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Optimum Flexibility
KIA'S NEW EUROPEAN HQ INCLUDES DESIGN CENTER: Kia Motors is building a new European headquarters in Frankfurt, home of one of the world's biggest bi-annual international motor shows. The facility will include a design center, which will be independent from Kia's sister company, Hyundai Motors, marking a change in strategy as other design centers are jointly operated. Kia expects to begin operations in the new building by March 2007. It will be home to 350 Kia personnel.

    The annual Ernst & Young European Attractiveness Survey (of 650 senior international executives), published in June 2005, shows that CEE is viewed as a viable alternative to China for the automotive, consumer goods and heavy industry sectors. Furthermore, with 31 percent of international investment directed towards CEE — more than France, Germany, Spain and Belgium combined — many Western European countries continue to face transformation challenges.
      The U.K. remains the leader for attracting and retaining foreign investment and, as such, finds itself in a unique situation. Lhermitte sees major challenges for the U.K. in balancing its very attractive business-orientated fiscal policies with an ability to deliver quality services and infrastructure as it continues its transformation from a manufacturing to a high-tech and services economy. Having adopted the U.K. investment model, Ireland and the Netherlands are also facing many of the same issues.
      The majority of the rest of Europe — the Nordic countries, Germany, France, Belgium and Spain — are facing challenges of reform in terms of transformation that the U.K. has already undergone. Lhermitte says that their more social model will necessitate the need for more regulatory changes to help them become more flexible.
      "France and Germany have followed a very narrow path," he says. "They will face real regulatory challenges, and they need to make the right overtures to investors and the banking community that they are more pro-business than they appear to be. They face the challenge of becoming more flexible — a delicate situation within a complex social system."
      For the mature CEE countries, namely Poland, the Czech Republic, Hungary and Slovakia, Lhermitte believes that the growing challenge is for them to enjoy the same high job creation in services as they do in manufacturing. To do this they will have to make sure that education, infrastructure, housing and banking can meet these needs. "They need to be very efficient and selective in their use of capital and finance," he adds.
      Outside the EU, Romania, Russia, the Ukraine and Turkey are all emerging as locations that will challenge CEE, although some are five to seven years away from being stable and having "normal economies" while others are 20 to 25 years away. Lhermitte believes that they can only be developed using European platforms, as FDI is increasingly driven by European cross-border investment.
      Russia is seen as a future spur of Europe's attractiveness in five to 15 years, and this is confirmed by the "very, very active investor and consultant interest in Russia." The Mediterranean basin region, meanwhile, will benefit from French, Italian and English influence.
      The challenge for Europe as a whole involves harmonization versus diversity. This is both a political and strategic debate — should Europe be one big country with a flat corporation tax or maintain its diversity?

EC Forges New Industrial Policy

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