What is La Baule WIC ?

Annual Theme

Europe’s attractiveness in a changing world

The World Investment Conference (WIC) has emerged as an essential forum for both global business and political leaders to discuss the attractiveness of Europe as a destination for foreign direct investments.

In 2010, the WIC is committed to providing positive answers and sustainable solutions to face the downturn that is affecting our countries, regions, and businesses.

The WIC is organized around 3 main conferences dedicated to the larger theme of “European attractiveness in a changing world.”

European attractiveness report 2010: How will Europe emerge from the crisis?
 Changing patterns of FDI: greenfield, expansion, offshoring, alliances, restructuring
 Competition among countries, regions and cities : winners and losers in Europe and the world
 Post-crisis opportunities: industries, countries, technologies
 Focus on growth sectors (cleantechs, life sciences, BtoB and BtoC services, infrastructure, creative industries,…)

Europe’s attractiveness model post-2010 : What is Europe’s value added?
 Talent & Education
 Finance & Services
 Industry & Technology
 Business Environment & Regulation
 Infrastructure & Public Investment

Proposals for the future: Which actions will improve European attractiveness?
 Policy and reforms
 Attractive cities and regions
 Communication and marketing
 Governance and Public-Private initiatives

Participants and speakers

The WIC 2010 is capping its guest list at 500 high-level speakers and participants.

Media coverage

 Cited in more than 300 articles in 2009, across 10 countries, from Great Britain to India
 1800 quotes since 2003 in news papers in France, Belgium, Germany, Spain, Italy, UK, Hungary, Romania, Russia, Portugal, Poland, Greece, Denmark, Chile, China, Czech Republic, Japan…
 The European Attractiveness Survey is consistently in the top three articles “clicked” on websites that offer a link

Headlines on Europe’s attractiveness - 2010

Playing Defense

Some industries and some countries have been hit by multiple shockwaves (in the automotive, real estate, software, industrial equipment sectors, etc…), leading to massive job losses. A record number of companies are expected to go bankrupt in 2009 (260,000 business insolvencies in Europe and in the US). More companies are likely to breach their loan covenants in 2009 as the slowdown intensifies, leading to a surge in company restructurings or failures.

During 2009, in many manufacturing sectors, orders were down by 40-50% from their July 2008 peaks and many industrial companies have yet to reveal the scale of damage in their worst-hit divisions, while many companies owned by private equity are over-borrowed.

Many countries were affected by the crisis and in multiple sectors. In a strange turn of events, business leaders have been looking at their governments to help tackle the industrial crisis, to get through the current situation and beyond.

The response by governments has been varied: from straight cash injection to the implementation of revised insolvency regimes. In many cases, these initiatives have saved distressed companies, even by favoring their survival of over the interests of creditors, taking into account the “social” cost and the cost to rebuild these corporate structures in the long term. We have yet to see the toll on public debt and the ex post judgment on the relevance of some bailouts.

But we have also seen more pro-active, less defensive initiatives. For instance, the crisis has been an encouragement in many regions of the world to accelerate the building of world-class technology clusters. With the aim to create favorable eco-systems of innovation, creating and financing “technology bridges” between companies and the research community, between private R&D and university labs, between industry and education, between global manufacturers and fast-growth, technology-intensive entrepreneurs.

One of the key messages from Ernst & Young’s European attractiveness 2009 survey was the complete reconfiguration of international expansion modes. 42% of investors surveyed said they will reconsider the way they expand their international operations. FDI activity in 2009 is likely to be dominated by non-cash mergers and consolidation, as companies seek to survive economic turmoil by optimizing assets and combining with competitors to cut costs. Restructuring and mega-mergers are underway in the financial, pharmaceutical and IT sectors, and we can expect similar activity in other vulnerable industries, particularly the automotive sector, where several groups have already launched discussions, and also among airlines.

Investors still looking East

Yet, the engine of growth in the global economy is moving east, propelled by a combination of commodity production and the advent of a new Asian middle class. Emerging market multinationals are becoming global champions in many industries. In this world in transformation, new power brokers (sovereign wealth funds, private equity, hedge funds) have taken off, but the financial crisis is altering their trajectories.

According to our panels, China and India are better positioned than many other developing economies for a quick recovery towards double-digit growth. They have relatively small and insulated financial sectors, high savings and socially-concentrated wealth. Since becoming full and leading members of the G20, governments in both countries have responded with an array of measures. India’s central bank has eased its key lending rate to increase market liquidity, while tightening monetary policy in other areas to prevent inflation. China, with its focus on economic growth, has announced several stimulus policies; the biggest by far being a US $586 billion package of investment in infrastructure, utilities and housing over the next two years. Our survey respondents demonstrate faith in the effectiveness of these policies, with China scoring the second among all regions for its ability to address the crisis: 70% of respondents are confident the region has what it takes to overcome the difficulties. India ranks fourth, with 63% of our panel expressing confidence in the region.

The remaining BRICs - Russia and Brazil - fare less well in the eyes of potential investors. Russia’s problems stem from an ongoing crisis in its financial markets, the aftermath of the war in Georgia and the plummeting price of its crude oil, which in March this year (2009) was down more than 70% from its July 2008 peak.

Careful confidence in Europe

In total, 74% of respondents of Ernst & Young’s latest European Attractiveness Survey say they were very confident, or fairly confident in Europe’s ability to tackle the financial and economic meltdown, particularly in the West. Central and Eastern Europe was also expected to overcome difficulties, although potential investors were more reticent about its capacity to do so. Can East Europeans cope alone? A deep split is developing in Europe over the extent to which Europe’s richer Western countries should help their poorer Eastern neighbors. Beleaguered Eastern members fear “old Europe” is drifting from the core European Union principle of a single market, and that this could leave "new Europe" abandoned in its time of need. The US - even sorely bruised by current events, was given a favorable rating for its ability to address the crisis: 69% of those surveyed proclaim their faith in the country’s ability to overcome the current difficulties.

Europe’s advanced regime of "flexicurity" may now be viewed as an advantage; cushioning the downturn and s in demand by keeping more people at work, avoiding home foreclosures, and providing social security payments to the jobless. A handicap in times of strong economic growth has become a regional economic asset in recession – providing an automatic relative stimulus to consumer spending, as well as a social and politically stabilizing role.

The changing pattern of FDI

Multi-cultural approaches, collaborative partnerships and new forms of out and co-sourcing of production and service delivery bring new opportunities. Offshoring, nearshoring, expansion, colocation,? Risk management is now at the heart of a company’s location decisions, prompted by the prevailing climate of uncertainty. The current priority is for transparency, stability and clarity in the countries chosen for investment projects. Companies are sharpening their focus on the balance of risks and rewards in economies everywhere. Investors are looking at a complex variety of costs, quality and risks factors before selecting their business locations.

Among the key location factors:
 Infrastructure in education and research
 Transportation and telecom
 Governance and government investment
 Market dynamics
 Talent pool
 Quality of life
 Tax regime and general business conditions
 Real Estate quality and quantity

Green and High Tech Growth Needs Fuel

The transition to sustainable models requires a shift from a volume to a value economy: to ‘make more with less’. Today, people have realized the importance of these challenges, and that the present economic crisis provides an opportunity to create this new green economy. Modern technologies, research and innovation will require colossal investment to rise to the environmental challenges. Some countries, such as China and the United States, whose stimulus plans put the environment at the heart of their investment – have understood this well. But financing and political will are crucial to this battle, and it is essential that Europe and other developed and even developing countries move strongly in this direction.

Public authorities everywhere increasingly realize that building on responses to today’s major societal needs is essential to remain attractive and to create tomorrow’s lead markets: solutions for a greener environment and energy efficiency, active safety in automotive, intelligent parking and road systems, and increased broadband access to the home and on the move. The European innovation strategy should be built on four pillars: a robust education system, strong R&D, lead markets and manufacturing expertise. In addition, Europe should implement dedicated innovation-led measures to benefit from those unique foundations and shape its own future.”

To fuel, some governments have “injected” cash in the eco-systems or used tax relief or similar mechanisms to prime the investment pump, for example to encourage light industry and households, to invest energy-efficient materials and systems.: these investments have a quick payback and create demand. Others have used or intend to use public borrowing, not to finance consumption, but to invest in goods and services that will benefit the next generation.