For the third year running, IESE’s Global Venture Capital and Private Equity Country Attractiveness Index has measured the investment attractiveness of countries in the volatile VC/PE fields.
The United States again leads the way with its consistent attractiveness across key criteria, although competition posed by large emerging economies continues to grow stronger.
The six key drivers of VC/PE attractiveness examined were economic activity; depth of capital market; taxation; investor protection and corporate governance; human and social environment; and entrepreneurial culture and deal opportunities. The index, which calculates changes over a five-year period (2008-2012), was led by IESE Prof. Heinrich Liechtenstein, Prof. Alexander Groh of EMLYON Business School and Karsten Lieser, IESE research associate.
The index was expanded again this year, from 80 to 116 countries, with the inclusion of various African countries accounting for much of the increase. The five-year comparison underlines the increasing attractiveness of smaller emerging economies. In particular, several countries in the Middle East registered a strong performance, with Tunisia, Morocco, Saudi Arabia, Egypt and Kuwait all rising at least 10 places, despite the turmoil of the Arab Spring.
Greece, Iceland and Ireland all dropped on the back of the sovereign debt crisis. Ireland, for example, fell eight places over five years.
Although investors continue to capitalize on the fast-growing BRICS (Brazil, Russia, India, China and South Africa), the survey revealed reservations about these economies. Corporate governance levels and investor protection remain concerns, while bribery and corruption levels remain high, and innovation and corporate R&D low. These factors particularly affect Russia, a relative laggard among the BRICS.
Most worrisome, however, is that growth and wealth creation in the BRICS are often confined to certain regions and elites. Until growth benefits are more widespread, the BRICS are unlikely to improve across the board.