Question

Define the factors to be considered to calculate country attractiveness

Answer 1

Country attractiveness is a multidisciplinary concept at the crossroads of development economics, financial economics, comparative law and political science: it aims at tracking and contrasting the relative appeal of different territories and jurisdictions competing for “scarce” investment inflows, by scoring them quantitatively and qualitatively across ad hocseries of variables such as GDP growth, tax rates, capital repatriation … etc.

There are multiple factors determining host country attractiveness in the eyes of large foreign direct institutional investors, notably pension funds and sovereign wealth funds. Research conducted by the World Pensions Council (WPC) suggests that perceived legal/political stability over time and medium-term economic growth dynamics constitute the two main determinants[1]

Some development economists believe that a sizeable part of Western Europe has now fallen behind the most dynamic amongst Asia’s emerging markets, notably because the latter adopted policies more propitious to long-term investments: “Successful countries such as Singapore, Indonesia and South Korea still remember the harsh adjustment mechanisms imposed abruptly upon them by the IMF and World Bank during the 1997-1998 ‘Asian Crisis’ […] What they have achieved in the past 10 years is all the more remarkable: they have quietly abandoned the “Washington consensus” [the dominant Neoclassical perspective] by investing massively in infrastructure projects […] this pragmatic approach proved to be very successful.”[2]