PwC EM20 - Doing Business in South East Europe

One of most interesting findings of this year’s EM20 was that three countries of South East Europe – Bulgaria, Serbia and Romania – are all ranked in the top seven in both the Manufacturing Index and the Services Index.

This might initially appear counterintuitive given that a key driver of a high ranking in the Manufacturing Index is relatively low labour cost, while high placement in the Services Index is linked to household incomes being sufficiently high to create markets for service providers, be they banks or media companies.

However, what this confirms is that attractive investment locations are determined by more than just GDP per capita levels – they are important but not paramount. In the case of Bulgaria and Romania, for example, recent accession to the EU has reduced their country risk premia, which has had a positive effect on their rankings in both indices.

While Serbia’s country risk premium is relatively high, it scores particularly well in the Manufacturing Index as the risk is counterbalanced by its proximity to large West European markets. Although there are still downsides to these three countries in terms of infrastructure and governance, our analysis suggests that South East Europe deserves to be given serious attention as a region with considerable potential.

To take a closer look at the opportunities in South East Europe we have planned the following events:

September 2008: Podcast on economic outlook of South East Europe. Available on our website end of September

Autumn 2008: various regional events

For more information, please e-mail emerging.markets@uk.pwc.com