Here's food for thought if your company is still among those taking a cautious, wait-and-see posture toward expanding in emerging markets. While you're playing it safe, your competition may be aggressively moving ahead and establishing market share, suggests the latest "FDI Confidence Index" from Chicago-based A.T. Kearney (www.atkearney.com).

Compiled from the global management consulting firm's semi-annual survey of Global 1000 firms' CEOs, CFOs and other top executives, the Kearney survey shows that corporations around the world are increasing their foreign direct investment (FDI) plans, acknowledging a more stable global economic conditions.

"Confidence in the global investment environment has risen in the last six months," says the Kearney FDI report. In fact, 33 percent of senior executives surveyed by Kearney indicate a more positive outlook than six months ago, and 75 percent plan to maintain or slightly increase their investments abroad.

In particular, Japanese corporate investors are more likely to invest abroad today than they were six months ago, the Kearney report indicates.

"After two years of instability in emerging markets, Brazil's decision to devalue in January 1999 did not lead to further system-wide breakdown," said Paul A. Laudicina, A.T. Kearney vice president and managing director of the firm's Global Business Policy Council, which conducts the FDI study. "As a result, fears that the emerging market crisis would inexorably become global have subsided," Laudicina added.

Unlike last December, when Kearney found that CEOs' greatest concern was the future of emerging markets, worries have now shifted to the United States. In fact, 87 percent of Kearney respondents say their greatest concern is whether U.S. economic growth will remain robust enough to continue fueling global recovery and driving the worldwide investment outlook. At the same time, however, the Kearney survey found that the North American market continues to be the most attractive corporate investment destination, strengthening its position as the top region since Kearney's last survey.

In contrast, the Kearney report found that corporate confidence in Europe and Latin America has waned over the past six months. However, Asia as a whole is relatively more attractive than six months ago, the survey found. Markets such as Malaysia, Hong Kong and the Philippines have regained their positions in the top 25 most-preferred investment destinations.

Here's a more in-depth look at the Kearney survey findings:

U.S. Lead Widens
The United States maintained its position as the most attractive investment destination and actually increased its score on Kearney's FDI Confidence Index (FCI).

"Considering that the United States accounted for 40 percent of global growth in 1998, it's not surprising that senior executives in our survey acknowledge the predominant role of U.S. economic performance in driving the global investment outlook around the world," Laudicina said.

Forty percent of corporations surveyed said they are "highly likely" to invest over the next three years in the U.S. market, which, the report says, "is characterized by robust economic growth, high productivity and continued strong consumer confidence." And almost a third of executives expressed an even more positive outlook for the U.S. than six months ago.

Japan: Investor Caution Remains
Japan slipped two spots on the Index, from 19th to 21st, as 85 percent of surveyed executives said that Japan's continued recession is adversely affecting their investment plans.

"The reforms enacted by the Japanese government over the past year have done little to reassure multi-national companies that 'Japan is back,' " Laudicina said.

Kearney found that some 18 percent of firms are more optimistic about the Japanese market today, compared to 28 percent six months ago. Heavy manufacturers are the most bullish about the Japanese market, taking advantage of acquisition opportunities created by the Japanese recession.

Brazil's Devaluation Slows Investor Confidence in Latin America
In the aftermath of is currency devaluation, Brazil fell from the second most-attractive investment destination, a position it had held for the last year, to fourth.

Brazil is currently the country registering the highest shift in sentiment since last December's Kearney survey; 40 percent of surveyed senior executives said Brazil's attractiveness as an investment destination has deteriorated compared to six months ago.

Laudicina, however, added that "to some, Brazil's ability to manage the devaluation successfully gave reason to improve their outlook," as 15 percent of firms surveyed said they are more optimistic about Brazil than six months ago. "Indeed, the capacity to contain breakdown is a sign of Brazil's intrinsic strength as an investment destination; notwithstanding the crisis, it remains in the top five most-preferred investment destinations," Laudicina said.

Concerns about Brazil are also affecting perceptions of the rest of Latin America, Kearney executives reported. Argentina, Chile and Venezuela all followed in Brazil's footsteps, dropping in the rankings for FDI confidence. Mexico, however, rose from No. 8 to No. 5 in the FCI rankings, with its economy benefiting from the U.S. market's growing strength, Kearney officials say.

Europe: Investor Confidence Dips
While Europe was only minimally affected by emerging market instability last year, most Western European countries, compared to six months ago, fell in the rankings.

Germany, for example, fell from No. 5 to No. 8, "evidently reflecting corporate uncertainty about tax policy, structural reforms and slowing growth prospects," said the Kearney report. France and Italy both maintained their positions as the respective 10th and 11th most attractive destinations. Spain fell four places to 13th.

The United Kingdom remains Europe's top FDI market, apparently unaffected by its decision to remain outside the first wave of "Euro zone" countries. In fact, only 3 percent of surveyed executives say they intend to pull away from European countries as a result of those nations' decision not to participate in the single currency.

European executives rank other European countries higher in overall attractiveness than do executives from non-European firms. European investors are also the most affected by the introduction of the Euro, the survey found: More than 75 percent of European executives reported that Europe's new single currency is affecting their choice of FDI destinations.

China Rises in Rankings, Despite Growing Investor Concerns
China, says the Kearney report, now ranks second only to the United States as the most-preferred FDI destination, taking the No. 2 ranking previously held by Brazil.

Although China is also ranked as the most attractive worldwide emerging market, however, its overall attractiveness to investors has deteriorated. Twenty-seven percent of executives surveyed by Kearney consider China's outlook more negative than six months ago.

"Increased regulatory strains, tougher domestic competition and slow market development appear to be negatively impacting the psychology of those considering investments in China," said Laudicina.

In addition, 51 percent of senior executives whose firms are investing in the Asia indicate that the region's currency crisis has created acquisition opportunities for their companies. South Korea appears to be the main beneficiary of this trend. The Kearney survey found that 23 percent of CEOs surveyed have an improved opinion of that country's business environment compared to Kearney's earlier survey six months ago.