WORLD TRADE's Hot Picks for Trade & Expansion

30 Top Countries by Lara L. Sowinski Posted: May 7, 2003

WORLD TRADE's hot picks for trade & expansion

This year's annual survey of the leading countries for trade and expansion confirmed a trend that WORLD TRADE first identified several years back. Namely, that top countries are becoming more competitive than ever, and this year's close scores confirm it.

Indeed, this year's results yielded more ties than any previous year, which prompted us to break down the whole number rankings into fractions in order to resolve a number of ties. We also consulted the Economist Intelligence Unit's e-readiness rankings, a useful gauge as to how well a country is keeping up with regards to

IT infrastructure, technological innovation, and government initiatives to support the Internet's advancement.

The rankings also illustrate another significant trend-the move towards stability and familiarity. The current business environment is one that is dominated by security concerns and lean profit margins, and executives are averse to high degrees of risk at the moment. It's therefore no surprise that stalwart trading partners like the U.K., Canada, and Australia placed highest on the survey. These countries are characterized as highly stable both politically and economically, and share a lot of cultural similarities with the U.S., including language. On the other hand, despite all the hoopla that China has received for its ability to attract manufacturing operations, when the country is analyzed across a comprehensive set of criteria, the areas that China needs to improve upon are revealed.

We've also made a few changes to this year's survey, such as measurements for protection of intellectual property and mean tariff rate, as well as the World Economic Forum's Growth Competitiveness Ranking. In addition, we have also included data on inward direct investment flows and real private consumption.

While the theme of this year's results may be to "go with what you know," the experienced executive knows that golden opportunities exist in numerous countries, some of whom may not have qualified as one of WORLD TRADE's "Top 30," but whose nascent potential would be a mistake to overlook.

Number 1: United Kingdom

Aside from passing up the competition to win the top spot in this year's survey, the U.K. has plenty more to offer. The country is the largest venture capital market in the world outside of the United States and has the lowest utilities costs in the EU. Corporate and personal tax rates are both low, as are the social security contributions from employers. The U.K.'s geographic position, which is centrally located between the U.S. and Asia, gives the country a wide range of business hours. Mature finance and capital markets, a sophisticated technology infrastructure, competitive labor rates, and an excellent transportation system enhance the U.K.'s attractiveness.

Number 2: Canada

The U.S.' northern neighbor is also its biggest trading partner. Canada's proximity to the U.S. is an appealing feature; coupled with the duty free benefits afforded under the NAFTA and access to Mexico's market, the country stands out for good reason. The country was recently ranked as the best fiscally managed country in the G-7 by the Institute for Management Development. Canadian workers rank first in the world in terms of education. Canada's strong domestic fundamentals have positioned the nation well. The present global economic slowdown is less severe in Canada, and the country is poised to emerge from it earlier than other industrialized economies.

Number 3: Australia

Australia figures as the undisputed gateway to the Asia Pacific region, with a sound economy that withstood the Asian financial crisis of 1997 and one that is faring better than many in the present global economic downturn. Approximately 52 percent of households are connected to the Internet, as are nearly 100 percent of all large businesses. The regulatory environment is open and efficient, with an executive opinion poll concluding that Australia's ranks 5th in the world on the transparency of government policy. The country' costs for CEO and employee remuneration are significantly lower than in the U.S., Japan, the U.K., and Germany. Australia's AAA credit rating by Standard & Poor's for foreign currency borrowing is the highest possible, reflecting international confidence in the public finance and banking sectors.

Number 4: Japan

Although Japan's economy has been under considerable downward pressure for some time, it seems the banking reforms and other regulatory changes implemented by the government are beginning to pay off. Merger and acquisition activity is picking up and the economy appears to be regaining some strength, slowly but surly. Key markets include information and communication technology; healthcare and biotechnology; service industries such as food and franchising; and environment. In fact, soil and water remediation, pollution prevention services, and energy saving and management are gaining prominence in the island nation where eco-business is becoming very important.

Number 5: Netherlands

Sixty percent of all U.S. companies establishing a pan-European distribution center choose the Netherlands as their preferred location, and over 800 European D/Cs are in operation. The logistics infrastructure is highly efficient, and the country also has a high concentration of shared service centers and customer care centers. According to global real estate firm Cushman & Wakefield, the Netherlands is one of the most affordable places for office space in Western Europe-two to three times less expensive than the U.K., France, Ireland, Germany, Italy, and Switzerland. Nike is one company that has centralized its European operations in the Netherlands.

Number 6: Spain

In addition to a healthy domestic economy, Spain's close links with Latin America and North Africa make this country a stepping stone to other key markets. The services sector is the main contributor to the country's GDP, followed by industry. These two sectors represent almost 90 percent of Spain's GDP. Renewable energy, including thermal, photovoltaic solar, and wind power, is a sector ripe for expansion and it's on track to become the country's third most important energy source. The European Wind Energy Association rates Spain as the second largest producer of wind power in the world after Germany. Swedish multinational Ikea plans to make the Iberian peninsula (Spain and Portugal) the fourth largest European market for its products.

Number 7: Austria

Geographic location also plays well for Austria. It's central location gives Austria ideal access to the emerging markets of Central and Eastern Europe. Vienna is 266 km (approximately 45 minutes) from Budapest and 299 km from Prague. Austria's banking sector is also very familiar with the nuances of Central and Eastern European business. The country's education system is one of the best in the world, and is largely oriented towards the needs of the business world. A wide range of subsidies is available for SMEs, especially for research and development, company start-ups, and investments in new technology. BASF, Coca Cola, and McDonald's are some of the multinationals with Central and Eastern European headquarters in Austria.

Number 8: Ireland

Ireland's English speaking population is also the youngest in Europe with over 40 percent of the country's citizens under the age of 25 years. The country has one of the lowest corporate tax rates in the world. Since January 1 of this year, a corporate tax rate of 12.5 percent applies to trading profits in all sectors, including manufacturing and international services. Operating costs, such as employment costs, are also lower than most other European countries. The deregulation of the Irish telecom market last year marked a significant change in the country's telecommunications market, opening up more opportunities for foreigners.

Number 9: France

Electricity prices in France qualify as amongst the lowest available for industrial customers. The country also has some of the lowest prices for international telephone calls. Agribusiness is France's largest industrial sector, ahead of chemicals, automobiles, IT, and aeronautics. Biotechnology is becoming a key sector, too. France is among the top 3 countries for biotech companies. IBM, Delphi, Kodak, and 3M are some of the companies who have established operations in France.

Number 10: Denmark

Denmark offers unparalleled access to Nordic countries and the Baltic Sea region. Copenhagen Airport was voted Europe's best by the International Air Transport Association (IATA) in 2002. The airport has the shortest goods transit time of all European airports and boasts non-stop flights to over 95 European cities. The 2002 World Competitiveness Yearbook gave Denmark the highest rating for its distribution and infrastructure of goods and services. The country ranked higher than the U.S., Germany, France, Sweden, Belgium, the Netherlands, and the U.K. Denmark has a well-educated multilingual workforce, 78 percent of whom speak English, 43 percent German, and 14 percent French speaking.

Number 11: Switzerland

According to the Swiss-American Chamber of Commerce, Switzerland ranks number one globally in terms of productivity, and amongst the top five in terms of management efficiency and cost of capital/rate of return. The country also ranks amongst the top five globally in research and development spending, and has the highest number of patent registrations per capita in the world. Switzerland traditionally reports a small trade surplus and a significantly positive balance of payments. In addition, the country boasts one of the highest savings rates in the world along with low inflation. The EU is its largest trade partner and English is widely spoken throughout Switzerland.

Number 13: Italy

According to KPMG's 2002 Competitive Alternatives Guide, Italy has improved its "cost of doing business" position against every G7 country. Among all the countries surveyed, Italy came in third in overall cost of doing business and third in total labor costs, including wages and salaries. Its costs for doing business are 13.4 percent lower than the U.S. Business surveys typically rate Italy as a country that has a reputation for innovation and creativity, an excellent manufacturing base, superior geographic location, and excellent ability to produce high quality products. The U.S. is the biggest investor in Italy with 26 percent of all foreign capital in manufacturing sectors. There are over 830 American firms in Italy employing some 317,000 people.

Number 14: Sweden

Like a few other of its neighbors who made this year's Top 30 list, Sweden is a big player in the Baltic region, which also cover the countries of Norway, Denmark, Finland, Estonia, Latvia, Lithuania, western Russia, Poland, and northern Germany. The Boston Consulting Group (BCG) has observed a trend toward managing international business in Europe through five to seven regional headquarters and small local offices in each country. The consultancy says that a regional solution can give a company the best of both worlds: proximity to the market as well as cost-effectiveness. The Invest in Sweden Agency reports that 41 of the world's 100 largest companies have a regional office in Scandinavia. Sweden is prized for its ability to rapidly bring an idea to the marketplace via a streamlined commercialization process.

Number 15: Finland

The World Economic Forum's 2001 Growth Competitiveness Ranking put Finland in the number one position, while the 2002 report found Finland in the number two spot behind the United States. The country has an outstanding concentration of intellectual capital, which is often cited as a reason that foreign companies find the country attractive for investment. Furthermore, Finland has the highest Internet and mobile phone penetration in the world and a national 100 percent digital fiber optic network. The economy is expected to embark on an export led recovery, which will become most evident during the second half of this year. The electronics equipment industry will play an important role in the recovery, while the outlook for the forestry industry is also promising.

Lara L. Sowinski

Lara is Associate Editor for World Trade.