Archive:Foreign direct investment statistics

Data from September 2009, most recent data: Further Eurostat information, Main tables and Database.

Table 1: Foreign direct investment, 2008 (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: Foreign direct investment inward stocks by main extra-EU investor, EU-27, end-2007 (1) (% of extra EU-27 FDI stocks)

Graph 1: Stocks of foreign direct investment abroad, EU-27, 2006 (1)(% 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-member countries into the EU-27 were valued at EUR 198 701 million in 2008, while outflows from the EU-27 to non-member countries were valued at EUR 347 667 million. EU investments abroad were higher than inward FDI to the EU, and as such, the EU was a net investor abroad with net outflows of EUR 148 966 million. Large net outward investments were recorded for Germany, France and the United Kingdom.

Inward flows of FDI were equivalent of 1.6 % of the EU-27’s gross domestic product (GDP) and outward flows of FDI were equivalent to 2.8 %, combining to give an FDI intensity of 2.2 % – this latter ratio indicates the relative importance of both inward and outward FDI flows during the course of a single year in relation to the size of the national economy.

Luxembourg recorded the highest rate of FDI intensity among the individual Member States (234.0 % of GDP), but this should be interpreted with caution as the relatively high importance of FDI in Luxembourg results mainly from the role of Luxembourg-based holding companies.

FDI stocks show the value of all previous investments at the end of the reference period. At the end of 2007, the EU-27 held net outward stocks of FDI that were valued at EUR 3 151 000 million; inward FDI stocks for foreign investors in the EU-27 were valued at EUR 2 352 000 million.

As such, outward stocks of FDI accounted for 25.5 % of EU-27 GDP at the end of 2007, while inward FDI stocks were valued at 19.0 %. A more detailed analysis by partner reveals that stocks of EU-27 FDI abroad were largely concentrated in North America (37.2 % of the extra EU-27 total at the end of 2007).

Asia remained the second biggest partner for outward stocks of FDI, accounting for 13.2 % of the EU-27 total with non-member countries. North America was an even more important partner in terms of inward stocks, accounting for 48.8 % of the EU-27’s FDI coming from non-member countries. Central America was the second most important investor in the EU-27 at the end of 2007 (with a 14.2 % share of the EU-27’s inward stocks of FDI).

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 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.

FDI may be seen as an alternative economic strategy, adopted by those enterprises that invest to establish a new plant/office, or alternatively, purchase existing assets of a foreign enterprise. These enterprises seek to complement or substitute external trade, by producing (and often selling) goods and services in countries other than where the enterprise was first established.

There are two kinds of FDI, namely the creation of productive assets by foreigners or 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. FDI is a type of international investment where an entity that is resident in one economy (the direct investor) acquires a lasting interest (at least 10 % of the voting power) in an enterprise operating in another economy. The lasting interest implies the existence of a long-term relationship between the direct investor and the enterprise, and a significant degree of influence by the investor on the management of the enterprise.

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)