Where will your suppliers, partners and competitors be expanding their global operations over the next few years? The 2004 Global Investment Prospects Assessment, a survey of multinational executives recently conducted by the U.N. Conference on Trade and Development, provides some valuable clues, along with a few surprises. The good news: The recession that began in 2001 is over. Multinational companies are optimistic about investing in manufacturing, distribution, logistics and other operations in every region. Nearly 80 percent of all respondents said they expect their prospects to improve through 2007. Companies responding to the survey control total assets worth $1.9 trillion, of which 38 percent are cross-border assets.
It's no surprise that developing nations are now the most attractive places to expand, and China is rated the most attractive of all. Ironically, three of the four most-attractive developing-world locations for the short term (2004-05) were marginal players in the global economy little more than a decade ago: South Africa, long shackled by apartheid, and China and Poland, long ruled by Communist governments.
Although the respondents were fairly optimistic about expansion-related investment in the U.S., only one-third expected brighter prospects for Western Europe; 20 percent even predicted worsening conditions there. Nevertheless, among developed countries, the U.S. was ranked "the most attractive" for investment flows, followed by Britain, Canada, Germany and Japan.
Outside the developed world, other popular locations included Brazil - which 60 percent called attractive in the short term - and Poland and South Africa, now rated attractive by about half of respondents. In Europe, the eastward expansion of the European Union means many companies will expand their manufacturing, distribution and services in the Czech Republic, Hungary and Poland. However, with its population of nearly 40 million, Poland offers by far the largest work force - and domestic economy - of any new EU member.
Despite overall bullishness, multinationals prefer the biggest stars among developing countries, and neglect many lesser players. Most developing countries, particularly smaller ones, still face challenges in attracting foreign direct investment, said Karl Sauvant, director of UNCTAD's division on investment, technology and enterprise development.
Still, the prevailing mood is optimistic in every geographical region, even Africa, where the report noted "a remarkable reversal in experts' opinions" compared to 2003. More than 80 percent of respondents said Africa's prospects had improved. South Africa is the most-attractive African location, but Angola and Tanzania rank second and third because of their bright prospects in natural resources. The growing popularity of Angola - embroiled in civil war until 2002 - reflects its oil reserves and progress toward democratic reforms.
Among Asian nations, India, which ranks second behind China, has yet to become the major destination for multinational expansion, despite years of anticipation. However, the report notes, "experts expect a major surge" into India by 2006-07. Other especially bright spots in Asia include the usual stars - Thailand, Malaysia, Singapore and South Korea. In Latin America, the "traditional magnets" for investment flow remain the big winners; Mexico, Brazil and Chile are expected "to continue to play that role," the report said.
In which business sectors will multinationals expand fastest? In developed countries, the hottest industries worldwide will be electrical and electronic products; motor vehicles; and other transportation equipment, followed by chemicals, and machinery. In the service industry, the most-attractive sector in developing countries will be transportation and business services, followed by tourism, retail and wholesale trade, and computer-related services.Journal of Commerce:
