The investment climate in Europe is showing some renewed signs of vitality after years of falling FDI and an overall deteriorating business environment. Nonetheless, European countries, especially the EU bloc, have a long way to go to fulfil their investment potential, as Angel Gurría, secretary-general of the Organisation for Economic Co-operation and Development (OECD), tells fDi Magazine.
What is your feeling about Europe’s current investment climate?
FDI into Europe has been very low compared with the past and pre-crisis levels. However, today FDI is bouncing back and Europe’s share of global FDI is again more consistent with the size and importance of Europe. It looks as if there is a recovery, and we hope it is here to stay.
What are the opportunities that Europe can offer foreign investors today?
The reasons why there is so much accumulated investment here is that Europe has got the talent, the technology and the savings. The question now is: what types of investment are European countries willing to attract? They have to focus on relatively sophisticated businesses with high-tech components to make the most of their comparative advantages. Combining human talents and technology can lead to very competitive businesses based in Europe. Integrated markets are definitely another comparative advantage, which is why we are encouraging EU authorities to wrap up the integration process leading to a common market in energy, telecommunications and electricity.
And cheaper input costs from collapsing commodity prices make Europe’s business proposition even more competitive…
Cheaper input prices should be wind in the sails for Europe. The low costs of energy, combined with low interest rates and a weaker euro should all go in the direction of increasing the competitiveness of the region. However, Europe’s competitiveness in the mid and long term depends on its productivity and the overall profitability of a project, and these factors are only part of the picture. Bear in mind that the higher the knowledge input, the less a business depends on energy, for example.
FDI inflows are coming back, but are still far from the peak reached before the crisis. What is missing for Europe to recover fully its investment appeal?
Reforms, reforms, reforms, which will eventually unlock new investment. Europe has to reform labour, skills and, as mentioned, continue with the integration process of key markets.
Are you concerned Brexit will somehow hamper the current investment recovery?
Brexit won’t be good for anybody, but I think it will not happen. I’m confident there will be a common understanding, positive proposals by the EU and everybody will be actively working to keep the EU together.