Report: Estonia, Europe less attractive for investment

  • 2007-07-11
  • Staff and wire reports
TALLINN - Estonia, along with other European countries, has lost much of its investment attractiveness, a new survey by Ernst & Young, a leading accounting and consultancy firm, shows.
"The attractiveness of Estonia has declined along with that of Europe of course," Hanno Lindpere, a partner in the firm, said July 10.

As he explained, much of Estonia's economic growth has in part relied on inexpensive borrowing, which has fueled consumption and consequently pulled the current account gap wider.
"Similarly, the declining attractiveness of Europe is affecting the price at which we can borrow money, making Estonia's outlook worse in the end. Even though Europe as a whole is still an interesting area for investment for entrepreneurs, new focal points of attraction are emerging elsewhere, primarily in India, China and Brazil," Lindpere said.

Tarmo Toiger, senior consultant with Ernst & Young Baltic, added, "Estonia's position in the competition for investments with other countries of Eastern Europe is not bad, considering the continued tax incentives."
Toiger pointed out a labor shortage and higher labor costs as Estonia's disadvantages in comparison with Poland, for instance.
The survey 's the European Attractiveness Survey 's was based on interviews with more than 1,000 businessmen.
"Having successfully fended off advances by other global regions in recent years, Europe's clear lead as the location of choice is narrowing," the report reads. "While over half (55 percent) of decision-makers cite Western Europe as one of their three most preferred business locations, this represents a full thirteen-point fall from the 2006 score."

Central and Eastern Europe has lost 13 percentage points in 2007, placing it third on the global scoreboard, the survey says.
After maintaining a consistent second place in the previous surveys, Central and Eastern Europe ceded its second position to China in the ranks of regional attractiveness in the latest survey.
Central and Eastern European locations are unable to rely solely on their position at the heart of change in Europe, nor draw the full benefit from a favorable labor environment, Ernst & Young said.
"The increased level of interest identified by our survey in 2005 as a result of favorable labor costs has not been maintained. While 27 percent of respondents ranked Central and Eastern Europe top for this strategic location factor in 2005, it has fallen to 20 percent in 2007," it said.