The index, which was launched last year, shows once again that, while the BRIC countries (Brazil, Russia, India and China) continue to offer interesting opportunities, there are other locations - nearer to home - that offer attractive alternatives for UK companies looking to invest in emerging markets.

While Egypt tops the PricewaterhouseCoopers EM20 manufacturing Index this year, Bulgaria and Serbia are ranked second and third, with Romania in seventh place.

Those three countries make up a ‘golden triangle’, as they also feature in the top ten of the services Index which is headed by Poland.

The PricewaterhouseCoopers EM20 Index report noted that while there are still downsides to these markets in terms of infrastructure and governance issues, southeast Europe deserves to be given serious attention as a region with considerable potential.

For manufacturing companies seeking to invest in emerging markets, low production costs are a key requirement. Other factors then come into play, including the location’s country risk premium, its distance from key export markets and the local corporation tax rate.

For businesses in the services sector, relatively high GDP per capita levels are a significant factor.

Typical service businesses represented in the model would be banks, insurers, media, telecoms and IT-related operators.

Ian Coleman, UK head of emerging markets, PricewaterhouseCoopers LLP, commented that:

“This year we have run our model on historic data for all countries we have looked at to give a five year track record. This allows us to consider the direction – and speed - of movement of various countries within the PricewaterhouseCoopers EM20 Index over time and spot rising (or waning) stars."

"Political risk has emerged as a factor which has a major impact on countries ascending or descending both indices. This is illustrated particularly strongly by Serbia which has dramatically improved its performance in the manufacturing index, largely due to improving political stability since 2000. In 2008 Serbia is third in the index, compared to 25th in 2004."

Colman continued: “The impact of political risk is also evident across central and south east European member states of the European Union. Slovakia, which joined the EU in 2004, has enjoyed political and economic stability which has made it a rising star of the services index, sixth place in 2008 up from 16th in 2004. The trend is also reflected in the experience of Romania and Bulgaria, which joined the EU in 2007."

This year’s PricewaterhouseCoopers EM20 Index includes a number of refinements to the methodology used to rank the emerging markets.

In particular, the scope of the model has been expanded to include all countries considered as plausible candidates for foreign direct investment (FDI).

A number of extra filters have also been applied during the process of identifying emerging markets, according to PwC, so that the stylised investment model better reflects the real-world decisions which companies make when deciding where to invest.

This has resulted in some countries no longer meeting the criteria and falling out of the index, while others have entered it for the first time.