What does a negative FDI inflow mean

Foreign direct investment statistics

This Statistics Explained article has been archived.

Data extracted from April 2017. Latest data: Further information from Eurostat, main tables and database. The German language version of this article will be archived in March 2018.
Figure 2: FDI outflows, 2013-2015 average
(in% of total outflows from the EU-28)
Source: Eurostat (bop_fdi6_flow)
Map 1: FDI stocks abroad, EU-28, end of 2015
Source: Eurostat (bop_fdi6_pos)
Table 2: The ten partner countries outside the EU-28 with the highest stocks of FDI, EU-28, at the end of 2012-2015
(in billions of EUR)
Source: Eurostat (bop_fdi_main) and (bop_fdi6_pos)
Table 3: FDI stocks in the EU-28 by economic sector, EU-28, end of 2014
(in billions of EUR)
Source: Eurostat (bop_fdi6_pos)

This article provides an overview of Foreign Direct Investment (FDI) with data on year-end stocks, annual flows and income for the European Union (EU). The period from 2009 to 2015 is examined for the EU-28. It should be noted that the figures for 2013 to 2015 are based on new methodological standards, namely the 6th edition of the Balance of Payments Manual (BPM6) and the 4th edition of the definition of ADI benchmarks (BD4) (in English) and the statistics from 2013 onwards are therefore not directly comparable with the statistics of previous years.

Main statistical results

core items

Both the inflows into the EU (direct investment from third countries in EU member states) and the outflows (direct investment from EU member states into countries outside the EU) fell drastically in 2014 to their lowest level in the period 2009 to 2015. The significant declines were primarily extensive disinvestments in the traditional partner countries, d. H. the United States and Switzerland, as well as divestments by the United States in the EU. In 2015, the inflows and outflows of foreign direct investment approached the 2013 level again.

In 2015, FDI stocks increased. The trend of previous years thus continued, albeit with a higher rate of increase than in previous years. The returns on both investment outflows and investment inflows for the EU-28 decreased slightly in 2015 compared to 2014. Via special purpose vehicles[1] As in previous years, channeled FDI flows played a key role in the results.

ADI flows

Sharp decline in FDI flows in 2014 and renewed increase in 2015

Direct investment by EU member states in countries outside the EU (outflows)

After rising between 2009 and 2013, direct investment by EU member states in countries outside the EU fell in 2014 due to a sharp decline to its lowest level between 2009 and 2015 (see Figure 1)[2]. This drastic decrease was mainly due to a high reduction in investment in some traditional partner countries, above all the United States with EUR -83.3 billion and Switzerland with EUR -33.0 billion (see Table 1). Disinvestments in the acquisition of equity capital on the US market were particularly strong. A decrease from EUR 206.8 billion in 2013 to EUR -85.0 billion in 2014 was recorded here.

In Central America, too, direct investment by EU member states fell significantly, but here it remained positive at a total of EUR 35.0 billion. This development was mainly due to the decline in the EU's FDI transactions with offshore financial centers in this region, where special purpose vehicles play an important role.

In 2015, there was again a strong increase in direct investment by EU member states in countries outside the EU. The level of 2013 was almost reached again. Investments in the United States and Switzerland in particular increased, so that the outflows in both countries between 2012 and 2014 were more than offset. Investments in South Africa in 2015 were also much higher than in any other year shown in Table 1; The same goes for investments in Turkey, Singapore and Japan.

Direct investment from third countries in EU member states (inflows)

Foreign direct investment in the EU fell in 2014, reflecting the trend in outflows. Here, too, the development was mainly due to the transaction flows with the United States, which in 2014, after a plus of EUR 352.8 billion in 2013, reached a negative value of EUR -24.8 billion. H. instead of investments, there were disinvestments. Direct investment from all other continents (apart from the rest of Europe) in the EU also decreased. Direct investment from Brazil fell from EUR 10.0 billion (2013) to EUR 2.0 billion (2014), and for Singapore, after investments of EUR 11.7 billion, the figure was EUR -4.5 billion even divestments have been recorded.

Like the outflows, the inflows also recovered very well in 2015, although the level of 2013 was not quite reached here either. Investments from the United States in particular have risen sharply; At EUR 252.4 billion in 2015, however, they remained below the 2013 figure (EUR 352.8 billion). In 2015, investments from Switzerland, Canada, the Gulf States and Singapore were higher than in all other years shown in Table 1. Investments by offshore financial centers in the EU also rose sharply again in 2015; At EUR 83.0 billion, however, they were just below the 2012 level (EUR 84.9 billion).

Luxembourg remains the leading EU investor in non-EU countries

FDI flows can fluctuate significantly from year to year as they are primarily influenced by large mergers and acquisitions. Luxembourg remained the EU Member State with the highest share of total FDI outflows from the EU (see Figure 2).

In 2013-2015, Luxembourg accounted for 40% of total EU FDI outflows, with most of Luxembourg's direct investments being made by special purpose vehicles. Special purpose vehicles also play an important role in other EU Member States such as the Netherlands, Belgium and Hungary.

North America (especially the United States) was the main destination of Luxembourg direct investment in non-member states in the period 2013-2015 with around 73%. The fact that offshore financial centers were also an important target for FDI outflows from Luxembourg shows the importance of the financial sector for this EU member state.

The Netherlands' FDI in non-member countries was also very high in 2013-2015, accounting for 33% of total outflows from the EU-28. This placed the Netherlands in second place among the Member States, ahead of Spain (9% of total outflows).

FDI stocks

Accelerated growth in 2015

In 2015, FDI stocks increased faster in both inflows and outflows than in 2014. Between late 2014 and late 2015, EU-28 stocks of FDI grew by 14.9% abroad and stocks in the EU grew by 14.9% -28 by 20.7% compared to 10.0% and 15.2% between the end of 2013 and the end of 2014.

North America continues to have the largest share of EU-28 FDI stocks in non-member countries

At the end of 2015, North America had the largest share (40.8%) of the EU-28's FDI stocks abroad (see Map 1). The United States alone accounted for around 37.1% (€ 2560 billion) of the EU-28's FDI stocks (see Table 2).

At the end of 2015, 19.6% of the EU-28's FDI stocks were in European non-EU countries. Switzerland as the second most important destination had a share of 11.9% in the FDI positions of the EU-28; these investments were primarily in the banking and insurance industries.

At the end of 2015, Bermuda was the third top destination, accounting for 5.3% of the EU-28's FDI stocks, reflecting its role as an offshore financial center. Fourth and fifth were Brazil and Canada, with shares of 4.8% and 3.6% respectively of the EU-28's FDI stocks. The Asian countries (excluding the Middle East), primarily China, Singapore and Hong Kong, accounted for 11.5% of the EU-28's FDI stocks. At the end of 2015, these three countries together accounted for more than half of the EU-28's FDI positions in Asia.

The United States held most of the FDI that entered the EU-28

At the end of 2015, the United States accounted for a good two-fifths (41%) of total FDI from the rest of the world into the EU-28 (see Table 2). The United States thus continued to hold the largest share of FDI stocks in the EU-28. At the end of 2014, these investments were mainly made in the financial services sector, followed by manufacturing. A third of the investments in the manufacturing sector went to mineral oil processing, the manufacture of chemical and pharmaceutical products, rubber and plastic goods, and almost a third to the manufacture of food, beverages and tobacco products.

As with the EU-28's FDI positions abroad, Switzerland was also in second place in terms of foreign direct investment in the EU-28 in 2015, with a total of EUR 619 billion, of which more than half (56%) was in the sector Financial services were omitted (end of 2014).

Bermuda was not only the third largest destination country for FDI stocks in the EU-28 at the end of 2015, but also ranked third among the FDI stocks in the EU-28 with a share of 8.6%. Behind these three partner countries (USA, Switzerland and Bermuda) ranked in the ranking of the FDI stocks that flowed into the EU-28, several countries that were not among the top ten countries in terms of foreign direct investment in the EU-28, as well as Canada: Jersey held 3.9% of EU-28 FDI stocks, Canada 3.8%, Cayman Islands 3.3%, Japan 2.9% and Gibraltar 2.8%. Several of these countries are offshore financial centers.

Investments in financial services remain predominant

At the end of 2014, the EU-28 had a positive FDI balance. H. the outflow of FDI stocks exceeded the FDI stocks in the EU-28 (see Table 3). In 2014, the distribution of FDI stocks by industry in the EU-28 remained almost unchanged. The service sector continued to show a negative balance, mainly due to transactions in the financial services sector, as almost all other service sectors, like all other sectors, were positive.

The service sector had by far the largest share of FDI stocks in the EU-28 at the end of 2014, both in terms of outflows abroad (59%) and inflows into the EU (87%), with the share of outflows being slightly higher than at the end of 2013. Around four-fifths of the FDI stocks in the EU-28 and two-thirds of the outflows of FDI stocks in the service sector related to finance and insurance, which grew in 2014.

Manufacturing was in second place with 27% of outflows and 9% of inflows. Mineral oil, chemical and pharmaceutical products accounted for around two-fifths of total FDI stocks in manufacturing, both in terms of investment inflows and outflows.

Income from FDI

EU-28 net income decreased in 2014 and 2015

EU-28 investment income received from non-member states (from FDI outflows) decreased to € 303 billion in 2015, while income from investment in EU-28 paid to non-member states (FDI inflows) increased to € 219 billion ( see Figure 3). As a result, net FDI revenues fell from EUR 116 billion in 2014 to EUR 84 billion in 2015. This was the fourth consecutive annual decrease in net income (note the methodology change made between 2012 and 2013).

The return on inflows and outflows in 2015 was lower than in 2014. For stocks abroad, it went from 6.0% to 5.0% and for stocks abroad in the EU from 5.1% to 4.6% back[3].

Data sources and data availability

The data for the EU statistics on foreign direct investment are compiled in accordance with Regulation (EC) No. 184/2005 of the European Parliament and of the Council on Community statistics on the balance of payments, international trade in services and direct investment and Regulation (EU) No. 555 / 2012 collected by the Commission amending Regulation (EC) No. 184/2005.

The underlying methodology is the third (up to reference year 2012) or fourth edition (from reference year 2013) of the OECD reference definition of the term direct investment. It contains an operational definition that is consistent in all points with the IMF Balance of Payments Manual.

This article is based on FDI data available in Eurostat's database in April 2017. The series in the database cover the period 1992 to 2015, broken down by partner country, economic sector and type of direct investment (equity capital, loans and reinvested earnings). The data on foreign direct investment given in this article for the years 2013 to 2015 are based on the new international standards; H. on the 6th edition of the Balance of Payments Manual (BPM6) and the 4th edition of the definition of ADI benchmarks (BD4) (in English).

The aggregates for the EU include special purpose vehicles, which are a special type of company (often holding companies).

context

In a world of increasing globalization, in which political, economic and technological barriers are rapidly disappearing, a country's participation in global economic activity is an important indicator of its performance and competitiveness. In order to remain competitive, modern companies no longer limit their business relationships with foreign countries to traditional trade in goods and services. This is evidenced by the increasing number of mergers, partnerships, joint ventures, licensing agreements and other forms of collaboration between companies.

Foreign direct investment can be viewed as an alternative economic strategy by companies making investments to establish a new permanent establishment or branch or to acquire the existing facilities of a foreign company. In doing so, these companies attempt to supplement or replace foreign trade with the production (and often also the sale) of goods and services outside the country in which they were founded.

There are two types of foreign direct investment: the creation of productive assets by foreigners (so-called greenfield investments) and the acquisition of existing means of production by foreigners (e.g. through acquisitions, mergers, takeovers). FDI differs from securities investments in that it is intended to control the company in question or to exert significant influence on the company’s management and to acquire a long-term stake in the company. Direct investments include not only the acquisition of equity capital, but also subsequent capital transactions between the foreign investor on the one hand and domestic and affiliated companies on the other.

See also

More information from Eurostat

Main tables

European Union direct investment (t_bop_fdi)

Database

European Union Direct Investment (bop_fdi)
European Union Direct Investment (BPM6) (bop_fdi6)

Special area

Methodology / metadata

Source data for the tables, figures and maps (MS Excel)

additional Information

Web links

Footnotes

  1. ↑ Special purpose vehicles are primarily foreign-owned financial holding companies that primarily engage in cross-border financial transactions while having little or no activity in the Member State in which they are located.
  2. ↑ The figures for the years 2013 to 2015 were compiled according to the new international standards (BPM6 and BD4) and are therefore not directly comparable with the figures for earlier years.
  3. ↑ The FDI return is determined here as (FDI yield from year t) / (FDI stock at the end of year t-1).