Archive:Foreign direct investment statistics
- Data from June 2014. Most recent data: Further Eurostat information, Main tables and Database. Planned article update: June 2016.
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(% of extra EU outward flows) - Source: Eurostat (bop_fdi_main)
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(billion EUR) - Source: Eurostat (bop_fdi_main)
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(billion EUR) - Source: Eurostat (bop_fdi_pos_r2)
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This article gives an overview of foreign direct investment (FDI) statistics for the European Union (EU) in relation to year-end stocks, annual flows and income. The analysis mainly covers the period 2010 to 2012 for the EU-27, but provisional data on FDI flows for 2013 for the EU-28 are also included; note that the latter are based on provisional quarterly figures that have been annualised for the purpose of this analysis.
Main statistical findings
Key points
EU foreign direct investment (FDI) is recovering after the global financial and economic turmoil. In 2013, EU-28 outward flows were 34 % higher than EU-27 flows in 2012. Similarly, EU-28 inward flows were 12 % above EU-27 flows in the previous year. However, EU-28 FDI flows in 2013 stood at more than 20 % below the EU-27 peak levels of 2011 in terms of both inward and outward investment relations with the rest of the world (see Figure 1). The income rates of return from both EU-27 outward and inward investment in 2012 were slightly down from the previous year but remained above the rates of 2008 and 2009 (see Figure 3). As in earlier years, FDI flows channelled through special-purpose entities (SPE) [1] played a very significant role in the results.
FDI flows
FDI flows declined in 2012 but increased again in 2013
Between 2010 and 2013 EU FDI flows were less affected by the global financial and economic crisis. Total EU-27 FDI outflows increased by 57 % in 2011, mainly due to a substantial increase for equity capital and reinvested earnings. EU-27 inward flows increased in 2011 by 90 %. In 2012, outward flows of FDI dropped again, down 46 %, once more due to a sharp decline in equity capital invested outside the EU-27, though partially compensated by an increase in reinvested earnings and steady levels of other capital. Inward flows also decreased, down 31 %; all FDI instruments contributed to this negative change.
EU-27 direct investment abroad in 2012 declined mainly due to reduced FDI activity with some traditional partners — the United States (down 62 % to EUR 62.9 billion = EUR 62 900 million) and Switzerland (down 91 % to EUR 4.5 billion). The central American countries (moving from investment in 2011 to disinvestment of EUR 4.9 billion in 2012) also contributed to the negative change, mainly due to decreased EU FDI activities with offshore financial centres (OFC) located in this area, where special-purpose entities play an important role. In 2012, EU-27 FDI in Asia shrank to EUR 57.0 billion from EUR 89.8 billion the year before, and this decrease was not restricted to the EU's main partner countries.
The United States remained the most important player in relation to EU-27 inward direct investment flows in 2012. Flows from the United States (EUR 98.8 billion) into the EU-27 more than halved from the previous year but still accounted for one third of total EU-27 inward FDI in 2012. FDI from other traditional partners also shrank — Switzerland (down 54 %), Brazil (down 83 %), Japan (down 61 %) and the Arabian Gulf countries (moving from investment in 2011 to a small disinvestment of EUR 0.1 billion in 2012). The increased FDI flows from Canada (to reach EUR 19.7 billion), Russia (EUR 8.4 billion), offshore financial centres (EUR 74.2 billion) and some Asian partners (China, Singapore and South Korea) only partially compensated for the overall downturn in the EU-27 inward investment in 2012.
The EU-27’s FDI activity with Australia was relatively volatile throughout the period studied. In 2012, this partner attracted a relatively large share (4.5 %; EUR 11.6 billion) of the EU’s outward FDI but accounted for only 0.1 % (EUR 0.2 billion) of the EU’s inward flows.
Provisional figures for 2013 show increases in EU FDI flows in both directions. EU-28 outward flows were 34 % higher in 2013 than were EU-27 outflows in 2012; many of the EU’s principal investment partners contributed to these developments.
In 2013, EU-28 direct investment into the United States were more than double (up 153 %) the 2012 level recorded for the EU-27. The EU-28’s outward FDI increased substantially in Switzerland (to reach EUR 24.4 billion), Brazil (EUR 35.6 billion) and offshore financial centres (EUR 39.9 billion). Nevertheless, the EU-28 direct investment activity decreased in China (down from EUR 15.5 billion for the EU-27 in 2012 to EUR 8.2 billion for the EU-28 in 2013), Hong Kong (from EUR 15.0 billion to EUR 10.4 billion) and India (from EUR 5.5 billion to EUR 3.2 billion), while that in Russia and Canada was less than the level of (earlier) outward FDI withdrawn from these countries such that overall the EU-28’s outward FDI flows to these countries were negative (disinvestments).
Similarly, EU-28 inward flows of FDI in 2013 were higher than the equivalent flows for the EU-27 in the previous year, up 12 %. The United States remained the main source of incoming FDI and its direct investment into the EU more than tripled in 2013. Inward flows of FDI from Brazil in 2013 (up from EUR 2.2 billion for the EU-27 in 2012 to EUR 21.5 billion for the EU-28 in 2013) and Japan (from EUR 3.9 billion to EUR 9.6 billion) also expanded sharply, while Hong Kong and India turned to investment in the EU-28 in 2013 after the disinvestment in the EU-27 registered in 2012. Nevertheless, large decreases were registered for inward FDI flows from Canada and China, while the inward flow from offshore financial centres fell sharply such that it turned negative (a disinvestment) in 2013.
EU’s main sources of outgoing FDI
FDI flows can vary considerably from one year to another, influenced mainly by large mergers and acquisitions. In the period 2011–13, Luxembourg had the largest share (54 %) of EU FDI outward flows because special-purpose entities handle most of Luxembourg’s total direct investment. Special-purpose entities also play an important role in other EU Member States, especially the Netherlands, Austria, Hungary and Cyprus, but the data presented here exclude special-purpose entities for these countries.
Luxembourg’s outgoing FDI almost doubled in 2013 compared with 2012, whereby Luxembourg remained the leading EU investor in non-member countries. The United States was the top recipient attracting 80 % of Luxembourg's outward FDI in non-member countries in 2013. Offshore financial centres were the second most common destination, showing the importance of the financial sector for this Member State.
In 2013, the United Kingdom recorded a sharp drop in outward FDI flows to non-member countries, lowering its contribution to the EU total. Furthermore, Germany's outward FDI flows to non-member countries increased in 2013, pushing it that year into second place among the EU Member States, ahead of the United Kingdom.
FDI stocks
Slower growth in 2012
In 2012, growth in EU-27 outward and inward FDI stocks (or positions) slowed to around 5 % for each direction; this can be compared with 17 % growth for outward stocks and 20 % growth for inward stocks in 2011.
North America remains the main location of EU-27 FDI outward stocks in non-member countries
At the end of 2012, North America had the biggest share (37 %) of EU-27 FDI stocks abroad (see Map 1). The United States alone accounted for some 32 % (EUR 1 655 billion) of total EU-27 outward stocks, with growth of 4 % in 2012 compared with 26 % growth in 2011 (see Table 2). The main EU-27 holders of FDI stocks in the United States were the United Kingdom (15 %), France (11 %) and Germany (10 %).
Switzerland was the second most important location for EU-27 outward FDI positions at the end of 2012, accounting for 13 % of total stocks, the main activity being financial intermediation. At the end of 2012, Canada was the third main location with a 5 % share of EU-27 FDI outward stocks, having overtaken Brazil.
In Asia, the main location for EU-27 outward FDI stocks were Hong Kong, Singapore and China, together accounting for almost half of the EU-27’s FDI positions in Asia at the end of 2012. Japan (EUR 98.8 billion) was not among the three top Asian partners for EU-27 FDI outward positions, but still remained ahead of India, South Korea and Indonesia.
In Africa, the main destinations for EU-27 FDI stocks were South Africa (EUR 58.2 billion), Egypt (EUR 30.9 billion) and Nigeria (EUR 27.2 billion). The EU-27’s FDI outward stocks in South Africa turned back to growth (6 % in 2012) but this country remained out of the EU-27’s top 10 FDI partners after a sharp (-27 %) fall in 2011.
The United States was the main holder of inward FDI stocks in the EU-27
At the end of 2012, the United States held close to two fifths (39 %; EUR 1 536 billion) of total EU-27 FDI inward stocks from the rest of the world (see Table 2). The United States thus maintained its position as the major FDI stocks holder in the EU-27, having invested, as of the end of 2011, mostly in the financial services sector, followed by manufacturing; one third of the latter was in the manufacture of petroleum, chemical, pharmaceutical, rubber and plastic products, and another third in the manufacture of food products, beverages and tobacco products.
Similar to the ranking for FDI outward positions, Switzerland was the second biggest FDI stock holder in the EU-27 in 2012, with stocks valued at EUR 505 billion, 5 % more than at the end of 2011.
Other countries with significant shares in EU-27 FDI inward positions at the end of 2012 were Japan and Canada (4 % each), followed by Brazil, Russia, Singapore and Hong Kong. In 2012, the highest annual growth among these partners was achieved by Russia (34 %), followed at some distance by Singapore (14 %). China's FDI stocks in the EU-27 increased by 44 % in 2012, but by the end of 2012 China was still not among the top 10 investors (in terms of inward FDI positions) in the EU-27.
Continued dominance of financial services
At the end of 2011 the EU-27 had a positive FDI balance — in other words, outward stocks of FDI exceeded inward stocks (see Table 3). The activity structure of EU-27 FDI stocks changed slightly in 2011, mainly due to the services sector having turned to a negative balance following a sharp growth in inward stocks in financial and insurance activities, which more than doubled from the previous year. In 2011, a negative balance was also registered for some of the smaller services sectors.
Services made by far the largest contribution to both outward (62 %) and inward (87 %) FDI stocks for the EU-27, and their respective shares of total stocks at the end of 2011 were greater than at the end of 2010, in particular for inward stocks. Around three fifths of inward stocks of services and close to four fifths of outward stocks of services were held in financial and insurance activities, which themselves grew during 2011. Almost all services subsectors contributed to the positive development, the highest growth being recorded for information and communication services (outward stocks) and financial and insurance activities (inward). On the other hand, EU-27 inward stocks decreased in information and communication services, accommodation and food service activities as well as real estate activities, while both inward and outward stocks decreased for other services.
Thanks to steady increases in its main subsectors, EU-27 outward stocks in manufacturing grew by 24 % in 2011. On the other hand, inward stocks halved from 2010 following a sharp fall in all subsectors except the manufacture of vehicles and other transport equipment. The contributions of the construction and mining and quarrying sectors to total EU-27 stocks at the end of 2011 remained relatively unchanged from the previous year.
Income from FDI
EU-27 net income decreased moderately in 2012
The EU-27’s investment income from and to non-member countries decreased in 2012 to EUR 318.4 billion of income received (from outward FDI) and EUR 170.2 billion of income paid (from inward FDI). The EU-27’s resulting net income from the rest of the world also decreased to EUR 148.2 billion in 2012, 7 % lower than the record level of 2011. The EU-27’s investment income (from FDI) balance in 2012 was 1.15 % of GDP, compared with 1.26 % in 2011.
Following a recovery in 2010 and 2011, a decrease in FDI income in 2012 brought rates of return [2] down to 6.4 % for EU-27 FDI outward stocks (in other words, inflows of income) and 4.5 % for EU-27 FDI inward stocks (in other words, outflows of income) — see Figure 3.
Data sources and availability
FDI statistics in the EU are collected in accordance with Regulation (EC) No 184/2005 of the European Parliament and of the Council on Community statistics concerning balance of payments, international trade in services and foreign direct investment.
The methodological framework used is that of the OECD benchmark definition of foreign direct investment — third edition, which provides a detailed operational definition that is fully consistent with the IMF’s balance of payments manual (fifth edition).
This article is based on FDI data that were available in Eurostat’s database at the beginning of June 2014. The series in the database covered the period from 1992 to 2012, analysed by partner, activity and type of direct investment (equity capital, loans and reinvested earnings). The aggregated FDI figures that are presented in this article for 2013 are provisional data based on annualised quarterly balance of payments data.
EU aggregates include special-purpose entities, which are a particular class of enterprises (often empty shells or holding companies) not included in all countries’ national statistics. Consequently, EU aggregates are not simply the sum of national figures.
Context
In a world of increasing globalisation, 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 international exchange of goods and services, as witnessed by the increasing reliance of enterprises on mergers, partnerships, joint ventures, licensing agreements, and other forms of business cooperation.
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 international 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: the creation of productive assets by foreigners, or the purchase of existing assets by foreigners (for example, through acquisitions, mergers, takeovers). FDI differs from portfolio investments because it is made with the purpose of having control, or an effective voice, in the management of the enterprise concerned 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.
Conventional international 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, and is increasing at a more rapid pace than international trade in services. As a result, the share of services in total FDI flows and positions has increased substantially, as the service sector has become increasingly international.
See also
- Foreign direct investment between the European Union and BRIC
- Implementing the new international standards for foreign direct investment (FDI) statistics
- Balance of payment statistics
- Africa-EU - key statistical indicators
- Foreign affiliates statistics - FATS
Further Eurostat information
Main tables
- European Union direct investments (t_bop_fdi)
Database
- European Union direct investments (bop_fdi)
Dedicated section
Methodology / Metadata
- European Union direct investments (ESMS metadata file — bop_fdi_esms)
Source data for tables, figures and maps (MS Excel)
Other information
External links
- OECD Benchmark Definition of Foreign Direct Investment
- United Nations Conference on Trade and Development (UNCTAD) — FDI Statistics
Notes
- ↑ Special-purpose entities are mainly financial holding companies, foreign-owned, and principally engaged in cross-border financial transactions, with little or no activity in the Member State of residence.
- ↑ The FDI rate of return is measured here as (FDI income of year t) / (stock of FDI at the end of year t-1).