Methodology — Sourcing Attractiveness Index

Scale & Direction

Scoring Scale

This index uses an inverted scale relative to the risk indices published alongside it.

9 — most attractive

Strong structural conditions on this dimension. A score of 9 indicates a meaningful competitive advantage for EU buyers sourcing from this country.

4–6 — moderate

Adequate conditions with identifiable constraints. Monitoring recommended. A score in this range does not disqualify a country but warrants active supplier assessment.

1 — least attractive

Significant structural disadvantage on this dimension. Not necessarily a disqualifier — other dimensions or sector-specific factors may outweigh this.

Read alongside risk indices

A high attractiveness score does not mean low risk. China scores 6.4 on attractiveness and 6.4 on EU Compliance risk — the indices answer different questions and should be read together.

D1

Labour Cost Competitiveness

Scores the relative cost of manufacturing labour adjusted for productivity — not raw wage levels. A country with rising wages but proportionally rising productivity may score as competitively as a lower-wage country.

What is scored

Manufacturing labour cost per unit of output relative to peer countries. Wage levels, statutory benefits, and productivity ratios.

What is not scored

Service sector wages. Executive or knowledge worker compensation. Currency effects — a weak local currency increases effective competitiveness beyond what this score captures (see Currency note below).

Primary source

ILOSTAT — ILO Labour Statistics database. Annual wage and productivity data by country and sector.

D2

Supply Base Depth

Scores the density and maturity of the qualified supplier ecosystem — including tier-2 and tier-3 depth, industry clustering effects, and the availability of specialist component and material suppliers within the country.

What is scored

Number and quality of active export suppliers in relevant categories. Industry cluster effects (e.g. Penang semiconductors, Thai automotive corridor, Chinese electronics manufacturing belt). Tier-2 and tier-3 local sourcing depth.

What is not scored

Supplier count alone. A country with many low-capability suppliers scores lower than one with fewer but deeper specialist suppliers.

Primary source

ITC TradeMap — HS-level exporter density and market share data.

Secondary source

World Bank Enterprise Surveys — supplier quality and capability assessments.

D3

Logistics & Infrastructure

Scores port efficiency, road and rail quality, power supply reliability, and logistics network depth. Strong logistics infrastructure reduces lead times, lowers freight costs, and increases supply chain resilience.

What is scored

Port container handling efficiency, inland transport quality, power grid reliability, cold chain availability, and frequency of shipping services to EU ports.

What is not scored

Geographic distance to EU markets — this is a structural factor acknowledged in the Limitations section but not scored as a dimension.

Primary source

World Bank Logistics Performance Index (LPI) — biennial country-level logistics assessment covering customs, infrastructure, international shipments, logistics competence, tracking, and timeliness.

D4

Workforce Skills

Scores the quality and availability of the manufacturing and technical workforce — including educational attainment, STEM graduate output, English proficiency, and vocational training infrastructure.

What is scored

Tertiary education enrolment and attainment, STEM graduate output, English proficiency (for management and documentation), and vocational/technical training system quality.

What is not scored

Total labour force size — that is captured in D9 (Scalability). A small country with a highly skilled workforce scores well on D4 regardless of total headcount.

Primary source

World Bank Human Capital Index — country-level human capital measurement covering health, education, and productivity.

D5

Trade Access

Scores the tariff and preferential access available to EU buyers sourcing from each country — covering FTA coverage, GSP/GSP+ status, and duty elimination scope. High score = lowest tariff burden for EU importers.

What is scored

Active EU FTA coverage and tariff elimination scope. GSP+ (zero duty on ~66% of lines) scores above standard GSP (partial reductions). Countries with no EU FTA or GSP status receive low scores.

Scale reference

Vietnam (EVFTA, 2020) and Singapore (EUSFTA, 2019) score 9 and 8 respectively — the best available EU market access. UK and US score 3 — no EU FTA means MFN rates apply, a significant cost penalty for EU buyers.

Primary source

ITC Market Access Map — EU tariff schedules, FTA preference margins, and GSP eligibility by HS code.

D6

Ease of Doing Business

Scores the regulatory environment for foreign buyers establishing and operating supplier relationships — covering customs efficiency, administrative clarity, contract enforcement reliability, and the burden of compliance documentation.

What is scored

Customs clearance efficiency, regulatory transparency, contract enforcement speed and reliability, administrative burden for import/export documentation, and consistency of rule application.

Note on source

The World Bank Doing Business report was discontinued in 2021. This dimension uses the IMD World Competitiveness Yearbook, which provides comparable annual country-level business environment assessment.

Primary source

IMD World Competitiveness Yearbook — annual ranking of 64 countries on business environment, government efficiency, infrastructure, and economic performance.

D7

Innovation & Technology

Scores R&D investment, technology adoption rates, digital infrastructure quality, and IP output — reflecting a country's capacity to support product development, process improvement, and advanced manufacturing.

What is scored

R&D expenditure as a share of GDP, patent application rates, digital infrastructure quality (broadband penetration, mobile connectivity), technology adoption in manufacturing sectors, and STEM ecosystem strength.

Relevance to buyers

High-innovation sourcing origins support co-development, rapid prototyping, and process improvement. As supply chains shift toward higher-value manufacturing, innovation capacity is an increasingly important attractiveness factor.

Primary source

Global Innovation Index (WIPO) — annual ranking of 132 countries on innovation inputs (institutions, human capital, infrastructure, market, business) and outputs (knowledge, technology, creativity).

D8

Sustainability Credentials

Scores ESG audit culture maturity, environmental standards compliance, and social compliance infrastructure — reflecting how well the country's supply chains support buyers' sustainability due diligence requirements.

What is scored

ISO 14001 certification density (environmental management), SMETA and BSCI audit culture in export manufacturing, ESG reporting maturity among key suppliers, and environmental regulatory enforcement quality.

Relationship to compliance index

The EU Compliance index scores regulatory risk (what could go wrong). D8 scores credentials (what structures are in place to support due diligence). A country can score moderately on both — China's export manufacturing clusters have established audit culture (D8=5) while carrying significant compliance risk (EU Compliance score 6.4).

Primary sources

EcoVadis Global Supply Chain Sustainability Index. LRQA EiQ Supply Chain ESG Global Risk Outlook.

D9

Scalability

Scores the structural capacity to grow order volumes — labour pool size, available industrial land, utilities infrastructure headroom, and manufacturing capacity growth trajectory.

What is scored

Working-age population size, industrial zone capacity, utilities headroom (power, water), historical manufacturing capacity growth rate, and government investment in industrial infrastructure.

Important nuance

Scalability scores reflect the total structural potential across all sectors. Agricultural and commodity supply chains may offer higher scalability than manufactured goods supply chains in the same country — Brazil (D9=5) has very large agricultural scalability but constrained manufacturing scalability due to infrastructure gaps and regulatory complexity.

Primary source

UNIDO Industrial Statistics Database — manufacturing value added, output, and employment by country.

D10

Quality & Standards

Scores the maturity of quality management systems, ISO certification density in export manufacturing, and the export food safety record (RASFF alert rate) — reflecting a country's baseline quality culture.

What is scored

ISO 9001 and ISO 14001 certification density per manufacturing employee. SMETA/BSCI audit pass rates in export sectors. RASFF alert rate for food-category exports to EU (lower = better, scored inversely).

Primary source

ISO Survey of Certifications — annual country-level count of valid ISO 9001 and 14001 certificates.

Secondary source

EU RASFF portal — food and feed safety alert data for EU import notifications by country of origin.

Currency Note

Currency Competitiveness

Exchange rate movements between the euro and local sourcing currencies are not scored as a dimension — but they materially affect the real-world competitiveness of each country beyond what the static index shows.

The mechanism

When a local currency depreciates against the euro, the effective cost of goods sourced from that country falls for EU buyers — even if wages and prices in local currency terms are unchanged. A 10% depreciation of the Vietnamese dong or Indian rupee against the euro is equivalent to a 10% cost reduction for EU buyers, with no change to the supplier's economics.

Why it is not scored

Exchange rates are volatile and directional shifts can reverse quickly. Embedding a currency score would require quarterly updates and risk embedding a snapshot that becomes misleading within months. The static index is designed to reflect structural attractiveness that changes slowly.

How to apply it

For any active sourcing decision, buyers should adjust the index with a simple currency overlay: check the EUR/local currency rate against a 12-month and 36-month baseline. A country whose currency has depreciated significantly against the euro is more price-competitive than the static index score alone suggests — and vice versa.

Reference source

ECB Euro reference exchange rates — daily reference rates for all major currencies published by the European Central Bank.

Currencies to monitor

The most exchange-rate-sensitive sourcing currencies in this index: Indian rupee (INR), Indonesian rupiah (IDR), Vietnamese dong (VND), Brazilian real (BRL), Philippine peso (PHP), Malaysian ringgit (MYR). These have shown meaningful multi-year movements against the euro. Singapore dollar and US dollar have been more stable.

Limitations

What This Index Does Not Capture

The index scores structural attractiveness factors that change slowly. Several important real-world competitiveness factors are not scored — buyers should apply these as overlays to the index.

Geographic proximity

The gravity model of international trade predicts that trade volumes scale inversely with distance. A country 3,000km from Rotterdam has structurally lower freight costs and lead times than one 12,000km away. Turkey, Morocco, and Eastern Europe benefit from proximity advantages not captured in this index. Buyers should add estimated freight cost and transit time to any country comparison.

Historical relationship inertia

Once supply chains are built — tooling investments, quality approvals, logistics infrastructure, personal relationships — switching costs are enormous. Actual trade flows reflect historical decisions as much as current attractiveness. A country may improve its score significantly without seeing trade increase quickly.

Category specialisation

The index is a general attractiveness assessment. Category-specific dynamics — Vietnam for electronics assembly, Malaysia for semiconductor ATP, Thailand for automotive, Brazil for soy — can make one country the only viable option in a category regardless of overall index position.

Per capita vs. absolute trade

Large countries (China, India, US, Brazil) generate large absolute trade volumes partly because of their size. The index scores structural attractiveness per sourcing unit — not total trade potential. Per capita EU trade figures are a useful complement when assessing whether a country is over- or underperforming its structural attractiveness.

Coverage & Cadence

Country Coverage & Update Schedule

Countries covered

Brazil, China, India, Indonesia, Malaysia, Philippines, Singapore, Thailand, United Kingdom, United States, Vietnam.

Review cadence

Annual. Scores are reviewed each January against updated primary source releases. The currency note is explicitly excluded from annual scoring — buyers should apply the ECB exchange rate overlay independently and continuously.

Read alongside

EU Compliance & Market Access index — regulatory, labour, and traceability risk. Geopolitical & Concentration Risk index — conflict, sanctions, climate, and policy continuity. All three indices use the 1–9 scale. Direction differs: Compliance and Geopolitical scores high = more risk; Attractiveness scores high = more attractive.