Author: Hardy Graupner
Renowned consultancy A.T. Kearney on Wednesday published its 2017 Foreign Direct Investment Confidence Index, looking once again at changes in investors’ perception of the business climate in specific countries and regions.
The authors of the study said they were surprised by this year’s results, pointing out that a year ago investors were concerned about the rise of populist policies in the Brexit referendum vote and the US presidential elections.
“And yet this year, despite Brexit and the equally unexpected US election outcome, the US maintains its No.1 rank on the index, and the United Kingdom gains one spot to rank fourth,” A.T. Kearney’s Paul Laudicina said on the consultancy’s website.
Not as bad as previously thought?
The study said the discrepancy could best be explained by the fact that the US and UK markets were both large and open economies with relatively efficient regulations, transparent tax rates and strong technological capabilities. It added investors had pointed to these characteristics as the primary factors they considered when determining where to invest.
There’s also the perception that both Brexit and US President will be good for business at least in the short term. This is based on London’s prospect of having to deal with fewer cumbersome EU-mandated regulations and a more rational immigration policy, once it’s left the EU.
The study remarks that Trump for his part has promised to lower corporate tax rates and invest heavily in US infrastructure.
Germany a winner
This year’s index provides some good news for Germany as it rises to second place in the table behind the US, marking its highest ranking in the nearly two-decade long history of the FDI Confidence Index.
A.T. Kearney says the improvement likely reflects the country’s business-friendly regulatory environment and its robust labor market. Many investors expect Germany to benefit from the fallout from Brexit.
The number of European markets on the index fell for the second year in a row to 11 countries in 2017, signaling a downward trend in investor interest in Europe as a region. Nonetheless, the five largest European economies all made gains in the ranking this year.
Emerging markets secured a share of 28 percent of the positions, “rebounding from a historical low of 20 percent last year.”
A.T. Kearney viewed this as a nascent trend of global investors increasing their risk tolerance and eyeing emerging economies for growth opportunities, particularly China and India.