Businesses or individuals invest in another country to either source components/raw materials, to locate their production in cost-efficient or skills-abundant locations, or to get closer to their customers.
There are two main types of foreign investment:
Foreign direct investment (FDI) – where an investor sets up or buys a company (or a controlling share in a company) in another country, and;
portfolio investment – where an investor buys shares in, or debt of, a foreign company without controlling that company.
The EU is the world’s main provider and the top global destination of foreign investment. Foreign direct investment stocks held in the rest of the world by investors resident in the EU amounted to €8,750 billion at the end of 2018. Meanwhile, foreign direct investment stocks held by third country investors in the EU amounted to €7,197 billion at the end of 2018.
By contributing to economic growth, job creation and integration in global value c
hains, foreign investment tends to benefit host countries as well as home countries. Through domestic policies and international agreements, most countries seek to improve conditions to attract investors. Recent findings also highlight the importance of helping investors retain and expand their existing investments.
