Archive:Foreign direct investment statistics

Data from June 2016. Most recent data: Further Eurostat information, Main tables and Database. Planned article update: January 2017.

This article gives an overview of foreign direct investments (FDI) for the European Union (EU) in relation to year-end stocks, annual flows and income. The analysis mainly covers the period 2011–14 for the EU-28; note that the 2013 and 2014 figures are based on new methodological standards — Balance of Payments Manual, 6th edition (BPM6), and Benchmark Definition of FDI, 4th edition (BD4) — therefore, the statistics from 2013 onwards are not directly comparable with previous years.

Figure 1: FDI flows and stocks, EU-28, 2009–14
(billion EUR)
Source: Eurostat (bop_fdi_main), (bop_fdi6_flow) and (bop_fdi6_pos)

Table 1: Foreign direct investment, EU-28, 2011–14 (¹)
Source: Eurostat (bop_fdi_main) and (bop_fdi6_flow)

Figure 2: FDI outward flows, 2013–14 average
(% of extra EU-28 outward flows)
Source: Eurostat (bop_fdi6_flow)

Map 1: Outward stocks of FDI, EU-28, end 2014 (¹)
Source: Eurostat (bop_fdi6_pos)

Table 2: Top 10 countries as extra EU-28 partners for FDI positions, EU-28, end 2012–14
(billion EUR)
Source: Eurostat (bop_fdi_main) and (bop_fdi6_pos)

Table 3: Extra EU-28 FDI stocks by economic activity, EU-28, end 2013
(billion EUR)
Source: Eurostat (bop_fdi6_pos)

Figure 3: FDI income and rates of return, EU-28, 2010–14 (¹)
Source: Eurostat (bop_fdi_main), (bop_fdi6_inc) and (bop_fdi6_pos)

Main statistical findings

Key points

Both EU inward flows (direct investments in EU Member States from non-member countries) and outward flows (EU Member States’ direct investments in countries outside the EU) fell sharply in 2014 and were at their lowest levels during the period 2009–14. These big falls were mainly due to large disinvestments in the traditional partner countries — the United States and Switzerland — as well as disinvestments from the United States in the EU. FDI stocks increased steadily in 2014 and followed the trend from previous years. The income rates of return from both EU-28 outward and inward investments increased slightly in 2014 compared with 2013. As in earlier years, FDI flows channelled through special-purpose entities ^[1] played a significant role in the results.

FDI flows

FDI flows declined sharply in 2014

EU Member States’ direct investments in countries outside the EU (outward flows)

After having increased during the years 2009–13 the EU Member States’ direct investments in countries outside the EU declined sharply in 2014 and were at their lowest level during the period 2009–14 (see Figure 1) ^[2]. This big fall was mainly due to large disinvestments in some traditional partner countries — the United States (EUR -69.8 billion) and Switzerland (EUR -20 billion) — see Table 1. The large falls affected, in particular, Luxembourg and the Netherlands due to declines in investments made by special-purpose entities. Disinvestments were particularly high for equity capital acquisitions in the United States market that went from EUR 219.9 billion in 2013 to EUR -82.1 billion in 2014.

EU Member States’ direct investments also fell significantly in Central America, but remained positive at a total of EUR 20.7 billion. This was mainly due to decreased EU FDI activities with offshore financial centres located in this area, where special-purpose entities play an important role.

EU Member States’ direct investments increased significantly in Canada from EUR 11.8 billion in 2013 to EUR 23.4 billion in 2014.

Direct investments in EU Member States from non-member countries (inward flows)

Direct investments in the EU also fell in 2014, thus mirroring the development for outward flows. Again this was largely due to the flows with relation to the United States changing from EUR 433.4 billion in 2013 to EUR -20.3 billion in 2014, in other words from investment to disinvestment. Most affected, among the EU Member States, were the Netherlands and Luxembourg, both declaring significant withdrawals in equity capital done by United States investors.

Direct investments in the EU also declined from both South America and Asia. Brazil went from direct investments of EUR 14.3 billion in 2013 to EUR 1.0 billion in 2014, while Singapore went from EUR 12.9 billion of investment to EUR -5.5 billion of disinvestments.

Luxembourg remained the leading EU investor in countries outside the EU

FDI flows can vary considerably from one year to another, influenced mainly by large mergers and acquisitions. Luxembourg remained the EU Member State with the largest share of the total FDI outward flows from the EU (see Figure 2).

In the period 2013–14, Luxembourg had a share of 57 % of total EU FDI outward flows; special-purpose entities handle most of Luxembourg’s total direct investment. Special-purpose entities also play an important role in other EU Member States, such as the Netherlands, Belgium and Hungary.

The United States was the top recipient, attracting around 60 % of Luxembourg’s outward FDI investments in non-member countries in 2013—14. Offshore financial centres were the second most common destination of Luxembourg’s outward FDI, reflecting the importance of the financial sector for this EU Member State.

The Netherlands’ outward FDI flows to non-member countries were also very high during 2013–14 (17 % of the EU-28 total), pushing it into second place among the EU Member States, ahead of Germany (8 % of total).

FDI stocks

Continued growth in 2014

Both inward and outward FDI stocks continued to grow in 2013 and 2014, despite the implementation of the new methodology in 2013. Between end 2013 and end 2014, EU-28 outward stocks grew 7.6 % and inward stocks grew 9.6 %.

North America remains the main location of EU-28 FDI outward stocks in non-member countries

At the end of 2014, North America had the biggest share (40.2 %) of EU-28 FDI stocks abroad (see Map 1). The United States alone accounted for some 34.5 % (EUR 1 985 billion) of all EU-28 outward stocks (see Table 2).

European countries outside the EU accounted for 20.6 % of EU-28 outward stocks at the end of 2014. Switzerland was the second most important location, accounting for 11.0 % of EU-28 outward stocks, its main activity being financial intermediation. At the end of 2014, Brazil was the third main location with a 6 % share of EU-28 FDI outward stocks, with Canada in fourth place.

Asian countries accounted for 11.6 % of EU-28 outward stocks, the main locations being China, Singapore and Hong Kong. Together these three countries accounted for almost half of the EU-28’s FDI positions in Asia at the end of 2014.

The United States was the main holder of inward FDI stocks in the EU-28

At the end of 2014, the United States held close to 40 % of total EU-28 FDI inward stocks from the rest of the world (see Table 2). The United States thus maintained its position as the major holder of FDI stocks in the EU-28, having invested, as of the end of 2013, 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 largest FDI stock holder in the EU-28 in 2014, with stocks valued at EUR 509 billion, around half from the financial services sector (end 2013).

Other countries with significant shares in EU-28 FDI inward stocks at the end of 2014 were Japan and Canada (both 3.6 % shares). By the end of 2014, China was still not among the top 10 investors (in terms of inward FDI positions) in the EU-28.

Continued dominance of financial services

At the end of 2013, the EU-28 had a positive FDI balance — in other words, outward stocks of FDI exceeded inward stocks (see Table 3). The activity structure of EU-28 FDI stocks remained relatively unchanged in 2013; the services sector still had a negative balance due to financial services activities. Almost all other services sectors registered a positive balance.

Services made by far the largest contribution to both outward (57 %) and inward (87 %) FDI stocks for the EU-28, and their respective shares of total stocks at the end of 2013 remained steady from 2012. Around three fifths of inward stocks of services and four fifths of outward stocks of services were held in financial and insurance activities, which themselves grew during 2013.

Manufacturing was the second largest sector. In particular, petroleum, chemical and pharmaceutical products constituted around 40 % of total manufacturing FDI stocks for both inward and outward investment.

Income from FDI

EU-28 net income increased in 2014

The EU-28’s investment income received from non-member countries (on outward FDI) increased in 2014 to EUR 313 billion. So did EU-28 investment income paid to non-member countries (on inward FDI) to EUR 207 billion (see Figure 3).

The rate of return on both inward and outward FDI stocks was lower in 2013, but it is not possible to estimate how much of this decline is due to the implementation of the new methodology in 2013. Income rates of return increased slightly from 2013 to 2014 ^[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, and the amending Commission Regulation (EU) No 555/2012.

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 in June 2016. The series in the database covered the period from 1992 to 2014, analysed by partner, activity and type of direct investment (equity capital, loans and reinvested earnings). The FDI figures that are presented in this article for 2013 and 2014 are based on the new international standards — Balance of Payments Manual, 6th edition (BPM6) and Benchmark Definition of FDI, 4th edition (BD4).

EU aggregates include special-purpose entities, which are a particular class of enterprises (often holding companies).

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 (so-called green field investments), 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.

Further Eurostat information

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)

Balance of payments - International transactions (BPM6) (bop_6), see:

European Union direct investments (bop_fdi6)

External links

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 figures for 2013 and 2014 have been compiled according to the new international standards (BPM6 and BD4) and therefore they cannot be directly compared with figures for previous years.
↑ The FDI rate of return is measured here as (FDI income of year t) / (stock of FDI at the end of year t-1).

[1] 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.

[2] The figures for 2013 and 2014 have been compiled according to the new international standards (BPM6 and BD4) and therefore they cannot be directly compared with figures for previous years.

[3] The FDI rate of return is measured here as (FDI income of year t) / (stock of FDI at the end of year t-1).

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Archive:Foreign direct investment statistics

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