulgaria  Romania is also perceived as Telecom infrastructures weaker than Greece and Turkey on telecommunication 37% infrastructures 16% 12% 5% Greece Turkey Romania Serbia Source : Ernst & Young South East Europe Attractiveness Survey 2007- 200 international executives 32
  33. 33. Investors’ expectations for Romania Connectivity and stability Investor’s expectations Further improve transport and 29% communication infrastructures Implement more flexible and simple 28% administrative procedures Ensure political environment stability 28% Meet with the European economic 24% regulatory standards Improve the education system 21% Can’t say = 21% 0% 10% 20% 30% 40% 50% 60% 70% 80% Source : Ernst & Young South East Europe Attractiveness Survey 2007 - 200 international executives 33
  34. 34. Bulgaria
  35. 35. Building Bulgaria´s international image Reality Image ranking ranking Romania 1 = 1  … but high expectations Turkey 3 2 from the international investors Greece 5 3 Bulgaria 2 4  62% of the respondents are optimistic about Serbia 4 5 Bulgaria´s improvement within 3 years: # 2 in the region 35
  36. 36. New Confidence, New Challenges  Accession to the EU is building investors´ confidence  … yet puts Bulgaria in a  Stability (# 6 in the SEE challenging league: region)  Infrastructures (# 6)  Hungary  Quality of life (# 5)  Slovakia  Czech Republic  … 36
  37. 37. Competitive advantages Cost factors Labour cost  Bulgaria is perceived as 23% 19% the 2nd most attractive 11% country for labour cost 9% Romania Bulgaria Turkey Greece  Bulgaria is perceived as Corporate Tax the 2nd most attractive country for corporate 15% 12% 12% 11% taxation Romania Bulgaria Cyprus Greece Source : Ernst & Young South East Europe Attractiveness Survey 2007- 200 international executives 37
  38. 38. Investors’ expectations for Bulgaria Stability and quality Investor’s expectations Further improve transport and 29% communication infrastructures Ensure political environment stability 27% Meet with the European economic 25% regulatory standards Implement more flexible and simple 23% administrative procedures Improve quality of life 20% Can’t say = 25% 0% 10% 20% 30% 40% 50% 60% 70% 80% Source : Ernst & Young South East Europe Attractiveness Survey 2007 - 200 international executives 38
  39. 39. Future challenges
  40. 40. Investor monitor Europe at a crucial time of change – Eastern prospects  Executive’s perception of Europe’s attractiveness over the next three years  East will meet West  Russia and Ukraine – „future atractiveness“ 40
  41. 41. South East Europe future challenges  Play together as a region, like Central and Eastern Europe  Match image and reality  Make regional diversity a competitive advantage  Showcase for EU accession  Meeting high expectations on quality and stability 41
  42. 42. Thank you for your attention 42

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