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Europe Offers a Range of Investment Opportunity 

europe gcfi-summer 2014

By Patrick Dine

Thinking of international locations? Here are three European hotspots.

There are many different countries in Western Europe and to think of Western Europe or even Europe as one monolithic entity is always a mistake of simplicity. In terms of business and investment, there can be great differences in the location and its features even within an hour’s drive of a city right in the same country. Munich in Bavaria has very different investment opportunities than Austria or Switzerland, for example, and even Stuttgart and Munich are more different than similar, even though both are in Germany. Beyond labor force, incentives, transportation connections and other traditional aspects such as rural versus urban or manufacturing versus office, you must do your homework and find out which countries are trending in what ways. There is no one-size-fits-all for foreign direct investment and there is no one “Europe” when it comes to doing business.

Business Advantages in Switzerland

Switzerland is a very attractive location already, with low taxes, solid infrastructure, good entrepreneur friendly setting and framework, which makes setting up a business quite easy. Switzerland is in the center of Europe, which makes it an even better place for business especially because the cantons/states are able to grant tax incentives and offer tax rulings. As of July 1, 2014, the free trade agreement between Switzerland and China will go into effect, which means there will be a wide array of opportunities for doing business with China via Switzerland.

In general, Switzerland is a very economic friendly county for establishing a business. According to the World Economic Forum, Switzerland was ranked for the fifth time in a row as No. 1 for its economic-friendly climate. It is a highly innovative country with top-class universities and research institutes. The eastern part of Switzerland is the ideal place for DACH (Germany, Austria, Switzerland) penetration but also a wonderful opportunity for a Eurpoean/EMEA/worldwide headquarters.

The industries that are currently thriving in Switzerland include ITC, life sciences and pharma. It is a great place for high-end production, with 38.5 percent of industry in the production sector. Some amazing pro-business advantages include being amongst the lowest taxes worldwide, a highly qualified workforce, with many languages spoken in the country — you will get an international and diverse workforce, there is amazing work-life balance as part of the cultural climate.
Switzerland is not part of the EU and went quite smooth through the economic crisis (compared to most other countries). Since the crisis, interest rates are nowhere lower than in Switzerland, so the cost for capital is very low. Switzerland is one of only 10 countries with highest rankings from each of the three big rating companies (the other countries are: Australia, Denmark, Germany, Finland, Canada, Luxembourg, Norway, Sweden and Singapore). Compared to other countries in the Euro area, Switzerland has very low debts. A stable financial situation is the ground for long-term stability and good economic conditions. In addition, inflation in Switzerland during the last five years has been close to zero.

With 79.4 percent of the working-age population employed, Switzerland has the second-highest employment rate in the OECD. (Source: OECD) Something else to consider is that in Switzerland, 82 percent of the people have confidence in their national government — even higher than before the crisis — compared to the OECD average of 43 percent. The growth of the country has been solid as well — the GDP growth rate of Switzerland is always above the average of the Euro area. Once again, Switzerland as an investment location may surprise you, and before you consider investing elsewhere, may well be worth a look.

Business Advantages in Portugal

Portugal offers one of the deepest and most modern ports, a completely revised immigration system, multilingual support centers and much more. This location provides a perfect opportunity for businesses to take advantage of the solid conditions and advantages including a strategic location, solid workforce, competitive costs, high-quality infrastructure, many tax incentives and grants, and an extremely business-friendly environment. The Portuguese government has taken many impressive actions to bring its country out of the economic crises and foreign investors should not consider southern Europe as one entity.  

Portugal’s location is a big advantage, as it is the nearest European country to the United States, a three-hour distance between Brazil and Russia, and the same time zone as the UK and Ireland. The country offers daily flights to major European cities.

Portugal was recently ranked No. 2 in human resources growth performance, offers amazing postgraduate educational opportunities with Carnegie Mellon, Fraunhofer, Harvard Medical School and the University of Texas at Austin. The life science, health and engineering areas represented 40 percent of the total enrolled students in tertiary education in 2010. Portugal also ranked No. 2 in the Migrant Integration Policy Index III 2011, out of 31 countries.

Some other things for a business owner to consider are that the energy costs in Portugal are below the EU-27 average, and energy efficiency practices are encouraged in construction as well as in consumption. Hourly labor costs in 2012 decreased -4.9 percent (EU-27 rose by +2.2 percent), and in 2012, average hourly labor costs of 12.2 euros in Portugal, 23.4 euros in the EU-27, and 28.0 euros in the euro area.In terms of real estate, Portugal is among the least expensive locations in Europe.

Portugal offers a highly developed transportation infrastructure, including the deepwater port of Sines, with natural backgrounds up to -28m ZH. More than 26 million tons were handled in 2011.

There are also four international rail lines exiting Portugal, and the cargo activity increased by 40 percent in the 2010-2011 period.

The United Nations Public Service Awards granted Portugal with firstprize in “Improving the Delivery in Public Services category in May 2011.” One of Portugal’s main focuses is on communications. The country ranks in ninth place out of 30 locations in terms of lowest broadband price, 95 percent of the country has DSL coverage. As a country with more Internet access areas, Portugal is ranked among the top 20 countries with the highest use of fiber-optics technologies, and seventh place in fastest speed lines. NGN is also being deployed quickly. In 2010, Portugal reached 1 million users, as well as schools and public institutions. In terms of Internet use, 31 percent of the population uses the Internet regularly; and 90 percent of public services are online. What’s more, 98 percent of large-sized companies and 90 percent of medium-sized companies have broadband access.

Companies will find it extremely easy to set up a business as all major public services are online and the average time to set up a business is less than one hour. Portugal offers a diverse and international workforce as they are very open to foreign cultures. Due to the availability of international schools, the safety record and quality of life to attract expatriates, Portugal is ranked No. 2 in the Migrant Integration Policy Index III 2011. The country has been successful in attracting young graduates and executives.

Big name businesses already taking advantage of Portugal’s business-friendly climate include Fujitsu, Microsoft, IBM, Apple, Xerox, Siemens, Adidas, Dow, Ikea and Mercer. Some of the most successful industries include automotive, aeronautic, agriculture and food, pulp and paper, petrochemical, mining, textile and clothing, building materials, renewables and business services, molds and metalworking. In short, if you are looking for a deep port, multilingual staff or some of these other advantages, you would do well to consider Portugal versus Ireland, Spain or the Czech Republic, for example.

Business Advantages in Germany
Rounding out European business hotspots is the country of Germany, which offers a young and vibrant business culture. Germany has only been a country for 140 years, and today consists of a federation of 16 states. Each state is different in terms of norms and cultures. It is very important to research the area of Germany you are looking to locate in and become familiar with their customs and regional characteristics. There is definitely not a “one-size-fits-all” mentality in Germany. Germans like when someone does their homework and is able to make small talk with them. Germans take their meetings very seriously and they are often quite formal.

The German economy is the world’s fourth-largest and accounts for more than one-fifth of European GDP. They are currently the United States’ largest European trading partner so it makes for a perfect place to begin an international business. There aren’t many barriers to U.S. trade or investment

The German economy did suffer during the recent economic crisis, but has modestly rebounded. In 2012, the GDP grew by 0.7 percent. The labor market also offers a great deal of solid potential. There is a higher cost of doing business in Germany; however, investors will find higher levels of productivity, a very skilled and functioning workforce, solid, quality engineering, top-rate infrastructure and a strategic location at the heart of Europe. This high productivity is a key advantage of investing in Germany.

Strong industries in Germany include manufacturing, services, health care and medical, synthetic materials, automotive technology and high tech. The German market is very diverse and investors will find that interests are quite different in each German state. Some things to consider include higher tax rates than other European locations and tax laws that some may find quite complicated.

The best advice is to find a professional that is highly experienced in German tax laws that can help businesses locate deductions, allowances and write-offs to help get tax levels to a more manageable number. Overall, Germany is an attractive and diverse location for international business.

Patrick Dine is president and CEO of PSD Global Inc., (www.psdglobal.com), an international consulting firm providing market entry and economic development consulting services in 30 countries since 1999.   Among his clients are 100 regional and national governments as well as leading companies such as Apple and Siemens. Dine is also a best-selling author of books such as How to Go Global and FDI Success Stories and has won multiple awards, including a presidential merit award for excellence in exporting. He can be reached directly at dine@psdglobal.com or (703) 981-2097.

Illustration by cooldesign at Free Digital Photos.net

 

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