China and Russia are the rising stars in an investment attractiveness rating released by consulting firm A.T. Kearney, which polled managers at 1,000 companies in 34 countries.
Russia leapt into the top 25, rocketing from 32nd to 17th place, despite Central Bank statistics showing that direct investment in the country has actually dropped by about $1 billion since 1999. Meanwhile, China knocked the United States from the top spot, which it had held for the previous five years.
According to the Central Bank, Russia received $3.3 billion in direct investment in 1999, $2.7 billion in 2000 and $2.5 billion in 2001. The trend over the first quarter of this year is similarly negative. Direct investment makes up less than 1 percent of the country's gross domestic product, while in Central and Eastern European countries it accounts for 5 percent to 10 percent.
But the authors found other explanations for Russia's rosy image among investors. They cite the reduced ratio of foreign debt to GDP -- from 90 percent in 1998 to 50 percent in 2001 -- and the proclamation of Russia as a market economy.
"Russia's rating, like that of other countries, is a reflection of its prospects and its image," said A.T. Kearney vice president and project coordinator Paul Lodisin.
"However, this is a reliable reflection, and Russia can expect direct investments to grow," he said.
China's success was put down to a stable political climate, joining the World Trade Organization and a successful bid to host the 2008 Olympics.
"The majority of those polled said that China had given them what they value most -- namely a big market and a consistent state policy that supports business," Lodisin said.
All this is happening against a backdrop of decreasing investment attractiveness in the United States. Last year foreigners invested $108 billion in U.S. companies, but in the first half of this year, direct foreign investment fell to $19.6 billion.
Capital Magnets
1. China 1.99
2. United States 1.89
3. Britain 1.51
4. Germany 1.50
5. France 1.29
6. Italy 1.23
7. Spain 1.22
8. Canada 1.20
9. Mexico 1.19
10. Australia 1.16
11. Poland 1.15
12. Japan 1.12
13. Brazil 1.09
14. Czech Republic 1.07
15. India 1.05
16. Hungary 1.02
17. Russia 0.99
18. Hong Kong 0.95
19. Netherlands 0.95
20. Thailand 0.93
21. South Korea 0.91
22. Singapore 0.89
23. Belgium 0.86
24. Taiwan 0.85
25. Austria 0.85
Source: A.T. Kearney
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