As a result of their success these countries have started developing strong domestic ICT clusters which, in turn, are looking at markets abroad to expand. India, particularly, has become an important outward investor in ICT and is now considered by many IPAs as an important target country. Indian companies set up operations in the leading economies, such as Europe and north America, when they plan expansions into these markets; and in developing countries, such as in Africa, where they find access to pockets of skill at even more competitive costs than in India.
China is also developing maturing industries seeking access to markets and resources in other parts of the world by locating operations there.
At the receiving end of the FDI market, the most striking trend is that investment into western Europe is not picking up at the same pace as in other regions around the world. Western Europe sees more domestic companies investing abroad than foreign companies investing in the individual countries. This is likely to continue as eastern European regions improve their business environment, while their cost competitiveness is likely to remain strong.
Various western European countries are still not sufficiently recognising that they face some very tough years concerning inward investment, and are not seeking improvement actively enough in their competitiveness despite many signals from industry leaders in ICT and other sectors. Most concerns relate to high overall labour costs – with no clear sight of stabilisation or even decreases – and inflexible labour laws, whereas corporate income taxes in various countries remain on the high side as well.
Roel Spee is associate partner at IBM Business Consulting Services – Plant Location International