Archive:Foreign direct investment statistics

Data from September 2008, most recent data: Further Eurostat information, Main tables and Database.

Table 1: Foreign direct investment (1)

Foreign direct investment (FDI) is where an enterprise either invests to establish a new plant and/or office in a country other than where it was first established or purchases existing assets of a foreign enterprise. For the purposes of statistical analysis, FDI is defined as a situation where an entity resident in one economy (the direct investor) acquires control, i.e. at least 10 % of the voting power, in a foreign affiliate.

FDI is a component of the balance of payments which shows all financial transactions between one country, or area like the European Union (EU), and all other countries. It is an important indicator of an economy's status in international trade.

Producing or selling goods and services in countries other than where an enterprise was first established may be a complement or even a substitute for external trade.

This article discusses patterns of FDI in the European Union (EU), examining the inward flows and outward flows, the origin and destination of these flows, and the chief components of FDI.

Main statistical findings

Graph 1: Stocks of foreign direct investment abroad, EU-27, 2006 (1)(% of extra EU-27 FDI)

Graph 2: Stocks of foreign direct investment in the EU-27, 2006(% of extra EU-27 FDI)

Table 2: Foreign direct investment stocks for selected partner countries, 2006 (1)(EUR 1 000 million)

Flows of FDI (new investments made during the reference period) fluctuate considerably from one year to the next, partly as a function of economic fortunes. FDI flows generally increase during times of rapid growth while disinvestment is more likely during periods of recession as companies focus on core activities in their domestic market.

Inflows of FDI from non-EU countries into the EU-25 were valued at EUR 145.022 billion in 2006, 54 % more than in 2005 (see Table 1). Outward flows from the EU-25 to non-EU countries were valued at EUR 202.223 billion. Despite the rapid increase in inward flows, the EU-25 remained a net investor abroad with net outflows of EUR 57.201 billion in 2006 (down from EUR 91.810 billion in 2005).

Stocks of FDI show the accumulated value of all previous investments at the end of the reference period. Inward FDI stocks for the EU-25 accounted for 16.1 % of gross domestic product (GDP) in 2005, while outward FDI stocks were valued at 21.9 % of GDP.

Stocks of EU-25 FDI abroad were largely concentrated in North America, which accounted for 39.1 % of the total in 2004 (see Graph 1). North America was an even more important partner in terms of stocks of FDI within the EU-25, accounting for 51.7 % of all FDI made by non-member countries (see Graph 2).

The share of Asian countries in outward stocks rose from 14.7 % to 15.4 % and in inward stocks from 9.0 % to 9.4 % between 2003 and 2004.

The relatively high importance of FDI in Luxembourg should be interpreted with caution as it results mainly from the role of Luxembourg-based holding companies (see Table 2).

Data sources and availability

Annual EU foreign direct investment statistics give a detailed presentation of FDI flows and stocks, showing which Member State invests in which countries and in which sectors. The EU statistics agency Eurostat collects FDI statistics for quarterly and annual flows, as well as for stocks at the end of the year. FDI stocks (assets and liabilities) are part of the international investment position of an economy at the end of the year.

Outward flows and stocks of FDI (or FDI abroad) report investment by entities resident in the reporting economy in an affiliated enterprise abroad.

Inward flows and stocks of FDI report investment by foreigners in enterprises resident in the reporting economy.

FDI flows are new investment made during the reference period, whereas FDI stocks provide information on the position, in terms of value, of all previous investments at the end of the reference period. The intensity of FDI can be measured by averaging the value of inward and outward flows during a particular reference period and expressing this in relation to GDP.

The financial account of the balance of payments records all financial transactions; it includes foreign direct investment, portfolio investment, other investment and reserve asset flows.

There are two kinds of FDI:

the creation of productive assets by foreigners (greenfield investment);
the purchase of existing assets by foreigners (acquisitions, mergers, takeovers, etc.).

FDI differs from portfolio investments because it is made with the purpose of having control or an effective voice in management and a lasting interest in the enterprise. Direct investment not only includes the initial acquisition of equity capital, but also subsequent capital transactions between the foreign investor and domestic and affiliated enterprises.

The sign convention adopted for the data shown in this section, for both flows and stocks, is that investment is always recorded with a positive sign, and a disinvestment with a negative sign.

Context

In a world of increasing globalization, where political, economic and technological barriers are rapidly disappearing, the ability of a country to participate in global activity is an important indicator of its performance and competitiveness.

In order to remain competitive, modern-day business relationships extend well beyond the traditional foreign exchange of goods and services, as witnessed by the increasing reliance of firms on mergers, partnerships, joint ventures, licensing agreements, and other forms of business co-operation.

Conventional trade is less important for services than for goods. While trade in services has been growing, the share of services in total intra-EU trade has changed little during the last decade. However, FDI is expanding more rapidly for services than for goods, increasing at a more rapid pace than conventional trade in services. As a result, the share of services in total FDI flows and positions has increased substantially, with European services becoming increasingly international.

Further Eurostat information

Publications

Main tables

Balance of payments - international transactions (t_bop), see:

European Union direct investments (t_bop_fdi)

Database

Balance of payments - international transactions (bop), see:

European Union direct investments (bop_fdi)

Other information

Balance of payments and international investment position manual (BPM6)