Countries’ attractiveness for setting up business
Attractiveness depends on cost-competitiveness, the tax system, the skill level of the labour force, corporate profitability, public infrastructure, etc. So it is a multi-faceted and complex variable.
It can be measured indirectly, by:
- cost-competitiveness, in light of the trend in exchange rates measured by the real trade-weighted exchange rate. Currently the currencies of the United Kingdom, Italy and Spain are overvalued in real terms;
- export market shares, in which losses have been very marked in Japan, the United Kingdom, France and Italy;
- the trend in potential GDP and in production capacity in industry. Potential GDP has grown significantly in the United States, while production capacity has stagnated in the United Kingdom, Japan, Spain and Italy;
- growth in employment excluding the civil service, which has been the most vigorous in Spain and the weakest in Japan.
If we use these criteria, the most attractive countries for companies are the United States, Sweden, Germany, Spain and France, while the least attractive are the United Kingdom, Italy and Japan.
Attractiveness measured by investment
However, for each country we also look at two direct measures of attractiveness for companies:
- the proportion of the country’s business investment that is carried out in that country and not abroad. This proportion is low in Sweden, France, Spain and the United Kingdom;
- the share of investment by foreign companies in GDP. This proportion is high in Sweden, the United Kingdom and Spain.
According to this investment criterion of attractiveness, the most attractive countries are the United States, the United Kingdom, Spain; the least attractive are France and Italy.
Which are the most attractive countries among the large OECD countries?
When you summarise both the indirect and the direct approaches, you realize that the United States tops the ranking, while France and Italy are found at the bottom.